Is It Time to End the IMF and WTO? - American Thinker (I know, conservative source, but interesting)

[pampango]

http://www.americanthinker.com/2009/11/is_it_time_to_end_the_imf_and.html

"We are now in the second year of the worldwide Great Recession partly caused by the inaction of the International Monetary Fund (IMF) and the inadequacy of the World Trade Organization (WTO). The problem is that countries found ways to exploit international rules to their own advantage. As a result, these two institutions allowed huge imbalances in international trade and international cash flow to destabilize the economy of the United States. Perhaps it is time for these institutions to fade into the sunset."

"The primary cause of the current Great Recession was the trade imbalances among countries. In a nutshell, the Asian mercantilists (countries that pursue policies to maximize exports and minimize imports) brought about the Great Recession through their currency manipulations. For years, their central banks bought up the extra dollars that their exporters were earning in America, and used the proceeds to buy American financial assets. They did so in order to keep their currencies artificially weak. Through this strategy they were able to lower the price of their exports and raise the price of their imports, giving their industries a competitive advantage in international markets and giving American industry a competitive disadvantage. ... Balanced trade can grow forever, but a growing imbalance of trade eventually bankrupts the trade deficit countries, ruining the markets for the trade-surplus countries and for other trading nations."

The International Monetary Fund agreement should have prevented the very actions by central banks which caused and perpetuate the Great Recession. Specifically, Article IV of the IMF Articles of Agreement requires that countries "avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members." Yet the IMF never did anything to enforce the agreement. As late as August 20, 2008, economist Brad Setser reported that the IMF was beginning to consider the possibility of enforcing this provision in their agreement.

Of course, these institutions do not deserve as much blame as do the American Presidents who, beginning with Clinton, have all permitted Asian mercantilism without taking adequate action. The U.S. is capable of looking after its own interests. Its foreign policies and its trade policies do not require international institutions as intermediaries. Presidents Clinton, Bush, and Obama have intentionally ignored Asian mercantilism rather than deal with it.
------------------------------------------
As a conservative publication their answer is more bilateral free trade agreements (they tout NAFTA in the article) and less reliance on multilateral organizations (consistent with their desire to withdraw from the UN and stay out of Kyoto), but the role that the IMF and WTO played in causing the Great Recession is, if not news, clearly explained.

While they blame Clinton, Bush and Obama more than the institutions, it is possible that Clinton thought that Article IV would be enforced after China joined the WTO and IMF and it was Bush who did nothing to about our trade imbalance with China when he had institutional tools to do something. Obama has had a full plate in his first year, but has imposed unilateral tariffs on some Chinese exports (again yesterday) and will be negotiating in China later this month.

[malaise]

1. I don't understand the point here

The IMF and WTO were under the control of the Washington Consensus group.

[Turbineguy]

2. Hmmm.....

Food for thought. Maybe these institutions aren't being run by white people anymore.

:sarcasm:

[doc03]

3. I don't know about the IMF but I agree on WTO

Back ten years ago Asian and old Soviet East European countries were dumping steel in the us and drove 40 steel companies into bankruptcy. The steel industry and USWA filed unfair trade charges and
and the ITC agreed with us. But President Clinton and the WTO opposed any action. GWB imposed tariffs on illegally dumped steel, then immediately WTO opposed the action and American industries especially the auto industry lobbied to have the tariffs lifted. Yes the auto industry, (GM was the ring leader) they wanted the cheap foreign illegally dumped steel. It wasn't long until every steel product was exempted from the tariffs. What ended up saving the steel industry from complete destruction was the Chinese economy was so hot they used all the steel they could produce at home. So here we are ten years later and GM comes whining to the government for a bailout to save their sorry ass because they can't compete with IMPORTS. I may sound bitter but you will find few in the steel industry that have much sympathy for the auto industry, the UAW or the WTO.

[pampango]

4. China didn't become a member of the WTO until December 11, 2001. Maybe Clinton

should have done something, but I don't think it would have been through the WTO if it involved China. Clinton pushed China's membership in the WTO through Congress in 2000, but it didn't actually become a member until late 2001.

The history of Bush's steel tariffs and the WTO and auto industry push back was very interesting. Thanks for the information. I knew about the steel tariffs and what happened to them, but I hadn't heard the about the behind the scenes "players". :)

[doc03]

6. Back in the late 90's there was a slowdown in the

Asian economy so China, other Asian, and East European countries were dumping their steel (bankruptcies and unemployment on the US steel industry). So Clinton threw the American worker under the bus to help prop up the Asian economy. Actually it was Dick Cheney, of all people, that pushed GWB to put the tariffs on steel, he was a great believer in steel being important to national defence. But when the tariffs were finally put on the damage had already been done and by that time China was going flat-out using all the steel they could make and importing it. The steel industry has filed and won many complaints about steel dumping with the ITC, but the WTO and our steel consuming industries, especially the Auto industry, always back the foreign workers over the US workers..

[Sinti]

5. I didn't realize it was under the purview of WTO or IMF

to control the balance of payments. I thought the IMF was there to enforce the dominance of laissez faire capitalism (opening doors for multinationals) via debt and economic rule-making for third world nations, and the WTO was the organization where those multinational interests meet and decide how the cartels divide those markets. That's what it looks like from here.

They can blame their tools all they want, but unless they want to continue into a Dickensian dystopia, they're going to have to realize it's the system itself, not the tools that's failed them.

[pampango]

7. I hadn't realized it either. Apparently if Obama wants to use institutional rules (which Bush chose

to ignore out of stupidity or avarice), there looks like there is an IMF provision that he could use to help balance trade with China. He's already used WTO provisions, that Bush never chose to utilize, a couple of times to put tariffs on certain Chinese exports.

If China wants to belong to the WTO/IMF (and I'm pretty sure they like what membership is doing for them), they're going to have to take the bad with the good. I just hope Obama talks tough with them when he visits next week. He's mad them mad recently by acting tough on trade, but so much more needs to be done.

[Sinti]

8. It would be pretty cool

if the leadership (worldwide) started using these organizations for the purpose they were supposed to be created for, rather than to just enrich themselves and their cronies :) After all, these orgs and systems are just tools, it's how you use them, right?