International Economic Organizations, Developing Country Reforms, and Trade

By Krueger, Anne O. | NBER Reporter, Winter 1999 | Go to article overview

International Economic Organizations, Developing Country Reforms, and Trade


Krueger, Anne O., NBER Reporter


Anne O. Krueger [*]

International Economic Organizations

The three major international economic organizations are the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO). The WTO emerged out of the General Agreement on Tariffs and Trade (GATT) in 1995; it is an arrangement across countries that serves as a forum for negotiations on trading rules as well as a mechanism for dispute settlements in trade issues. [1] By contrast, the World Bank and IMF deal with their member countries one at a time. They have little influence with industrial countries but can affect developing countries during times of economic crisis and when those countries seek additional foreign exchange resources. The origins and evolution of the three organizations are of considerable interest. [2] Perhaps even more important in light of the recent financial crises in Mexico, East Asia, and a few other countries, are the questions that arise about the current and future roles of the IME and the World Bank. [3]

These questions cover a broad set of issues. A healthy open trading system is crucial for the progress of the international economy. It is particularly important in providing an environment in which developing countries can successfully reform their policies and achieve rapid economic growth and rising living standards for all. I have been particularly interested in the relationship between preferential trading arrangements, such as the North American Free Trade Agreement (NAFTA), and the WTO. [4] The issue is simple: the WTO is based on the principle of open, nondiscriminatory trade among its members, while preferential trading arrangements are, by their nature, discriminatory. Under NAFTA, for example, goods originating in Mexico and Canada are not subject to duties when they enter the United States, yet the same goods from other countries are subject to U.S. duties. Assuring that preferential trading arrangements will not block progress in multilateral liberalization is important, and I am now completing a paper in which I analyze how much discrimination has been a factor under the first three years of NAFTA.

My other major concern regarding international economic organizations is closely related to the subject of developing countries' economic policy reforms. I want to know what the current and future roles of the World Bank and IMF will be in economic policy reform in developing countries. In the case of the World Bank, for example, to what extent will the Bank need to focus its resources on poor countries and the support of economic policy reforms, as opposed to tackling "new issues," such as gender and ethnicity (including treatment of minorities). Both the Bank and the IMF have been criticized by many in light of the Asian financial crises of 1997 and 1998.

Economic Policy Reforms

That takes me immediately to my second set of issues of concern: the choice of exchange rate regime and its relationship to economic growth and the avoidance of crisis. Even before 1994 there was cause for concern about Mexico and other countries that adopted "nominal anchor" exchange rate policies: they deliberately kept their exchange rates from depreciating as rapidly as would have been warranted on the basis of the inflation differential between themselves and the rest of the world. These regimes enabled foreigners to invest very profitably in local markets (because they received the domestic interest rate and could convert it into their own currencies at the appreciated exchange rate) until investors realized that the debt-servicing obligations that were accumulating were too heavy. [5]

Moreover, as long as foreigners were willing to lend and invest, domestic credit could increase in these countries without strong inflationary pressures: the lending financed an excess of imports over exports. Investors appear to have been fooled: they did not observe fiscal deficits, but they also failed to recognize that under these exchange rate regimes, rapid expansion of domestic credit was equivalent to increasing the contingent liabilities of the government, with the same long-run implications for sustainability unless capital inflows financed highly productive investments. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

International Economic Organizations, Developing Country Reforms, and Trade
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.