Only a few of the 98 IMF borrowers trade enough to have much ability to significantly affect any individual sectors of the U.S. economy. The eight largest U.S. trade partners generally maintain moderate barriers to trade. According to the tariff and other information we analyzed, most have average tariffs between 10 percent and 20 percent and are rated by various indicators as having significant nontariff barriers. The four countries have experienced either rising trade surpluses or falling trade deficits with the United States since their financial crises began, due primarily to a large decline in U.S. exports to them. Appendix I contains more information on these and other U.S. priority import policies in Brazil, Indonesia, Korea, and Thailand. Trade Liberalization in Brazil’s, Indonesia’s, Korea’s, and Thailand’s Recent IMF Financing Arrangements

Countries in an IMF financing arrangement sometimes have liberalized their trade systems within the context of their arrangements, although in many cases the liberalization has not been a condition of receiving disbursements of IMF funds. These commitments, if fully implemented, could lead to increased U.S. investment in and trade with these countries. Other IMF Conditions Could Significantly Affect the Four Countries’ Trade

In addition to trade liberalization measures, as part of their IMF financing arrangements, Korea, Indonesia, and Thailand have committed to further open their economies to foreign investment and to substantially restructure their financial and corporate sectors. Potential Impact of IMF Borrowers’ Export Policies on the United States Is Difficult to Measure

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. 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 are likely a major reason for recent changes in trade flows. Products accounting for about16 percent of the value of U.S. imports from these four IMF borrowers registered large increases in imports and falling prices over the past year. Also, U.S. imports from Brazil, Indonesia, Korea, and Thailand rose at a slower pace than overall U.S. imports in 1998, and, for Brazil and Indonesia, rose by less in 1998 than they had in previous years. Thailand

Thailand’s average tariff rate in 1998 was about 18 percent. Comments From the Department of the Treasury

Objectives, Scope, and Methodology

This report (1) identifies the extent to which current International Monetary Fund (IMF) borrower countries restrict international trade and the countries whose trade has the greatest potential to affect the United States; (2) describes in detail the reported trade barriers and export policies of four IMF borrowers that are among those with the greatest capacity to affect the United States—Brazil, Indonesia, the Republic of Korea, and Thailand—and recent actions reported to have been taken to reduce those barriers or modify policies; (3) identifies actions, in the context of their current IMF programs, the four countries have taken or are committed 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 changes in trade from these countries.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO provided information on the International Monetary Fund (IMF), focusing on the: (1) extent to which IMF borrower countries restrict international trade and the borrowers whose trade has the potential to affect the United States; (2) reported trade barriers and export policies of four IMF borrowers that are among those with the greatest capacity to affect the United States--Brazil, Indonesia, the Republic of Korea, and Thailand--and recent actions reported to have been taken to reduce those barriers or modify policies; (3) actions, in the context of their recent IMF financing arrangements, the four countries have taken or are committed to take to liberalize their trading systems; and (4) 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.

What GAO Found

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.