International Monetary Fund

GAO is required to report on the extent to which International Monetary Fund (IMF) borrowers restrict free and open trade and whether their export policies could harm or result in unfair trade practices against U.S. companies. The 98 current IMF borrowers include several countries that have received large-scale IMF financial assistance since the Asian financial crisis began in 1997. This report (1) identifies the extent to which current IMF borrower countries restrict international trade and the borrowers whose trade has the potential to affect the United States; (2) describes the reported trade barriers and export policies of four IMF borrowers--Brazil, Indonesia, the Republic of Korea, and Thailand--that are among those with the greatest capacity to affect the United States and recent steps taken to reduce those barriers and modify policies; (3) identifies actions the four countries have taken or plan to take to liberalize their trading systems; and (4) determines the extent to which the impact of the four countries' export policies on the United States can be predicted and measured and which U.S. industry sectors might be affected by recent changes in trade from these countries.

GAO noted that: (1) although the 98 IMF borrowers all restrict trade to some extent, only a few are large enough traders to affect individual sectors of the U.S. economy; (2) according to IMF and other measures of trade restrictiveness, borrowers have generally reduced their tariff and nontariff barriers since 1990; (3) however, according to the IMF measure, about half still maintain moderate to restrictive barriers; (4) GAO studied four countries--Brazil, Indonesia, Korea, and Thailand; (5) in 1998, Thailand had an average tariff rate of about 18 percent, Korea had an average tariff rate of about 8 percent, and Brazil's and Indonesia's rates fell in between; (6) Brazil, Indonesia, Korea, and Thailand have experienced either rising trade surpluses or falling trade deficits with the United States and other countries since their recent financial crises began; (7) countries in an IMF financing arrangement sometimes have liberalized their trade systems within the context of their arrangements; (8) in addition to trade liberalization measures, as part of their IMF programs, Korea, Indonesia, and Thailand have committed to further open their economies to foreign investment and to substantially restructure their financial and corporate sectors; (9) these commitments, if fully implemented, could lead to increased U.S. investment in and trade with these countries; (10) the policies maintained by Brazil, Indonesia, Korea, and Thailand to encourage exports could potentially distort trade and displace production by U.S. producers, even though they may benefit other U.S. companies or consumers; (11) however, the large macroeconomic changes in these countries caused by their recent financial crises greatly complicate predicting and measuring the policies' impact on the United States because the macroeconomic changes have probably been a more important source of recent changes in trade flows; (12) GAO's analysis of 1997-1998 trade data reveals that overall U.S. imports from Brazil, Indonesia, Korea, and Thailand rose moderately in 1998, but by less than U.S. imports from other trading partners; (13) however, products accounting for about 16 percent of the value of U.S. imports from these four IMF borrowers registered large increases and falling U.S. prices during this period; and (14) some of these product sectors, notably steel, have already been subject to petitions by U.S. industry for relief from unfairly traded imports under U.S. trade law, while the executive branch is monitoring imports of others of these products, including semiconductors, chemicals, and paper and paper products.