Balance of Payments and Related Issues in the Uruguay Round of Trade Negotiations

Abstract

Little attention has been paid to the balance of payments provisions of the General Agreement on Tariffs & Trade (GATT), despite the fact that they directly influence the trade policies of the developing countries. This article suggests that there is a need to reconsider these provisions in the context of the ongoing Uruguay Round of multilateral trade negotiations. The article traces the historical evolution of GATT practices on trade restrictions for balance of payments purposes. With the general introduction of more flexible exchange rate arrangements, the original rationale for temporary barriers to safeguard a country's external financial position appears to have lost its force. Recent theoretical and empirical work has demonstrated that neutral or export promoting trade strategies are more effective for development than the import substitution frequently advocated by economists in the 1950s and 1960s. The current debt problems of developing countries strengthen the argument for a relatively open trade and payments regime to attain balance of payments viability. The article suggests that stronger international discipline over trade restrictions for balance of payments purposes would contribute to and presuppose other necessary improvements in the multilateral trading system which are already on the agenda of the Uruguay Round.