Promoting Freer Trade: The IMF's Perspective -- Remarks by Michel Camdessus

IMF News, December 9, 1996

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Promoting Freer Trade: The IMF's Perspective -- Remarks by Michel Camdessus

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Bibliographic details

• Published: December 9, 1996

Context and occasion

• Remarks by Michel Camdessus, Managing Director of the International Monetary Fund, at the First Ministerial Conference of the World Trade Organization, Singapore, December 9, 1996.
• Conference milestone marking efforts to promote freer trade and uphold the multilateral trading system.

IMF roles and instruments in supporting trade liberalization

• Primary Fund purpose (as stated in the IMF Articles of Agreement): "to facilitate the expansion and balanced growth of international trade."
• Three main channels the IMF uses to support freer trade:
  • Surveillance and program design to promote sound macroeconomic policies, appropriate and stable exchange rates, and structural reforms underpinning trade liberalization.
  • Encouragement to eliminate restrictions on current account transactions: to date, 134 of our 181 members have eliminated such restrictions.
  • Promotion of outward-oriented policies that do not discriminate between production for domestic market and export, or between domestic and foreign purchases; Fund-supported programs frequently include measures to increase outward orientation consistent with WTO obligations.

Financing instruments and support for adjustment

• IMF financing adapted to support members' adjustment and reform needs:
  • Extended Fund Facility.
  • Enhanced Structural Adjustment Facility (ESAF) for low-income members.
• Program status and objectives:
  • At present, there are 62 Fund arrangements in place, of which 32 are ESAF programs.
  • Work underway to finalize ESAF's future financing so concessional resources will be available on a permanent basis to support the poorest members' reform efforts.
  • Special ESAF operations to contribute to the joint IMF–World Bank initiative to reduce the debt burden of heavily indebted poor countries whose reform efforts could not otherwise be expected to result in a sustainable debt position.

Empirical experience and development outcomes

• Repeated IMF observations from work with 181 member countries:
  • Opening economies to external trade helps get domestic prices "right," improving market signals, domestic resource allocation, and efficiency.
  • Open markets tend to attract additional resources and grow more rapidly, creating a virtuous circle of trade, investment, and growth that facilitates poverty reduction and human resource development.
• Country examples:
  • Chile and a number of ASEAN countries followed outward-oriented approaches and achieved considerably higher levels of development than similar countries pursuing inward-looking policies.
  • More recent examples where trade liberalization has been important to adjustment and reform strategies: Bolivia, Peru, the Philippines, Poland, and Uganda — with outcomes including lower inflation, higher investment, and stronger growth.

Challenges, responsibilities, and policy prescriptions

• Recognition of short- and medium-term social costs of reform:
  • Reforming economies and dismantling protection can be painful and have harsh social consequences if not accompanied by appropriate social policies and credible instruments of multilateral solidarity.
• Policy prescriptions and responsibilities:
  • Trade liberalization should be accompanied by appropriate social policies at home and credible multilateral solidarity mechanisms.
  • Industrial countries must adopt outward-oriented policies and accelerate structural reforms (especially in labor markets) to increase their efficiency and provide greater market access to developing and transition countries.
  • Social safety nets are important for vulnerable populations, but preserving uncompetitive sectors or enterprises is ultimately self-defeating and imposes costs on taxpayers and consumers.
  • Renewed international commitment to ambitious, nondiscriminatory trade liberalization that brings all countries into the liberalization process.

Institutional cooperation and next steps

• Complementarity of IMF, WTO, and World Bank roles in advancing trade liberalization through surveillance, support of adjustment, and technical/legal cooperation.
• Cooperation framework developments noted:
  • A Cooperation Agreement between the IMF and the WTO to be signed in Singapore by Director General Ruggiero and Managing Director Camdessus.
  • The World Bank's Executive Board has approved the WTO/World Bank Cooperation Agreement.
• Call to action: Member countries are expected to encourage and support the cooperative efforts of the IMF, WTO, and World Bank to implement complementary objectives for global prosperity.

Remarks by Michel Camdessus, Managing Director of the International Monetary Fund, First Ministerial Conference of the World Trade Organization, Singapore, December 9, 1996.

References

• Bolivia and the IMF
• Chile and the IMF
• Peru and the IMF
• Philippines and the IMF
• Republic of Poland and the IMF
• Singapore and the IMF
• Uganda and the IMF
• The IMF and the World Trade Organization -- A Factsheet
• Speeches
• PRESS CENTER
• https://www.imf.org/en/home