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Foreign trade policy

The D-cycle: deficit, debt and default in developing countries under the current global economic order

Publication´s date: 
Mar 2015
Author: 
Francisco Mango y Enrique Aschieri
This article aims at investigating the reasons why, with few exceptions, debts accumulated by developing countries could not be paid off during the second half of the 20th century, at least in the sense given by Keynes referred to the fact that they are effectively cancelled as long as they are repaid with countries’ resources. In a fiduciary international monetary system where developed countries’ currency units act as reserves, developing countries’ own resources are basically constituted by positive results in their balance of trade. Nevertheless, the global economic order prevailing, with some shades, as an aftermath of war, succeeded in consolidating developed countries’ protectionist schemes, whose import expenditures are the main means through which developing countries can effectively cancel their debt commitments, in Keynes’ sense. Within this framework, the current global economic order promotes the formation of a recurrent medium-term cycle in the dynamics of growth of developing countries, which in the present work will be defined as the D-cycle: deficit, debt and default. Given the protectionism present in developed countries, this cycle begins with a first stage where developing countries must become indebted so as to be able to cover the demand for imports that are vital for their economic growth. The cycle follows with a second stage, in which indebtedness persists but it is directed towards financing mainly the repayment of the debt previously accumulated and, to a lesser degree, essential imports, thus resigning economic growth. In the last stage, suffocated by the burden of foreign debt services and the need to resume growth, developing countries incur default of one part of their obligations, which implies more than simply default on payment.
Type: 
ARTICLE

The Marshall-Lerner condition and exchange market stability. A theoretical note

Publication´s date: 
Mar 2015
Author: 
Mariano de Miguel
This theoretical note is aimed at reconsidering the Marshall-Lerner condition (M-L) in the version that is usually presented in texts and manuals on the matter, so as to make clear some of its main assumptions and assess the extent to which the condition is altered when these assumptions are modified. If the currency adjustment is ignored by means of a contraction in domestic economic activity –giving the model an overt sense of unreality, but being very useful for a fundamental analysis– the M-L condition will depend on the absolute value of foreign trade elasticities. A non-gravitating country in global supply and demand of exports and of imports faces a less-restrictive M-L condition; nonetheless, that does not judge on the convenience of a devaluation policy as a tool to improve foreign trade balance. With reduced foreign trade elasticities, low unemployment and wage resistance, the size of the required nominal devaluation can bring about unnecessarily high costs that are consequently unjustifiable. The analysis of the terms of trade determinants, in their mercantile and factorial versions, comes up as an axis for prospective research, due to its relevance in the final expression of the M-L condition and in the degrees of foreign freedom that countries possess to exercise an autonomous and self-centred economic policy. The pessimism in foreign trade elasticities is the reverse side of the optimism in revaluation.
Type: 
ARTICLE
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“Green trade protectionism”: an analysis of three new issues that affect developing countries

Author: 
María Victoria Lottici - Carlos Galperín - Julia Hoppstock
The environment is increasingly being used to justify protectionist measures that enjoy greater social legitimacy. In the last years new issues have been included and in this study we will analyse three of them: green growth and green economy, climate change response measures, and the liberalisation of environmental goods and services. These new issues are used both to apply barriers to the goods and services coming from developing countries and to enhance the access of developed countries’ exports of industrial products. All this ends up in a “green protectionism” which is aimed at improving the trade balance of developed countries, especially in relation to developing countries. In the multiple forums where these topics are being debated, Argentina has claimed that these issues should neither result in a green protectionism nor encourage policies that constitute disguised restrictions on international trade, which would be inconsistent with the multilateral trading system and with the international environmental law, in particular with the principle of common but differentiated responsibilities.
Type: 
ARTICLE
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