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International economic Institutions

1. Bretton woods development:
In the wake of the unprecedented destruction caused to the global economic
structure by the Second World War, and the accompanying instabilities and
uncertainties that arose in the economies world over, a group of nations met at
Bretton-woods for a conference in 1944.
Their principal objective was to prepare a framework for economic cooperation
and co-ordination between sovereign nations having the right to pursue
independent policies. The Bretton-woods conference, as it has since come to be
known as, addressed itself to three broad issues of interest in international
economic relations, viz. (i) trade in goods, (ii)Flow of capital for development, and
(iii) stability of exchange rates andprovision for assistance to members who get
confronted with shorttermimbalance in their balance of payments.
In seeking to find a solutionto the problems arising out of these, the Brettonwoods conferencereached an agreement to set up three multilateral institutions,
viz. International Monetary Fund, (b) International Bank for Reconstruction and
Development (IBRD), and (c) International Trade Organization (ITO).
The two institutions, IMF and the IBRD(is part of World Bank today) which
were set up and started functioning since 1946 came to be identified as Brettonwoods twins.
The agreement relating to the setting up of the ITO was not ratified bythe US and
hence the ITO could not be established. Instead, the US, UKand a few other
countries, set up in 1947 an interim organization calledGeneral Agreement on
Tariffs and Trade (GATT discussed later in this article).

2. International Monetary Fund:

The International Monetary Fund(IMF) came in to force on the December 27, 1945.
The main functions of the IMF as given below:
1. To facilitate international monetary cooperation;
2. To promote exchange rate stability and orderly exchange arrangements;
3. To assist in the establishment of a multilateral system payment and the
elimination of foreign exchange restriction ; and
4. To assist member countries by temporarily providing financial resources to
correct maladjustment of their balance of payment (BoP).

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The Board of Governors of the IMF consists of one Governor and one Alternate
Governor from each member country. For India, Finance Minister is the Ex-officio
Governor While the RBI governor is the Alternate Governor on the Board.
The day-to-day management of the IMF is carried out by the Managing Director who
is Chairman (currently, Ms. Christine Lagarde) of the Board of Executive Directors.
Board of Executive Directors consists of 24 directors appointed / elected by member
countries/group of countries is the executive body of the IMF. India is represented
at the IMF by an Executive Director (currently ArvindVirmani), who also represent
three other countries in Indias constituency Bangladesh, Sri Lanka, and Bhutan.
2. World Bank:
The World Bank group today consist of five closely associated institutions propitiating the
role of development in member nations in in different areas. A brief account as follows:
1. IBRD
The International Bank for Reconstruction and Development is the oldest of the the
World Bank institutions which started functioning (1945) in the area of
reconstruction of the war-ravaged regions (WW2) and later for the development of
the middle-income and creditworthy poorer economies of the world. Human
development was the main focus of the developmental lending with a very low
interest rate (1.55 % per annum) the areas of focus being agriculture, irrigation,
urban development, healthcare etc. It commenced lending for India in 1949.
2. IDA
The International Development Agency which is also known as the soft window of
the WB was set up in 1960 with the basic aim of developing infrastructural support
among the member nations, long term lending for the development of economic
services.
3. IFC
The International Finance Corporationwas set up in 1956 which is also known as
private arm of WB. It lends money to the private sector companies of its member
nations. The interest rate charged is commercial but comparatively low.
4. MIGA
The Multilateral Investment Guarantee Agency, set up in1988 encourages foreign
investment in developing economies by offering insurance (guarantee) to foreign

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private investor against loss caused by non-commercial (i.e. political) risk , such as
currency transfer, expropriation, war and civil disturbance.

5. ICID
The International Centre for Settlement of Investment Dispute, set up in 1966 is an
investment settlement body whose decision is binding on the parties.

3. General Agreement on Tariff and Trade(GATT):

23 nations did an agreement at Geneva on October 23, 1947 for decrease tax on
import trade.
This agreement is known as GATT.
This agreement came in force on January 1, 1948.
GATT washeadquartered at Geneva.
But GATT was temporary arragment.
Objective of GATT:
1. Expansion of international trade;
2. Increase of world production by ensuring full employment in the participating
nations;
3. Development and full utilisation of world resources; and
4. Raising standard of living of the world community as a whole.
4. WTO:
The WTO was born out of negotiations, and everything the WTO does is the result of
negotiations. The bulk of the WTOs current work comes from the 198694
negotiations called the Uruguay Round and earlier negotiations under the General
Agreement on Tariffs and Trade (GATT).
It established on January 1, 1995. It replaced GATT and it is permanent
organization. But is not specialized organization UN.
Headquarter : Geneva
Objective of WTO:
1. to set and enforce rules for international trade,
2. to provide a forum for negotiating and monitoring further trade liberalization,
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3. to resolve trade disputes,

4. to increase the transparency of decision-making processes,
5. to cooperate with other major international economic institutions involved in global
economic management, and
6. to help developing countries benefit fully from the global trading system.

Rounds of GATT negotiations:

The meeting of GATT conducted between 1947 to 1993 is called Rounds. The 8
rounds completed under the GATT. First six rounds were about to reduce the tariff.
7th round was about tariff and other barriers and 8th round was different from earlier
rounds. This was started at Punta del Este city of Uruguay. Everything was discussed
during this round i.e. from item thing to aircraft, bank to telecommunication,
medicines to textile. But, member nations were not agreed- therefore no agreement.
Therefore the Director General of GATT then Arthur Dunkel made a broad proposal.
This proposal is called Dunkel Proposal. This proposal transformed into final
agreement on December 15, 1993. 124 countries including India signed this proposal.
GATT came to end on December 12, 1995.

Function of WTO:
Administering WTO trade agreements
Forum for trade negotiations
Handling trade disputes
Monitoring national trade policies
Technical assistance and training for developing countries
Cooperation with other international organizations.

Structure of WTO:
The WTO secretariat is headed by a Director General with a three-tier system of
decision making. The decisions are made at three levels: (i) Ministerial Conference, (ii)
General Council and other councils, and(iii) Heads of Delegations.

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Ministerial conferences of WTO:The ministerial conference of WTO is the highest

decision making body of WTO. It meets once in two years. The Finance minister of
every member nation participates in it.
The General Council of the WTO, togetherwith the other councils for Trade in Goods,
Trade in Services andIntellectual Property, performs the WTO functions. These
councils areresponsible for overseeing the implementation of the WTO agreementsin
their respective areas of specialization.
The third-tier of decision-making, at the Heads of Delegation level, is most effective
in overcoming inherent impediments for reachingconsensus on a trade-related issue.
The current Director-General of the WTO is Roberto Azevdo.

Ministerial Conferences of WTO:

1st ministerial conferences at Singapore: 1996 December 9 to 13. This conference
created controversy between developed and developing countries. There were two
controversial issue in this conference: (1) Social clause. (2) Singapore issue.
(1) Social clause: according to USA there is more child labour in developing countries
(including India). There might be tariff on import in USA from developing
countries, as long as they solve problem child labour. For this USA referred article
of GATT. Developing countries opposed vigorously for this.
(2) Singapore issue: this conference discussed four issue , this known as Singapore
issue. These are Investment, Competition, Collection by government, and
straitening the trade
2nd conference at Geneva: 1998 -18 to 20 May. It discussed Uruguay round and
Singapore issue.
3rd conference at Seattle: 1999 November 30 to December 3. There was much protest
during this conference. The view of protesters was that WTO will effect badly on
human development and environment.
4thconference at Doha: 2001 November 9 to 14. This round has been temporarily
named as the Doha Development Round. This round beganin January 2002 and was
expected to end by January 1, 2007. It has,however, not concluded till today.The
Doha round of trade negotiations mandated negotiations onagriculture, industrial
products, services, intellectual property, WTO rules,trade and environment. The
negotiations at WTO reached a dead-end inJuly 2006 and were temporarily
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suspended. Since then, some attemptshave been made to revive them, but these have
not been successful.
5th conference at Cancun: 2003 September 10 to 14. There was much protest against
Globalization in this conference. The controversy created between developed and
developing countries about Agreement on Agriculture (discussed late in this article)
and Singapore issue. Unity between developing countries was an important incidence
inthis conference. Developing countries created a group under the leadership of Brazil
(called G-20) for put points of Agreement on Agriculture on table. Another group
also created under the leadership of Malaysia for cross out Singapore issue.
6th conferences at Hon Kong: 2005 December 13 to 18. Decision taken for complete
Doha round by 2006. Decision taken to end subsidy on agricultural exportation of
developed countries. Decision taken to end the subsidy on cotton exportation of
developed countries.
7th conference at Geneva: 2009 November 30 to December 2. The result of Doha did
not come.
8th conference at Geneva: 2011 December 15 to 17. Decision take to give a
membership for Russia, Samoa, Montenegro and Vanuatu. Three issue discussed
trade and development, importance of multiparty trade, and Doha Development
Agenda.
9th conference at Bali: 2013 December 3 to 6.

Important points:
Agreement on anti-dumping (ADA):
The objective of this agreement is to provide the right to the contractingparties to
applyanti-dumping measures. These are measures againstimports of a product if such
imports cause injury to a domestic industryin the territory of the contracting
party.The ADA allows member-nations to apply anti-dumping measures on
aunilateral basis after elaborate investigations. The anti-dumpinginvestigation
determines whether:
an imported product has been dumped;
it has caused material injury to the domestic industry of a like product;
there is a causal link between dumped imports and the injury.

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If the investigations establish these three factors, the government is allowed to levy
anti-dumping duty on imports. This duty could be levied on imports either from a
specific country or a group of countries.

Agreement on Agriculture (AOA):

Agreement on Agriculture (AOA):

The approach adopted here is to encourage gradual reduction of trade distorting

subsidies. The AOA specifically deals with: (i) providing market access, (ii) containing
of export subsidies, and (iii) regulatingdomestic support.
1).Market Access:
The AOA requires tariffication of all NTBs, and a reduction of those tariffs by an
average of 36 percent for developed countries and 24 percent for UDCs. Developed
countries were given 6 years to bring about these reductions, while developing
countriesare given 10 years. The time counting has begun from 1995.
2). Export Subsidies:
Export subsidies have to be reduced by 36 percent in budgetary terms and 21 percent
in volume over a six-year period. The developing countries have been given lower
reduction targets of 24 and 14 percent respectively over a longer period of 10 years.
3). Domestic support:
A distinction has been made between subsidies that did not distort trade and those
that do. Only the trade distortingsubsidies have to be reduced, if they are above the
permissible level.The following have been exempted from this provision.
Green Box: Subsidies with no, or minimally trade distorting, effecthave

been put in this box. These are not subject to any

reductioncommitments. It includes all government service programmes.
Blue box: It contains those subsidies whose continuation is subject to a
limitation on production.

Whit box: It includes such subsidy practices in developingcountries like

investment subsidies, agricultural input subsidiesavailable to low-income
or resource-poor farmers and measuresto encourage diversification from
growing illicit narcotic crops.

5. South Asian Association Regional Cooperation (SAARC):The SAARC, is an

economic and political organization of eight countries in southern Asia. In terms of
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population, its sphere of influence is thelargest of any regional organization: almost

1.5 billion combinedpopulation of its member states. It was established on December
8,1985 by India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives andBhutan. In
April 2007, Afghanistan became its eighth member.
It is headquartered at Kathmandu (Nepal).
Objective of SAARC:
Promote the welfare of the peoples of South Asia and improve their quality of
life;
Accelerate economic growth, social progress and cultural developmentin the
region by providing all individuals the opportunity to live indignity and realize
their full potential;
Promote and strengthen collective self-reliance among the countriesof South
Asia;
Contribute to mutual trust, understanding and appreciation of oneanothers
problems;
Promote active collaboration and mutual assistance in the economic, social,
cultural, technical and scientific fields;
Strengthen co-operation with other developing countries;
strengthen co-operation among themselves in international forumson matters
of common interest; and
Co-operate with international and regional organizations with similaraims and
purposes.
SAARC Preferential Trade Agreement (SAPTA):
The 6th summit of SAARC finished at Colombo in 1991. Member nations established one
action group for doing trade agreement between themselves. According to this group,
SAARC countries did an agreement for specific reduction of tariff on December 7, 1993, this
agreement is known as SAPTA. This agreement signed in Delhi during 8th summit of
SAARC. It came in to force on December 7, 1995. SAARC countries completed 4 round under
this agreement.
It (SAPTA) concretizes the first step towards creation of a trade bloc in the South Asian
Region.Under the SAPTA mechanism, the SAARC countries, to begin with, haveidentified
226 items for exchange on tariff concessions ranging from10 percent to 100 percent. Member

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nation may change tariff step by step but, it caninclude all items gradually.India has agreed
to extend tariff concessions on 106 items.

SAARC Free Trade Agreement (SAFTA):

This historic agreement signed at Islamabad during 12th SAARC summit (January 2 to 4,
2004)by member countries. The decision was taken to create free trade area in South Asia
according to this agreement. It came into force on January 1, 2006. And SAPTA is replaced
by SAFTA.
Difference between SAPTA and SAFTA: Member countries accepted to give some concession
to each other under SAPTA. While, they decided to destroy all barriers of trade and tariff
under SAFTA. There is expectation of common market and common currency in South Asia
under SAFTA in future.
Features of SAFTA:

Member nations agreed to reduce tariff to 0-5% by 2016.

Any member can leave this agreement at any time.
List of sensitive items about trade will be available.
If tariff on some item will not reduce, such items will be reviewed.
Comparatively developed countries (India, Pakistan, and Sri Lanka) will give
compensation to less developed countries for reduction of revenue.

6. Asian Development Bank:

The Asian Development Bank (ADB), with an international partnership of 63 countries, was
established in 1966 and has headquartered at Manila (Philippines). Bank started its work on
January 1, 1967. India is founding member of ADB. The chairman of ADB is always from
Japan.
Total members: 67 countries (48 are from Asia-Pacific region and 19 are non-Asian)
The principal Function of ADB:
to make loans and equity investment for the economic and social advancement
of its developing member countries:
to provide technical assistance for the preparation and execution of
development project and programmes and advisory services:
to respond to the request for assistance in coordinating development policies
and plans in developing member countries;

7. United Nations Conference on Trade and Development (UNCTAD):

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Owing to the persistent insistence of the developing countries for setting up the ITO, which
move was continually opposed by the US, the United Nations (UN) appointed a committee
in 1963 to resolve the issue. The committee recommended the alternative of setting up a
United Nations Conference on Trade and Development (UNCTAD). The UNCTAD was thus
set up in 1964. It is specialized and permanent institute of UN for regulate investment and
development. Its membership is completely voluntarily. It is headquartered at Geneva.

Its principal functions outlined as follows:

promote international trade with a view to accelerate economic development;

formulate principles and policies on international trade and relatedproblems of

economic development;
assist developing countries in the negotiations in the international fora and

facilitate market access for the goods of developing countries andencourage

technology transfer to them;
assist developing countries to improve their terms of trade vis--visthe
developed countries;
negotiate multilateral trade agreements; and
make proposals for putting its principles and policies into effect.

9. OECD
The Organization for Economic Co-operation and Development (OECD) celebrated its
50th anniversary, but its roots go back to the rubble of Europe after World War II.
Determined to avoid the mistakes of their predecessors in the wake of World War I,
European leaders realized that the best way to ensure lasting peace was to encourage
co-operation and reconstruction, rather than punish the defeated.
The Organization for European Economic Cooperation (OEEC) was established in
1948 to run the US-financed Marshall Plan (George Catlett Marshall was finance
minister of USA then) for reconstruction of a continent ravaged by war. By making
individual governments recognize the interdependence of their economies, it paved
the way for a new era of cooperation that was to change the face of Europe.
Encouraged by its success and the prospect of carrying its work forward on a global
stage, Canada and the US joined OEEC members in signing the new OECD
Convention on 14 December 1960. The Organization for Economic Co-operation and
Development (OECD) was officially born on 30 September 1961, when the
Convention entered into force.

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Other countries joined in, starting with Japan in 1964. Today, 34 OECD member
countries worldwide regularly turn to one another to identify problems, discuss and
analyze them, and promote policies to solve them.

The mission of the Organization for Economic Co-operation and Development

(OECD) is to promote policies that will improve the economic and social well-being of
people around the world.

Main working Areas of OECD:

First and foremost, governments need to restore confidence in markets and the
institutions and companies that make them function. That will require improved
regulation and more effective governance at all levels of political and business life.
Secondly, governments must re-establish healthy public finances as a basis for
future sustainable economic growth.
In parallel, we are looking for ways to foster and support new sources of growth
through innovation, environmentally friendly green growth strategies and the
development of emerging economies.
Finally, to underpin innovation and growth, we need to ensure that people of all
ages can develop the skills to work productively and satisfyingly in the jobs of
tomorrow.
Headquarters Paris.
BRICS BANK
The New Development Bank BRICS (NDB BRICS), formerly referred to as the
BRICS Development Bank, is multilateral development bank operated by the
BRICS states (Brazil, Russia, India, China and South Africa) as an alternative to
the existing US-dominated World Bank and International Monetary Fund. The
Bank is set up to foster greater financial and development cooperation among the
five emerging markets. Together, the four original BRIC countries comprise in
2014 more than 3 billion people or 41.4 percent of the worlds population, cover
more than a quarter of the worlds land area over three continents, and account
for more than 25 percent of global GDP. It will be headquartered in Shanghai,
China. Unlike the World Bank, which assigns votes based on capital share, in the
New Development Bank each participant country will be assigned one vote, and
none of the countries will have veto power.

Asian Infrastructure Investment Bank

The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank
(MDB) conceived for the 21st century. Through a participatory process, its founding
members are developing its core philosophy, principles, policies, value system and operating
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platform. The Bank's foundation is built on the lessons of experience of existing MDBs and
the private sector. Its modus operandi will be lean, clean and green: lean, with a small
efficient management team and highly skilled staff; clean, an ethical organization with zero
tolerance for corruption; and green, an institution built on respect for the environment. The
AIIB will put in place strong policies on governance, accountability, financial, procurement
and environmental and social frameworks.
The AIIB, a modern knowledge-based institution, will focus on the development of
infrastructure and other productive sectors in Asia, including energy and power,
transportation and telecommunications, rural infrastructure and agriculture development,
water supply and sanitation, environmental protection, urban development and logistics, etc.
The operational strategy and priority areas of engagement may be revised or further refined
by its governing boards in the future as circumstances may warrant.
AIIB will complement and cooperate with the existing MDBs to jointly address the daunting
infrastructure needs in Asia. The Bank's openness and inclusiveness reflect its multilateral
nature. AIIB welcomes all regional and non-regional countries, developing and developed
countries, that seek to contribute to Asian infrastructure development and regional
connectivity.
History.
Chinese President Xi Jinping and Premier Li Keqiang announced the AIIB initiative during
their respective visits to Southeast Asian countries in October 2013. The Bank was envisaged
to promote interconnectivity and economic integration in the region and cooperate with
existing multilateral development banks.
Following this announcement, bilateral and multilateral discussions and consultations
commenced on core principles and key elements for establishing the AIIB. In October, 2014,
22 Asian countries gathered in Beijing to sign Memorandum of Understanding (MOU) to
establish the AIIB. At a Special Ministerial Meeting following the signing of the MOU, Mr.
Jin Liqun was appointed as the Secretary General of the Multilateral Interim Secretariat.

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Status.
Discussions among Prospective Founding Members (PFMs) on the establishment of AIIB
commenced with the 1st Chief Negotiators' Meeting (CNM) in Kunming, China, in November
2014. Discussions about the proposed Articles of Agreement (AOA) were launched at the
second CNM, which was held in Mumbai, India, in January 2015. The AOA was discussed
further at the 3rd CNM meeting that was held in Almaty, Kazakhstan, in March 2015 and at
the 4th CNM meeting which took place in Beijing in April 2015. The final text of the AoA
was adopted on May 22, 2015 at the 5th CNM held in Singapore.
Representatives from the 57 PFMs gathered on June 29, 2015 in Beijing at a Signing
Ceremony of the Bank's Articles of Agreement at the Great Hall of the People and 50 PFMs
signed the Articles, including: Australia, Austria, Azerbaijan, Bangladesh, Brazil, Brunei
Darussalam, Cambodia, China, Egypt, Finland, France, Georgia, Germany, Iceland, India,
Indonesia, Iran, Israel, Italy, Jordan, Kazakhstan, Republic of Korea, Kyrgyz Republic,
Lao PDR, Luxembourg, Maldives, Malta, Mongolia, Myanmar, Nepal, Netherlands, New
Zealand, Norway, Oman, Pakistan, Portugal, Qatar, Russia, Saudi Arabia, Singapore, Spain,
Sri Lanka, Sweden, Switzerland, Tajikistan, Turkey, the United Arab Emirates, the United
Kingdom, Uzbekistan, and Vietnam. The Articles remain open for signing by PFMs
Until December 31, 2015 and it is expected that the AIIB would be operational by the end of
this year.

References:
1.
2.
3.
4.
5.
6.
7.
8.

http://www.oecd.org
http://unctad.org
http://www.worldbank.org/
http://www.wto.org/
www.saarc-sec.org/
http://www.imf.org/external/index.htm
IGNOU-Indian Economic Development_Issues and Perspectives unit 22 and 23.
Indian Economy by Ramesh Singh.

By Iyachamy Murugan
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