Abstract

This report updates the 2009 IEO evaluation of IMF Involvement in International Trade Policy Issues. Since then, the composition and structure of international trade have evolved, but trade has not regained its former dynamism. With increasing concern about potential winners and losers from trade, there has been a loss of political support for globalization, increasing trade tensions and protectionism, and the institutional framework supporting multilateral trade has come under heavy strain. The report concludes that overall the IMF deserves considerable credit for its active and timely response, playing a prominent role in championing commitment to an open, rules-based multilateral trading system. The Fund has largely implemented the recommendations of the 2009 evaluation and has strengthened and consolidated its trade policy analysis and advice, appropriately focusing on the key macroeconomic effects and associated risks of trade policy developments at the national and international levels. IMF advocacy on trade has been underpinned by a major expansion in the attention to trade policy issues in multilateral surveillance—and to some extent in bilateral surveillance—supported by high-quality research and analysis, building on the Fund’s well-established modeling capacity. Looking forward, the Fund will need to sustain its current high level of advocacy and analysis on trade policy issues and consider how to increase the overall impact of this work. Key challenges include: contributing to foster a recommitment to trade policy cooperation; further attention to translating multilateral surveillance into bilateral policy advice; consolidating relations with partner institutions; and increased attention to rapidly developing trade policy issues. Across all these dimensions, care will be needed to ensure appropriate evenhandedness in trade policy surveillance across countries. A holistic review of the IMF’s “trade strategy” would help to guide trade policy work and the allocation of scarce resources among competing priorities.

Annex 1 Recommendations, Executive Board Response, and Proposed Follow-up1

As presented in the implementation plan approved in December 2009 (SM/09/275). "Current status" reflects lEO’s assessment.

Annex 1 Compendium of Selected IMF Work on Trade Policy Surveillance

Multilateral

World Economic Outlook

  • ► Do Financial Crises Have Lasting Effects on Trade?—Fall 2010.

  • ► Exchange Rates and Trade Flows: Disconnected?—Fall 2015.

  • ► Global Trade: What’s Behind the Slowdown?—Fall 2016.

  • ► Spillovers from China’s Transition and from Migration—Fall 2016.

  • ► Understanding the Downward Trend in Labor Income Shares—Spring 2017.

  • ► The Price of Capital Goods: A Driver of Investment Under Treat?—Spring 2019.

  • ► The Drivers of Bilateral Trade and the Spillovers from Tariffs—Spring 2019.

Regional Economic Outlook—Asia-Pacific Region

  • ► Implications of Asia’s Regional Supply Chain for Rebalancing Growth—Spring 2011.

  • ► Does Growing Regional Integration Make Asian Economies Move More in Sync— Spring 2014.

  • ► Reaping the Benefits from Global Value Chains—Spring 2015.

  • ► Navigating the Transition: Trade and Financial Spillovers from China—Spring 2016.

  • ► China’s Evolving Trade with Advanced Upstream Economies and Commodity Exporters—Spring 2016.

Regional Economic Outlook—Middle East and Central Asia

  • ► Economic Cooperation and Integration in the CCA—Fall 2014.

  • ► Leveraging Trade to Boost Growth in the MENAP and CCA Regions—Fall 2017.

Regional Economic Outlook—Sub-Saharan Africa

  • ► Sub-Saharan Africa´s Engagement with Emerging Partners: Opportunities and Challenges—Fall 2011.

  • ► Global Value Chains: Where Are You? The Missing Link in Sub-Saharan Africa´s Trade Integration—Spring 2015.

Regional Economic Outlook—Western Hemisphere

  • ► Trade Integration in Latin America and the Caribbean: Hype, Hope, and Reality— Fall 2015.

Bilateral

Article IV Reports: China, Euro Area, Japan, United Kingdom, and United States

Article IV reports for 2010–18, for China, the euro area, Japan, the United Kingdom, and the United States, were reviewed to consider the extent and nature of trade policy coverage. Collectively these economies, together with 27 advanced members of the European Union (EU) accounted for 62 percent of global trade in goods and similarly 62 percent of global trade in services in 2018. The review found that between 2010–18, across all five sets of Article IV reports, staff provided diverse insights, advice, and recommendations on trade policy.

Article IV reports for China between 2010–18 highlight that bilateral trade policy surveillance has shifted over time, from generic advice on opening up trade, to a stronger focus on the implications of trade reforms in the context of China’s rebalancing and the country’s increased role in the global economy. Trade policy issues have included, for example, analysis of the implications for suppliers, as Chinese industries progressively moved up the value chain (2015); analysis and a table on outward trade spillovers and an assessment of factors causing a slowdown in imports (2016); detailed analysis of the consequences of a retreat from cross-border integration, including on China’s real GDP should higher trade barriers be imposed by trading partners, including scenarios in which China retaliated with similar tariffs, as well as advice on the investment climate and trade and on reform of state-owned enterprises and promotion of competition (2017); and an analysis of services’ trade restrictiveness and staf’s advice on accelerating opening up and on mitigating trade tensions. More recently there has also been increasing staff attention to new trade policy issues. The 2018 Article IV report for China, for example discusses e-commerce and foreign direct investment restrictiveness and opportunities from the Belt and Road Initiative.

After limited coverage of trade policy issues between 2010–16, Article IV reports for the euro area between 2017–18 focused on the impacts of rising global trade tensions and the potential consequences of Brexit. The 2017 report, for example, highlighted the need for ongoing modernization of intra-EU trade in goods statistics and for ambitious trade agreements, accompanied by policies to support adjustment to trade and to ensure that the gains from trade are evenly and widely distributed; and emphasized the rising importance of new issues in bilateral trade policy and trade policy surveillance, including discussion of legal clarity on the EU’s role in trade negotiations, and observing that the EU-Japan Economic Partnership Agreement constitutes the first international trade agreement to include a clear commitment to fight climate change and support the Paris goals. The euro area 2018 Article IV report considered the impacts of a hard Brexit on member countries, noting that the United Kingdom ranked among the euro area’s three largest trading partners, with supply-chain linkages implying substantial indirect trade links through third countries. Staff estimated that EU-27 real GDP would fall by up to 0.8 percent or 1.5 percent in the long run relative to the baseline, in the event of a standard free trade agreement or a default to World Trade Organization (WTO) rules, respectively, with varying impacts across euro area members and with no winners from Brexit.

The report dovetailed with similar analyses in the 2018 Spring WEO, which included a box on the implications of Brexit and an update paper to the G20 in the summer of 2018. The 2018 report also highlighted other emerging trade-related policy issues, for example, pointing to a doubling in the share of investment in intangibles, including research and development, software, databases, and intellectual property, from about 10 percent of gross fixed capital formation in Europe in the early 1990s to close to 20 percent in more recent years, with the bulk of the increase in the manufacturing and service trade sectors. Discussions with staff indicated that Fund surveillance through the Article IV process has generally been welcomed by members, with the Fund as an independent authoritative voice, particularly in the analysis of free trade agreements.

For Japan, sporadic references were made to trade policy during 2010–13, while the 2014 Article IV report highlighted structural factors, including the rising share of offshore production—exceeding 20 percent of overall manufacturing output—and Japan’s upstream position in the global supply chain, as having reduced the sensitivity of exports to fluctuations in the yen. More recent reports have focused on the effects of both the global trade slowdown and production offshoring on exports (2016); the impacts on Japan’s goods trade surplus and on growth from a global retreat from cross-border integration, including exposures to trade policy changes by both exporters and local producers relying on GVCs (2017); and an assessment of Japan’s trade and foreign direct investment regimes, illustrating their relative openness, comparing trade restrictiveness measures for Japan, the G20 average, and G20 advanced economy average (2018).

U.S. Article IV reports since 2010 have covered a wide range of trade policy issues, emphasizing prioritization of multilateral trade, periodically drawing attention to transition costs from greater trade integration and more recently urging caution in the use of import restrictions and emphasizing risks from increased trade protectionism. Attention to trade policy has been strongly concentrated in the period 2017–19. Reports from 2010–16 emphasized redoubling efforts to conclude the WTO Doha Round (2010); reaching agreement on large regional and plurilateral agreements while renewing efforts to advance the multilateral agenda (2012, 2013, 2014); and highlighting the likely transition costs to jobs and incomes from greater trade integration and effects on income polarization, and the need for training and temporary income support to mitigate downsides (2016). Reports since 2017 have considered the influence of trade-related factors, among others, in explaining a decline in labor’s share of income since 2000 (2017); highlighted potential gains from more ambitious trade agreements, while urging judicious use of import restrictions (2017); drawn attention to measures being taken by the U.S. administration to impose new tariffs or otherwise restrict imports into the United States (2018); and provided an assessment of the impact on North American trade from a successful renegotiation of NAFTA (2018).

Annex 3: Underpinnings for the Fund’S Work on Trade in the Articles of Agreement

The underlying purpose of the IMF’s work in trade is described in Article I(ii) of the Articles of Agreement. It specifies that a purpose of the Fund is “to facilitate the expansion and balanced growth of trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.”

While Article I(ii) specifies the purpose, the legal authority to work on trade issues, in the context of surveillance, use of Fund resources, and technical assistance, derives from other provisions; Article IV provides the basis for the Fund’s surveillance mandate; Article V, Section 3 authorizes the IMF to use its general resources to assist members to resolve their balance of payments in a manner that establishes adequate safeguards for the temporary use of those resources; and Article V, Section 2(b) provides that upon request the Fund may provide technical assistance provided such assistance is consistent with the purposes of the Fund.

Furthermore, Article X provides that the Fund shall cooperate with other international organizations having specialized responsibilities in related fields. The Article is particularly relevant to the IMF’s cooperation with the WTO, as both have overlapping jurisdiction on certain policy measures that have both exchange and trade attributes. Article VIII, Section 2(a) provides that, without the Fund’s approval, no member may impose restrictions on the making of payments and transfers for current international transactions. As certain provisions in WTO Agreements also cover international current payments and transactions, this necessitates close cooperation between the IMF and WTO, to avoid imposing conflicting requirements on their common membership.

Annex 4: Trade Policy Text Analysis

The evaluation update utilized text analysis to obtain a measure of the attention paid to trade policy issues across IMF documents. The results are useful to provide a quantitative picture of how coverage has varied over time, and also sheds light on how attention has shifted among different aspects of trade policy. The IEO used the Fund Document Extraction Toolkit (FDET), a data preparation tool developed by the IMF Information Technology Department (ITD) and benefitted from ITD´s support and access to the Fund’s document repository (ELib).

Text analysis was applied to the following IMF document series: Article IV reports; the World Economic Outlook (WEO); the Regional Economic Outlook (REO); External Sector Reports (ESR); the Managing Director’s Global Policy Agenda (GPA); the Managing Director’s speeches (MDS); IMF Working Papers (WP); Selected Issues Papers (SIPs); and selected country program documents (UFR). Text analysis was applied for the period from January 2000 (or for document series that were launched at a later date, such as the REOs, GPAs and ESRs, from their respective inception dates), to July 2019. Table A4.1 shows the total number of documents analyzed for each document series in each year from 2000 to 2019.

Table A4.1

Documents used for Text Analysis

Note: The 2019 data point is estimated by annualizing (multiplying by 2) the January 1–June 30, 2019 data. N/A = not applicable.

Using text analysis, all documents were searched to determine the number of occurrences of specific trade-policy-related terms in a document, which were then grouped in six general areas. Table A4.2 presents all terms searched and the classification used. These terms were identified by the IEO following interviews with external partners, IMF management and staff, Executive Board members and their staff and through a review of trade policy literature. The selection process built on the search criteria utilized by staff in the 2015 Review (IMF, 2015a).

Table A4.2

Terms and Classification used for Text Analysis

Caveats in using text analysis

There are a number of caveats to the use of text analysis, including: (i) the frequency of use of key words and phrases should not be taken as a measure of the quality of work embodied in the text, or as an definitive estimate of the volume of work done by staff, as this work could also be channeled through other series of documents; (ii) results from text analysis are dependent on the initial choice of search words and phrases used; and (iii) results are also dependent on the completeness of the document series used. The update encountered challenges regarding the completeness of the document series and the preparedness of documents for machine reading. The Fund’s ELib contains a large collection of documents that have been prepared for use in text analysis, enabling searches of key words and phrases that can be conducted with a high degree of confidence. However, at present it comprises an incomplete set of the Fund’s documents. Consequently, where available in ELib, these documents were used; and where unavailable, these were complemented by a PDF collection compiled by the IEO. Table A4.3 shows the composition of the two collections.

Table A4.3

Composition of Collections used for Text Analysis

Sources: IMF ELib and IEO compilation.

The exercise in developing a complete collection highlighted some duplication, multiple versions in different languages, and as noted, gaps in the availability of documents in ELib. As text analysis gains interest as a supplementary tool in the work of the Fund, it would be useful to address gaps in the Fund’s document management process, to strengthen support for the Fund’s FDET tool and to accelerate its development; and similarly to accelerate the development of a complete collection of all IMF document series within ELib.

References

  • Abrego, Lisandro, and others, 2019, “The African Continental Free Trade Agreement: Welfare Gains Estimates from a General Equilibrium Model,” IMF Working Paper No. 19/124 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Ahn, JaeBin, and others, 2016, “Reassessing the Productivity Gains from Trade Liberalization,” IMF Working Paper No. 16/77 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Aiyar, Shekhar, and others, 2013, “German-Central European Supply Chain Cluster Report,” Country Report 13/263 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Aslam, Aqib, Natalija Novta, and Fabiano Rodrigues-Bastos, 2017, “Calculating Trade in Value-Added,” IMF Working Paper No. 17/178 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Arizala, Francisco, and others, 2019, “Regional Growth Spillovers in Sub-Saharan Africa,” IMF Working Paper No. 19/160 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Autor, David H., 2013, “The ‘Task Approach’ to Labor Markets: An Overview,” Journal for Labour Market Research, February, pp. 115.

    • Search Google Scholar
    • Export Citation
  • Autor, David H., 2018, “Trade and labor markets: Lessons from China’s rise,” IZA World of Labor, February.

  • Boz, Emine, Gita Gopinath, and Mikkel Plagborg-Møller, 2018, “Global Trade and the Dollar,” VOX, CEPR Policy Portal (Washington: Center for Economic and Policy Research).

    • Search Google Scholar
    • Export Citation
  • Boz, Emine, Nan Li, and Hongrui Zhang, 2019, “Effective Trade Costs and the Current Account: An Empirical Analysis,” IMF Working Paper No. 19/8 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Cerdeiro, Diego A., 2016, “Estimating the Effects of the Trans-Pacific Partnership (TPP) on Latin America and the Caribbean (LAC),” IMF Working Paper No. 16/101 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Cerdeiro, Diego A., and Rachel J. Nam, 2018, “A Multidimensional Approach to Trade Policy Indicators,” IMF Working Paper No. 18/32 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Dabla-Norris, Era, and others, 2015, “Causes and Consequences of Income Inequality: A Global Perspective,” IMF Staff Discussion Note 15/13 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Dao, Mai Chi, and others, 2017, “Why Is Labor Receiving a Smaller Share of Global Income? Theory and Empirical Evidence,” IMF Working Paper No. 17/169 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • De Backer, Koen, and Dorothee Flaig, 2017, “The future of global value chains: Business as usual or “a new normal”?OECD Science, Technology and Industry Policy Papers No. 41 (Paris: Organisation for Economic Cooperation and Development).

    • Search Google Scholar
    • Export Citation
  • Dollar, David, 2019, “Invisible links: Value chains transform manufacturing—and distort the globalization debate,” Finance and Development, Vol. 56, No. 2 (June), pp. 5053.

    • Search Google Scholar
    • Export Citation
  • Ebeke, Christian, and others, 2018, “Trade Uncertainty and Investment in the Euro Area,” IMF Working Paper No. 18/281 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Furceri, Davide, and others, 2019, “Macroeconomic Consequences of Tariffs,” IMF Working Paper No. 19/9 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Gopinath, Gita, and others, 2018, “Dominant Currency Paradigm,” CREI Lectures in Macroeconomics 2018 (Barccelona: Centre de Recerca en Economia Internacional).

    • Search Google Scholar
    • Export Citation
  • Gregory, Rob, and others, 2010, “Trade and the Crisis: Protect or Recover,” IMF Staff Position Note 10/07 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Gruss, Bertrand, Malhar Nabar, and Marcos Poplawski-Ribeiro, 2018, “Growth Accelerations and Reversals in Emerging Market and Developing Economies: The Role of External Conditions,” IMF Working Paper No. 18/52 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Henn, Christian, Chris Papageorgiou, and Nikola Spatafora, 2013, “Export Quality in Developing Countries,” IMF Working Paper No. 13/108 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Huidrom, Raju, and others, 2019, “Trade Tensions, Global Value Chains and Spillovers: Insights for Europe,” Departmental Paper 19/10 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Ignatenko, Anna, Faezeh Raei, and Borislava Mircheva, 2019, “Global Value Chains: What are the Benefits and Why Do Countries Participate?IMF Working Paper No. 19/18 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Independent Evaluation Office of the International Monetary Fund (IEO), 2009, IMF Involvement in International Trade Policy Issues (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Independent Evaluation Office of the International Monetary Fund (IEO), 2018, Structural Conditionality in IMF-Supported Programs: Evaluation Update (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 1996, “Agreement between the IMF and the WTO” (Washington).

  • International Monetary Fund, 2001, “Structural Conditionality in Fund-Supported Programs,” February (Washington).

  • International Monetary Fund, 2002, “Operational Guidance Note for Staff Following the 2002 Biennial Surveillance Review,” September (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2009, “Implementation Plan in Response to Board-Endorsed Recommendations Arising from the IEO Evaluation of IMF Involvement in International Trade Policy Issues,” November (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2010a, “Reference Note on Trade in Financial Services,” IMF Policy Paper, September (Washington).

  • International Monetary Fund, 2010b, “Reference Note on Trade Policy, Preferential Trade Agreements, and WTO Consistency,” October (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2011, “The WTO Doha Trade Round—Unlocking the Negotiations and Beyond,” IMF Policy Paper, November (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2012, “Decision on Bilateral and Multilateral Surveillance,” Decision No. 15203-(12/72), July, Selected Decisions and Selected Documents of the IMF, Thirty-Ninth Issue (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2013a, “Jobs and Growth: Analytical and Operational Considerations for the Fund,” March (Washington).

  • International Monetary Fund, 2013b, “Guidance Note on ‘Jobs and Growth Issues in Surveillance and Program Work,’September (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2014, “Review of the IMF’s Communications Strategy,” June (Washington).

  • International Monetary Fund, 2015a, “Review of the Role of Trade in the Work of the Fund” (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2015b, “The Chairman’s Summing Up—Review of the Role of Trade in the Work of the Fund,” Executive Board Meeting 15/21, February (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2016, “Group of Twenty—Reinvigorating Trade to Support Growth: A Path Forward,” May (Washington).

  • International Monetary Fund, 2018a, “2018 External Sector Report: Tackling Global Imbalances amid Rising Trade Tensions,” July (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2018b, “Regional Economic Outlook: Western Hemisphere Region—An Uneven Recovery,” October (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2018c, “Regional Economic Outlook: Asia Pacific—Asia at the Forefront: Growth Challenges for the Next Decade and Beyond,” October (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2019a, “2019 External Sector Report: Te Dynamics of External Adjustment,” July (Washington).

  • International Monetary Fund, 2019b, Sub-Saharan Africa Regional Economic Outlook: Recovery Amid Elevated Uncertainty, April (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, World Bank, and World Trade Organization, 2017, “Making Trade an Engine of Growth for All: The Case of Trade and for Policies to Facilitate Adjustment,” for discussion at the meeting of G20 Sherpas, March (Frankfurt).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2018, “Reinvigorating Trade and Inclusive Growth,” February (Washington).

  • Jaumotte, Florence, Subir Lall, and Chris Papageorgiou, 2013, “Rising Income Inequality: Technology, or Trade and Financial Globalization & Quest,” IMF Economic Review, Vol. 61, Issue 2, pp. 271309.

    • Search Google Scholar
    • Export Citation
  • Johns, Bartley, and others, 2015, “The Role of Trade in Ending Poverty,” (Geneva: World Trade Organization).

  • Lagarde, Christine, 2015, “Reinvigorate Trade to Boost Global Economic Growth,” Address at the U.S. Ex-Im Bank Conference, April (Washington).

    • Search Google Scholar
    • Export Citation
  • Lagarde, Christine, 2018, “New Economic Landscape, New Multilateralism,” Address at the meeting of the IMF Board of Governors, October (Bali).

    • Search Google Scholar
    • Export Citation
  • Lang, Valentin F., and Marina Mendes Tavares, “The Distribution of Gains from Globalization,” IMF Working Paper No. 18/54 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Lee, Dongyeol, and Huan Zhang, 2019, “Export Diversification in Low-Income Countries and Small States: Do Country Size and Income Level Matter?IMF Working Paper No. 19/118 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Loungani, Prakash, and others, 2017, “World Trade in Services: Evidence from a New Dataset,” IMF Working Paper No. 12/77 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • McKinsey Global Institute, 2014, “Global flows in a digital age: How trade, finance, people, and data connect the world economy.”

  • Milanovic, Branko, 2013, “Global Income Inequality in Numbers: in History and Now,” Global Policy, Vol. 4, Issue 2, pp. 198208.

  • Montagnat-Rentier, Gilles, 2019, “Revenue Administration: Short-Term Measures to Increase Customs Revenue in Low-Income and Fragile Countries,” Technical Notes and Manuals, Fiscal Affairs Department (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Ostry, Jonathan D., Prakash Loungani, and Andrew Berg, 2019, Confronting Inequality: How Societies Can Choose Inclusive Growth (New York: Columbia University Press).

    • Search Google Scholar
    • Export Citation
  • Payosova, Tetyana, Gary C. Hufauer, and Jeffrey J. Schott, 2018, “The Dispute Settlement Crisis in the World Trade Organization: Causes and Cures,” PIIE Policy Brief (Washington: Peterson Institute for International Economics).

    • Search Google Scholar
    • Export Citation
  • Rahman, Jesmin, and Tianli Zhao, 2013, “Export Performance in Europe: What Do We Know from Supply Links?IMF Working Paper No. 13/62 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Shin, Hyun Song, 2019, What is behind the recent slowdown,” at the “Public Finance Dialogue” workshop arranged by German Federal Ministry of Finance and Centre for European Economic Research, May (Berlin: Bank for International Settlements).

    • Search Google Scholar
    • Export Citation
  • Van Wersch, Cornelia Lotte, 2019, “Statistical Coverage of Trade Finance—Fintechs and Supply Chain Financing,” IMF Working Paper No. 19/165 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • World Trade Organization, 2010, Annual Report 2010 (Geneva: World Trade Organization).

Statement by the Managing Director: On the Independent Evaluation Office Report on imf Involvement in International Trade Policy Issues: Evaluation Update

I would like to thank the Independent Evaluation Office (IEO) for preparing this informative update to the 2009 report on IMF Involvement in International Trade Policy Issues. It is reassuring that the Update recognizes that IMF trade work remains generally well-aligned with the Fund’s mandate and comparative advantage. I concur that the remaining challenges need our continued attention and collective commitment.

Over the last decade—the period covered by the Update—global trade has undergone major changes. The Update credits the Fund for its active and timely response to many of these changes, and for playing a prominent role in championing open, rules-based global trade. The Update also underscores the quality, relevance, and timeliness of the Fund’s multilateral work on trade policy, such as through the WEO, joint trade papers with the World Bank and WTO, and input to the G-20. As the Update also notes, this work has benefitted from rekindling the working relationship with the WTO—which was greatly appreciated by senior WTO officials.

The IEO has appropriately identified several challenges that we face in our ongoing trade work. These include paying more attention to rapidly developing trade-related issues such as e-commerce and services.

I would like to conclude by thanking the IEO for this informative report as a good basis to advance our dialogue.

1

The report adopts the same trade policy definition and approach as the 2009 evaluation: measures that directly and primarily aim to influence the quantity and/or value of a country’s own or its trading partners’ imports and exports of goods and services, encompassing traditional instruments, including tariffs, quotas, and export subsidies and taxes; customs administration, preferential trade agreements and domestic “behind-the-border” policies that distort trade. As with the 2009 evaluation, other policies that also affect trade, including exchange controls and multiple exchange rates and policies that affect the domestic impact of trade, for example, on employment and income distribution, while certainly noteworthy, are nevertheless treated as outside the scope of the evaluation.

2

Management Implementation Plans in response to IEO recommendations are followed up in Periodic Monitoring Reports. In this case, the implementation of actions associated with the evaluation recommendations were monitored until 2015, when the 2015 Review was published.

3

Annex 1 presents (i) the original recommendations; (ii) Executive Directors’ responses, as recorded in the summing up; (iii) the actions endorsed by the Executive Board, as shown in the implementation plan (IMF, 2009); and (iv) the IEO’s current assessment regarding implementation.

5

Global Trade Alert (https://www.globaltradealert.org/global_dynamics. Global Trade Alert’s definition of “harmful” measures does not necessarily imply WTO-inconsistency).

6

Several large regional free trade agreements (FTAs) have been agreed or are in progress since the 2009 evaluation, with many either progressing to or reaching conclusion in the last two years. These include the Canada-EU Comprehensive Economic and Trade Agreement, which entered into force in September 2017; the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (December 2018), including 11 countries representing 13.4 percent of global GDP; the EU-Japan Economic Partnership Agreement (February 2019); the U.S.-Mexico-Canada Agreement (awaiting ratification), which will govern trade in North America and replace the North American Free Trade Agreement (NAFTA); and the African Continental Free Trade Agreement, which entered into force in May 2019. Expansions of two existing plurilateral agreements were also reached among groups of WTO members, including the WTO Agreement on Government Procurement (2014) and the WTO Information Technology Agreement (2015).

7

Article I(ii) of the Articles of Agreement specifies the underlying purpose of the Fund’s work on trade, while other provisions in the Articles provide the Fund with the legal authority to work on trade issues (see Annex 3 and IMF, 2015a).

8

The WEO is published semi-annually and typically includes outlook chapters and analytical chapters—which present in-depth analysis on specific issues of relevance.

9

While the structure and periodicity of issues has changed over time, the IEO has identified those analytical chapters (or sections within chapters) that were focused mainly on trade policy issues. Chapters that dealt only marginally with these issues are not counted. Report updates are not included. Annex 2 lists the analytical chapters identified

10

Annex 4 discusses the methodology, sources, and caveats of the text analysis presented in this update.

11

The update reviewed all Spring and Fall REOs for the period 2010–19 to identify REO chapters largely or exclusively devoted to trade policy issues. For Spring 2019, the sample includes REOs published by July 2019 (AFR and MCD).

12

The limited trade coverage in the EUR REOs may reflect that (i) most countries in Europe are already part of, or have considerable access to, the EU (the world’s largest trade bloc), making trade less of an issue in comparison with other regions; (ii) EUR REOs typically have a limited number of analytical chapters; and (iii) trade policy issues (including trade agreements with other regions) feature in the euro area surveillance report. In addition, regional issues have featured in EUR working papers and other publications, for example, Huidrom and others (2019) and Aiyar and others (2013).

13

The exercise extended a textual analysis approach and methodology developed by staff and utilized in the detailed 2015 Review.

14

A detailed reference includes a complete sentence or more than half of a paragraph covering the relevant theme.

15

Text analysis assessed: tariff and non-tariff measures; goods and services trade; trade agreements; spillovers and trade tensions; the multilateral trading system; and GVCs and emerging trade policy issues, examining the frequency with which key terms and phrases associated with each policy issue appeared in each document (see Annex 4).

16

A score of 1 was assigned where the full chapter covered trade policy. Where at least three-quarters of the chapter covered trade policy, a score of 0.75 was assigned. Where at least a half of the chapter covered trade policy, a score of 0.5 was assigned. No value was assigned where trade policy covered less than a half of the chapter.

17

The Global Trade Policy Analysis is a network of researchers and policymakers analyzing international policy issues, coordinated by the Center for Global Trade Analysis at Purdue University. Associate Members include the IMF, World Bank, several UN agencies, and the WTO.

21

The Monitoring of Fund Arrangements (MONA) database contains information on Fund-supported programs and is publicly available at https://www.imf.org/external/np/pdr/mona/index.aspx. The IEO’s evaluation update on structural conditionality (IEO, 2018) discusses the design, usability, and efficacy of MONA.

22

The Policy Support Instrument approved for Rwanda in 2010 required an export diversification strategy and action plan, classified under MONA’s category “8. International trade policy, excluding customs reforms.” The conditionality of 38 programs, between 2010 and 2018, explicitly mentioned customs-related measures, generally aimed at improving customs administrations and increasing revenue collection, classified under MONA’s category “1.2. Revenue administration, including customs.”

23

It is a Fund policy, however, that all Fund arrangements and instruments of policy support include a standard continuous performance criterion on not imposing or intensifying import restrictions for balance of payments reasons.

24

The Conditionality Guidelines require that measures may be established as conditionality where they are of critical importance for achieving the goals of the program and are also reasonably within the direct or indirect control of members.

25

Among trade, current account, capital account, labor, financial and product reform categories, average regulatory liberalization of trade ranks highest, in both emerging market economies and LICs.

26

Oldest data available for this category in the MONA database.

27

Introduced in 2004, following concerns expressed by developing countries in the context of the Doha Round, the TIM was designed to help members face balance of payments shortfalls that might result from trade liberalization measures implemented by other countries. The TIM is not a special lending facility, but a policy aimed at making resources more predictably available under the IMF lending facilities. Only three members have obtained support through the TIM: Bangladesh (2004), the Dominican Republic (2005), and Madagascar (2006).

28

The Fund and the Managing Director play this role in accordance with the Integrated Surveillance Decision and the Fund’s communications strategy (IMF, 2014).

29

The list of countries is fluid and includes those countries (currently 22) that, according to SPRXP’s assessment, have a larger impact on trade policy by virtue of the size of their economies and the potential for progress across several key trade policy areas, both traditional (e.g., agricultural, goods market access) and “frontier” areas (e.g., services, investment, digital trade, or regulatory cooperation).

IMF Involvement in International Trade Policy Issues
  • Abrego, Lisandro, and others, 2019, “The African Continental Free Trade Agreement: Welfare Gains Estimates from a General Equilibrium Model,” IMF Working Paper No. 19/124 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Ahn, JaeBin, and others, 2016, “Reassessing the Productivity Gains from Trade Liberalization,” IMF Working Paper No. 16/77 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Aiyar, Shekhar, and others, 2013, “German-Central European Supply Chain Cluster Report,” Country Report 13/263 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Aslam, Aqib, Natalija Novta, and Fabiano Rodrigues-Bastos, 2017, “Calculating Trade in Value-Added,” IMF Working Paper No. 17/178 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Arizala, Francisco, and others, 2019, “Regional Growth Spillovers in Sub-Saharan Africa,” IMF Working Paper No. 19/160 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Autor, David H., 2013, “The ‘Task Approach’ to Labor Markets: An Overview,” Journal for Labour Market Research, February, pp. 115.

    • Search Google Scholar
    • Export Citation
  • Autor, David H., 2018, “Trade and labor markets: Lessons from China’s rise,” IZA World of Labor, February.

  • Boz, Emine, Gita Gopinath, and Mikkel Plagborg-Møller, 2018, “Global Trade and the Dollar,” VOX, CEPR Policy Portal (Washington: Center for Economic and Policy Research).

    • Search Google Scholar
    • Export Citation
  • Boz, Emine, Nan Li, and Hongrui Zhang, 2019, “Effective Trade Costs and the Current Account: An Empirical Analysis,” IMF Working Paper No. 19/8 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Cerdeiro, Diego A., 2016, “Estimating the Effects of the Trans-Pacific Partnership (TPP) on Latin America and the Caribbean (LAC),” IMF Working Paper No. 16/101 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Cerdeiro, Diego A., and Rachel J. Nam, 2018, “A Multidimensional Approach to Trade Policy Indicators,” IMF Working Paper No. 18/32 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Dabla-Norris, Era, and others, 2015, “Causes and Consequences of Income Inequality: A Global Perspective,” IMF Staff Discussion Note 15/13 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Dao, Mai Chi, and others, 2017, “Why Is Labor Receiving a Smaller Share of Global Income? Theory and Empirical Evidence,” IMF Working Paper No. 17/169 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • De Backer, Koen, and Dorothee Flaig, 2017, “The future of global value chains: Business as usual or “a new normal”?OECD Science, Technology and Industry Policy Papers No. 41 (Paris: Organisation for Economic Cooperation and Development).

    • Search Google Scholar
    • Export Citation
  • Dollar, David, 2019, “Invisible links: Value chains transform manufacturing—and distort the globalization debate,” Finance and Development, Vol. 56, No. 2 (June), pp. 5053.

    • Search Google Scholar
    • Export Citation
  • Ebeke, Christian, and others, 2018, “Trade Uncertainty and Investment in the Euro Area,” IMF Working Paper No. 18/281 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Furceri, Davide, and others, 2019, “Macroeconomic Consequences of Tariffs,” IMF Working Paper No. 19/9 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Gopinath, Gita, and others, 2018, “Dominant Currency Paradigm,” CREI Lectures in Macroeconomics 2018 (Barccelona: Centre de Recerca en Economia Internacional).

    • Search Google Scholar
    • Export Citation
  • Gregory, Rob, and others, 2010, “Trade and the Crisis: Protect or Recover,” IMF Staff Position Note 10/07 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Gruss, Bertrand, Malhar Nabar, and Marcos Poplawski-Ribeiro, 2018, “Growth Accelerations and Reversals in Emerging Market and Developing Economies: The Role of External Conditions,” IMF Working Paper No. 18/52 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Henn, Christian, Chris Papageorgiou, and Nikola Spatafora, 2013, “Export Quality in Developing Countries,” IMF Working Paper No. 13/108 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Huidrom, Raju, and others, 2019, “Trade Tensions, Global Value Chains and Spillovers: Insights for Europe,” Departmental Paper 19/10 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Ignatenko, Anna, Faezeh Raei, and Borislava Mircheva, 2019, “Global Value Chains: What are the Benefits and Why Do Countries Participate?IMF Working Paper No. 19/18 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Independent Evaluation Office of the International Monetary Fund (IEO), 2009, IMF Involvement in International Trade Policy Issues (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Independent Evaluation Office of the International Monetary Fund (IEO), 2018, Structural Conditionality in IMF-Supported Programs: Evaluation Update (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 1996, “Agreement between the IMF and the WTO” (Washington).

  • International Monetary Fund, 2001, “Structural Conditionality in Fund-Supported Programs,” February (Washington).

  • International Monetary Fund, 2002, “Operational Guidance Note for Staff Following the 2002 Biennial Surveillance Review,” September (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2009, “Implementation Plan in Response to Board-Endorsed Recommendations Arising from the IEO Evaluation of IMF Involvement in International Trade Policy Issues,” November (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2010a, “Reference Note on Trade in Financial Services,” IMF Policy Paper, September (Washington).

  • International Monetary Fund, 2010b, “Reference Note on Trade Policy, Preferential Trade Agreements, and WTO Consistency,” October (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2011, “The WTO Doha Trade Round—Unlocking the Negotiations and Beyond,” IMF Policy Paper, November (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2012, “Decision on Bilateral and Multilateral Surveillance,” Decision No. 15203-(12/72), July, Selected Decisions and Selected Documents of the IMF, Thirty-Ninth Issue (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2013a, “Jobs and Growth: Analytical and Operational Considerations for the Fund,” March (Washington).

  • International Monetary Fund, 2013b, “Guidance Note on ‘Jobs and Growth Issues in Surveillance and Program Work,’September (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2014, “Review of the IMF’s Communications Strategy,” June (Washington).

  • International Monetary Fund, 2015a, “Review of the Role of Trade in the Work of the Fund” (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2015b, “The Chairman’s Summing Up—Review of the Role of Trade in the Work of the Fund,” Executive Board Meeting 15/21, February (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2016, “Group of Twenty—Reinvigorating Trade to Support Growth: A Path Forward,” May (Washington).

  • International Monetary Fund, 2018a, “2018 External Sector Report: Tackling Global Imbalances amid Rising Trade Tensions,” July (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2018b, “Regional Economic Outlook: Western Hemisphere Region—An Uneven Recovery,” October (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2018c, “Regional Economic Outlook: Asia Pacific—Asia at the Forefront: Growth Challenges for the Next Decade and Beyond,” October (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2019a, “2019 External Sector Report: Te Dynamics of External Adjustment,” July (Washington).

  • International Monetary Fund, 2019b, Sub-Saharan Africa Regional Economic Outlook: Recovery Amid Elevated Uncertainty, April (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, World Bank, and World Trade Organization, 2017, “Making Trade an Engine of Growth for All: The Case of Trade and for Policies to Facilitate Adjustment,” for discussion at the meeting of G20 Sherpas, March (Frankfurt).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2018, “Reinvigorating Trade and Inclusive Growth,” February (Washington).

  • Jaumotte, Florence, Subir Lall, and Chris Papageorgiou, 2013, “Rising Income Inequality: Technology, or Trade and Financial Globalization & Quest,” IMF Economic Review, Vol. 61, Issue 2, pp. 271309.

    • Search Google Scholar
    • Export Citation
  • Johns, Bartley, and others, 2015, “The Role of Trade in Ending Poverty,” (Geneva: World Trade Organization).

  • Lagarde, Christine, 2015, “Reinvigorate Trade to Boost Global Economic Growth,” Address at the U.S. Ex-Im Bank Conference, April (Washington).

    • Search Google Scholar
    • Export Citation
  • Lagarde, Christine, 2018, “New Economic Landscape, New Multilateralism,” Address at the meeting of the IMF Board of Governors, October (Bali).

    • Search Google Scholar
    • Export Citation
  • Lang, Valentin F., and Marina Mendes Tavares, “The Distribution of Gains from Globalization,” IMF Working Paper No. 18/54 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Lee, Dongyeol, and Huan Zhang, 2019, “Export Diversification in Low-Income Countries and Small States: Do Country Size and Income Level Matter?IMF Working Paper No. 19/118 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Loungani, Prakash, and others, 2017, “World Trade in Services: Evidence from a New Dataset,” IMF Working Paper No. 12/77 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • McKinsey Global Institute, 2014, “Global flows in a digital age: How trade, finance, people, and data connect the world economy.”

  • Milanovic, Branko, 2013, “Global Income Inequality in Numbers: in History and Now,” Global Policy, Vol. 4, Issue 2, pp. 198208.

  • Montagnat-Rentier, Gilles, 2019, “Revenue Administration: Short-Term Measures to Increase Customs Revenue in Low-Income and Fragile Countries,” Technical Notes and Manuals, Fiscal Affairs Department (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Ostry, Jonathan D., Prakash Loungani, and Andrew Berg, 2019, Confronting Inequality: How Societies Can Choose Inclusive Growth (New York: Columbia University Press).

    • Search Google Scholar
    • Export Citation
  • Payosova, Tetyana, Gary C. Hufauer, and Jeffrey J. Schott, 2018, “The Dispute Settlement Crisis in the World Trade Organization: Causes and Cures,” PIIE Policy Brief (Washington: Peterson Institute for International Economics).

    • Search Google Scholar
    • Export Citation
  • Rahman, Jesmin, and Tianli Zhao, 2013, “Export Performance in Europe: What Do We Know from Supply Links?IMF Working Paper No. 13/62 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Shin, Hyun Song, 2019, What is behind the recent slowdown,” at the “Public Finance Dialogue” workshop arranged by German Federal Ministry of Finance and Centre for European Economic Research, May (Berlin: Bank for International Settlements).

    • Search Google Scholar
    • Export Citation
  • Van Wersch, Cornelia Lotte, 2019, “Statistical Coverage of Trade Finance—Fintechs and Supply Chain Financing,” IMF Working Paper No. 19/165 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • World Trade Organization, 2010, Annual Report 2010 (Geneva: World Trade Organization).