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Question no.

2
Answer:
WTO:

The World Trade Organization (WTO) is the only global


international organization dealing with the rules of trade between
nations. At its heart are the WTO agreements, negotiated and
signed by the bulk of the world’s trading nations and ratified in
their parliaments. The goal is to help producers of goods and
services, exporters, and importers conduct their business.

ROLE:

The WTO was born out of negotiations, and everything the WTO
does is the result of negotiations.
There are a number of ways of looking at the World Trade
Organization. It is an organization for trade opening. It is a forum
for governments to negotiate trade agreements. It is a place for
them to settle trade disputes. It operates a system of trade rules.
Essentially, the WTO is a place where member governments try to
sort out the trade problems they face with each other.

RESPONSIBILITIES:
The WTO agreements are lengthy and complex because they are
legal texts covering a wide range of activities. But a number of
simple, fundamental principles run throughout all of these
documents. These principles are the foundation of the multilateral
trading system.

1. Non-discrimination
2. More open
3. Predictable and transparent
4. More competitive
5. More beneficial for less developed countries
6. Protect the environment

IMF:

The International Monetary Fund (IMF) works to foster


international monetary cooperation, secure financial stability,
facilitate international trade, promote high employment and
sustainable economic growth, and reduce poverty around the
world. Created in 1945, the IMF is governed by and accountable to
the 187 countries that make up its near-global membership.

Role:

The IMF is helping governments to protect and even increase


social spending, including social assistance. In particular, the IMF
is promoting measures to increase spending on, and improve the
targeting of, social safety net programs that can mitigate the impact
of the crisis on the most vulnerable in society. Below are some
examples of how recent IMF-supported programs seek to protect
social spending in a way that is both fiscally sustainable and cost-
effective.

The IMF’s responsibilities:

The IMF's primary purpose is to ensure the stability of the


international monetary system—the system of exchange rates and
international payments that enables countries (and their citizens) to
transact with one other. This system is essential for promoting
sustainable economic growth, increasing living standards, and
reducing poverty. Following the recent global crisis, the Fund is
clarifying and updating its mandate to cover the full range of
macroeconomic and financial sector issues that bear on global
stability.

WORLD BANK:

The World Bank is an international financial institute that provides


loans to developing countries for capital programmes . The World
Bank has a goal of reducing poverty. By law, all of its decisions
must be guided by a commitment to promote foreign, international
trade and facilitate capital investment.

Roles and responsibilities

• Provide assistance to developing and


transition countries
• Promote the economic development of
the world's poorer countries
• Finance the poorest developing
countries whose per capita GNP is less
than $865 a year special financial
assistance through the International
Development Association (IDA)
Question no .3
Answer:
International trade is a risky business. Among many of the risks
involved in it, the political ones are the most difficult to measure,
while having the potential of greatest damage as well. The political
risks themselves can be classified according to their different
origins and etiologies.
TYPES:

1. CHANGE OF GOVERNMENT

The political risks that can confront an international trader can arise in
several ways. The most common of these is the 'change of government'.
In a democracy, this can happen in the form of election of a different
party to power. Such cases, being quite common in established mature
democracies, can often be foreseen to some extent, and hence it is one of
those political risks that is comparatively easier to plan for.

2. VIOLENT CONFLICTS

Violent conflicts, whether internal or external are invariably damaging to


trade, and unfortunately the world seems to be full of them. Internal
conflicts can manifest themselves as civil wars like those seen in Nepal,
Sri Lanka and Sudan. However, most of these violent conflicts exist
today in the form of terrorist activities, which again are very difficult to
plan for in advance.

3. SANCTIONS

Another political risk to international trade exists in the form of conflicts


without violence. International sanctions are the main form of these,
which may be precipitated by an action of the host country, like the
nuclear testing indulged in by North Korea or sudden Buddhist protests
in Myanmar last year. Sanctions may ban trade with target countries all
together, and hence such possibilities need to be taken into account and
factored in while dealing with countries with likelihood of such
sanctions.

4. POLITICAL TRADE RISKS

A peculiar form of political risks are changes in trading pattern imposed


by politics. An example is a sudden ban on all imports or exports.

In case of imports, ban can be imposed from the popular dissent and
media hype against its adverse impact on the domestic industry. In case
of exports, such a ban could arise from the price escalation of those
goods in the domestic market.

TO MINIMISE OR MANAGING POLITICAL RISKS:

To plan for managing a risk, the first step is to compute the probability of
its occurrence. Once that is done, a decision needs to be taken as to
whether in the light of that risk and the probable loss arising from it, it
makes any sense to continue with the business. A difficult and tricky
question is to quantify this risk in monetary terms, which alone is a
sensible indicator for the need to spend on planning for it.

Once it is decided to continue with business in spite of these risks, then


necessary provisions need to be made for the losses likely to arise from
them, while also attempting to hedge against each of those risks to the
best extent possible.