The IMF and protectionist trade policies: What does the record of the past 15 years tell us?
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Speakers
Susan Schaedler, IEO Vinod Thomas, World Bank IEG Jo-Marie Griesgraber, New Rules on Global Finance Mr. T Bayoumi, IMF Moderator: Hector Torres, WTOPresentations
Susan Schaedler – presnted the findings of the IEO report. For more detail see the IEO website for the report.
Vinod Thomas
- This concurs with IEG finding on trade policy at the World Bank (ref IEG report on trade policy from 1987-2000); need for coplimentary policies to benefit from tariff changes, trade opportunities
- The distance to the technological frontier matters for the impact of liberalisation and competition policy
- there are different gains and losses in different segments of the household sector, this needs to be considered
- Greater trade openness meant larger impact from financial crisis, but also faster recovery
Jo-Marie Griesgraber
- IMF mandate is to expand trade, that is why it was set up in 1944
- Countries with more controls on financial services weathered the crisis better
- On the IEO report specifically:
- Welcome that it recognises the IMF’s bias in favour of unilateral liberalisation; that the IMF board has political favourites; that the IMF claims to learn from mistakes; and that the board fails to provide direction
- negative critique – trade theory is accepted as broadly accurate when it is not; we need a candid assessment of trade theory; we need stronger recommendations; IEo failed to look sat whether the IMF staff references UNCTAD work on trade
Bayoumi response
- Acknowledge failure to analyse preferrential trade agreements (PTAs) and trade in financial services – but also IMF reports trying to be more focussed and less box-ticking exercises
- New guidance notes have been produced PTA analysis – but issues are very complex, difficult to know the impacts
- We accepted the conventional wisdom that rich countries had the right models of financial services regulation – we are rethinking this
- It is very hard to be “evenhanded” and to tailor advice to country circumstances
- staff doubts about increasing capacity on trade policy analysis – maybe not the best use of limited resources of IMF
Discussion
Questioner – We need to sya more about the lowering of trade barriers and subsidies that the IMF forced on LICs
Torres – the problem is not trade theory, it is the assumptions, plus dont reflect true costs
Schaedler – we accepted that trade openness is good because it is near consensus in economics; IMF did great analysis on the problem of US agriculture subsidies in 2002 but completely failed to look at the 2007 US farm bill
Bayoumi – IMF has been quite straightforward on the negative impact of agricultural subsidies in the North, see WEO
Thomas – liberalisation must go with good regulation, not zero regulation; lso the path to liberalisation is very important
Questioner – What are the prospects for better advice and objective guidance on trade in financial services when a large portion of the IMF board comes from countries that are financial services exporters?
Schaedler – this is the exact problem, 05-06 board guidance on financial services was implicitly pro-liberalisation with no reservations; scope for change now, there can’t be total amnesia
Bayoumi – our advice will change, especially as Basle Committee on Banking Supervision is also changing risk weights; don’t yet know the exact outcome
Griesgraber – it all comes down to governance, this is why governance must be fixed
Torres – the IMF will change for exmaple changes on the opinion of what central banks’ roles are; but governance needs to change as well
Questioner – G20 isnt really tackling the reality of the crisis, it is not bonuses; they are trying to return to the position before the crisis, this will only lay the groundwork for a new crisis
Questioner – We have to also consider the imbalance of the IMF’s influence
Questioner – What kind of IMF governance do we want to see?
Schaedler – the IEO recommends not to have any conditionality on trade policy
Griesgraber – For recommendation on governance see the report of the civil society “fourth pillar” on IMF governance
Bayoumi – The rise of the G20 is a big improvement over setting policy at the G7
Torres – governance is a big problem and it is slowly moving in the right direction; we also have to address protectist threat; we can’t wait for the IMF to solve its governance problems, but have to work on WTO as well; someone has to promote policy coherence.
