Abstract

This paper discusses reviews major issues and developments in the trade area and outlines the problems in the multilateral trading system that governments face as they seek to liberalize trade in the Uruguay Round of trade negotiations. The paper’s emphasis is on policy developments in the major trading nations as they relate to trade in both industrial and agricultural products. The survey also includes a review of trade policies in developing countries and refers to available quantitative evidence on protectionism wherever possible. The increased use of nontariff measures reflects, in part, the fact that most industrial countries have “bound” a considerable proportion of their tariffs, particularly on industrial products, at relatively low levels. Restrictions are particularly widespread in industries suffering from excess capacity (such as steel) and where comparative advantage has generally shifted to developing countries. The lack of major liberalization in agriculture in the US–Canada Free Trade Agreement has led some industrial countries to suggest that the US interest in multilateral negotiations is now primarily in agriculture and in some selected new areas, such as telecommunications, banking, and patent protection.

© 1988 International Monetary Fund

Library of Congress Cataloging-in-Publication Data

Issues and developments in international trade policy.

(Occasional paper / International Monetary Fund; no. 63)

Bibliography: p.

1. International trade. 2. Commercial policy. I. Kelly, Margaret R. II. Series: Occasional paper (International Monetary Fund) ; no. 63.

HF1379.I85 1988 382’.3 88-32891

ISBN 9781557750372

Price: US$7.50

(US$4.50 university libraries, faculty members, and students)

Address orders to:

External Relations Department, Publications Services

International Monetary Fund, Washington, D.C. 20431

Contents

  • Prefatory Note

  • List of Abbreviations

  • I. Overview

    • Issues in International Trade

      • Industrial Countries

        • Multilateral Versus Unilateral Approaches to Trade Liberalization

        • Arguments for Protection

      • Developing Countries

    • Prospects for Liberalization

    • Surveillance

    II. Industrial Countries’ Trade and Industrial Policies

    • Trade Trends

    • Trade Policies

      • Tariffs

      • Nontariff Measures

      • Antidumping and Countervailing Duties

    • Trade Policy in Individual Countries

      • United States

      • Japan

      • European Community

      • Canada

    • Industrial Policies

      • Rationale for Industrial Policies

      • Approaches to Industrial Policies

      • Trends in Subsidies

    • Causes and Costs of Protection

    III. Issues Affecting Developing Countries

    • Trade Trends

    • Trade Policies

      • Tariffs

      • Nontariff Measures

      • Recent Developments

      • Trade Policies of Newly Industrializing Economies

      • Countertrade

    • Trade and Trade-Related Industrial Policies Affecting Developing Countries

      • Generalized System of Preferences

      • Tariff Peaks and Escalation

      • Countervailing and Antidumping Duties

      • Nontariff Measures

    IV. Evolving framework for International Trade

    • Overview of Multilateral Trade Initiatives

      • The Uruguay Round

      • Other Initiatives

      • The Role of the Fund

        • Article IV Consultations

        • Trade Policies in Fund-Supported Programs

        • Fund-GATT Collaboration

    • Surveillance

      • Existing GATT Mechanisms

      • Standstill and Rollback

      • Functioning of the GATT System

        • Trade Policy Reviews

        • GATT Effectiveness

        • Cooperation with Other Organizations

    • Instruments of Protection

      • Tariffs

      • Nontariff Measures

      • Safeguards

      • Subsidies and Dumping

        • Subsidies

        • Dumping

      • Trade-Related Aspects of Intellectual Property Rights

      • Trade-Related Investment Measures

    • Sectoral Issues

      • Agriculture

      • Textiles and Clothing

      • Tropical Products

      • Natural Resource-Based Products

      • Services

    • Trade Issues Affecting Developing Countries

      • Issues of Interest to Developing Countries

      • Integration Issues

      • Balance of Payments Provisions

    • Disputes, Articles, and Codes

      • Dispute Settlement

      • GATT Articles

      • MTN Agreements and Arrangements

  • V. Agricultural Trade Policies

    • Introduction and Summary

    • Developments in Individual Countries

      • United States

      • European Community

      • Japan

      • Canada

      • Australia

      • New Zealand

      • European Free Trade Association

      • Developing Countries

    • Developments in Trade in Individual Commodities

      • Dairy Products

        • United States

        • European Community

        • Japan

      • Grains

        • United States

        • European Community

        • Japan

        • Canada

        • Australia

      • Meat

        • United States

        • European Community

        • Japan

        • Brazil

      • Sugar

        • United States

        • European Community

    • Costs of Agricultural Support Policies

      • Direct Costs

      • Macroeconomic Effects

      • International Effects

        • Impact on Commodity Prices

        • Impact on Industrial Countries

        • Impact on Developing Countries

        • Impact on Price Variability

  • VI. Industrial Trade Policies

    • Recent Trends

    • Steel

      • Recent Trade Trends

      • United States

      • European Community

      • Canada

      • Australia

    • Textiles and Clothing

      • Recent Trade Trends

      • Multifiber Arrangement

      • Other Protective Measures

      • United States

      • European Community

    • Automobiles

      • Recent Trade Trends

      • United States

      • European Community

      • Canada

      • Costs of Protection

    • Shipbuilding

      • Recent Trade Trends

      • European Community

      • Japan

      • Korea

    • Electronics

      • Recent Trade Trends

      • United States

      • European Community

      • Japan

    • Footwear

      • United States

      • European Community

      • Canada

      • Australia

    • Civil Aircraft

      • Recent Trade Trends

      • Institutional Framework

      • The Airbus Dispute

  • Appendices

    • I. The European Community: Aims and Instruments of Trade and Industrial Policies

    • II. Ministerial Declaration on the Uruguay Round

    • III. Country Classifications

    • IV. Glossary of Terms

    • V. Statistical Tables

      • List of Tables

  • Selected References

  • TABLES

  • Section

    • I. 1. Trends in World Trade and Production

    • 2. Export Restraint Arrangements, 1987-88

    • 3. Industrial Countries: Imports Affected by Selected Nontariff Measures

    • 4. Japan: Shares in Stock of Foreign Direct Investment in Manufacturing

    • III. 5. Export Shares of Food Products

    • IV. 6. Discussion Forums in GATT and the Uruguay Round

    • V. 7. A Summary of Common Agricultural Support Policies

    • 8. Main Agricultural Producer Support Policies for Selected Countries and Major Commodities, 1982-87

  • Appendix

    • I. 9. European Community: Share in World Trade

    • 10. European Community: Level and Direction of Trade

    • 11. European Community, United States, and Japan: Average Tariff Rates

    • 12. European Community: Voluntary Export Restraint Arrangements, September 1987

    • 13. European Community: Voluntary Export Restraint Arrangements, May 1988

    • 14. European Community: Authorization of Article 115 Actions, 1980-87

    • 15. European Community: Internal Market Program—Selected Measures

    • 16. European Community: Macroeconomic Consequences of Completion of the Internal Market

The following symbols have been used throughout this paper:

… to indicate that data are not available;

—to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

– between years or months (e.g., 1984—85 or January-June) to indicate the years or months covered, including the beginning and ending years or months;

/ between years (e.g., 1985/86) to indicate a crop or fiscal (financial) year.

“Billion” means a thousand million.

Minor discrepancies between constituent figures and totals are due to rounding.

Prefatory Note

This study was prepared in the Trade and Payments Division of the Exchange and Trade Relations Department of the International Monetary Fund, Its authors are Margaret Kelly, Division Chief; Naheed Kirmani, Assistant Division Chief; Clemens Boonekamp, Senior Economist; and Miranda Xafa and Peter Winglee, Economists. Dan Lee, Philippe Moutot, and Bernhard Fritz-Krockow also made significant contributions to the preparation of this study. The authors are indebted to a number of colleagues, both in the Fund and in other national and international agencies, for their willingness to exchange views and provide information. The authors are grateful to the editor, Elin Knotter, of the External Relations Department, and to Marcela Toso and Barbara Bulcock who typed the bulk of the draft. The authors alone are responsible for the study; any opinions expressed are theirs and do not necessarily reflect the views of the Fund.

To obtain information and collect views for this paper, staff teams held discussions with trade and economics officials in Bonn, Brussels (the Commission of the European Communities), Canberra, London, Mexico City, Ottawa, Paris, Seoul, Tokyo, Washington, and Wellington. In addition, a staff team visited Geneva and Paris for discussions with GATT and OECD officials. Staff members of the Western Hemisphere Department participated in the discussions held in Ottawa and Washington. Staff members of the European Department participated in the discussions in Bonn, Brussels, London, Paris, and Wellington, and staff members of the Asian Department participated in the discussions in Seoul and Tokyo. While in Europe, the staff team was assisted by the Fund Office in Europe and the Fund Office in Geneva.

The study reviews major issues and developments in the trade area and outlines the problems in the multilateral trading system that governments face as they seek to liberalize trade in the Uruguay Round of trade negotiations. It follows the pattern of the Fund staff surveys prepared in 1978,1981,1982, and 1985. * As in the latter paper, emphasis is on policy developments in the major trading nations as they relate to trade in both industrial and agricultural products. The survey also includes a review of trade policies in developing countries and refers to available quantitative evidence on protectionism wherever possible.

The study comprises six sections and five appendices. Section I provides an overview of recent trade policy trends, the major issues facing the multilateral trading system, and the prospects for liberalization in the Uruguay Round of trade negotiations. Section II describes recent trade trends, reviews the overall stance of trade and trade-related industrial policies in major industrial countries, and discusses the causes and costs of protection. Section III examines the trade policies of developing countries and the implications for them of trade restrictions in foreign markets. Section IV describes the recent evolution in the framework for international trade, including the major issues under discussion in the Uruguay Round, and the role of the Fund in trade and its collaboration with GATT. Sections V and VI describe trade actions by major industrial countries in individual agricultural and manufacturing sectors, respectively, including quantitative estimates of the costs of protection in individual sectors. Appendix I describes the trade and trade-related industrial policies of the European Community. Appendix II reproduces the Ministerial Declaration on the Uruguay Round, Appendix III describes the classification of countries and regions used in the paper and Appendix IV provides a glossary. Appendix V contains statistical tables.

The study was completed in July 1988 and most of the data do not go beyond this period. In the light of subsequently available information, certain data have been updated and a few major developments have been incorporated in the text or in footnotes.

List of Abbreviations

ACP

African, Caribbean, and Pacific countries

CAP

Common Agricultural Policy (EC)

CCC

Commodity Credit Corporation (United States)

CSEs

Consumer subsidy equivalents

ECU

European currency unit

EEP

Export Enhancement Program (United States)

EFTA

European Free Trade Association

EMS

European Monetary System

ERA

Effective rate of assistance

ERP

Effective rate of protection

FOGS

Functioning of the GATT System (Uruguay Round)

GATT

General Agreement on Tariffs and Trade

GMP

Guaranteed minimum price

GNG

Group of Negotiations on Goods (Uruguay Round)

GNS

Group of Negotiations on Services (Uruguay Round)

GSP

Generalized System of Preferences

IDA

International Dairy Arrangement

IPRs

Intellectual property rights

ITO

International Trade Organization

LIPC

Livestock Industry Promotion Corporation (Japan)

MAFF

Ministry of Agriculture, Forestry and Fisheries (Japan)

MCA

Monetary compensatory amount

MFA

Multifiber Arrangement

MFN

Most-favored-nation (principle)

MTN

Multilateral trade negotiations

NIEs

Newly industrializing economies

NPC

Nominal protection coefficient

NRBP

Natural re source-based products

NTMs

Nontariff measures

OECD

Organization for Economic Cooperation and Development

PIK

Payment in kind (United States)

PSEs

Producer subsidy equivalents

QRs

Quantitative restrictions

SB

Surveillance Body (Uruguay Round)

SITC

Standard International Trade Classification

TEA

Targeted Export Assistance program (United States)

TNC

Trade Negotiations Committee (Uruguay Round)

TRIMs

Trade-related investment measures (Uruguay Round)

TRIPs

Trade-related intellectual property rights (Uruguay Round)

TSB

Textile Surveillance Body

UNCTAD

United Nations Conference on Trade and Development

VERs

Voluntary export restraints

WEO

World Economic Outlook