Washington, DC: On March 27, 2023 the Executive Board of the International Monetary Fund (IMF) concluded a periodic Review of the Role of Trade in the Work of the Fund. The review provides an opportunity for the Fund to update the objectives and modalities of its work on trade issues.
The paper emphasizes that open, stable, and transparent trade policies remain key for economic growth and resilience, and for addressing key global challenges. It cautions that the deteriorating global trade policy landscape poses risks to the current levels of prosperity, and a weakened multilateral trading system has been ill-equipped to address these challenges.
Against this backdrop, the review emphasizes the continued importance of the Fund's advocacy for open, stable, and transparent trade policies and outlines an agenda to reinvigorate the role of the Fund to help country authorities address key trade-related challenges. These challenges include identifying opportunities and managing risks associated with structural changes in the global economy, such as those driven by climate change and new technologies. It also includes finding ways to cooperate amid rising geopolitical tensions, managing the risks of geo-economic fragmentation, and promoting policy coherence between trade and non-trade objectives such as climate, inequality, and security.
To operationalize this agenda, the review outlines priorities for future work, including on analytical issues, surveillance, and cooperation with other international organizations, especially the World Trade Organization (WTO).
The review's main findings on trends, the Fund's work on trade and trade policy, emerging challenges, and priorities for a forward-looking agenda are reflected in the Main Paper, while technical information and in-depth analysis of several key trade issues are covered in the accompanying Background Paper.
Executive Board Assessment
Executive Directors welcomed the timely review of the role of trade in the work of the Fund and broadly agreed with its main findings. They noted that the review will serve as a blueprint for an enhanced strategy that will reinvigorate the role of the Fund in trade. This will assist country authorities navigate the challenges associated with a changing trade landscape in the coming years.
Directors recognized the importance of the Fund fulfilling its traditional institutional mandate on trade and welcomed the high-quality and policy-relevant work done by the Fund in this area in recent years. Nonetheless, against the backdrop of a changing trade policy landscape with challenges related to climate change and technology, the growing use of trade policy for non‑trade objectives, and recent trade tensions, Directors considered that the Fund should boost its attention to trade policy issues, including in the context of bilateral surveillance, as well as scale up its expertise, to ensure that the Fund's work on trade remains central and its policy advice is seen as evenhanded. Directors noted that the trade work should continue to focus on the areas of Fund expertise, emphasizing topics of macroeconomic, fiscal, and financial relevance. Amid competing institutional priorities and resource pressures, Directors generally agreed that the scale up of Fund work on trade should primarily be attained through careful internal re-prioritization, while protecting other priorities, and continued active collaboration with other international institutions, including the WTO. Some Directors cautioned against underestimating the needed resources for the reinvigorated trade agenda.
Directors noted that the Fund could contribute to addressing key trade policy challenges through multiple channels, including bilateral and multilateral surveillance, advocacy, and inter‑institutional cooperation. Directors generally encouraged staff to maintain its support for strengthening the WTO. They agreed that a strong multilateral system is central to open, stable, and transparent trade policies, and the Fund should remain a vocal advocate. The Fund could bring a more active voice to major global trade policy debates, such as on subsidies and other trade-distortive policies and barriers to trade and investment. Directors noted that the Fund is not well placed to assess the appropriateness of trade measures imposed for national or international security reasons, but that it should assess the economic implications of such policies, including spillovers.
Directors encouraged more consistent and more active coverage of trade policy issues in bilateral surveillance and urged staff to translate its analysis and multilateral surveillance into tailored and practical policy advice, including how the gains from trade can be shared by all. Regardless of countries' level of development, open, stable, and transparent trade policies are important for economic growth and stability. Trade diversification and supply chain resilience will also be crucial. For advanced economies, a key priority is to avoid new trade and investment restrictions and other discriminatory measures wherever feasible. Further opening markets to products, especially those of export interest to developing countries, and reducing barriers to services trade will also be important. Improved domestic policies to facilitate adjustment to technological change and import competition are critical to better share the benefits of open trade. For emerging market economies, further liberalization of goods and services markets would bring benefits. At the same time, trade policy should be better integrated with structural reforms promoting competition. For low-income countries, greater trade openness should be complemented by improved trade facilitation and increased access to regional and global markets. This should be underpinned by macroeconomic stability and structural reforms and supported by relevant technical assistance. The Fund can fill the analytical and policy gaps to assess the development and growth impacts of trade in the world economy. Attention should also be paid to the implications of country characteristics on trade.
Going forward, Directors considered it important to continue to periodically review the role of trade in the Fund's work. They asked staff to provide regular briefings on the evolution of the trade landscape and implementation of this trade strategy.
