Global trade: key to recovery
The annual meeting of the World Bank and the International Monetary Fund officially beginning in Washington today is crucial. The international community is finally emerging from recession. Yet, continuing world prosperity is directly linked to global trade. If trade expands, the world economy expands. If global trade is stagnant, or constricts, the recovery could be threatened.
The vital issue, then, is clear-cut: How does the world community ensure expanding trade?
As World Bank president A.W. Clausen is expected to say in his address today, two factors are essential. The industrial nations must avoid taking actions, such as imposing quotas or tariffs, that could trigger a fresh round of global protectionism.
At the same time, the industrial nations must continue to provide the capital necessary to sustain a healthy volume of new lending to financially pinched third-world nations.
Let there be no mistake about the importance of Mr. Clausen's call for a sufficient pool of international capital for loan packages. New lending to developing nations is not a ''handout.'' Nor is such new lending a bail out of big banks that have already made loans to debtor nations. Rather, the new lending is essential both to enable debtor nations to service existing debt obligations - and thus prevent a global banking crisis - as well as to help third-world nations finance trade.
The stakes for the United States are particularly high in the lending equation. As much as 4 percent of total US gross national product depends on trade to developing nations. During 1981 alone, 2.5 million jobs in the US were directly linked to trade to third-world countries.
Unfortunately, the volume of private commercial lending to developing nations has fallen off during the past year. During the 1970s, by contrast, private lending had risen at an annual rate of around 14 percent. Many indebted third-world nations have now begun stringent austerity programs, often as a condition to obtaining further international loans to service existing debt. The budget restraints, however, make it difficult to finance trade or to meet internal demands for adequate nutrition, health, or education programs. So social unrest could intensify in some debtor nations.
Since private lending is being slashed, international lending by the IMF becomes all the more important. The US Congress would be remiss in not approving the $8.4 billion in new funding for the IMF as urged by the Reagan administration. Congress is dragging its feet on the request. But the funding ought to be seen for what it really is - serving the legitimate self-interest of Americans by sparking global trade.
The Reagan administration, to its credit, finally came around to recognizing the importance of IMF funding after initially criticizing the IMF for supporting ''socialist governments.'' The administration should also come around on the matter of new funding for the International Development Association. IDA makes ''soft'' or interest-free loans to the poorest nations. The 32 contributors to IDA other than the United States want to raise IDA's total capital pool to between $12 and $16 billion over the next three years. The US, however, says that it will provide no more than $750 million annually over that period, which will restrict the total replenishment to around $9 billion - far below the $12 billion to $16 billion that World Bank officials say is adequate.
There is still time for the US to change its position and enlarge its contribution. The US should seriously consider such a larger contribution before a meeting is again held on the IDA replenishment in Paris in late November.