IMF establishes new trade mechanism: TIM in a nutshell

• Pages: 135-136

Page 135

The Doha Round holds the prospect of major advances for developing countries. If negotiations are concluded successfully, most-favored-nation (MFN) tariff rates-the rates members of the World Trade Organization (WTO) must grant to each other on a nondiscriminatory basis-will drop, and agricultural subsidies in the industrial countries will be lowered. But such gains are likely to emerge only over the long term and will depend on economic adjustment in developing countries. Not all developing countries, for example, stand to benefit directly from reduced MFN tariff rates. Many of these countries already export to developed countries at reduced rates under special arrangements (for example, the Everything but Arms scheme of the European Union (EU) and the African Growth and Opportunity Act of the United States).

Developing countries may also be hurt as other countries that do not now benefit from preferential market access strengthen their market position in line with reduced tariffs. Similarly, while a lowering of trade-distorting agricultural subsidies is expected to benefit many developing country exporters, it is likely to result in higher costs for food-importing developing countries.

Under the Trade Integration Mechanism (TIM), the IMF stands ready to

- discuss new financing from conventional IMF lending facilities (that is, drawings from upper credit tranches, the Extended Fund Facility, or the Poverty Reduction and Growth Facility) with countries facing balance of payments shortfalls triggered by trade-related adjustments;

- take into account the anticipated impact of the trade adjustment on the member's balance of payments in determining the appropriate size of access under both new and existing arrangements; and

- consider augmentation of access under simplified procedures if the actual balance of payments effect turns out to be larger than anticipated.

For more information about the TIM, please see the IMF staff report Fund Support for Trade-Related Balance of Payments Adjustments. That report and other relevant material are available on the IMF's website (www.imf.org).

The pending expiration of the Agreement on Textiles and Clothing (ATC) that resulted from the 1986-94 Uruguay Round complicates matters. When the agreement's special (and more restrictive) rules end in 2005, trade in textiles and clothing will be mainstreamed, with a resulting expansion of trade opportunities...