Trade Liberalization, Regional Initiatives Explored

• Pages: 392-394

Page 392

African cabinet ministers, academics, and senior officials from the IMF, African regional organizations, and donors gathered in Washington, on December 1-3 to explore trade liberalization and regional integration issues in Africa. The seminar, co-sponsored by the IMF and the African Economic Research Consortium (AERC) and organized by the IMF Institute, blended scholarly analysis and practical experience in a search for pragmatic solutions.

In his opening remarks, Alassane Ouattara, a Deputy Managing Director of the IMF, encouraged participants to take a comprehensive view of issues; examine the analytical basis for trade policy reforms and regional integration; and weigh goals and policy options. Benno Ndulu, Executive Director of the African Economic Research Consortium, wryly urged participants to take this "unique opportunity" to discuss the issues without the IMF's customary benchmarks in the context of negotiations.

The realities of globalization provided the backdrop for the seminar. The role that trade, and trade liberalization, could play in the quest for higher growth and greater integration into the world economy was at the heart of much of the discussion. Presenters and participants generally agreed that sound macroeconomic policies were critical for greater openness. The debate had shifted from whether or not to liberalize to how to liberalize. The role that refocused regional arrangements could play in furthering liberalization and spurring greater foreign direct investment in sub-Saharan Africa also drew attention.

Lessons from Experience

Mohsin Khan, Director of the IMF Institute, opened the seminar with a review of the lessons gleaned from trade liberalization in developing countries. Presenting a paper prepared by Michael Mussa, head of the IMF's Research Department, he underscored the importance of complementary macroeconomic and structural reforms if trade is to be an "engine of growth."Bold and comprehensive trade liberalization strategies have proven more durable than hesitant measures, andPage 393 sound macroeconomic policies-especially maintenance of competitive exchange rates-are essential. The Mussa paper sketched out a sequencing of reforms that would over five years remove quantitative restrictions and limit tariffs to 30 percent as a first step, and then would further reduce tariffs to a maximum of 15 percent. Major trade reforms could be facilitated, if countries accompanied these efforts with a real exchange rate depreciation and an improvement in the fiscal position. Regional integration efforts should also be consistent with multilateral liberalization.

Distilling the experiences of regional organizations, Gary Hufbauer of the Council on Foreign Relations and Barbara Kotschwar of the Organization of American States suggested a checklist of ingredients crucial to the success of regional arrangements. An essential precondition, they argued, is a deep commitment to liberalization. Be mindful of...