Trade and Development Report, 2006 Contents FOREWORD- ..H- i Explanatory notes ..- .. xiii Abbreviations- xiv OVERVIEW- .. I-XXI Chapter I GLOBAL IMBALANCES AS A SYSTEMIC PROBLEM 1 A. Global growth ..- 1 B. Turbulences in financial markets.- 3 C. The systemic character of the global imbalances- .. 5 1. Alternative views on external imbalances ..- 5 2. The main players.- .. 7 3. Benign or malign unwinding of global imbalances? 10 D. Low real interest rates: global savings glut versus global monetary conditions 12 1. A savings glut?..- .. 12 2. Monetary policy and interest rates ..- 13 Notes..- ..- .. 16 References- ..- .. 16 Annexes to chapter I Annex 1 Commodity Prices and Terms of Trade . 17 Annex2 The Theoretical Background to the Saving/Investment Debate 31 Chapter II EVOLVING DEVELOPMENT STRATEGIES - BEYOND THE MONTERREY CONSENSUS- 41 A. Introduction ..- 41 B. The emergence of the Washington Consensus 42 C. The outcome of orthodox reforms.- 45 D. Second-generation reforms and debt reduction . 50 1. A new focus on poverty and institutions ..- 50 2. Debt relief and the proliferation of conditionality..- .. 55 E. The MDGs and the Monterrey Consensus- .. 55 F. Beyond the Monterrey Consensus- 58 G. Towards a fundamental policy reorientation ..- .. 60 Notes ..- ..- .. 67 References- ..- .. 69 Chapter III CHANGES AND TRENDS IN THE EXTERNAL ENVIRONMENT FOR DEVELOPMENT ..- .. 73 A. Introduction ..- 73 B. Export opportunities for developing countries- 75 1. Market access conditions ..- 75 2. Non-tariff measures (NTMs) ..- .. 80 3. Import demand growth in developing countries' trading partners 82 C. Debt relief and official development assistance- 89 1. The framework for official debt relief..- 89 2. Extent and impact of the HIPC Initiative ..- .. 92 3. Additionality of debt relief and ODA- .. 96 4. Debt problems of middle-income countries ..- 98 Page D. Migrants'remittances ..- . 100 1. Recent trends in migrants' remittances- . 100 2. The economic impact of migrants' remittances 102 3. National and international policies to enhance remittances' impact 104 E. A strengthened role for FDI? ..- .. 105 1. FDI in developing countries: trends and patterns . 105 2. The role of international production systems and networks .. 110 3. The potential impact of FDI on development- . Ill F. Conclusions- . 114 Notes..- ..- 776 References- ..- . 779 Annex tables to chapter ///..'.- .. 123 Chapter IV MACROECONOMIC POLICY UNDER GLOBALIZATION 727 A. Introduction- . 727 B. Coping with the macroeconomic implications of liberalization and globalization .. 128 1. Financial integration and capital inflows ..- . 725 2. Domestic financial liberalization ..- 729 3. Changes in the fiscal structure- 7J7 4. Exchange-rate and monetary policy..- . 7J7 C. Macroeconomic policies in support of a dynamic investment and growth process .. 134 1. Monetary policy and interest rates ..- .. 134 2. The exchange rate- 136 3. Confidence game or counter-cyclical policies? 138 4. Capital controls ..- 140 D. Towards a new assignment of policies ..- .. 742 Notes..- ..- 146 References- 147 Chapter V NATIONAL POLICIES IN SUPPORT OF PRODUCTIVE DYNAMISM 149 A. Introduction ..- .. 149 B. Stimulating the dynamic forces of markets.- . 752 1. Maintaining productive dynamism- 752 2. Principles and types of policies for stimulating the dynamic forces of markets 762 C. Restrictions imposed by internationalagreements on policy autonomy: an inventory 766 1. The Agreement on Trade-related Investment Measures (TRIMs) 768 2. The Agreement on Subsidies and Countervailing Measures (SCM) 769 3. The Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) 171 4. Industrial tariffs ..- .. 174 D. Industrial dynamism and national policies: recent experiences. 180 1. Industrial dynamism: recent empirical evidence .. 180 2. National policies for industrial development: some recent experience 182 E. Conclusions: options for policy innovation ..- 193 Notes ..- ..- 796 References- 207 Chapter VI INSTITUTIONAL AND GOVERNANCE ARRANGEMENTS SUPPORTIVE OF ECONOMIC DEVELOPMENT- 205 A. Introduction ..- .. 205 B. National institutional and governance structures in support of sustained economic growth ..- .. 207 1. Institutions and governance ..- .. 207 2. Institutions and market efficiency- .. 209 3. Institutions and structural transformation..- 273 4. Conclusions ..- 276 C. Multilateral institutions and global economic governance 277 1. Introduction..- . 277 2. International monetary and financial rules and disciplines 220 3. Rules and commitments in the multilateral trade regime.. 222 Notes ..- .. 225 References- 227