Prospects for Liberalising the International Trading System

The first half of the 1980s was perhaps the most turbulent period for the international economy since the Second World War. The second oil price increase in 1979–80, and the disinflationary response of most OECD governments, led to a series of major economic difficulties. World-wide recession resulted, and with it came a number of highly-publicised economic ills. These included the ‘debt crisis’ of some developing countries, the drop in primary commodity prices, ultimately including oil, and the first drop (in 1982) in the value and volume of world trade in any year since the end of the Second World War. For the United States, some of the difficulty was at first hidden as expansionary fiscal policy offset tight monetary policy. However, as most economists had forecast, that imbalance gave rise to a series of events — including strong appreciation of the dollar, a sharp rise in real interest rates in the United States and abroad, and large swings in current account balances among the developed countries — which led to further dislocations both in the United States and in other major trading nations.