Mar 15, 1984

SCEPTICISM OVER IMF REPORT ON EXCHANGE RATE VARIATIONS.

GENEVA, MARCH 13 (IFDA/CHAKRAVARTHI RAGHAVAN) – Members of the GATT Council expressed "scepticism" and "incredulity" over the conclusions of an IMF study that has found no significant link between exchange rate variability and its impact on world trade.-

The GATT Council, which gave preliminary consideration to the study, is expected to come back to it at a future meeting.-

In preliminary comments, there was also surprise expressed by Jamaica, and endorsed by the European Community, that the study had not dealt with the problem of the exchange rate fluctuations and its impact on Third World trade and exports, specially commodity exports.-

The Community spokesman, Tran Van-Thin, who according to a GATT spokesman made the "most telling comments", said that instead of "demystifying" the relationships between exchange rate variations and trade, the study had "added to the confusion".-

The study, Tran suggested, flew in the face of the Bretton woods agreement and all previous understandings about exchange rate managements and reasons for it.-

Tran, echoed the views of Jamaica’s Anthony Hill, on the failure of the study to deal with the problem of the effects on Third World countries, specially the effect on commodity earnings.-

The impact of speculative capital flows, and the general ability of the developing countries to trade effectively in commodities had also been ignored.-

Hill underlined the number of points that the report had not dealt with, though called for in the November 1982 GATT Ministerial decision.-

The Ministerial meeting had called for "a study of the effects of erratic fluctuations in exchange rates on international trade".-

A number of other speakers also expressed doubts on whether the conclusions of the IMF study were "wholly justified". The point was also made that the report was a case of monetary experts looking at trade rather than trade experts looking at monetary trends, as had been intended by the GATT Ministerial declaration.-

Norway associated itself with the comments of the Community and also expressed some surprise at the conclusions. Pakistan agreed with the EEC that instead of "demystifying" the study had added to the confusion.-

The U.S. did not make any comments, while Switzerland was the only one to say that the IMF study had "stuck to its mandate".-