The Debt - Trade Connection in Debt Management Initiatives. The Need for a Change in Paradigm (2004)

Rethinking Bretton Woods | Fri, Dec 10, 2004

By Aldo Caliari

The close interrelationship between the asymmetries in the trade system and the chronic burden of debt faced by developing countries has not been sufficiently recognised in international economic policy. To the degree that debt and trade have been integrated in policy initiatives, they have been integrated from a particular perspective that has not proved helpful in supporting development. A change of paradigm is urgently needed. Debt reduction, or even cancellation, cannot have lasting benefits unless the trade dynamics that lead to debt accumulation are addressed. Likewise, proposals to reform the international trade system cannot be effective unless they incorporate a recognition of the crippling impact of debt on developing countries’ participation in that system.

This paper concentrates on the debt side of the problem. In essence, it explores the question: what would happen if a new paradigm for the interrelationship between debt and trade were to be applied in the debate on debt sustainability currently taking place within the Bretton Woods Institutions – the International Monetary Fund (IMF) and the World Bank?

The paper was published as a chapter contribution for "Debt and Trade: Time to Make the Connections", a book by the Jesuit Centre for Faith and Justice, on behalf of the International Jesuit Network for Development. Veritas Publications, 2005 ( Dublin, Ireland.


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