Environmental Engineering Reference
In-Depth Information
ows are conditioned by domestic, as well
as external, factors. Domestic factors include the real interest rate and expectations about
the future evolution of macroeconomic aggregates and the performance of the current
account. External factors include the international rate of interest, the state of other
markets, and changes in the regulatory framework in other economies. Recognizing this
single fact is of utmost importance for its theoretical and policy implications.
The International Monetary Fund (IMF) should allow countries to discourage exces-
sive short-term capital in
In interdependent
fi
nancial markets, capital
fl
ows. This can be done through capital controls that can smooth
cycles in the capital account and reduce overall economic vulnerability. Capital controls
allow policy-makers to regain some autonomy for a countercyclical monetary policy.
The experience of the past 20 years demonstrates that premature and abrupt liberal-
ization of the capital account is inappropriate for developing countries. Even when
strong regulatory regimes continued to exist, most developing countries have found it
di
fl
exible
approach in this domain can play a key role in bringing about stability with adequate
foreign investment levels.
The role of capital controls is to smooth the cycles of the capital account, enhance sta-
bility and allow for greater independence of monetary policy. This objective can also be
attained with the use of balance of payments provisions within the WTO framework.
Although these measures were rea
cult to adapt to the volatile environment of international capital
fl
ows. A
fl
rmed in Marrakech, they have been left in the back-
waters of policy-making thanks to opposition from dogmatic quarters in the WTO, the
IMF and the US Treasury. These provisions can provide a constructive response to exter-
nal accounts' crises (Nadal, 1996) and should be reconsidered as an important tool in the
intersection between trade and
ows.
Fiscal policy needs to go beyond the shortsighted objectives of providing primary sur-
pluses that serve only to transfer resources from the real sectors of the economy to the
sphere of
fi
nancial
fl
nancial services. This is the typical IMF recommendation and is normally
achieved not by increasing
fi
scal revenues, but by cutting expenditures. Thus, precisely
when adjustment to trade liberalization enters its critical stages, a restrictive posture in the
realm of
fi
scal policy need
to be reconciled and an approach linking public expenditures to the objectives of attain-
ing dynamic competitive advantages should be one of the highest priorities.
fi
scal policy will have negative e
ff
ects on producers. Trade and
fi
Agriculture
The urgent task of reforming the world's agricultural system lies at the crossroads of
trade, social responsibility and the environment. What we do today to the agricultural
system of the world will determine the history of our future as a species. Yet the world
has been unable to reconcile adequate food production and distribution systems, improv-
ing living standards and environmental sustainability of the agricultural system.
The strategic objectives of the Uruguay Round's Agreement on Agriculture (URAA)
were to open up the markets of several highly populated countries to exports from the
USA and Europe, and to maintain a façade of discipline in the relations between these
two giant agricultural producers. It envisaged the reduction of subsidies, but allowed pay-
ments that are decoupled from production. It preserved the capacity of developed coun-
tries to maintain highly deleterious export subsidies close to US$ 300 billion per year
(Stern, 2002). The URAA failed to open market access for developing countries' products,
