This chapter surveys major developments in Fund members’ restrictive practices affecting international trade and financial transactions. These practices take the form of either quantitative restrictions or price-related measures that involve implicit or explicit taxes and subsidies affecting international transactions. Most of the practices are described in detail in the country-specific reports that comprise the Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER).
This chapter surveys major developments in Fund members’ restrictive practices affecting international trade and financial transactions. These practices take the form of either quantitative restrictions or price-related measures that involve implicit or explicit taxes and subsidies affecting international transactions. Most of the practices are described in detail in the country-specific reports that comprise the Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER).
Quantitative Restrictions on Imports
Almost all Fund member countries maintain some quantitative controls on imports. Such restrictions limit the amount or value of imports through licensing procedures, the administrative allocation of foreign exchange, tied imports or countertrade, prohibitions, and other discretionary actions by the authorities to control various categories of imports. Quantitative restrictions can be targeted at specific products, countries, and even enterprises. Their sectoral and bilateral nature makes them relatively simple to apply; their distorting and discriminatory impact has led the Fund and the General Agreement on Tariffs and Trade (GATT) to strive for the elimination of such controls. For the Fund, quantitative import controls and other trade restrictions are subject to surveillance because of their implications for exchange rate policies under Article IV, Section 2, of the Articles of Agreement. Issues in regard to trade policies were reviewed recently in the Fund’s Executive Board.14
Many of these restrictions constitute outright bans and are maintained more or less permanently for health or security reasons; restrictions on drugs and arms are obvious examples. Otherwise, the maintenance or intensification of quantitative import controls reflects the desire of governments to protect particular industries, or even enterprises, or to conserve foreign exchange reserves. Even in situations where the exchange rate is fully market-determined, the authorities may be unwilling to accept fully its resource allocation implications for specific sectors, either in the short run to smooth the necessary adjustments, or in the longer run. The nature and especially the extent of trade restrictions can alter relative prices between sectors, leading to distortions in resource allocation and influencing the market-clearing functions of exchange rate and other macroeconomic variables.
Chart 12 demonstrates divergent trends in quantitative import controls between industrial countries and developing countries in 1988. Whereas developing countries on balance have been stepping up the pace of liberalization, albeit from a considerably more restrictive base, the industrial countries have intensified their net recourse to quantitative import controls. However, in 1988 relatively few new measures were taken by industrial countries in this area. These occurred under the Uruguay Round pledge of a “standstill” on trade-restricting measures inconsistent with the GATT.
The increasing recourse to quantitative trade restrictions by industrial countries since the mid-1980s has been mainly confined to the European Communities (EC) countries and the United States. The major exceptions to the tightening of restrictions were Japan, Australia, New Zealand, and, to some extent, Canada, where a net opening up of trade prevailed. Among the controls implemented to regulate access to these countries’ markets, export restraint arrangements negotiated with each supplying country on a bilateral basis have continued to replace quantitative restrictions governed by GATT rules.15 Over the course of the 1980s, as traditional trade restrictions in the form of quotas and tariffs have been eased—in the context of the Tokyo Round multilateral discussions and elsewhere—sector-specific and bilateral agreements to restrain trade have proliferated (Chart 13). The Uruguay Round aims to resolve long-standing problems in areas such as agriculture, textiles and clothing, and safeguards, and to agree on multilateral rules in the “new areas” of services, trade-related investment measures, and trade-related aspects of intellectual property rights. Some positive results were achieved at the midterm review of the Uruguay Round, which was begun in Montreal in December 1988 and completed in Geneva in April 1989. These included agreements on procedural issues in all negotiating groups; comprehensive guidelines for the negotiation of a framework regarding the progressive liberalization of trade in services; a short-term “freeze” by industrial countries on domestic and export support and protection levels in the agricultural sector, together with agreement that the long-term objective is to provide for substantial progressive reductions in agricultural support and protection sustained over an agreed period of time; the establishment of a trade surveillance mechanism for individual GATT members; and agreement on concrete liberalization measures by industrial countries in the area of tropical products.
The prevalence of voluntary export restraints (VERs) stems also from the fact that, on the face of it, they are applied “voluntarily” by exporters, so that their GATT consistency has been viewed as unclear. Even more than tariffs and quotas, their numbers and quantitative impact are difficult to assess. This is because in large measure VERs result from bilateral discussions, which, although not actually imposing, raise the threat of antidumping or countervailing duties.16 In most of these discussions, the notions of reciprocity and “fair” trade have become underlying principles. As noted above, the EC and the United States account for a large proportion of these measures, which concern trade between them, as well as with Japan, Korea, Taiwan Province of China, and other developing countries. The number of bilateral trade negotiations and disputes between industrial countries and developing country exporters of manufactures has been on the increase in 1987 and 1988. This rise has been part of a trend that began around 1986 when, as a result of the improved competitiveness of their manufactured exports, some developing country exporters of manufactures began to capture a growing share of world trade, concentrated especially in certain industrial country markets. Outside of agriculture and textiles, specific quotas are seldom used as a major form of import control in most industrial countries. Hence, the intensification of nontariff measures in recent years has come about through recourse to VERs.
Nontariff measures, and VERs in particular, are especially pernicious in their effects because of their lack of transparency and their distortive effects and also because they heighten uncertainty about access to exports markets other than those directly affected. In addition, VERs are applied on a discriminatory basis outside GATT control and thus undermine the fundamental most-favored-nation principle of GATT. Measurement problems in this area are particularly difficult, but the end result of tariffs and quantitative controls, including VERs, is the same: they raise the price of imported goods in a particular market relative to prices without restrictions and relative to world market prices. For instance, a recent study estimates that the net effect of VERs on steel imports to the United States has raised the price of steel sold in the United States—as U.S. producers raised their prices behind protective barriers—by 25 percent above equivalent Japanese prices on average over the period 1969–85.17 However, since VERs are less transparent than tariffs, the balance of payments and budgetary effects are disguised. In addition, unlike tariffs where the beneficiary of the consumer welfare loss is the government budget, quantitative restrictions benefit the foreign exporter, depending upon the price elasticity of demand.
By altering the effective bilateral, sectoral terms of trade, quantitative controls act in the same manner as an exchange rate change, but in an implicit, discriminatory fashion. In fact, the increasing recourse by industrial countries to VERs stems from difficulties particular sectors have in accepting the international resource allocation effects of market-determined exchange rates and whose protests may be vociferous, or where the transitional employment effects do not seem to be tolerable. However, VERs are not “transitional” measures. Once applied, few quotas or VERs are removed—the Multifiber Arrangement, for example, has been in existence for 28 years despite significant structural adjustment in some industrial country textile sectors.
For EC countries, the focus has continued on the trade-distorting and restrictive effects of the Common Agricultural Policy. One third to one half of all agricultural imports in major EC countries are covered by quotas and monitoring arrangements.18 In 1988 trade disputes arose over the imposition of import restrictions on apples and hormone-treated beef. The EC accounts for about half of the VERs applied by industrial countries. In 1988, 25 new known VERs were applied after an increase of 44 in the previous year. Of the total outstanding VERs in 1988, 102 were applied Community-wide, and another 44 were applied individually by one or more countries under Community auspices.
The EC is implementing a broad-ranging program to reduce regulatory barriers and liberalize trade and factor movements within the Community. With the expected abolition of internal borders in 1992, national restrictions on imports from third countries will no longer be enforceable. By the end of 1988, about 38 percent of the 279 proposals to establish the single market had been adopted. Only 50 remain to be drafted and circulated for discussion. The most significant progress has been made in removing capital controls, enhancing labor mobility, liberalizing road transport, harmonizing technical standards affecting pharmaceutical products, and reducing customs formalities.
For the United States, as noted above, most of the VERs have arisen from the pursuit, or threatened pursuit, of antidumping or countervailing duty investigations. The Omnibus Trade and Competitiveness Law of 1988, in particular, stipulates a number of action deadlines in 1989, notably May 30, by which time the U.S. Trade Representative was required to identify priority countries which are viewed as maintaining pervasive import barriers and market-distorting practices. Negotiations would then be required to eliminate all of the priority trade practices of these countries within three years.
Since 1985 Japan has implemented a series of market-opening measures for agricultural and industrial goods as well as in the service sector, with most of the measures in place well before the July 1988 deadline. Moreover, in 1988 Japan agreed to reduce trade barriers as a result of GATT panel investigations and bilateral negotiations outside the GATT. In the agricultural sector, which has traditionally been heavily protected, Japan agreed to phase out quotas on eight out of ten products found to be inconsistent with GATT rules. Japan implemented necessary changes following a finding in November 1987 of a GATT panel investigation that different tax rates applied to liquor of different quality and grade favored local products. Separate bilateral discussions with the United States and Australia also resulted in Japan’s agreement to phase out its quotas on imports of beef and replace them with tariffs; and bilateral negotiations with the United States resulted in Japan’s agreement to phase out its quotas on citrus fruits. Bilateral discussions have also been undertaken with the EC to ease barriers arising from standards, testing, and certification procedures in Japan, particularly on automobiles and pharmaceuticals. Certain sector-specific liberalization measures have resulted from bilateral discussions, although concerns of discrimination against third parties were raised with reference to the United States-Japan semiconductor agreement that was concluded in September 1986, as well as United States-Japan bilateral discussions on government procurement.
Among smaller industrial countries, New Zealand announced in July 1988 that import licensing requirements will be eliminated for all imports not subject to industry plans. As a result, about 80 percent of the value of total imports will be free of controls.
In developing countries the import liberalization trend observed in 1986 and 1987 has continued. In 1988, 20 countries applied some 50 different liberalization measures to imports, in some cases wide-ranging ones, whereas 6 countries imposed or intensified 13 import restrictions. Although the intensity and scope of the various measures are not strictly comparable, it is notable that the movement toward net liberalization has gathered momentum; the number of tightening measures in each year has declined steadily. In this period, Bolivia, The Gambia, Guinea, Guinea-Bissau, Haiti, Nigeria, Paraguay, and Senegal have virtually eliminated import licensing. Other countries have greatly narrowed the scope of their licensing system: Burundi, Ghana, Korea, Mexico, and the Philippines. Venezuela in early 1989 adopted a plan to reduce substantially the coverage of import licensing, particularly of manufactures imports. It is significant that most of these countries have also adopted market-determined exchange rates (Bolivia, The Gambia, Ghana, Mexico, Nigeria, Paraguay, the Philippines, and Venezuela) or at least have increased the flexibility of their exchange rate systems.
In the group of Asian newly industrialized economies (NIEs), in 1988 Korea liberalized imports by foreign subsidiaries and joint ventures engaged in manufacturing and removed a total of 252 items from the list of restricted imports, including 5 agricultural products, and bans on imports of beef and frozen french fries were eliminated. Singapore abolished an import licensing requirement for air conditioners. Other developing country exporters of manufactures also continued to liberalize quantitative import controls.
For the fuel exporting developing countries, performance with respect to quantitative import controls was mixed in 1988, compared with the liberalizing trend noted in the previous year, in the face of the effects of several years of lower-than-peak oil prices. Whereas the Congo replaced the import licensing requirement for most products with an export declaration system, and Libyan Arab Jamahiriya and Tunisia lifted restrictions on certain imports, Nigeria added barley, malt, sulfate, and retreaded tires to a short list of prohibited imports and removed unprocessed timber. Syria authorized producers of ready-to-wear clothing to import outside the permitted import system and dry fruit producers to import raw materials, but withdrew authorization to import prohibited goods of a value up to LS 70,000. Ecuador, after first banning automobile imports in February 1988 and then replacing the ban with specific quotas, reinstituted the ban at end-August 1988 as well as restricting capital goods imports.
A significant number of non-fuel developing countries narrowed the range of imports subject to administrative licensing or prior authorization. The major measures were an elimination by Burundi of controls on luxury goods imports; an extension by Madagascar of the open general license system to all imports, except for a number of prohibited items and a small number still requiring prior authorization mainly for security and health reasons; and the abolition by Senegal of all quantitative restrictions, with minor exceptions.
There were a number of other significant developments. Bangladesh permitted rice imports by the private sector in 1988 and also reduced the number of items on negative and restricted lists. Benin eliminated quantitative restrictions applied to imports of products competing with domestic production and replaced them by import duties and taxes. Brazil liberalized imports of agricultural commodities. In Ghana all imports, except for five items on the negative list and those barred for nontrade reasons, were transferred to the authorized list and thus become eligible for funding through the exchange auction system. Guyana removed certain items from the prohibited import list. India added 329 intermediate and raw materials items and 99 capital goods items to open general license and lifted licensing requirements for almond imports. Malaysia abolished licensing requirements for imports from China. Maldives increased import quotas by 30 percent between April 1988 and March 1989. Tanzania allowed a portion of foreign exchange to be made available on an automatic basis for a selected positive list of priority import categories under open general license; and Zimbabwe allowed cumulative tourist travel allowances of up to US$900 to be used to import goods under open general license.
In only a small number of instances were restrictions intensified. Jordan prohibited the imports of certain items classified as luxury goods; and the Netherlands Antilles reduced quotas on 43 items to 50 percent of the c.i.f. value of 1987 imports.
Import Surcharges and Taxation
In 1988 the trend toward increased use of tariffs and other forms of import surcharges and taxation by most industrial countries observed since 1985 accelerated, and was only partly offset by an increased number of liberalizing changes.19 In the developing countries the main changes relating to import taxation were mixed, although on balance there was some liberalization (Chart 14).
In the industrial countries successive rounds of multilateral trade negotiations have over the long run reduced most-favored-nation (MFN) tariff rates to an average of 5–6 percent on manufactured products. However, problems of tariff peaks and escalation remain, and many tariffs are not bound in the GATT, particularly on agricultural products where rates remain considerably higher.
Even though tariffs are relatively low on an average basis and no longer represent the principal form of trade restriction, significant scope remains for further progress on tariff reductions in some sectors. Under the U.S. Omnibus Trade and Competitiveness Act of 1988, for example, authority is granted to the President to proclaim tariff cuts up to an average of 50 percent under the Uruguay Round.
Since 1984, when the EC adopted the New Commercial Policy Instrument intended to counter “unfair” trade practices abroad, important changes in antidumping legislation have been introduced, which have broadened and sharpened the scope of existing rules and given rise to trade disputes with Japan and Korea. In addition, recent antidumping actions initiated by the EC have been directed against Brazil, Mexico, and the Eastern European countries. Moreover, an estimated 92 petitions for antidumping actions were filed in 1988, and restrictive measures were taken under “safeguard” provisions in 9 cases.
There were many instances of offsetting tariffs, and strains appeared to increase in the trade relations between various industrial countries, as evidenced by the number of investigations under existing legislation of alleged unfair trading practices and demands for compensation (and implementation of countervailing and antidumping duties) by domestic producers claiming to be injured by imports. In 1988 the United States launched 76 antidumping and 26 countervailing duty investigations.
The most recent available evidence suggests that there has been an increase in the number of antidumping and countervailing actions involving industrial countries, especially the EC and the United States (Chart 15).20 Although it is difficult to quantify the impact of these actions, it seems that they have acquired greater economic and technological importance. For example, the EC decided to impose antidumping duties on 15 Japanese manufacturers of dot matrix printers whose exports to the Community were valued at $1.3 billion, or about 86 percent of the total EC printer market in 1987; and the U.S. International Trade Commission (ITC) found that 3.5 inch floppy computer disks from Japan were injuring U.S. industry and imposed countervailing duties.
As noted above for quantitative restrictions, the mere threat of legal or administrative actions can evoke restraint on the part of actual or potential exporters. The increasing resort to litigious procedures, along with administrative or legislative recourse, to protect domestic markets is therefore ominous—although, unlike administrative actions, the legal actions are subject to challenge or appeal. Such actions may have a harassment value, owing to the prolonged delays with uncertain outcome and the considerable expense involved, and lack transparency. Moreover, they are highly selective. It is therefore difficult to assess the true extent of the loss of efficiency, additional resource cost, and trade disruption provoked by these measures. What is clear is that they have become a more potent source of trade tensions because of the controversial nature of some unfair pricing practices and the expansion of certain new national antidumping regulations.
Of particular concern is the recent trend in the EC to apply its regulations to prohibit the circumvention of antidumping duties through the establishment of “screwdriver” assembly plants (see below). The U.S. Omnibus Trade and Competitiveness Act of 1988 contains a provision authorizing prevention of circumvention assembly operations in the United States or third countries. In July 1988 the EC adopted a revised version of antidumping regulations. Aside from clarifying procedures, it also strengthens certain provisions. Among the latter is an amendment designed to compel foreign exporters to include antidumping duties imposed in the price of their exports rather than absorbing the cost themselves. The Australian Parliament approved legislation in June 1988 implementing a September 1987 decision to introduce new procedures for the investigation of complaints of dumping or subsidization of goods exported to Australia. It provides specifically for the establishment of a new independent antidumping authority.
The United States imposed antidumping duties on color picture tubes from Canada, Japan, Singapore, and Korea in January 1988. Canadian potash producers reached an agreement in January 1988 with the U.S. Department of Commerce that will avoid imposition of antidumping duties, on the condition that sales to the U.S. market take place at prices judged by the Department of Commerce to reflect the costs of production. Antidumping duties were also imposed on some steel products, forklift trucks, micro disks, synthetic rubber, brass sheets, granular PTFE resin, digital readout systems, and some appliance plugs from Japan. Countervailing duties were introduced for some products from Malaysia and Argentina. The United States also imposed antidumping duties on certain imports from Italy, the Netherlands, and Venezuela.
The United States removed several countries from preferential tariff treatment under the Generalized System of Preferences (GSP), including Bahrain, Bermuda, Brunei, Nauru, Hong Kong, Singapore, Korea, and Taiwan Province of China. While adding items to the product list, it announced that imported products valued at about $1 billion in 1987 would no longer be eligible for duty-free treatment after July 1, 1988. The MFN status of Romania and the duty-free treatment for Panamanian products were suspended by the United States in 1988.
Other industrial countries, however, expanded the coverage of their GSP schemes to the list of least-developed countries: including Austria (for Myanmar and Hungary); Japan (for Myanmar and New Caledonia); Norway (for Myanmar); Sweden (for Myanmar and Burundi, Bolivia, Burkina Faso, and Fiji); and Switzerland (for Myanmar, Kiribati, Tuvalu, and Mauritania).
The EC, while resorting mostly to VERs and administrative measures to control imports, imposed antidumping duties on a wide range of products from various countries (see Appendix). One particularly significant aspect of these cases was the application of antidumping duties to the production from manufacturers operating in the EC with close ties to companies outside the EC where more than 60 percent of parts are imported from a country against which an antidumping duty had been imposed. This was the case in 1988 for electronic scales and typewriters and photocopiers assembled by Japanese corporations in France and the United Kingdom. The Japanese authorities have requested the GATT’s Council of Representatives and Antidumping Committee to examine the consistency of the EC’s new regulation with the GATT and the antidumping code.
In June 1988 Australia imposed antidumping duties, based upon a preliminary ruling, on levamisole hydrochloride from Belgium, the Federal Republic of Germany, Hong Kong, China, Singapore, and Switzerland; definitive duties on woven worsted fabrics from China were confirmed in May 1988. Provisional duties were assessed for certain products from Korea, Japan, and New Zealand. Definitive duties were imposed on frozen pea imports from New Zealand in January 1988. Also in 1988, Canada assessed provisional duties on certain products from Brazil, France, Japan, Sweden, Taiwan Province of China, the United Kingdom, and the United States. Definitive duties were imposed on specific imports from Germany, Hong Kong, Japan, Malaysia, China, Korea, Singapore, and Taiwan Province of China. In January 1989, Canada and the EC reached an agreement to phase out over the next seven to ten years discriminatory Canadian pricing of European wine imports. Near the end of 1988, final determinations were made that the United States was dumping apples and sour cherries on the Canadian market. Public hearings are being held to make an injury determination. However, countervailing duties on U.S. exports of corn to Canada were reduced substantially in response to a recommendation by the Canadian import tribunal that doing so would be in the public interest.
In recent years, significant rationalization of import tariff and duty structures has been undertaken by a number of developing countries (Costa Rica, Korea, Lesotho, Malawi, Nigeria, Papua New Guinea, Senegal, Sri Lanka, Togo, and Uruguay). An important aspect of most rationalizations was the reduction in the dispersion of effective tariff rates, usually in tandem with the lowering of the average tariff rate.
As mentioned above, on balance there was some liberalization in import taxation changes in developing countries. Almost 50 percent more countries undertook import-reducing measures than raised duties, an acceleration of the pace of net liberalization relative to 1987. In addition, in a few instances, countries reformed their customs classification and administration, so that the net direction of the impact was uncertain. Among the East Asian NIEs, Korea reduced tariff rates on a wide range of items by 6.4 to 9.9 percentage points. Singapore eliminated duties on imports of refrigerators, and Taiwan Province of China implemented tariff reductions of up to 50 percent on various types of machinery and other intermediate products in October 1988.
In the group of fuel exporting developing countries, Saudi Arabia exempted a range of items from customs duties, but Trinidad and Tobago raised stamp duty rates on capital and consumer goods imports; Bahrain increased customs duties to 125 percent on alcoholic beverages and 50 percent on tobacco, and the temporary 20 percent tariff surcharge on imports competing with certain locally manufactured goods was extended for 12 months through February 1989.
Several other developing countries rationalized their customs classification systems and administration. Lesotho replaced a zero to 60 percent import surcharge system with an across-the-board 10 percent tariff rate. Madagascar’s eight-bracket tariff structure was simplified, although at the same time, a temporary 30 percent surcharge was introduced, and the minimum tariff rate was raised to 5 percent for all imports. Madagascar also eliminated a 5 percent import license application fee. Malawi combined the customs duty and import levy schedules into one tariff schedule, and taxes on luxury imports were shifted to a surtax schedule applicable to both imported and domestically produced goods. Tanzania simplified the tariff rate structure and reduced the number of exemptions. Zimbabwe changed the basis of customs duty assessment to c.i.f. values.
Most of the remaining modifications involved a reduction or elimination of some tariffs. Such was the case in Argentina, Brazil, Burkina Faso, China (on intermediate goods), Costa Rica, Dominica, The Gambia, India, the Lao People’s Democratic Republic, and Turkey. However, four countries raised duties on some items—namely Burundi and China (consumer durable goods), Jordan (on goods classified as nonessential), and Turkey (stamp duties and import surtax). Also, in May 1988 Brazil launched an antidumping investigation of transmission chains for cycles imported from Czechoslovakia, and Mexico assessed provisional antidumping duties on Brazilian, German, Malaysian, and U.S. imports of a range of chemical products.
Other Measures Affecting Import Payments
Advance import deposits. Under advance deposit schemes, usually in local currency, the authorities require importers to deposit with the monetary authorities or commercial banks a specified proportion of the value of an import transaction. In most cases, the deposits are required at the time application is made for an import license or at the time an import letter of credit is opened. They are retained for a specified period (usually not exceeding the life of the normal import transaction) or are applied against the import payment; in some cases, the deposit rates can exceed the value of the underlying transaction. In general, deposit schemes have been introduced to reduce import demand directly and, in most cases, indirectly, by restraining liquidity creation, which has often been excessive. Moreover, such deposit schemes have been used to restrain or favor particular imports, to frustrate the effects of liberal import licensing procedures, or to finance current government expenditure.
In 1988, 22 countries maintained advance import deposit schemes (15 percent of present Fund membership), or 2 less than in 1987 (Chart 16). This compares with 27 countries in 1975, or about 20 percent of the Fund’s membership at that time. On balance, when changes to existing schemes are taken into account, there was little overall change in 1988. No industrial country requires import deposits. Two countries, Bangladesh and Israel, eliminated their import deposit requirement schemes in 1988. In Madagascar an advance deposit scheme for imports of raw materials and spare parts was introduced in February, but then eliminated in May 1988. Also, in Turkey the guarantee deposit rate was raised from 7 percent to 15 percent in February, but then rescinded in May 1988. However, the advance deposit rate on imports was raised from 7 percent to 15 percent in October 1988 (this change had been reversed by May 1989). The scope of advance import deposits was extended in Ecuador to public sector imports, and the rates and duration of the scheme were raised.
Other import measures. A number of developing countries made modifications in 1988 to regulations governing the terms or procedures for import payments. As in other recent years, and for other measures affecting imports, most of these changes were in the direction of liberalization (Chart 17).
Minimum financing requirements for imports were liberalized in Brazil, and reference prices for imports and minimum import values were abolished. Foreign exchange controls were liberalized for about 75 percent of imports of nonpetroleum raw materials and spare parts in Malawi. In Botswana, the threshold limit was increased for import payments not subject to exchange control formalities; Burundi raised the authorization limits for commercial bank approval of import licenses; and in Western Samoa the requirement for prior authorization by the Central Bank was abolished for a number of products. Guyana abolished import licensing requirements for imports requiring no outlay of official foreign exchange and which were for personal use, and Peru introduced several measures in 1988 that allowed some categories of importers to use their own foreign exchange to purchase certain types of imports. (However, Peru also tightened the prior authorization procedures to obtain foreign exchange for imports.) Israel allowed commercial banks to finance imports of equipment from funds available in foreign currency deposits of nonresidents. Morocco lengthened the maximum payment period for imports from 12 months to 24 months and also lifted the requirement for a visa from the Exchange Office for imports without payment. In Papua New Guinea the time limit for settlement of import payments was eliminated. Thailand allowed residents to use their credit cards abroad for import payments if they submitted an application prior to their departure.
Controls on import payments or procedures were also tightened in developing countries in 1988 in several instances. In Bahrain modifications were made to government procurement requirements to give preference to goods produced in Bahrain or by Gulf Corporation Council (GCC) member countries. Zaïre introduced prior authorization for imports that did not require foreign exchange financing, and the maximum period for the surrender of export proceeds was shortened in Ecuador. In Fiji authorized banks were permitted to approve advance import payments only up to F$2,000, and a waiting period was introduced in Honduras for the granting of authorization for self-financed imports. In Thailand the required proportion of local purchases of imports of silk warp was increased from 4 percent to 5 percent.
Exports and Export Proceeds
Controls on exports during 1988 increasingly took the form of VERs made by exporters under pressure from importing countries. These were discussed in detail above, and will not be further covered here, but any overall assessment of restrictions on exports needs to take VERs into account. Apart from the export restraints, most measures taken to manage exports in recent years have been taken by developing countries.
In 1988 two industrial countries liberalized export quotas in conjunction with the implemention of VERs, but changed no other export measure. Actions taken by developing countries tended to reduce controls on exports by reducing licenses, quantitative controls, or surrender requirements. Moreover, the measures most frequently employed to manage exports were incentives, whether fiscal incentives, or special credit facilities. A few countries, notably China and India, extended controls on exports—mainly to influence the supply of exportables to the domestic market. Several other countries applied both controls and incentives on different exports, generally in an effort to raise fiscal revenues while encouraging foreign exchange earnings—these included Peru, Thailand, and Turkey.
Although VERs imposed on industrial countries had a serious restrictive impact on their exports,21 other forms of quantitative controls were generally liberalized in these countries in 1988. Australia removed controls on exports of petroleum, petroleum goods, and defense-related goods. Japan, which also implemented VERs on cars to the United States, the EC, and Sweden, liberalized somewhat the list of goods for export to China.
Considerably more developing than developed countries used quantitative controls (other than quasi-import controls in the form of VERs) to restrict exports. China prohibited exports of certain metal, rubber, and chemical products. India increased the number of goods subject to export controls, and Thailand extended quota allocations and controls for certain textile-related exports. At the same time, however, Thailand permitted exports of coffee that had not been filled under 1987/88 quotas. Madagascar liberalized its export controls, allowing private sector exports of certain goods, eliminating restrictive regulations on exports, and abolishing export card and declaration requirements and all administrative quality controls, except for a small number of items.
All changes to licensing systems were toward greater openness in 1988. Brazil eliminated arrangements for prior control on some exports; China abolished the need for licenses on some goods; Paraguay established a one-stop system for export approvals; Nigeria permitted exports of refined petroleum products to West Africa; and Togo abolished licenses for all domestically produced manufactures.
In the face of continuing balance of payments difficulties, several developing countries resorted to the use of fiscal and other incentives to promote exports. Bangladesh extended export incentive schemes to importers of inputs into exports (indirect exporters). India allowed exporters of computer software access to foreign exchange permits to promote exports; it also allowed indirect exporters access to duty drawback and compensation schemes, and to imported inputs at world prices. Hungary eliminated a tax refund on exports settled in convertible currencies. Thailand also reduced a fee on exports of frozen duck, and Brazil abolished export taxes on some exports to the United States, but made export earnings subject to corporate income tax. A few developing countries increased their export taxes (China and Paraguay).
In some developing countries, changes were mixed, as incentives for some exports were increased and others were reduced. Peru, faced with serious payments difficulties in 1988, reduced a number of controls on export earnings to allow exporters to receive a more market-related value for their export earnings. Foreign exchange earnings from exports of textiles were allowed to be exchanged for bank certificates denominated in foreign exchange, and exporters began to receive foreign exchange certificates equivalent to 30 percent of the f.o.b. export value to pay for imports or to transfer to other export enterprises. At the same time, however, Peru determined that tax credit certificates for nontraditional exports should be denominated in domestic currency, adjusted by no less than changes in the official rate, and made export earnings subject to a 10 percent tax. Thailand increased its export bonus ratio for tapioca exports, while extending its business tax on tin and tin ore exports for another year. Although Turkey announced a gradual elimination of the tax rebate system, it also introduced incentives for the early surrender of foreign exchange earnings, increased the number of goods eligible for support premia, and raised the minimum export requirements for income tax deductions.
Some developing countries made greater use of credit facilities to encourage particular exports. Argentina revised its export prefinancing and financing regimes to increase incentives to obtain external finance and to control more strictly its use by exporters. Thailand allowed promissory notes issued by sugarcane and rice exporters to be temporarily refinanced in specified proportions. Turkey also announced the gradual introduction of two subsidized credit facilities for exporters.
The trend in other export incentives, mainly connected with treatment of foreign exchange earnings, was generally toward more liberalization. Five countries reduced incentives, one increased them, and three did both. Honduras expanded the coverage of its export incentive system of Transferable Certificates of Foreign Exchange (LECTRAs) and increased the share issued for nontraditional exporters. The Lao People’s Democratic Republic allowed exporters to retain export earnings in foreign exchange deposits at the Central Bank. Madagascar increased the period for repatriating foreign exchange earnings from 30 days to 90 days from the date of shipment; Morocco permitted unauthorized delays in certain export payments and raised the maximum export commission transferable without the approval of the Exchange Office; and the Syrian Arab Republic allowed public enterprises to retain their export proceeds and allowed foreign exchange earnings to be surrendered at the promotion rate. Zaïre allowed gold exporters to retain 30 percent of their foreign exchange earnings. Both Paraguay and Thailand used other incentives to free some exports and restrict others. Paraguay made transit goods subject to registration at the Central Bank while reducing surrender prices for cotton, beef, and a variety of nontraditional export products. Thailand liberalized exports of a number of agricultural products, but set a bonus quota on tapioca exports to EC countries between September 23 and December 31. Uganda liberalized its requirements for the surrender of export proceeds. The need to surrender foreign exchange was modified to allow exporters of nontraditional goods to retain the proceeds to buy licensed imports.
Restrictions on international service transactions or the payments and transfers related to them are diverse and include a number of balance of payments categories, such as travel, medical expenses, study abroad, subscriptions, advertising, insurance transactions, transport and freight, banking, and payments for various services rendered by nonresidents. The latter include measures affecting remittances, investment income, and workers’ wages. Restrictions on service transactions are maintained by only one industrial country (Iceland), but by almost two thirds of all developing countries.
In 1988 there were no measures affecting international service transactions in industrial countries, but a number of developing countries liberalized their treatment of service transactions. On balance, the liberalization trend accelerated in 1988, and relatively few countries adopted tightening measures, compared with the immediately preceding years (Fiji, Malta, and Peru). In Fiji and Peru this tightening represented a continuation of similar measures adopted in recent years, but for Malta it was a partial reversal of earlier steps. A general feature of the measures liberalizing services in 1988 was increased allowances of foreign exchange for international travel by residents, with some 20 developing countries increasing foreign exchange availability for this purpose (Algeria, Barbados, Botswana, Brazil, Greece, Guinea, Hungary, Jamaica, Korea, Madagascar, Mauritius, Morocco, Pakistan, Papua New Guinea, Poland, Sri Lanka, Tunisia, Western Samoa, the Yemen Arab Republic, and Zambia). In all cases, the liberalization in 1988 represented a continuation of measures in the immediately preceding two years, but except for Korea, stopped short of freedom for travel payments. Other liberalizing measures affected a variety of payments abroad, such as dividend and workers’ remittances, expatriate transfers, rents, and, in the case of Dominica, the elimination of a tax on foreign exchange for invisibles. The overall trend represented a continuation of that observed in the previous two years, whereby over two thirds of all changes in regulations were in the direction of greater freedom for payments.
The adoption of Article VIII status in the Fund by Korea in 1988 was accompanied by the elimination of remaining restrictions on travel allowances and other bona fide (noncapital) invisibles payments. Under Article VIII of the Fund’s Articles of Agreement, members assume certain obligations for the avoidance of restrictions applied through their exchange systems. In the definition of the contents of such restrictions, an important consideration is the proximity of the technique of control to the foreign exchange transaction. Because of the intangibility of services, methods of control imposed on the physical movement of goods have less applicability to services. Correspondingly, services are monitored and controlled and taxed in many countries through the financial system. As a consequence, many service restrictions—probably the majority in the case of the developing countries—take the form of exchange restrictions subject to Fund jurisdiction under Articles VIII and XIV. Because of the financial nature of the restrictions, in many instances payments for such transactions may be made at a free market exchange rate. In this respect, a significant development in early 1989 was the introduction by Brazil and Poland of separate exchange markets for tourist transactions.
The agreement at the conclusion of the Uruguay Round of trade negotiations in 1986 to commence negotiations on liberalization of services and the recent GATT meeting in Montreal in November 1988 have focused attention on services restrictions. Despite a number of definitional problems in specifying the meaning and range of service trade, there is emerging agreement that this area of activity has become more important in recent years.
The financial character of most service restrictions also means that the payments constitute an important vehicle for illegal capital transfers. Because the liberalization of such transfers requires strong supporting measures in both the exchange rate and interest rates, a number of countries have delayed their liberalization, which has been reflected in the continuing widespread maintenance of restrictions by developing countries, as noted above. However, one technique for liberalizing invisibles while retaining capital controls has been the introduction of a so-called bona fides clause, whereby nominal limits are placed on invisible transfers beyond which the applicant must prove that the transfer is for current rather than capital purposes. Such an approach has permitted a number of countries to adopt the full obligations of the Fund’s Article VIII regarding avoidance of restrictions on transactions for current international transactions, while retaining capital controls consistent with the Fund’s Article VI, Section 3.
Freedom for service transactions may become increasingly more important, owing to the rapid growth of service sectors in industrial countries and, correspondingly, in certain specialized areas in developing countries. It is also clear from the form of the restrictions employed by developing and industrial countries that increasing economic organization may shift the incidence of service restrictions from the international payments system to more direct impediments. Although this falls within the realm of capital restrictions (see below), many impediments to direct investment, such as the right of establishment, indirectly affect freedom for provision of services. In some service sectors where trade can be a substitute for foreign direct investment (computer services, some forms of insurance, construction, communications, research, consulting, accounting, architectural, engineering, and legal and financial services), restrictions on capital transactions may affect invisibles trade to the extent that they make foreign direct investment unattractive or provide significant promotional incentives to encourage it. Restrictions on payments for services have hindered foreign direct investment in many developing countries. Special arrangements for relatively free treatment have been made to facilitate debt-equity swaps in a number of such countries—as a means of reducing an unsustainable debt load.
The liberalization trend in international capital transactions, evident now for several years both in industrial and developing countries, continued in 1988 and even accelerated in developing countries (Chart 20).22 This trend has also involved effective liberalization—that is, the dismantling of restrictions on capital outflows in payments-deficit countries and on capital inflows in payments-surplus countries. In the industrial countries, full liberalization of international capital transactions has become widely accepted as the appropriate goal for concerted effort at a supranational level, as external shocks have increasingly been absorbed by exchange and interest rate movements. Liberalization of international capital transactions has resulted in part from the restructuring of domestic financial systems and accompanying innovations in financial transactions, which have forced countries to open up their service sectors or risk losing competitiveness. In addition, because of technological advances, it has become more difficult for countries to impose enforceable administrative barriers to capital. An important development in 1988, with consequences for the debt situation, has been the opening up of portfolio and direct investment regulations in several major developing countries.
The EC has targeted full liberalization of international capital transactions among member countries in 1992. Under the directives of the Community, all remaining controls on short-term financial transactions unrelated to trade or direct and portfolio investments are to be lifted. In addition, bank accounts in member states would be allowed to be opened by residents of other member states. Eight countries were given two years until 1990 to comply with this policy. Of the eight, the United Kingdom, the Netherlands, and the Federal Republic of Germany have already removed all the relevant capital controls. Another four countries—Spain, Ireland, Greece, and Portugal—were given until 1992 to comply, with the possibility that the deadline for the last two countries could be extended until 1994. The EC directive was based on the, “ergaomnes” principle, which implies that the liberalization of capital movements would be extended not only to EC residents but also on a worldwide basis. Nevertheless, this principle would not override the EC’s or member countries’ reciprocal condition with respect to a third country. In addition, a safeguard provision allows member states to reimpose capital controls on grounds of urgency, although subsequent approval is required from the Community. Concurrently, the Organization for Economic Cooperation and Development (OECD) completed its review of the Code of Liberalization of Capital Movements and prepared extensive amendments for adoption by its Council. Virtually all capital transactions were recommended to be subject to liberalization obligations, including the short-term operations previously excluded, such as money market operations, short-term financial credits and loans, forward operations, and swaps and options. Only mortgage and consumer credits and governments’ operations on their own accounts were excluded from liberalization obligations under the proposed code.
In the group of developing countries, although the external positions in 1988 remained as difficult as in the past, changes in regulations affecting international capital transactions were overwhelmingly in the direction of liberalization. Decontrol of international capital transactions was carried out for various purposes and under different circumstances—although there has been no generalized shift to full liberalization as in industrial countries.
While the Fund’s Article VI. Section 3 authorizes members to regulate capital movements without the approval of the Fund, the Fund’s surveillance over exchange rate policies under Article IV, Section 3(a) takes into account developments with respect to capital controls. In particular, certain changes in capital controls are seen as indicative of a balance of payments problem that may prompt a Fund discussion with a member. Countries that had relied on stringent capital controls to prevent capital flight resulting from an adherence to unrealistic exchange rates found themselves in an even more precarious situation as the controls proved to be counterproductive, leading to the proliferation of parallel markets and capital flight. Some of these countries, such as Peru, Somalia, and Zaïre, have started to adopt liberalization of foreign exchange accounts and permission to repatriate capital funds without their origins having to be revealed. In addition, relaxation of capital controls in many other developing countries was a part of the package to bolster the confidence in the economy that encouraged capital inflows. In this connection, domestic securities markets were opened up, such as in Brazil and Malaysia. Capital controls have become superfluous in countries that have shifted toward more realistic exchange and interest rate policies as effective means to promote investment and restore balance in the economy. Some capital-surplus developing countries, such as Korea, liberalized outflows of capital. However, some developing countries further restricted aspects of the foreign exchange operations of banks so as to limit their exposure to exchange rate volatility, such as Malaysia, the Netherlands Antilles, and Zaïre.
Regulations on foreign exchange operations of commercial banks were relaxed in industrial countries, and changes were mixed in developing countries. In industrial countries, both Japan and Sweden continued their financial market deregulation by allowing certain financial institutions to trade spot options abroad (Japan) and by authorizing banks to grant permits for direct investment in certain areas (Sweden). In developing countries, various international commercial banking activities have been liberalized: offshore banking in Mauritius; repurchase of foreign exchange in Morocco; and acceptance of foreign currency deposits by nonresidents as well as exporting of excess foreign currency notes in Thailand. By contrast, certain foreign exchange transactions and positions were tightened in four other developing countries: a limit on swap arrangements in Malaysia; limits on net foreign asset positions in the Netherlands Antilles and Zaïre; and a higher transfer requirement on foreign exchange holdings in Turkey. In addition, foreign borrowing in Turkey was made subject to authorization as part of a general tightening of monetary control.
All changes affecting regulations on foreign exchange accounts were in the direction of liberalization in both industrial and developing countries. In industrial countries, France lifted the ceiling on the balance held by French firms. Ten developing countries (Guinea, Hungary, Israel, Jordan, Morocco, Peru, Somalia, the Syrian Arab Republic, Tunisia, and Zaïre;) adopted measures in favor of holdings of foreign exchange accounts that resulted in more freedom in holding and trading of foreign exchange by residents and nonresidents.
Almost all changes concerning transfers of emigrants’ funds and other transfers were in the direction of liberalization. In industrial countries, Ireland completely liberalized transfers of emigrants’ assets. In developing countries, Botswana, Fiji, and Korea relaxed controls on transfers of emigrants’ funds by either raising the limits or lifting the controls. However, in Lesotho, the transfers of earnings on blocked accounts of emigrants were limited.
Almost all regulations concerning portfolio and financial transactions by nonbanks were in the direction of liberalization both in industrial and developing countries. Sweden and Japan further opened up domestic markets for nonresidents to buy shares (Sweden), and to issue commercial paper (Japan). Three other industrial countries allowed residents more access to foreign capital and foreign markets. Ireland eliminated restrictions on purchases of foreign securities with maturity exceeding two years. Irish institutional investors were allowed to acquire bonds of less than two years’ maturity if their use of domestic funds observed certain limits. Moreover, the controls on personal borrowing in foreign currency were relaxed, in that domestic borrowers were no longer required to show that loan proceeds, which are not subject to any limit, would be used for productive purposes. In Norway and France foreign borrowing was liberalized. In addition, check payments abroad were liberalized in France. In the opposite direction, Spain reintroduced controls on inward short-term foreign capital in order to prevent pressure on the exchange rate.
In developing countries, five larger countries introduced measures to attract portfolio investment from abroad into the domestic capital market—through participation in Brazilian mutual funds; a higher equity share in Malaysian brokerage firms; new regulations for Moroccans living abroad to invest in Morocco; a debt-conversion program in Nigeria; and an easing of foreign participation in the Turkish securities market. Two other developing countries further facilitated residents’ investment abroad: higher limits were set for foreign exchange holdings for Korean securities, insurance, and investment trust firms that invested abroad; and the automatic authorization limit for outward investment was doubled in Papua New Guinea. In addition, restrictions on foreign borrowing have been relaxed in Israel and Papua New Guinea. In Botswana the measures were mixed; whereas the limit on non-resident-controlled business to borrow from local markets was relaxed, parastatals were advised to borrow from domestic sources rather than from abroad. In smaller and least-developed economies, the lack of depth of domestic capital markets has considerably lessened the impact from these measures.
All changes concerning inward direct investment were in the direction of liberalization in both industrial and developing countries. These changes involved the relaxation of regulations both on financing direct investment abroad and the provision of greater access for nonresidents’ investment. In industrial countries, Ireland and Sweden relaxed restrictions on financing domestic investments abroad, and Australia relaxed the guidelines for local equity participation for foreign investments in new oil and gas projects. In the developing countries, various measures were introduced to facilitate foreign investment, such as a new joint venture law in China; a new tax credit and exemption in Dominica; a more liberal conveyance of real property in Morocco; and the liberalization of foreign investment in advertising, motion picture distribution, and insurance industries in Korea. As for outward investment, Korea raised the limit subject to automatic approval, and Brazil allowed use of the (less-depreciated) official exchange rate for certain investments abroad. As noted in earlier issues of AREAER, there was surprisingly little movement in recent years by developing countries to liberalize inward direct investment, and the acceleration observed in 1988 is a welcome development. Not only does it assist in countering the effects of capital flight by residents, but it also provides an important vehicle for inward transfers of technology needed to complement exchange rate and price reform measures in debtor countries. Unlike portfolio investment, the option of encouraging inward direct investments is also open to countries with inadequate capital markets.
Restrictions Leading to External Payments Arrears
The Fund’s data on members’ external payments arrears include arrears that have been caused by exchange restrictions on current payments or transfers, as well as arrears on financial obligations of which the obligor is the government.23 The existence of arrears adversely affects the country’s creditworthiness, with the result that access to normal means of international financing is frequently curtailed. A further consequence is that the cost of international credit, as well as of imported goods and services, becomes higher than would otherwise be the case for most borrowers.
In view of the particularly adverse consequences for the country maintaining arrears and for the international payments system, the elimination or substantial reduction of payments arrears in an orderly manner and without any differentiation in the settlement of arrears as between other members constitutes an important element of members’ economic programs supported by the use of Fund resources.24 Moreover, the incurrence of arrears and the policies of members giving rise to them have been subject to careful scrutiny in the context of Article IV consultations with the Fund. The Fund has also consistently followed the practice of not approving under Article VIII, Section 2(a) of the Fund’s Articles of Agreement exchange restrictions evidenced by arrears on current international payments, except when a satisfactory program for the reduction or the elimination of arrears is in place.
After a decline by SDR 14 billion in 1985 from a peak of SDR 44 billion in 1984, external payments arrears of Fund members are estimated to have increased by SDR 7 billion in 1986 before reaching a recent low of SDR 29 billion at the end of 1987. In 1988 the amount of arrears is tentatively estimated to have increased again by SDR 10 billion, although there was a significant decline in the number of countries experiencing arrears from 55 in 1986 and 1987 to 49 in 1988.
Of the countries for which data are available, 37 experienced increases in existing arrears, 14 were able to reduce arrears, and 3 cases of arrears remained stable. Arrears were eliminated in eight countries and re-emerged in one country (the Philippines).25 Commercial debt rescheduling of arrears declined sharply from SDR 9.2 billion in 1987 to SDR 2.7 billion in 1988, with one country (Brazil) accounting for nearly the total amount. Overall, 18 Fund members that had external payments arrears at the end of 1987 concluded multilateral debt renegotiations with official and commercial creditors in 1988 (10 of these also had arrears at the end of 1988).
Twenty-four countries in 1988 adopted adjustment programs supported by stand-by or extended arrangements and/or structural or enhanced structural adjustment arrangements from the Fund. Of these, 13 had external payments arrears at the time of program approval. Eight of the programs provided for an elimination of payments arrears in the first year, and the remaining five for a reduction and an eventual elimination during the program period, through a combination of rescheduling and cash payments. In one case, a counterpart deposit requirement in local currency was introduced as a means of providing more comprehensive information on arrears and of sterilizing the expansionary liquidity impact associated with the incurrence of external arrears.
In addition to export restraint arrangements agreed between countries, there are numerous examples of reduced or redirected exports by suppliers where significant, but unofficial, pressure has been brought to bear, usually under the threat of retaliatory litigation for alleged dumping or other illegal trade actions.
Antidumping duties are levied on imports to offset the competitive advantage provided by dumping of imported goods—that is, by practicing price discrimination between exports and domestic sales of a given product. Countervailing duties are levied on imports to offset the competitive advantage provided by various forms of subsidies on imported goods.
An exception is Australia, which announced in May 1988 a program of general tariff reductions on manufacturing imports, with effect from July 1, 1988. Tariffs greater than 15 percent will be reduced in five stages to 15 percent by July 1, 1992 (except for passenger cars on which protection will be reduced from 57.5 percent to 35 percent by 1992, in the context of other more immediate liberalization measures; and for finished textiles, clothing, and footwear on which the rates have been reduced from about 55 percent to 50 percent); tariffs up to 15 percent will be phased down to 10 percent by the same target date; and the 2 percent duties have been abolished. At the same time, the Australian authorities announced a series of measures aimed at reducing government assistance and increasing trade liberalization in agriculture. New Zealand also introduced similar across-the-board phased tariff reductions for industries not subject to Industry Plans. Portugal and Spain reduced tariffs in accordance with EC accession.
Antidumping actions are undertaken when an exporter allegedly sells a product for less in the export market than in the domestic or comparable third markets; countervailing actions are used to adjust for alleged subsidies that would allow exporters to undersell unassisted domestic producers in the export market.
The VERs imposed by industrial countries, by raising the cost of imported inputs, would also have significant effects on their own exports in some cases; for example, the VER on steel imports to the United States, by raising the cost of steel used by the automobile industry, limits export markets for U.S. automobiles.
Payments arrears evidence an exchange restriction under the Fund’s Article VIII, Section 2(a), or Article XIV, Section 2, when the authorities of a country are responsible for undue delays in approving applications or in meeting bona fide requests for foreign exchange for payments and transfers for current international transactions as defined in Article XXX (d) on the basis of criteria adopted by the Fund, or distinction has been made between exchange restrictions and defaults (that is, nonpayment of debt for other reasons). Accordingly, when a government or a government entity whose financial operations form part of the central government’s budgetary process fails to meet an external payments obligation, the resulting arrears are considered as evidence of defaults by the government rather than exchange restrictions. Similarly, arrears incurred by governments participating in a common central bank are treated as defaults. Although these distinctions are relevant for the purposes of Articles VIII and XIV, in the context of the Fund’s policies on the uses of its resources, defaults and other forms of arrears involving current and capital payments are viewed as having the same broad macroeconomic character and consequences, and are therefore treated in the same manner. All references to payments arrears in this section relate to arrears as defined in the broadest sense.
A review of the implementation of Fund policies on members’ external payments arrears was undertaken by the Executive Board in November 1986, the major conclusions of which were summarized in International Monetary Fund, AREAER, 1987. The conclusions of earlier reviews of Fund policies were summarized in International Monetary Fund, AREAER, 1983 and 1985.
As of end-1988, the following members maintained external payments arrears: Angola, Antigua and Barbuda, Argentina, Benin, Bolivia, Burkina Faso, Burma, Central African Republic, Chad, Comoros, Congo, Costa Rica, Côte d’Ivoire, Dominican Republic, Ecuador, Egypt, Equatorial Guinea, The Gambia, Ghana, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Iraq, Liberia, Madagascar, Mauritania, Nicaragua, Nigeria, Panama, Paraguay, Peru, Philippines, Poland, St. Lucia, Sao Tome and Principe, Sierra Leone, Somalia, Sudan, Suriname, Syrian Arab Republic, Tanzania, Uganda, Viet Nam, Zaïre, and Zambia.