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Trade and Development Report 2004

Policy Coherence, Development Strategies and Integration into the World Economy

image of Trade and Development Report 2004

The current edition of the Trade and Development Report focuses on the global economic recovery currently underway. The Report raises questions about its considerable downside risks stemming from oil prices and exchange rates and the fact that both the sources and incidence of growth are unequally distributed around the globe. The TDR 2004 argues that, to enable developing countries to establish a virtuous interaction between external financing, domestic investment and export growth, a feasible development agenda has to be based on the concept of coherence. UNCTAD warns that attempts by many countries to keep their currencies undervalued could end up in competitive devaluations that could be disastrous for the world economy. UNCTAD suggests that changes in the exchange rate that imply deviation from purchasing-power parity should be governed by multilateral regulations.

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Introduction

Beginning in the mid-1980s, many developing countries made close integration into the international trading system a pillar of their economic reform agenda. They sought to achieve this not only through active participation in multilateral trade negotiations, but also through rapid unilateral trade liberalization. In many countries, trade liberalization was accompanied by an opening up of their financial sector and capital account. Rapid liberalization and increased exposure to international market forces and competition were expected to boost efficiency and competitiveness, which in turn would underpin a more rapid rate of economic growth and a narrowing of the income gap with developed countries. However, by the early 1990s there were many instances where the outcome of this policy strategy did not live up to expectations.

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