Introduction to Multilateral Agencies: Introduction to Multilateral Agencies The WTO, World Bank, and IMF


The World Trade Organization(WTO): The World Trade Organization (WTO) A Global Trading Regime


History – The Organization Formerly Known as GATT: History – The Organization Formerly Known as GATT General Agreement on Tariffs and Trade (GATT) formed in 1947 to encourage tariff reductions. Original goal had been to create a International Trade Organization, that would stand with the World Bank and the International Monetary Fund (IMF) to manage the international economy. That ITO goal included not only trade issues, but also management of foreign investment, unfair competitive practices, etc. As a threat to national sovereignty the ITO failed to be accepted. The default was GATT, which was a series of multi-lateral treaties for trade created provisionally, in anticipation of the ITO. GATT developed a system to adjudicate trade disputes between nations (e.g. dolphin-free tuna import case).


What were the major challenges in the GATT era?: What were the major challenges in the GATT era? Non-tariff Barriers (NTBs) – were the legitimate or not? Agricultural commodities Industrialized countries had much of the power and to protect their own farm industries, they resisted tariff reductions on agricultural products. Perceived unfairness by agricultural nations


Creation of the WTO: Creation of the WTO Developed through negotiation during the “Uruguay Round” (7 ½ years) Founded on January 1, 1995 in Geneva Currently 148 member countries The three purposes: A forum for trade negotiation A set of rules to govern trade A mechanism to settle trade disputes


What is the Source of Criticism of the WTO?: What is the Source of Criticism of the WTO? WTO stated objective: “The goal is to help producers of goods and services, exporters, and importers conduct their business”


What are the major challenges now?: What are the major challenges now? Managing trade in services. When do they cross borders? Intellectual property. Should it only accrue to corporations? Continuing tension over agricultural commodities. Civil society challenges about labor and environmental issues. Should the WTO have a more open process?


Some Acronyms: Some Acronyms MFN = Most Favored Nation status TRIPS = Trade Related Aspects of Intellectual Property Rights TRIMs = Trade Related Investment Measures A good site to check trade related acronyms (e.g. G7 and G77) and also terms (e.g. countervailing measures, parallel imports): http://www.wto.org/english/thewto_e/glossary_e/glossary_e.htm


The World Bank Group: The World Bank Group Source of funding for development purposes


A brief history: A brief history Founded in 1947 as part of the Bretton Woods Conference Initial objective: rebuilding and redevelopment following World War II First loan: $250 million to France Current objective: poverty alleviation in pporer countries through financial and technical assistance A specialized agency of the United Nations Currently 184 members


The Five Agencies of the WBG: The Five Agencies of the WBG International Bank for Reconstruction and Development For poor and middle income nations: sub-market rate loans International Development Association For the poorest nations: grants and interest free loans (The IBRD and the IDA are “The World Bank”) International Finance Corporation Loans for private enterprises were capital access is limited Multilateral Investment Guarantee Agency Insurance of foreign investment for non-commercial losses International Centre for the Settlement of Investment Disputes A forum for conciliation between governments and investors


Slide13: Board of Governors Executive Directors President Staff Functions Regional Vice Presidents Network Vice Presidents Additional Staff Functions The World Bank (IBRD and IDA) Structure


World Bank Management : World Bank Management All member nations (lenders and borrowers) have shares in the bank that reflect the size of their economies The Board of Governors, representatives of all member countries meet once a year to set overall strategy. Day-to-day operations are overseen by the Executive Directors who also represent the members. The five largest shareholders (Japan, UK, France, Germany, US) each have a director and the other nations, based on geographic regions, elect 19 directors. The president is elected for a five-year, renewable term. That position has always been held by a US national. He is responsible for the overall management of the Bank.


World Bank Funding: World Bank Funding So-called donor nations guarantee credit-worthiness and provide billions of dollars in callable credit for the Bank. The Bank actually gets its working capital, however, by floating bonds, which are bought by governments, institutional investors and others. At times, the Bank does generate an annual surplus, which is used to reduce debt of to increase IDA funds.


Four Additional Multilateral Lending Institutions: Four Additional Multilateral Lending Institutions Asian Development Bank (Manila) Inter-American Development Bank (Washington D.C.) European Bank for Reconstruction and Development (London) African Development Bank (Abidjan, Cote D’Ivoire)


The International Monetary Fund (IMF): The International Monetary Fund (IMF) “Stabilizing” National Economies


The Basics: The Basics Established in 1945 Headquartered in Washington DC 148 member nations Major goals: Expansion of world trade Stabilization of exchange rates Avoidance of competitive devaluations Orderly correction of balance of payments problems


To accomplish that, the IMF…: To accomplish that, the IMF… Monitors national economies and analyzes national economic institutions Makes policy and structural reform suggestions to national governments Lends to countries with balance of payments problems Provides technical assistance to governments and central banks on financial issues


The IMF has a clear view as to what it sees as a good economy: The IMF has a clear view as to what it sees as a good economy Limited government involvement in the economy Open to international trade and investment Free systems of currency exchange Low domestic inflation Limited or no balance of payments deficits Institutional transparency Limited size of economic actors Predictable exchange rate policy


Similar Management Structure to World Bank, except…: Similar Management Structure to World Bank, except… Russia, Saudi Arabia, and China also have seats on the Executive Board The top manager is called the “Executive Director” Funding is through a “quota” system in which members provide capital based on economic size. The US provides 17.5% of funding; Japan 6.5%; China 3.02%; and Palao provides 0.001%.


Special Drawing Rights (SDRs): Special Drawing Rights (SDRs) Created because of a concern of insufficient liquidity to support the expansion of global trade. Sometimes referred to as “paper gold” Market basket currency based on the US$, Euro, Yen, UK Pound SDRs are a reserve currency held by central banks. Can be used in transactions across nations, with 16 institutional holders and with the IMF


Types of IMF Assistance: Types of IMF Assistance Stand-by Arrangements and Supplemental Reserve Facility Generally designed to help with short-term BoP problems and market confidence issues Extended Fund Facility (3-4 years) Assistant with longer term BoP issues, typically linked to structural adjustment Poverty Reduction and Growth Facility Subsidized interest rates for poorest countries with longer terms Emergency Facility Generally to deal with short-term issues created by natural disasters or to respond to the end of military conflicts