'thec~ili~g

of ex.porte in sympathy

i. .

E!CN •14!WF,

2/4'"

36. This 'swing margin is'attended by certain advantages. The "waiting peritid"; for'e'xte'rnal'paymkntscllaraetkf{kticof

!tlie' irifi:if::";;ar'-dI~ar:i.ig)

agreemerit's'lsClch.ea;waY")f'fth.; Then

thek~:p()rtEirs'()()uid'ho~b~'"pa:r;f'i~ti;~i~

own .c!f!''''Sn()~eEh-un:Ji,il the. importers..hadr.em,i;tnl;ed sufficient

amoun'ts' itr;;· ....

nationi'c:J,,;P.)Ll:';re,wy to the clearing offioe," d'rhtirs :sl.o'ws ·downtl'attec~'· ~T1;i-i')d"rJ')'"

advantage '9f ;tA~,'\'l'wing crs.di.,!;1'" is that i t peir:mitl'll'an .unin'terir'tt!it'ed·'fiLow . L

of irade growing pari passu. Sinoe cut-pa.yment'se;lJii'·in:-'pEiJ:;ytrfeh'ts

1'le'EJd

no " , longer synchronize in -i;il)le"

:lib.",..

clearing p",ymen-l;:a, 0.13.):1 be.-dec,Wl,trfl!;Lizlfd, wip.b,:

.Lf~.~·::··;-":~"':':>;i·:::.:::' :'~':' .

".>,-,. .

~.,.-L(,;:.: " " ' , ' _ , 0 . " , . , " - ' , , " ' , ' . - , ' ' ' ; ' . , - - ' ' ' ' , ' ' - - . ."

comm erc,t1'-l;ban~~i;p'R-'r;r~n:/j\,il3F'19t'''9Count,s,. ,,¥0ti0"l'ye

f ii

^t:f,h:"s,W-i>;lg,.6'rf'''<j.;~t,HI';Py,1lj.:l-jlg each party with aocommode.t i.on in the ot4.er t.l'l p),l;\';J;'~noy may cause, :t;l,:\.},atera.l,.

:: . - .:,-:':" .::.) ""',,':'.l.-.:;" -. '_, -'-;.:.Ld'.'-,,/ ~.-,:;!•.- ' " ..-.,.-.;.,- " ,".' .:., _ .

-expar,:~,io~i.of _tr~fe. If"one~N;YY_r":lf~JtitijlJ,p:t!lfhase theoth!,~;mil-Y be,.

induced to do likewise. '.",,'~,'' " ,

37':Bn~te;:,al trade a€ifeeme;;tl'l"r?\',~ ~¥l';t't.JeJ;'m "... usualily ,.hJ)-)~<HlY'J;',eJ;l§wab;LEl'­

agreements in ~hich,the ,partlf<;l+s en~er,J,r,tto certaino?IIlj!}}tl1len:j;§l t!'eg§U'<!:ilJ,'lg"

.:~-"...;~"..' ",'^, .,'. .,- .

their reo:lj,r'ocal direct trade aniLscmetimes also. tr;>nsje;\;,t:re,~e"'BTb.e:r6.,:§U'e:j in the main two .types: que between .two _~.Lecurxency oourrtz-Les-azd

" " : ,: . . , : , _ J" '.c:, ':". . , ' ,'''.:'r,~ ., :,-' ,·(,.,r<,.- " " , , .,.,-,;.~:, 8.i),~,::·< 8,C,~': :)Or.i~'·· :,1"','" •

the other 'bi'itween an inccriverti15le cUrrency country and a convertible

:--i-:'_;." " ,;",;-~r}_,."!": ^"n ::'~::.~.; :.~{ii::t,;.^{.•;.j .C',} ,:,:,;:'<':'):}'T,~:!,':' ,:2;'~'iJ:r:V:,::-,q .L".,,;;,.j",::,:.L_"! ..-<

cUX'rency cbuntry ... ·In the former'case, each government undertakes to ~SSUe

: . " , : . , . : ' :.;'· ..~:,-I^...,.."'~::i·'.. ) ',~ "',::"',' :;,~ ::.".: ':'. ' . , ' :'-,.!'fJ 'r: :-:'.;.'.-'::,.c'" :'.,[ f:·::'tCj:'J.,~\"-;

upon'applicati6n,iIitj5ort licenses for certain listed exports of the oth~r

._.',' ,:",.'~"" .< . : \ .:':tt -. . . , ! '.' \ '·~r., ",', , . " .'

partner up to 1l.'spe6ified value or volume and to issue export business for its oW eX]1l0:d'prd'du6ts sininariyHiteiC In the latter

case,thec~nve:r:tible

cUX'r¥1l'dy::cdM1ir'y"gi>a:rits i';;p6ft

privil~ges tothe;in~onvert

i ble currency

" . . ·',CO...«" "·\..:i:" ,r,:,."'- ,:', :-;,<t::.,: :';,.::^';'.i,:',

•• -j- ..\. . ','.' " :::. ,':,".·C' "':""'-.~, " . " , .... _ . . - - , ,

count:t'y-'i'n 'exchange for pur6hase cOmmitments on the part of the inconvertible

',." .. ' ,,"'-"~.' . t,·,+~.-,i ',' .... :'.. . Jfl'·j':tF-:.7"·'·'·'

ourrency 'country'for listed'g66dsf;rom the convertible country.

":' ';""'. :';,' ._! 8(; :)j ( , L ' " " . • . .

38.

The pr'ov.Ls i.ons typical

"if

];)(~+a~!\,}l"\:lrl;l;F1J<d,%,agreements'arEl,.-i;he>!fW):1g:o,f

• '.:'.,i" , ' . ' . . 1" --,' .. , . . . " ,.:

import .quotas, paymentspro:>ed:u,re,L:i.f ,{lot., ,accompi'l.niedby'.."2.";:.: .~..'-, . L ' ," 1.:'.'.' ,.. ~'..!,.-.'.,.,,~[. ." " . ' .- '.~...- " . " i,a,(;S;ep~ate,opaym,en(l;:s)'.

agreeme!1\t), the gover)11ll,E!n;GpurG!+,,.sfj p,rogram1l16Qf. on'! o;r:"bq,t/+.l1'ar;l;n"rs.,

:':, i:" ''',::> ',','.\.... ;..,,<.1 ,-::c,~ . . --.~','. :-,,' .'" .-',,'.- . . . ' !,' .. " .

provi~~,o,~,regarqAn~iS1.7;P,I1~i,es9t;sPe8[Lal .~P~;rtgoO.d!,\par;f;,io)lJ;~:lY;MdefElJ:'r§d payment .t,e!.'ms, pro:::~j~ioll .for the. Bf'9fLtif'~-i;i~lljo;L a (tt:i,;l,.t.er",w/dept, s;f:Qrt:litll,'

prohib~i;i?:'l., or p~!.'missi.o~lof priv~te,jP?p1P,!pEi,a'tipn,tpp.nsa.o~ti:9nl'l,. fon, e:wti!!~>-'

quota

't;~--;;~aotio;';s

on a short.

compe~""'Hon.

bai3cis,a,nd iniV:i!l<!t'ji,!l>J:J4:Y,:r:u£Lej;j:.:oifr·"'O:G\'

",IIJJ.;:~::~) (Hi:::-' . " " ' , ; ',',~ ",..'V~.:'-l :" 'j':-'-" -'. " .

procedure f9r re-negotiatio):1 taJcing.accounj; 'of,_{::,,;r ',;-:-,} ohe,;ngingt!lla,rl<i"t0'C:Pndi.i\;'imtB~^8;

:~.~ ,,-- ,'. ' : .. "'''''--' ...~,'. . ,., ".'"

--..

' j ?'w'

EI eN .14/1'1:8.,2/4 E!CN.14/AMA!12

Annex Page 13

39.

^The ,p4rpbs~s and motiv~tions Uhderlyin~bildteral trade and payments

" '...^{" ,}

..

agreement s are numerous ...

40.

AbHateral payment s agreement is meant to secur-e a

continuoi:i~"expansion

.of exports to the bilateral partner. This is espeoi<:tlly

h6:p~'dfo:/

^{W'hen the} payments, agreement establishes a newtritde cormexd.on,

VerY:hftkn,"'h~wever,

it. is hopedto.,ja;ehleve'im

eX:l?~~!3iim

of exports even with

an

61'a.'t';;,)ie partner.. ,'(8ilateralpayrnents agi'eements are

also'~upposeci. '%6 di\;;;f;~ffy

^the

dest.inat-io'!'J.,:of exports.

l.lanyitgr~ements

we'I'econcluded 1;'0 ,dom.ina:lnLeneby a trading partner such: as an ex....meti'opo:J.;Ltan 'were designed to open up new markets.' This was especially

escape

'the

....,'.,,:t<l ':' power"; Others

. ,", r" '<:l

the case with a monopolistio' state. trading_{, ',. ,. 'J:}

·,42., The ,partuersto bilateral agre'einents·often wanted

t~'<r'Eii;t{il"rizethe

^flow

" ,ot·,e'<Cports through time .' Hence a trade agreement 'miiy'prescr'ii:le

''a~u~rterly

r ' , : -1',' ~':L'"~-"""~': ':~'~.:,.i""""

"ft:ime,p<3ite,.•f-or,the issue of import licenses. The'bilateral "paym'ents' a.greement i,l.a.i.,me!lcj<§1tLbij,;l.a.noing external payments in ail up'w'ardd~r"''Cti&l1. 1twa~ ^hoped

'('J;p.§l,'beiJ!:pc,.!'ts· and imports ,would grow pari passu.

In

fiiit, "'eithe"i-'party to a paYlll-llnts agreement can ,force the' partuer country to' accumulate ;':h'fncbnverti"iJle . credit balance within thes:Wil1lgl1largin by a policy of importing _f'H'~i. The

'crfilditor, partner seeinghi.scri;lilit·baianoe acoumulate may then be forced to import from ,the debtor c0untrY,so'as'to reduce,the credit balance. Some bi;I.,.teral partners were eS1?\,9iil:gy interested' in seotir:big an inoreased volume

",;,,"1--:'

ofimportsingeneralt'"or.c'of oertain essential imports iucl:ras oil, or .' oapital.goods, eto.·:.from:':the other partner.· ':

E!CN;.14!WP.2!4 E! c!,\:,

~41

MIlA!12 .

Annex' Page

14

. 43. Anot~,,:r.·Iljajo.r, objectbr<:i:Qf:the bila.teral agreemervt·s' was an. improvement in the barter terms cf trade. Some contracting part'ies suCceedl2fd<in' raising their export proceeds sometimes even above world

S?me oOAtractual parties suoceeded in Aowering the

"",,

had to. ~ower them, they

" c._;'" ,

the bilateral partner •

• S'- TO' C·-. , __

lowered them

marketp~oioes.,:or i~, they

• . •..· ' " c ,.".. . ' "',

.->-less than the priees of ,the imparts from_-'

- " . ' -',

priqef\ofgoods. im)'orted from the 1)a;rtner, sometimes even below world market prices.. If tho import prices ha~. t?,},e ra,ise~, they were sometimes raised less t~~:;: the, export p:r'ices. C()nt.I',~c,tingparties to bilateJ;'al~g:r'.eements

often

~,~,~~~t(), ,beCl.~teG~o.,pr~ve.nt

d?cYFwarp..: fh:U'i.t:ua,tio,ns

(osq~J}ati:q!i1J\)

^of export va.Luos , export prices and eXP()rt p r o c e e d s . ,

. :~l\~'- ',',._..., "'-'-:2;" ~'";, ',,-" "

44. '.

:Rome :b'i;l<Jit@rah.paymentl? .agreements attempted' to' ·'stabili,zei'the "bilateral rates of exchange and thus make U'p.ossible to plan: a fo:reign'ex~harige budgut.

The Br-i.tish Monetary)\,gr"elllent, aLso oalled the Simpn.,Reynaud Agreeplent of 4 Deoember

193~, :'~sth~'forerunner

; • _ ',,-) i . of the exchange, :, - .

pro:':is~;~s ,~f

"':"';:;"<!i,-:~':::' - (. ", -' ','~--'"^...

~st~-"war

payments agreements._{. .., .;~;V ,_ .'.c:' - ,- -}It. stipulat,ed. that fz-anos requir!,d bj the .._{C-._'·•. , •. - .. ,. .. _} -':.:'<.r ..-

-r-

^{.d'._. _.- ,- -~'"}l]X,-""'",wQ!,tld be.~.. ',

pro;vid.ed. b",: the. F!'S"nyp. (}oX!3r~!3!f1j; ~,~";~Hst payment j"n.ilJer}in,g"i1nd'oth'"

sterling r!3'luir!3d. by. Fr",nQ!,. wa!3 provide,(L ,by the ,Bri ti!3h" QoveJ:'iimentagainst

,-': ::, ':- -·-:.L~; ,':;::)~:,,' d':' -'.\'.J,::; ,.,:,;--,.) ; ',.. -. ':-. ---i~\ -···1 -'." '. ' .,-~ ~ _. ---i.;.~! I~L- " -,

francs" b~)~h.,t::ansaot:i()n!3,.at !3;t""bl,l', r",te"'i'l!pr thE>j.d.urat;Lp,uep;fthe war. No

, ,',,: ",'-..; ,." .-, - , . _.'.". - ,',.

.

^{.._._': . --. - , - . , - ;-,--,-,}

g()ld w:~s !l~oes':',ar'JT ~(?F.~jle""I'" tri3..SWfction.s~,:,The ster-Li.ng .held. by tjl",Freuoh

.~, '- .^,-, . ^{' , '} -." ' ."...

monetary authorities. wa.s available .. for pu:t;',Q)lase throughout th,es.t",rling

."'j'-' ' ,:I,. ,'i ' . -,'i.' ' ,.C.' __~- . . '•

'ij.:v,~~.and,thH f?an,,,?~, h",±~ by the Ulfp,cmeteu-;Y' a""thoriti§'5' w!3rea;va:i1.able , "", tp:rougj:1out the Fre11911 ,Empire •

. , . -, ' '," "":'-1 •

"hC"'::'43~ Th"kati~i-

P'1,7'po,,,,!3 Of.. any bilateral

paymen~\,,:,

agreemerrt I s the e conom i.zLng

- - -, "',., '.<>..

-'ir;')!;J."e'

.,use -of conyeJCtt'OlE! ,f0J:'eign. exchange. Thi,:e was E>spE>i)i:e).ly neoessary

~fter,World Wa;n"ll!3~-j;h!3

'm911!3tarY reserves.

~fJThlrOP~<J,n,

qountries and. their

, ~ , . ' .: ••" '_I "" , ..' _ - ", '., ~.... . - - - .- ,.. ..'. ," . ~'- . , ' . ,

~E>pendent territ(jr:iE>s .J1~,}'ur: 1?,1f'8iJ}~:l,a~ed.:tq,t.ldE; lfl:§lt-l1amed. objeqHve was the desire to manipulate )?qi;h thE>l.ev!3~ il;'l'd.;.i;h!,c81llJ?:"s~J~OJl9;fmonetary

" "'..' ; ; ' . , '-~:'-'.,':;"'.- '_.:"~"---- ",;:. ~,. ,-' ..- ..

.;,±:El~rr~?s :t;~?,ltgh the. P~?~Sf~gti(lnQt'c'iI?'eJ1.0~~<3for ~ll)i<J,:rd,1l,l1d outward tranS,fers., C(luntrie"".c,wii;h +owmonei;a=Fy~e!lerves jlaturl1-l~Y>5'9n!3i~e:req,the

;';' ':rJ"" :.-; , ... ,; .. '. "" '- " ,,'" -. ",; '.' .. ' '-"" ""

whqle of the swingqred.:j.i;, as ..1J,n 'i;Yc?rE>ase Qf.theirmonet"~';jh:r.e.ser¥es.,"This

,,"', "" oJ., "... " . '..t.,.'.: ,,-._, . j ,.• :. .~.. . ' . ' , - - ' , - - ,,', ,

"as especially tru,,? ofunde.J;'<j.,E>velo:jl,~d.countr'!c",s '!h:j.ch sig,Y\ed.,.P<l.;)'lfleE;i:jS

; ", .:' .. ,,' .. :.-.c·,'..•..."', _. -,; '."".' " "

agreemeJ1.ts~fte.,;,tl;je.;K?:r,eanwar"J;LEln~he t,eriJlS c.f .trq,de moved. sj{iftlyagainst them.i'.;.." I t',-.was alsqtrlJ." of underd,ev,el9PE><i, COlJ.ntries."wjlQ .d.eple,ted." ' - " J ,', ' .. - ' " . - , ••" " J -' ,.- - .- _. , th~ir

transferable sterling hold.ings lts.:t'inancE>, their aooele.rated develOPment

programmes~

XPHWf mere" ^{z -p- " ---2 .,}

"

E!CN. 14!WP. 2/4 E!CN.14!AMA/12

Annex Page 15

'~~the;

^major

~bjeotiv~

^of

bilater~l

payments agreements was oonnected withth~ sWing,~axgin. The prospeotive deficit nations _o6~Id import more than they exported to the extent of the swing credit. Pheprospeci;ive

",> ,< J ..,J~"" i'~: '; . : ..

creditor nation oould tie the trading partner

to

its ownexpGt'tgbygranting

, ,

the swihg oredit and it could, 1>t the same tim';, limit the debtor :position

01""'t116,

p.iitner to the amount of the swingoredit, r

.. 47•.

The fixing of the amount of the tied' credit', 'i.e., credit to be spent

,.•."'. ! , , : ,1..'

.1,', .

only in the creditor country, is a diffidult matter. The fo£lo~ingproblems

;%F~,"!~ when fixing the swing margin: "'c

( a)

I f the "wing ma,rg;il1, is, too debit and credit positions

.."',-; .

low in relation to total"i;iadeextreme arise quickly;

(eY

The amountO'f'6x;pdr'ts^cand imports in tra,nsJ,:tJ- f;t)om the ~U",teral partner are o,iff:LDU'lt to aSoertain·e\lpe(l;~9i:j.]"y;w:hen contracts are permitted' before export license'S "are obta:i,ned,;.:

- , .,,;;...

-~c:.',

When tradegt1-otas. ._ " I " . , " ,

.9,f,J~o.t,!l part~~rs

':./,.<: '.~",',.' . .> . ^do

not~~teriahze

,. . . , .' '" ^(e.g.,..

due to crop fail~e,,,-,,,ncellation

.,

^{-. ','} ,_.", ^{" ;} " ,.., of orders for 'capital goods)"

the swing will:,b"."su):>jeqted to. strain; .

• • - " : . ' .J..'.... '.'t . , ' " .:.' .:. :,. .\

L beg~n;

"', L"

(b) Leads and lags of payments by importers and in the collection of

claims~y'''~'x.por'iirs;;aY--&itld~if:to.reseen~'ettre.me.'Posi

tiOilll' in cet'tain ill6ntffifj''j L- s c ^{' J}~.'" ^{' i} s __

Seasoual'deiiveries'~ina.Y': req-,ih~j

a'iil:fgerIs#ing whichlllay. be

:L~: '" ," '," ":' '·"'-""'-'-:'n .-,,_, "'" '.' "-",,. '. ~

exhausted by incautlons i'iciinsill.gbefore"seaisonal deliveries

(d)

" . '.,

,.::~

'..,.

LibefB;:!'izati6n of imports (Le., freeing

tlt~WJ'

f;9m quantitative restrJ'CHi6ns)

ma;tJrena.er it

from the dollar,

EBU

or non7~o~~~~ non-Ef¥ area difficuU'.for. creditor nations to take imports

'" ... . , ' . '",,:.~~'

",D"'· from deficit 111j,t.:l-ons;,_'."

" , : -- ..-" :':' .1' ^{r, , '}

.

^:,

,',',

!,:.",:J .)

'(g)'A weak inobnvertible:

,c~untrywill

^;always

t;ry :1;,-9.

use all. its swing

3i,.r:. Ot"e-dl't' byJ'llleans ofhigh...imports ,an.d:loW!'!~"'H9r:i;~

"

E/C,,'N':l.,4/,'fP,',2,/,4\

:Ei/

GN\

14lJ\.lVIJ\.!

^12\

Annex Page 16

, ;48.

"Some bilateral::paymentEl'agreement'·trrM tb"stop ','

iniCit,

foreign exohange

-s- bansll.ctiofiS,;·.es:!>ecia:tlyJ.fliglJt'~oj'30apital;from:so:tt. tb"ha:rder arid. from

·;hotrd.r;x'.; to dolla:,,J cur-renoy ccbuZ'iti'iei'l.Sorrietirne sbilil:teral"t1'ad:e ana; payments .. "J',agreementi:l"'·aiimC.at ',' 6vercomi'ngH t h e ' i d f f f i c u J ! - ties'andiricdnvenrecg~

"Iii'

'conducting

'., U J.'eJ1ichangeiiiobetween, conVertible and inccriV:e'i'tibleottcrencies

, ,1-_~.;" _" •." ,"J'i 1:";;;;, __ ',' ,_ J-CiS.r':-';,,~_i: ,.,--~ ,.,::j-.,:'

49. The purposes and objectives of bilateral trade and payments agreements

'r':'fj.~; ,"..' , .' -'.;, ;'"

" ,"".; ave ,'of',eo1fi'se" "not ,al'W'ays or ;eVell' fre'lue'ti1il;Y' realized, lIlhatever 'the ','U.'1'{';;01;!,'}6otives <H":tM "coritr'aotingJparties'were/'c€i'tairlieffs'c't'E; of,b:i,1ateral

'trade alidpaymentsagreements could"nearly;Eilwajo

Jbe;(J:'il6e~~e'~~; \"'¥1fW

effects .".';Tt .••.oqc:~t+:;l;·eqi8~:i,e:t;J,y,inj;h:£,ee"d~eqt~p"s,.':"""_"?l.Y' ::&,~t:?:e ;,t;:J;ow'ofgo,ods, on the

for ced diversion of ,i,l:\v,estment" ,,~~ on"f,or~:i;gnex()b,~ng~.and, monetary policies and situations,

..

:i

.+. . f~

50. 'The initial effects of all bilateral payments agreements was a quick ,IDEli:r,il'p'):'ation: of",a; 'l't<evcidu.strad'ing·'VolUJllEi':j·'liJiiswas th4 e±perfence especially c,e<i:ft'iEU.r0;1)eaJ1,:countri:(>s;' 'There 'also occurr€d"an ·exp;msion ih trade between

countries which previously treated each other as .sourcea of supply in the dolhl.J;,.,a:r:ea,. ,T4e ,.quot9-F'p,f,;1"tany paymentE;<!,grl"ementswe:r'''? in the first or

; • "',!6' . i .:::-'.:...-:.~~::.,;:;~:_..:...~:~.:,.~_.,.,: ^-','-

-, .secondY!l.i'<;r-, of cpar-at Lon usua,lly e)\=Jland,€l\'l .p,nqua:j.lyan<1 were completely used.

;.: if; \.!,'j .: ••:::,1,.~_',:'c. "-' ,:. __ _. ' ,- - • ",

Very soon, however, the..leye:j.,.of trade, betwe~nthe bilateral partners was determined by the levels of output and by the pricing policies of the weaker

:par;thei'~

'±ri'the case 01

an~tw6:rk

df15il§t'iral pa;y;,ents agreements i t was

J~hiiiy theweakestparti~i:pantsinth~rii~'J6rk;b.~sep~oduction

^{levels and}

J~ ~ '''. _ ," " .'- d " , " , ' _ " , ' :'<'" ,_ ,:'1.3"-'- -' ~

pricing policies determined the level of trade between all participants.

'5i.""Tl:fes~ we~kpartici;~nts

^{were LricapabLe of}

exportir;~

much, while their

aemanlfor

c!J.~a:p a~d

^{high quali,}'liy imports ims always

l~~~,

Hence, they soon"

r .. , ',:.", ^{-j:", ... .' _',.} .. __'. "" -.•- .• . '. .-. - . . ...•

exhausted their swing credit and fmther trade stopped.

";~CJ'T..,

52, In the inconvertible currency countries, the tendency, bepame sOOn

.,-1; 'i-'~ "F'" .c-,:,; " -"','."::"1.1-'--' i-"'; .O"L'J . .:<._.~I"_:;·,·I>!\>.,, .~'.~,,;~<h ':'... \~:~,;

--·,'ttppmnt''tor'the exp6r't indus'triest6 oe'a:iVided into suppliers to the hard

~,+,,-:,,'y,~, ^.:'»: ,)"".; ':-";,,L< ".'.::".' ':to ;::,;;;".-,":. ,'··:::'·ii·;~r},)'Xo

( our-rency ar;la:s' atidsuppli'ers'to the soft currency are'as~--chile, for instance, , sold coffee and copper for dollars andootton and nitrate for .inconvertible

--~'-t!r2"'hCYk - t yd .? '1

EjCN.14l.tp~.2j4

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Annex

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17

^»:

curr,:,ncies,. BilateraLft,greelIlents: countries in the inconvertible:' areas of the:"wprld soon bec8ID<;>,: )J,Agh cost and high price areas, while the con;,,,e:r>tible areas were lcw-cost, and low.,..prj.'ce areas. Several'i,'consequences follcwed'.

The inconvertible currency exporters wante,d to selL only, to high price, and high cost areas, where sales were easy and profitable. The inconvertible countries with lower prices and costs, soon accumulated excessive claims against the weakerinconvkrtible comitriei',,·, All imports from the high:~' oost and highprioe'pre"s,into other ;inconvertible countries introduoed cost in;f+"~il'm,,:J;finQ9nye"ti1?lilQPuntries needed gpedfl, wh:ich in~h~

absence of couyertibl§ currency 4ad to be ,obtained from inconvertible

countries, ;theyhad to agree tq 19nger delivery dates and unfavourable ,terms of payment, If' the differences between high cost and high price areas, and low-cost and l",w-price areas got out of hand a commeroial switch (arbitrage)

trade developed •_{. '. .\,'}

, , ' .

55. :"T:t;a:ditional transit trade usually suffered frolll'bil.tteral payment-s agreements whioh tended to restriotp1i.yrnents to

di:r:e6tf~oiproca.i

tra.de."

Tran~it

trade was especial1Yiinped.ed., if'6urieno:liis'o:fad.1f:ferent'degree

of

·llarifness were iriV<:Ilved in thechahiof' t:taris'S:oti6rls.Traders who had.

paiU

hard currency were not contented'with recefvirtg soft cUrrency. '

r

54. Biiateral import and export quota,. had, of' co~rse, 4iv~rsiol}aryeffeots on tra.de. Without the bilateral agreements the US share in the tradE< :"i th

(±'J.~:;._-. .:'. , ' : < i : " ':':':-', ". . ' , : - ' . , '. ' "",.,. ,

Latin America and Europe after 1945 would have been greater., On the othe~

o;:~,^{, \ ' ;}'-f.:;:;.::.: .;'_ -).~: :~.",' - .

hand, the German share in Latin America trade after 1953 could not have been,i'tS'glF'eat as i-t'wa.'S"!a;s adhect result of the' bilateral agreeniEl>±ts.

55. MdX:eover, bliateralagre';ents had effects on the location of investment.

The

~~port~:r:~ ;i~onv~rtible

'areas were forced to establi$h subsidiaries

i~

i~6dh,i~rtibieCountri~'s

beca.use though

~ey

could Mt reoeive payments, for exports to inconvertible countries, they were allowed to,transfercaJ?ital profits and capital

8ID~~tization

ⁱⁿ

convertible~(}):l~;r:~"

^This

explains~he

. .• . ' , • :-:.'" ' 0 ' : " , . '- 0. ,~ 0 o,r

heavy American investments in the UK, Netherlll.nds and Italy. Inside ingorivCer'tible areas

limitedh~

^bilateral

payme~ts agre~rnents

^there

w~~'

^a

simiiit~j''di,,~~;sIon

of investment. The transfer of funds_.1

from~~~ent

_{• ': ': .L}

E! CN .14!W;P •.2/4 ..

i/ CN •14/iJIlA(i2

Annex ,.

Page 18

C0plJ"Vl;i,l':§, to,,sq,bl't~,d;i.~;i.es,;){as'Li'ssured, by the:pa'Yfllents agreements', Hence::

,pllltrpjPl'a,'l;!Jlallu,f}l-Q:t,W:'e;rs, ,:J;en(\ec1,"to,.sei4 ,direumyto'their own stibSiliili!'ie s in

!l,,,q,\l

('l",v~lop;i,M' :O(ljl;J;J::!,}:'y,.,..1o!J)h:e:exclusiom:"£["bb:e'merchaiits''by .dii'e'6t

s@,J,J:Lt1g1lnep.,,:j.ed+ t'eL4.argec,ex@ss Swing Dve:Nl.;rafts' of the Uria~}il'E;v6'l&ped";'

..

;...

'.;~,·Li~E,! ;-. '..;1"J.:·,_[jJ!nu-:>~:'J'· -,'

Effects on the foreign ,exphap('ie ~;,d mOYlet:,:,r~ position

'-'c;.C:-· . . ," . . .-.,..j,.,~.L

~---,-56. :,g'J;tfLNljj.j;eralpayments' a,gre'6ment.sindiloed the, contraotiilig'p(.rtie:s-t'il^{G O} PU!;'sus,ii'-

j:l,:j.s,q,,:j.minl).tOl1y,exQhangepoli.cy'~" Im,pca'tpo'lioiesweH,,;i:al'g~iy

^tGCC

based .0110

l;lH~1;111'''S

^.i9Lourrency ccnsiderations'.,:):: B:y"disQrimiriatlYry import ,;,,',ii:

,J,~9~nsingl;i,ncol!.,,?rHbleoounta-Les tende(1!i'll6 C0ncsntrate thei'iiC~urchases:'iJ<)O

_y"j

m,:Pt,4,erinoQm~iitblecount,ries. The"cdi!ll~9s~Mbn

of moneta1f reserved!:" 'tu

of inc5)r,tvertibleeountries whJich may have,be<lfi ii'ery st'i'<mg

at

tlieincepHbii of the bilateral trading arrangement, soon deteriorated of

l'l~'oessity,

fo:L"'"

the ;;~~~r,.inoonverti9le,)l9uJDt:r;:ie"ii+aPJ,Hld,x~~u~~e4i1i1?r~,~:Ss,lin,g:or,edHs ,i,..

and ,1~)~j~tronger iriC0'i'[,\r,~:~bt.~ coulJ:xi!;~~s:a cq.l1lll"',late,dilJ,iquid .cla:ip!s"o;IJ._8'~,C the weaker inconvertib:I,e S0Wt~.ries.The.~reli:l.tively::strong inco.r,tve:J;'t=!t1l::),~ill'IT

'-'; " ,~"'.."':."~- ;;" ,.- . '.- i:', ':' ,,;.,. ...,c:- _ ,.J'~-. . . ."

-countr,ies. might themse,J,vefLJ:'M,MIl. swir,t,g "de,bts to the, strongest "ill,\;<;Wi1ceJ"tJil.rl.e

;:1.:, ... '. _ -:..1' . _. " " " . ' ..~.U"'·.'..l~·',',"·· ^{,,'.' • __},_~.,_l,

courrtz-Les , Siy:ce" tJ;1ey C9u,].Pc!l.0,t] use tlJ,%'~iJ;,,,gW1 illilluid credit'\:i~OJillil>Y' their own debts,' the'y'';':e;e

comp~ll~d

to .ear-n and to keep a higher proportion of

'" _, _ " , ' _ ': c . : : , ' : ' - r : ' : " " , ' ,. i·, __.,'-; ~, . : : j ' ; ' . ~ _,.': ,. .l:''I;"J':"J.i'J,' ~ ,-~

'C()ri'v'ertib'l,;'cJ:2i'r'ertciestha;ii' they'woufil. normally have maintained, These.

" _ ' . " , ' , _' t . ,,~·r ••.,. _ ,._~__ ." _.,_" " ~ ':'~,:!J rs. •{'JDi::<[;1' il{)

et1'e'6)ts';of%11kteiiaJ.i~'cii"(nl"the'oomp'c;';:l.t.i'6nof' reserves tend';<i _t'~ intensify.

anW

,!t'dp'~i,j:peiiuat'eI~i'b.e~'te~tiici;i6risag~inst

^{oonvert i}

ble'"c';.,rre~6i~~ ;'",,' "~"e,l

;.r ;)"0;-: .::".L;f,":.,--:.. ".J... ·"·~"":'·.i 7;j.'.:· ··.·.l.e tI-'.ij :0- i',.,_,,~::,;; ;':~r('?-LI (-;'.;1/ t

57 • .~~~t8t~.fE~t,il~m,h,~?, ,ElO~!"ti,%$St,1'18,')

"Wfla

i;,i,0ffi':rr;V§c;f~~:<li;s, (7).!lj,s;<~.aplli3.'11e^i(:,,A wh$n credits were. received by exporters in the bilateralacoountswith~)Ut .

. ~;linSi' 'j,8qui';'~T~riF re'b~ipt

^oif

6oriv~itibie"~i~h,~;{~~~e'Th~ss~

^ex;or.t

~~~'dlt:'ha("

" ; , . _ }_ ; . . . >i-r'l ;-:-', ,'_',," ':~_,.;. ; f . ~.;;,.',-. {Y,'" :cC,0 '1"(,":' ,a'if.~,; c-- .:)Srl.;:i Hl.u.i:^or'Y '..,~.::- -:!:r.. ,::' ::::.- -. ".:.. ,.(-i:'_~' 0d.i.

t'h'e'Bffl;cif"'ofa nei;"a:a:dHiont() the money supply which needed to be offset.

TliB' ;follo)titi

g

¹

ni~~~{&'~s t~i-J"r~~b:ty;;t tg;t~~'.'~;t;~rt 'cr~dit~ '~e~ed

^asi'''';rf

" : ' , " '<'--'-:'8:'-"°"';' -'~'~- 1:.q\.~:,,_<;~~ ">~J'7:;r.:' ^{'f';\:{;[ ,.; .•!::..};.'-:.:j'";:1Li'>',:, '" .'.i;".:,.~;:, " i : : r :::;;:t":c),:P:0

collaterals~(:nit'i'ty'for"'roan:ftf':j:-om the" domestic capital market or from the

':', : " " r,--~,,"; ^':';'Lh' ~-V8r;:n!Yi A:',;J'i·'.t,~;~.v~;:,.', ^{·'. ..!:G ;T-f:" . " .} ',,<:'Un ... ··':·c",s.(,

exporters themselves bef'ore' they were paid in foreign exohange , Some

, ;~

.r.:~,~-', ,~,_C~', ':"C"'",-:-:i',''' te" ' ,;:,~r:':·.i~ ii-F,C."

countries,'1ike SW'r't~erfahd;"O':piJ:i.sued'a policy of sterilization under which·

'the

[t.d'Cl:ilil\iiatJd.~j(~&:d"'·dr'ed.i tk wc\r~

forbid.den to be usedt';" retire outstandi11g

'. :':"'., " ,'I';:"'f~"': .' " , ::,'" ',:.::P,':,', ~ • .: __ . ".. )\. :.1.- ':te· ;:1',';'..,'; :... ~-!.' ^{C,,", '}

debts of exporters to banks ,_. In other cases export proceeds accruing in_, inconvertible exchange were partially blooked.

E!CN.14!WP.2!4 E/CN •14!AMA(12

Annex Page 19

Bilateral payments agreem'mts as a cumulative process

58.:,

I f a conver-t.Lbfe country",

e .s-,

the Philippines, concluded a payments agreement witJ;pan':inccnviirtible country, e.g., the UK, it found itself soon under pressure to _trad~~ith other inconvertible countries. For as

:"i.,'" .t

inoon;ce'f'tiO;I,e countries were',lpder pressure:t;o conclude Jllcr~.1).a;r:nen;t;s ,.:,'::-'',",'

soon as count;ries were separated into conve.rtible and inconvertible ourrency

" " ,-'~' -', f

coU:ni'i:-:les, 'both desired, to.cut. out hard currency payments

-t

o ncn-;a gr-eemerrt

-.'. : ' . - ' .'--"',- "-j \

partners by restricting impo~ts from them and to e:<epand ~xports tc the non-agreement countriils. Thil':r'esult was that both the ,oonv"rtible and,the

agreements ...

59.

The most important practical aspect of any bilat~ral trade agreement is the fulfilment or non-cfu.Lf'Llmenf of the stipulated import quota _ I t is the other partner who is interest~d'in its fulfilment beoause he is anxious to sell exports. SOmetimes export quotas rather than import _q~otas were specified

U!!fd.J~pressure

^{of exiiert}

~nterests.

The non-fulfilment of the ,impo:rtqu<Hfas' and export quotas may be the fault of either side. Thei

non-fulfiJment"e':f bilateral trade agreement quotas is most likely to occur with

fulfil' a quota on thee part of an inconvertible"hrlateral Cuba, maY"suddenly

the wiliihgnes's to

countries which r'il'sort to broken cross rates of exchanges or use multiple exchange

rates'&!Fwlii~h

^suffer seve.re Iy from changes in the term.s.'ofj;Jj'ade.

A

creditor countfyDia§'n6t be abie to place further exports, becaUSe'-Ul1.e deficit 'country having exhasted the swing credit, turns to other sup¥liers

~_: [-Vj/,:;. :,S-,::',. .~::;~,-,' , ,

which are still willing to give it credit., A hard currency countr;y;/,.e:.g.,

_" .',' __.'." '," "J '.'^{> . . . . .}

be willing to accept soft currency and this may,"l'i:!t':fBct

. '.:,-. ~',' ^' - .

trade finance conduce s t0;~l:J.e

non-'::" "'~

Sometimes transit trade is allowed

•

^partner.,

trade r<ilsu;I,t~pg in unfulfilled Quotas.

exchange faoi;l.ities,and of'short-term

:",Y:' ,." ,'J.,... - . - ' ','

fu;I,f:i,:).men~",of.tradEl'agreemellttquotas.

Very

to develop and replaces ~irect

often the lack of _for~~d

, ric;'

60 •.

,.:SomEl'60untries'have failed consistently to grant Li.oence a ••foJ:' more than a neg'ligJJb1e proporti6>J:of 'luotasi'for non-essential th1ports.( textileEi,

leather, fUi'rtiture', oars,reiJ:'igera't01rs, radio and teley;i.sion .sertlsy .w-a.tohes,

, ._ ,_,. ,,\' C.Le;",',; . . :' - , "

out'lery, gIa,cs#'ifa'cEl, china,toys, perfume, wine, hart ioultural products).

E!CN .. ,~J.4'!WP ^.•Zj 4

EI

CN~14!JJ.IlA!12 ' Annex

Page 20

Non-e s s en t ial im£Q't:l; (l1.].Q']:r;,s· tend' to:'.

~'".;rk.i'a.hca<Lwi

th norr.i.es sen;i ii'""-i3:itp ort '1.uotas.~^c ,.Ep!,ever, .•. they nay .al.so b.~-,~inkea. to essential goods' by bargaining.

s;ip.~;redi

^ts

ar~sometimeEJ inore~s~d

to il'lduOBapar'ther"to: take hit. full '1.uo1,a of Lne asen_{.~';:: " ' : :. .')} t;:. ,L ,"-'i.a.I g ood.s •.. ' . ; -,~

~.i ';' :

611 ..'. Al1ieClto this are the Ii'3?ooeJiure.s for manipulatinls"bilateraIposi tions,

j,.e..•,.,.bilatena1'>d.e.f:tcits

orcr~iHts,

upwards ord6tiliW'aids. ",.,

62. .

Th<466r±'eot{dn may take

t~~ f~;m ~f'q,';ant~';aZ~~;J~~n:j,pu~ati,~~S,

^•.price

62. .

Th<466r±'eot{dn may take

t~~ f~;m ~f'q,';ant~';aZ~~;J~~n:j,pu~ati,~~S,

^•.price

Dans le document Conf6rence of Governors of African Central Banks (Page 119-138)