See “Market Access for Developing Country Exports—Selected Issues,” SM/02/280, Revision 1, September 26, 2002.
For the reason explained in this paragraph, the Uruguay Round does not offer an appropriate “testing ground” to evaluate the possible impact of the proposed Trade Integration Mechanism.
The Uruguay Round formula set a simple average rate of tariff reduction of 36 percent, and a minimum for each tariff line of 15 percent. Since only a small share of total tariff lines cover many of the relevant tariffs, the targeted average reduction did not require more than the minimum cuts in many of the highest and most important tariffs.
Important exceptions were the successive Lomé Agreements of the European Union, which allowed duty-free entry for a broad range of goods, although preferences were more limited for sensitive agricultural products.
The Managing Director, in his address to the General Council of the WTO (May 13, 2003), expressed the readiness of the Fund to consider any requests for technical assistance in managing the implications of tariff revenue erosion as a result of trade liberalization.
The World Bank is sponsoring a project aimed at measuring the extent to which preferences are actually utilized in the United States and the EU. An initial seminar will be held in Geneva on March 31, 2004 to present methodologies and initial results.
Arvind Subramanian, “Financing of Losses From Preference Erosion,” in “WTO Notes and Cover Letter from Ms. Krueger,” EB/CWTO/03/2, January 27, 2003; subsequently issued by the World Trade Organization as WT/TF/COH/14, February 14, 2003.
Based on FAO and IMF data, a total of 17 Fund member developing countries had net food imports exceeding 20 percent of total exports in 2001.
James E. Anderson, 1997, “The Uruguay Round and Welfare in Some Distorted Agricultural Economies,” NBER Working Paper 5923 (Cambridge, MA: National Bureau of Economic Research).
For example, Stephen Tokarick, 2003, “Measuring the Impact of Distortions in Agricultural Trade in Partial and General Equilibrium,” IMF Working Paper 03/110.
The indicators are: (i) an estimated 2 percent or larger decline in export unit values associated with a 40 percent erosion of preferences; (ii) net food imports represent more than 20 percent of total exports; (iii) a composite measure of vulnerability based on the concentration of exports of textiles and clothing, quota utilization rates and capacity for adjustment. According to these, admittedly arbitrary, cut-off points, only one country would be vulnerable to all three of the adverse impacts (Cape Verde), while ten would be subject to two. In some cases, different trade events might have directly offsetting impacts on the balance of payments.
This may not necessarily be true for every country individually, and considering trade policies in isolation. However, open trade is closely intertwined with other aspects of growth- and export-promoting reforms and resolving exact causalities is of more interest academically than in policy practice.
See Global Economic Prospects 2004: Realizing the Development Promise of the Doha Agenda (World Bank: Washington, DC).
The measures are set out in Section IV.
“Fund Support for Debt Reduction Operations—Preliminary Considerations,” EBS/89/78, April 19, 1989.
The commitment to coherence in international policymaking has been repeatedly underlined by the governing bodies of the Fund, the Bank, and the WTO.
Fund staff have prepared several studies of the revenue impact of trade liberalization, for example, Occasional Paper No. 180, ”Revenue Implications of Trade Liberalization” by Ebrill and others (1999) and “Revenue Implications of Trade Liberalization” (SM/01/255, August 8, 2001). Further work is currently underway to address this issue and inform Fund surveillance and technical assistance.
The direct impact is a “net impact” in the narrow sense that it refers to the impact on exports or imports minus directly associated changes in other items. For example, the impact of a reduction in garment exports would be net of reduced imports of fabric used in the production process.
Such a modification in access, which would be based on the projected impact of the trade events, must be distinguished from possible augmentation ex post under the deviation feature of the TIM (based on the actual impact of the trade event).
The 10 percent is not a target and, in cases where the Fund approves short arrangements for the member in quick succession, the previous activation of the deviation feature for a particular trade event may be taken into account in determining access.
As mentioned, there is no expectation that access under the deviation feature would be associated with additional conditionality.
While the impact of unilateral liberalization on third countries is covered by the definition in paragraph 31, the main purpose of the TIM is to address concerns that have arisen in the current Doha Round of the WTO.
A decline of five percent in the textiles and clothing exports of these countries would amount to a revenue loss of close to US$1 billion (based on exports in 2000).
Excluding India, which has indicated that it does not envisage to draw on PRGF resources, and Zimbabwe, which has been declared ineligible to draw on PRGF resources in light of its overdue obligations to the Fund.
Criteria of vulnerability as in footnote 11.
A five percent decline in the exports of textiles and clothing of these countries would represent US$750 million in lost export revenue (based on exports in 2000).