BCom International Economic Institutions Notes Study Material

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BCom International Economic Institutions Notes Study Material

INTRODUCTION

Toward the end of the Second World War, in July 1944, representatives of the United States, Great Britain, France, Russia, and 40 other countries met at Brettonwoods, a resort in New Hampshire, to lay the foundation for the post-war international financial order and to reconstruct world economy. Such a new system, they hoped, would prevent another worldwide economic cataclysm like the Great Depression that had destabilized Europe and the United States in the 1930s and had contributed to the rise of Fascism and the war. Other delegations of notables came from China, India, Russia and France.

At the time of Brettonwoods, there was serious concern about the stability of global economic markets. The world wide depression of the 1930s had been deepened by the instability of international currency markets and the contraction of international trade, so that stabilization of those markets and promotion of trade were considered crucial to avoid another crisis. Likewise, the widespread destruction of Europe and uncertainty about its future also threatened to cause economic and political break up. The countries allied to fight Nazi Germany and Japan believed that a similar collaborative effort was the only way to stabilize their economies and those of their soon-to-be-defeated enemies and to provide funds to rejuvenate the countries destroyed by the war.

In this tune some international economic institutions have taken birth i.e. World Bank and IMF. GATT was also an outcome of this conference but in different form. UNCTAD was established much better to help trade development specially to less developed countries. The WTO is the latest addition to world economic institutions in 1994. The basic philosophy is that international trade should be free from tariff and non-tariff barriers so that production capacities in various countries may be built on the basis of comparative cost advantage and then goods move freely without restrictions. The objectives and role of these institutions has been discussed below to understand international economic issues and problems.

WORLD BANK

The International Bank for Reconstruction and Development (IBRD), popularly known as the World Bank has come to be act after Monetary and Financial Conference Brettonwoods, New Hampshire, in July 1944. It established in 1945 after Brettonwoods conference along with International Monetary Fund (IMF) but began its operations in June 1946. As the World Bank expanded beyond its initial scope and purpose of rebuilding Europe after the Second World War, the World Bank grew through the creation of four additional organizations. Together, these five financial organizations comprise the World Bank Group, namely the IBRD, the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Center for Settlement of Investment Disputes (ICSID).

The IBRD and the IDA focus mainly on public sector monetary policy and provide low-interest loans, interest-free credit, and grants to developing countries. Additionally, they work to affect the policies of governments by providing macroeconomic policy advice, research, and technical advice. The remaining three institutions that belong to the World Bank Group focus more on private market interactions, providing funding, insurance and dispute resolution for private sector projects.

Organization and Structure

The organization of the bank consists of the Board of Governors, the Board of Executive Directors and the Advisory Committee, the Loan Committee and the president and other staff members. All the powers of the bank are vested in the Board of Governors which is the supreme policy-making body of the bank. The board consists of one Governor and one Alternative Governor appointed for five years by each member country. Each Governor has the voting power which is related to the financial contribution of the Government which he represents.

The Board of Executive Directors consists of 21 members, 6 of them are appointed by the six largest shareholders, namely the USA, the UK, West Germany, France, Japan and India. The rest of the 15 members are elected by the remaining countries. Each Executive Director holds voting power in proportion to the shares held by his Government. The Board of Executive Directors meets regularly once a month to carry on the routine working of the bank.

The president of the bank is appointed by the Board of Executive Directors. He is the Chief Executive of the Bank and he is responsible for the conduct of the day-to-day business of the bank. The Advisory Committees appointed by the Board of Directors. It consists of 7 members who are expects in different branches of banking. There is also another body known as the Loan Committee. This committee is consulted by the bank before any loan is extended to a member country.(BCom International Economic Institutions Notes Study Material)

Governance

The governance of the World Bank is almost identical to that of the IMF. It is directed by a board of governors composed of one representative from each member country, and the governors direct the IBRD based on weighted voting rights that are determined by each country’s agreed annual contributions to the World Bank. As in the IMF, the United States is the largest contributor and has the most weighted voting power, though as a practical matter, decisions are made by consensus. Objectives of World Bank

The World Bank is an international financial institution that provides loans in developing countries for capital programs. It comprises two institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The World Bank is a component of the World Bank Group, and a member of the United Nations Development Group.

The World Bank’s official goal is the reduction of poverty. According to its Articles of Agreement, all its decisions must be guided by a commitment to the promotion of foreign investment and international trade and to the facilitation of capital investment. The main objectives of World Bank are given as below:

1. Eradicate Extreme Poverty and Hunger: From 1990 through 2004, the proportion of people living in extreme poverty fell from almost a third to less than a fifth. Although results vary widely within regions and countries, the trend indicates that the world as a whole can meet the goal of halving the percentage of people living in poverty. Africa’s poverty, however, is expected to rise, and most of the 36 countries where 90% of the world’s undernourished children live are in Africa. Less than a quarter of countries are on track for achieving the goal of halving under-nutrition.
2. Achieve Universal Primary Education: The percentage of children in school in developing countries increased from 80% in 1991 to 88% in 2005. Still, about 72 million children of primary school age, 57% of them girls, were not being educated as of 2005.
3. Promote Gender Equality: The tide is turning slowly for women in the labour market, yet far more women than men-worldwide more than 60%-are contributing but unpaid family workers. The World Bank Group Gender Action Plan was created to advance women’s economic empowerment and promote shared growth.(BCom International Economic Institutions Notes)
4. Reduce Child Mortality: There is some improvement in survival rates globally; accelerated improvements are needed most urgently in South Asia and Sub-Saharan Africa. An estimated 10 million-plus child under five died in 2005; most of their deaths were from preventable causes.
5. Improve Maternal Health: Almost the entire half million women who die during pregnancy or childbirth every year live in Sub-Saharan Africa and Asia. There are numerous causes of maternal death that require a variety of health care interventions to be made widely accessible.
6. Combat HIVIAIDS, Malaria and Other Diseases: Annual numbers of new HIV infections and AIDS deaths have fallen, but the number of people living with HIV continues to grow. In the eight worst-hit southern African countries, prevalence is above 15 percent. Treatment has increased globally, but still meets only 30 percent of needs (with wide variations across countries). AIDS remains the leading cause of death in Sub-Saharan Africa (1.6 million deaths in 2007).(BCom International Economic Institutions Notes Study Material)

There are 300 to 500 million cases of malaria each year, leading to more than 1 million deaths. Nearly all the cases and more than 95 percent of the deaths occur in Sub-Saharan Africa.

7. Ensure Environmental Sustainability: Deforestation remains a critical problem, particularly in regions of biological diversity, which continues to decline. Greenhouse gas emissions are increasing faster than energy technology advancement.
8. Develop a Global Partnership for Development: Donor countries have renewed their commitment. Donors have to fulfill their pledges to match the current rate of core program development. Emphasis is being placed on the Bank Group’s collaboration with multilateral and local partners.

To make sure that World Bank-financed operations do not compromise these goals but instead add to their realisation, environmental, social and legal safeguards were defined. However, these safeguards have not been implemented entirely yet. At the World Bank’s annual meeting in Tokyo 2012 a review of these safeguards has been initiated which was welcomed by several civil society organizations.(BCom International Economic Institutions Study Material)

9. Other Important Objectives: (i) To provide long-run capital to member countries for economic reconstruction and development.

(ii) To induce long-run capital investment for assuring Balance of Payments (BOP) equilibrium and balanced development of international trade.

(iii) To provide guarantee for loans granted to small and large units and other projects of member countries.

(iv) To ensure the implementation of development projects so as to bring about a smooth transference from a war-time to peace economy.

(v) To promote capital investment in member countries by the following ways:

(a) To provide guarantee on private loans or capital investment.

(b) If private capital is not available even after providing guarantee, then IBRD provides loans for productive activities on considerate conditions.

World Bank Group

The World Bank functions with United Nations Economic and Social Council, and a family of five international organizations that make leveraged loans to poor countries:

1. International Bank for Reconstruction and Development (IBRD)
2. International Development Association (IDA)
3. International Finance Corporation (IFC)
4. Multilateral Investment Guarantee Agency (MIGA)
5. International Centre for Settlement of Investment Disputes (ICSID)

Functions of World Bank

World Bank is playing main role of providing loans for development works to member countries, especially to underdeveloped countries. The World Bank provides long-term loans for various development projects of 5 to 20 years duration. The main functions can be explained with the help of the following points:

1. World Bank provides various technical services to the member countries. For this purpose, the Bank has established “The Economic Development Institute” and a Staff College in Washington.
2. Bank can grant loans to a member country up to 20% of its share in the paid-up capital.(BCom International Economic Institutions Notes Study Material)
3. The quantities of loans, interest rate and terms and conditions are determined by the Bank itself.(International Economic Institutions Notes Study Material)
4. Generally, Bank grants loans for a particular project duly submitted to the Bank by the member country.
5. The debtor nation has to repay either in reserve currencies or in the currency in which the loan was sanctioned.
6. Bank also provides loan to private investors belonging to member countries on its own guarantee, but for this loan private investors have to seek prior permission from those countries where this amount will be collected.

Capital Resources of World Bank

The initial authorized capital of the World Bank was $10,000 million, which was divided in 1 lakh shares of $ 1 lakh each. The authorized capital of the Bank has been increased from time to time with the approval of member countries.

On June 30, 1996, the authorized capital of the Bank was $ 188 billion out of which $ 180.6 billion (96% of total authorized capital) was issued to member countries in the form of shares.

Member countries repay the share amount to the World Bank in the following ways:

1.2% of allotted shares are repaid in gold, US dollar or Special Drawing Rights (SDR).

2. Every member country is free to repay 18% of its capital share in its own currency.(BCom International Economic Institutions Notes Study Material)
3. The remaining 80% share deposited by the member country only on demand by the World Bank.

INTERNATIONAL MONETARY FUND (IMF)

The articles of agreement of international monetary fund were also formulated at United Nations Monetary and Finance Conference held at Brettonwoods between 1^st to 22^nd July, 1944. The IMF commenced operations in Washington on 1st March, 1947. The IMF describes itself as: “an organization of 186 countries, working to foster global monetary co-operation, secure financial stability facilitate international trade, promote high employment and sustainable economic growth and reduce poverty.”

Governance

The IMF is controlled by its 187 member-countries, each of whom appoints a representative to the IMF’s Board of Governors. The Board of Governors, most of whom are the finance ministers or heads of the central Bank of the members, meet once per year to discuss and possibly achieve consensus on major issues. In the meantime, day-to-day operations are managed by a 24-person Executive Board. The world’s major economic and political powers-the United States (the IMF’s largest shareholder), Great Britain, Japan, Germany, France, China, Russia and Saudi Arabia-each have permanent seats on the executive board, while the 16 other directors are elected for two-year terms by groups of countries divided roughly by geography, e.g., Caribbean, Africa, South-East Asia, etc. The executive board, in turn, is run by the managing director, who is elected for renewable five-year terms.

The IMF also has an International Monetary and Financial Committee of 24 representatives of the member-countries that meets twice yearly to provide advice on the international monetary and financial system to the IMF’s staff. In all of its operations, voting power is weighted based on the size of the economy and therefore the quota allocation of each country. Decisions are usually taken by consensus, but the United States, as the IMF’s major shareholder, has the most influence in the institution’s policy-making.

Organization

The IMF’s current managing director is Ms. Christine Lagarde of France, who took office on June 28, 2011. Each members of the executive board runs a particular department of the IMF. There are offices devoted to:

(a) Particular regions of the world, such as Europe, Africa, Middle East, Western Hemisphere, and Asia/Pacific;

(b) Functions, such as finance, technical assistance, fiscal planning, capital markets, research and statistics; and

(c) Administrative functions of the IMF itself.

The IMF has a total of 2,600 employees, mostly based in its Washington, D.C. headquarters.(BCom International Economic Institutions Notes Study Material)

Purposes

The Brettonwoods Conference set out six goals for the IMF in its Articles of Agreement. Those goals are known as the guiding principles of the IMF today.

(i) To promote international monetary cooperation through a permanent institution that provides the machinery for consultation and collaboration on international monetary problems.(BCom International Economic Institutions Notes)

(ii) To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.

(iii) To promote exchange stability, to maintain orderly exchange arrangements among members and to avoid competitive exchange depreciation.

(iv) To assist in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions that hamper the growth of world trade.

(v) To give confidence to members by making the general resources of the IMF temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.

(vi) In accordance with the above, to shorten the duration and reduce the degree of disequilibria in the international balances of payments of members.

In simpler terms, the goals are to:

(1) Facilitate the cooperation of countries on monetary policy, including providing the necessary resources for both consultation and the establishment of monetary policy in order to minimize the effects of international financial crisis.

(2) Assist the liberalization of international trade by helping countries increase their real incomes while lowering unemployment.

(3) Help stabilize exchange rates between countries. Especially after the global depression of the 1930s, it was considered vital to establish currencies that could hold their value, serve as mediums of international exchange, and resist any speculative attacks.(BCom International Economic Institutions Notes)

(4) Maintain a multilateral system of payments that eliminates foreign exchange restrictions. Countries are thus free to trade with each other without worrying about the effects of interest rates and currency depreciation on their payments.

(5) Provide a safeguard to members of the IMF against balance of payments crisis, i.e., when governments cannot balance the money they have with the money they owe to other countries. IMF members can have the confidence to adjust the imbalances in their national accounts without resorting to painful measures that would hamper their prosperity, such as devaluing their currency in relation to other countries.

(6) Try to reduce the effects of volatility in countries’ balance of payments accounts, the IMF helps assure that global trade and financial relationships can continue at a steady rate without the risks of global depressions like that of the 1930s.(BCom International Economic Institutions Notes Study Material)

INDIA AND THE INTERNATIONAL MONETARY FUND (IMF)

International Monetary Fund (IMF) was established along with the International Bank for Reconstruction and Development at the Conference of 44 nations held at Brettonwoods, New Hampshire, USA in July 1944. At present, 187 nations are members of IMF. India is a founder member of the IMF. India has not taken any financial assistance from the IMFsince 1993. Repayments of all the loans taken from International Monetary Fund have been completed on 31st May, 2000. The objectives of IMF is macro-economic growth, alleviation of poverty and economic stability, policy advice & financing for developing countries, forum for cooperation in monetary system, promotion of exchange rate stability and international payment system.(BCom International Economic Institutions Notes)

India’s current quota in the IMF is SDR (Special Drawing Rights) 5,821.5 million, making it the 13^th largest quota holding country at IMF and giving it shareholdings of 2.44%. However, based on voting share, India (together with its constituency countries viz. Bangladesh, Bhutan and Sri Lanka) is ranked 17^th in the list of 24 constituencies at the Executive Board.

Quota Reforms

As part of the Fourteenth General Review of Quotas (2010), India’s total quota has been increased to SDR 13,114.4 million from SDR 5821.5 million. With this increase, India’s share would increase to 2.75 % (from 2.44%), making it the 8th largest quota holding country in the IMF. Significantly, the reforms will lead to a realignment of quota shares of member countries, with the shifts to dynamic Emerging Market and Dynamic Countries (EMDCs) and from over- to under-represented countries both exceeding 6 percent, while protecting the voting share of the poorest member.(International Economic Institutions Notes)

Governance and India

Finance Minister is the ex-officio Governor on the Board of Governors of the IMF. RBI Governor is the Alternate Governor at the IMF. India is represented at the IMF by an Executive Director. At the 24-member Executive Board of the IMF. Currently, the members with the five largest quotas appoint an Executive Director each, while the rest of Executive Directors are elected. However, the reforms of the Executive Board would facilitate a move towards a more representative, all-elected Executive Board, ending the category of appointed Executive Director. To this end, there has been a consensus to reduce the number of Executive Directors representation advanced European countries by 2 in favour of EMDCs (Emerging Market Developing countries). The amendments are part of a package of reforms on quotas and governance in the IMF. Along with the recent quota reforms in IMF (i.e. Fourteenth General Review of Quotas), these amendments represents a major overhaul of the Fund’s quotas and governance, and help in strengthening the Fund’s legitimacy and effectiveness.

Article-IV Consultations

As part of its mandate for international surveillance under the Articles of Agreement, the IMF conducts what is known as Article-IV consultations to review the economic status of member countries. Article-IV Consultations are generally held in two phases, main consultations in October-November and mid-term review in June. Latest round of Article-IV Consultations for India took place in October 25-November 9, 2012.

Financial Transactions Plan (FTP)

India agreed to participate in the Financial Transaction Plan of the IMF in late 2002. Fifty three countries, including India, now participate in FTP. By participation in FTP, India is allowing IMF to en-cash its rupee holdings as part of our quota contribution, for hard currency which is then lent to other member countries who are debtors to the IMF. From 2002 to 31st December, 2010 India has made seventeen purchase transactions of SDKs 1194.16 million and twenty-two repurchase transactions of SDKs 795.98 million.

India’s Contribution to Lending Resources of IMF

In the London Summit of the Group of Twenty (G-20), a decision was taken to triple the IMF’s lending capacity up to US $ 500 billion. In pursuance of this decision, India decided to invest its reserves, initially up to US $ 10 billion through the Notes Purchase Agreement (NPA), and subsequently up to US $ 14 billion through New Arrangement to Borrow (NAB). As of 7th April, 2011, India has invested SDR 750 million (approx. 5,340.36 crore) through 9 note purchase agreements with the IMF.

REMARKABLE ACHIEVEMENTS OF THE IMF

(1) It provided excellent machinery for consultation in international monetary affairs. It serves as an excellent forum for discussions, practically on a day-to-day basis, of the economic, fiscal and financial policies of member countries with particular reference to their balance of payments impact. The Fund has created a feeling among the member countries that their economic problems are not their exclusive concern but of the whole international society.

(2) The Fund has contributed in certain ways to the expansion of world trade. By providing credit facilities to member countries, the IMF has reduced the need for their imposing import and exchange controls. It assists the deficit countries to meet their temporary disequilibrium in payments. It also works for facilitating multi-lateral payments and trade, promoting thereby international trade as a whole.(BCom International Economic Institutions Notes Study Material)

(3) Another fundamental object of the IMF is to promote exchange stability. The measure of exchange stability that the world has witnessed in the IMF era is remarkably superior to what was seen during the inter-war period of gold standard regime.(BCom International Economic Institutions Notes Study Material)

Under the IMF arrangements, stable exchange rates do not imply rigid exchange rates. IMF’s object is to combine the merit of stability with flexibility in exchange management. It aims at avoiding competitive exchange depreciations by wanting the members to declare the par values of their currencies fixed in terms of gold or the U.S. dollar.(BCom International Economic Institutions Notes Study Material)

However, it allows for an orderly adjustment of the exchange rates when this is needed for correcting a fundamental disequilibrium in a country’s balance of payments. The recent devaluation of the Indian rupee (in 1966) and that of pound sterling was justified by the IMF.

(4) Moreover, the Fund has been particularly interested in the newly developing countries of the world and has been liberally assisting them to have a healthy balance of payments and to maintain monetary stability at home.

In recent years, however, underdeveloped countries have started looking to the Fund to assist them in their economic development programmes also. Furthermore, most of the new members who have acquired independence recently are facing difficult problems in organizing their monetary, fiscal and exchange systems, so they need a solid basis for their economic growth.

The Fund has been already providing technical assistance to its members in this respect, but now its activity is substantially widened to meet this challenge. In many of these countries, the Fund’s experts have assisted in the formulation of appropriate monetary, fiscal and exchange policies in the implementation of stabilization programmes.

CRITICISM OF IMF

Over time, the IMF has been subject to a range of criticisms, generally focused on the conditions of its loans. The IMF has also been criticised for its lack of accountability and willingness to lend to countries with bad human rights record

Many criticisms of IMF includes:

1. Conditions of Loans: On giving loans to countries, the IMF makes the loan conditional on the implementation of certain economic policies. These policies tend to involve:

(i) Reducing government borrowing-Higher taxes and lower spending,

(ii) Higher interest rates to stabilise the currency.

(iii) Allow failing firms to go bankrupt.

(iv) Structural adjustment. Privatisation, deregulation, reducing corruption and bureaucracy.(BCom International Economic Institutions Notes Study Material)

The problem is that these policies of structural adjustment and macro-economic intervention make the situation worse.

2. Exchange Rate Reforms: When the IMF intervened in Kenya in the 1990s, they made the Central Bank remove controls over flows of capital. The consensus was that this decision made it easier for corrupt politicians to transfer money out of the economy (known as the Goldman scandal). Critics argue this is another example of how the IMF failed to understand the dynamics of the country that they were dealing with—insisting on blanket reforms. The economist Joseph Stiglitz has criticised the more monetarist approach of the IMF in recent years. He argues it is failing to take the best policy to improve the welfare of developing countries saying the IMF “was not participating in a conspiracy, but it was reflecting the interests and ideology of the Western financial community.”
3. Devaluations: In earlier days, the IMF have been criticised for allowing inflationary devaluations.
4. Neo-Liberal Criticisms: There is also criticism of neo-liberal policies such as privatisation. Arguably these free market policies were not always suitable for the situation of the country. For example, privatisation can create lead to the creation of private monopolies who exploit consumers. I
5. Free Market Criticisms of IMF: As well as being criticised for implementing free market reforms’. Other criticise the IMF for being too interventionist. Believers in free markets argue that it is better to let capital markets operate without attempts at intervention. They argue attempts to influence exchange rates only make things worse it is better to allow currencies to reach their market level.(International Economic Institutions Notes Study Material)

There is also a criticism that bailout countries with large debt creates mo hazard. Because of the possibility of getting bailed out it encourages people to borrow more.(BCom International Economic Institutions Notes Study Material)

6. Lack of Transparency and Involvement: The IMF have been criticised for imposing policy with little or no consultation with affected countries.

Jeffrey Sachs, the head of the Harvard Institute for International Development said: “In Korea the IMF insisted that all presidential candidates immediately “endorse” an agreement which they had no part in drafting or negotiating, and no time to understand. The situation is out of hand… It defies logic to believe the small group of 1,000 economists on 19th Street in Washington should dictate the economic conditions of life to 75 developing countries with around 1.4 billion people.”(BCom International Economic Institutions Notes Study Material)

7. Supporting Military Dictatorships: The IMF have been criticised for supporting military dictatorships in Brazil and Argentina, such as Castello Branco in 1960s received IMF funds denied to other countries.

WORLD TRADE ORGANIZATION (WTO)

The World Trade Organization (WTO) is an intergovernmental organization which regulates international trade. The WTO officially commenced on 1st January, 1995 under the Marrakech Agreement, signed by 123 nations on 15th April, 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. The WTO deals with regulation of trade between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants’ adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments.

Organizational Structure

The WTO has nearly 153 members accounting for over 97% of world trade. Around 30 others are negotiating membership. Decisions are made by the entire membership. This is typically by consensus. A majority vote is also possible but it has never been used in the WTO and was extremely rare under the WTO’s predecessor, GATT. The WTO’s agreements have been ratified in all members’ parliaments.(BCom International Economic Institutions Notes Study Material)

The WTO’s top level decision-making body is the Ministerial Conferences which meets at least once in every two years. Below this is the General Council (normally ambassadors and heads of delegation in Geneva, but sometimes officials sent from members’ capitals) which meets several times a vegy Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the Disputes Settlement Body.

At the next level, the Goods Council, Services Council and Intellectual Property (TRIPs) Council report to the General Council. Numerous specialized committees, working groups and working parties deal with the individual agreements and other areas such as, the environment, development, membership applications and regional trade agreements.

The General Council has the following subsidiary bodies which supervise committees in different areas:

1. Council for Trade in Goods: There are 11 committees under the jurisdiction of the Goods Council each with a specific task. All members of the WTO participate in the committees. The Textiles Monitoring Body is separate from the other committees but still under the jurisdiction of Goods Council. The body has its own chairman and only 10 members. The body also has several groups relating to textiles.(International Economic Institutions Notes Study Material)
2. Council for Trade-Related Aspects of Intellectual Property Rights: TRIPS is working about information on intellectual property in the WTO, news and official records of the activities of the TRIPS Council, and details of the WTO’s work with other international organizations in the field.
3. Council for Trade in Services: The Council for Trade in Services operates under the guidance of the General Council and is responsible for overseeing the functioning of the General Agreement on Trade in Services (GATS). It is open to all WTO members, and can create subsidiary bodies as required.

The Service Council has three subsidiary bodies: financial services. domestic regulations, GATS rules and specific commitments. The council has several different committees, working groups and working parties.

4. Trade Negotiations Committee: The Trade Negotiations Committee (TNC) is the committee that deals with the current trade talks round. The chair is WTO’s director-general. As of June 2012 the committee was tasked with the Doha Development Round.

Secretariat

The WTO secretariat, based in Geneva, has around 600 staff and is headed by a Director-General. Its annual budget is roughly 160 million Swiss Francs. It does not have branch offices outside Geneva. Since decisions are taken by the members themselves, the secretariat does not have the decision-making the role that other international bureaucracies are given.

The secretariat s main duties to supply technical support for the various councils and committees and the ministerial conferences, to provide technical assistance for developing countries, to analyze world trade and to explain WTO affairs to the public and media. The secretariat also provides some forms of legal assistance in the dispute settlement process and advises governments wishing to become members of the WTO.(International Economic Institutions Notes)

Accession and Membership

The process of becoming a WTO member is unique to each applicant country, and the terms of accession are dependent upon the country’s stage of economic development and current trade regime. The process takes about five years, on average, but it can last more if the country is less than fully committed to the process or if political issues interfere. The shortest accession negotiation was that of the Kyrgyz Republic, while the longest was that of Russia, which, having first applied to join GATT in 1993 was approved for membership December 2011 and became a WTO member on 22nd August, 2012. The second longest was that of Vanuatu, whose Working Party on the Accession of Vanuatu was established on 11th July, 1995. After a final meeting of the Working Party in October 2001, Vanuatu requested more time to consider its accession terms. In 2008, it indicated its interest to resume and conclude its WTO accession. The Working Party on the Accession of Vanuatu was reconvened informally on 4^th April, 2011 to discuss Vanuatu’s future WTO membership. The re-convened Working Party completed its mandate on 2nd May, 2011. The General Council formally approved the Accession Package of Vanuatu on 26th October, 2011. On 24th August, 2012, the WTO welcomed Vanuatu as its 157th member. An offer of accession is only given once consensus is reached among interested parties.

A country wishing to accede to the WTO submits an application to the General Council, and has to describe all aspects of its trade and economic policies that have a bearing on WTO agreements. The application is submitted to the WTO in a memorandum which is examined by a working party open to all interested WTO Members.(BCom International Economic Institutions Notes Study Material)

After all necessary background information has been acquired, the working party focuses on issues of discrepancy between the WTO rules and the applicant’s international and domestic trade policies and laws. The working party determines the terms and conditions of entry into the WTO for the applicant nation, and may consider transitional periods to allow countries some leeway in complying with the WTO rules.(BCom International Economic Institutions Notes Study Material)

The final phase of accession involves bilateral negotiations between the applicant nation and other working party members regarding the concessions and commitments on tariff levels and market access for goods and services. The new member’s commitments are to apply equally to all WTO members under normal non-discrimination rules, even though they are negotiated bilaterally.

Objectives of WTO

The Uruguay round of GATT (1986-93) gave birth to World Trade Organization. The members of GATT singed on an agreement of Uruguay round in April 1994 in Morocco for establishing a new organization named WTO. It was officially constituted on January 1, 1995 which took the place of GATT as an effective formal, organization. GATT was an informal organization which regulated world trade since 1948. Contrary to the temporary nature of GATT, WTO is a permanent organization which has been established on the basis of an international treaty approved by participating countries. It achieved the international status like IMF and IBRD, but it is not an agency of the United Nations Organization (UNO).

The important objectives of WTO are:

(i) To improve the standard of living of people in the member countries.

(ii) To ensure full employment and broad increase in effective demand

(iii) To enlarge production and trade of goods,

(iv) To increase the trade of services.

(v) To ensure optimum utilization of world resources.

(vi) To protect the environment.

(vii) To accept the concept of sustainable development.

Functions of WTO

As globalization proceeds in today’s society, the necessity of an International Organization manage the trading systems has been of vital importance. As the trade volume increases, issues such as protectionism, trade barriers, subsidies, violation of intellectual property arise due to the differences in the trading rules of every nation. The World Trade Organization serves as the mediator between the nations when such problems arise. WTO could be referred to as the product of globalization and also as one of the most important organizations in today’s globalized society.(International Economic Institutions Notes)

The WTO is also a centre of economic research and analysis : regular assessments of the global trade picture in its annual publications and research reports on specific topics are produced by the organization. Finally, the WTO cooperates closely with the two other components of the Brettonwoods system, the IMF and the World Bank.

The main functions of WTO are discussed below:

1. To implement rules and provisions related to trade policy review mechanism.
2. To provide, a platform to member countries to decide future strategies related to trade and tariff.
3. To provide facilities for implementation, administration and operation of multilateral and bilateral agreements of the world trade.
4. To administer the rules and processes related to dispute settlement.
5. To ensure the optimum use of world resources.
6. To assist international organizations such as, IMF and IBRD for establishing coherence in Universal Economic Policy determination.

Principles of the Trading System

The WTO establishes a framework for trade policies; it does not define or specify outcomes. It is concerned with setting the rules of the trade policy games. Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO:

1. Non-discrimination: It has two major components: the most favoured nation (MFN) rule, and the national treatment policy. Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members, i.e. a WTO member has to grant the most favourable conditions under which it allows trade in a certain product type to all other WTO members. National treatment means that imported goods should be treated no less favourably than domestically produced goods (at least after the foreign goods have entered the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical standards, security standards et al discriminating against imported goods).
2. Reciprocity: It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a nation to negotiate, it is necessary that gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialize.(International Economic Institutions Notes Study Material)
3. Binding and Enforceable Commitments: The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish “ceiling bindings”: a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement procedures.
4. Transparency: The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM). The WTO system tries also to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports.(International Economic Institutions Notes)
5. Safety Valves: In specific circumstances, governments are able to restrict trade. The WTO’s agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health.

There are three types of provision in this direction:

(i) Articles allowing for the use of trade measures to attain non-economic objectives;

(ii) Articles aimed at ensuring “fair competition”; members must not use environmental protection measures as a means of disguising protectionist policies.(BCom International Economic Institutions Notes Study Material)

(iii) Provisions permitting intervention in trade for economic reasons.

WTO Agreements

The WTO’s rule and the agreements are the result of negotiations between the members. The current sets were the outcome to the 1986-93 Uruguay Round negotiations which included a major revision of the original General Agreement on Tariffs and Trade (GATT).(International Economic Institutions Notes)

GATT is now the WTO’s principal rule-book for trade in goods. The Uruguay Round also created new rules for dealing with trade in services, relevant aspects of intellectual property, dispute settlement and trade policy reviews.

The complete set runs to some 30,000 pages consisting of about 30 agreements and separate commitments (called schedules) made by individual members in specific areas such as, lower customs duty rates and services market-opening.

Through these agreements, WTO members operate a non-discriminatory trading system that spells out their rights and their obligations. Each country receives guarantees that its exports will be treated fairly and consistently in other countries’ markets. Each country promises to do the same for imports into its own market. The system also gives developing countries some flexibility in implementing their commitments.(BCom International Economic Institutions Notes Study Material)

(a) Goods: It all began with trade in goods. From 1947 to 1994, GATT was the forum for negotiating lower customs duty rates and other trade barriers, the text of the General Agreement spelt out important, rules, particularly non-discriminations since 1995, the updated GATT has become the WTOs umbrella agreement for trade in goods.(BCom International Economic Institutions Notes Study Material)

It has annexes dealing with specific sectors such as , agriculture and textiles and with specific issues such as , state trading, product standards, subsidies and action taken against dumping.

(b) Services: Banks, insurance firms, telecommunication companies, tour operators, hotel chains and transport companies looking to do business abroad can now enjoy the same principles of free and fair that originally only applied to trade in goods.(BCom International Economic Institutions Notes Study Material)

These principles appear in the new General Agreement on Trade in Services (GATS). WTO members have also made individual commitments under GATS stating which of their services sectors, they are willing to open for foreign competition and how open those markets are.

(c) Intellectual Property: The WTO’s intellectual property agreement amounts to rules for trade and investment in ideas and creativity. The rules state how copyrights, patents, trademarks, geographical names used to identify products, industrial designs, integrated circuit layout designs and undisclosed information such as trade secrets “intellectual property” should be protected when trade is involved.(BCom International Economic Institutions Notes Study Material)

(d) Dispute Settlement: The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore, for ensuring that trade flows smoothly.

Countries bring disputes to the WTO if they think their rights under the agreements are being infringed. Judgments by specially appointed independent experts are based on interpretations of the agreements and individual countries’ commitments.(BCom International Economic Institutions Notes Study Material)

The system encourages countries to settle their differences through consultation. Failing that, they can follow a carefully mapped out, stage-by-stage procedure that includes the possibility of the ruling by a panel of experts and the chance to appeal the ruling on legal grounds.

(e) Policy Review: The Trade Policy Review Mechanism’s purpose is to improve transparency, to create a greater understanding of the policies that countries are adopting and to assess their impact. Many members also see the reviews as constructive feedback on their policies. All WTO members must undergo periodic scrutiny, each review containing reports by the country concerned and the WTO Secretariat.(BCom International Economic Institutions Notes Study Material)

WTO and INDIA

India’s increasing engagement in the international economy has created a growing awareness that multilateral trade negotiations can and must be used to serve development goals. At the same time, India is a developing economy of key importance in the World Trade Organization, and it played a pivotal role in the negotiation and design of the Doha Development Agenda.

The Indian economy experienced a major transformation during the decade of the 1990s. Apart from the effects of various unilateral economic reforms undertaken since 1991, the economy has had to reorient itself to the changing multilateral trade discipline within the newly written framework of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). The unilateral policy measures have encompassed exchange-rate policy, foreign investment, external borrowing, import licensing, import tariffs and export subsidies. The multilateral aspect of India’s trade policy pertains to India’s WTO commitments with regard to trade in goods and services, trade-related investment measures, and intellectual property rights.

Multilateral trade liberalization under the auspices of the Uruguay Round Agreement and the Doha Development Agenda is aimed at reducing tariff and non-tariff barriers on international trade. The purpose of this chapter is to provide a computational analysis of the effect of such changes in trade barriers on the economic welfare, on trade and on the inter-sectoral allocation of resources in India and its major trading partners.

The first stage of India’s reforms after 1991 continued to focus on manufacturing while largely ignoring agriculture. The share of value added in the manufacturing sector protected by QRs declined from 90 percent to 47 percent by May 1992 and to 36 percent by May 1995. The corresponding decline was much less in agriculture—from 94 percent to 93 percent by May 1992 and to 84 percent by May 1995. It has been estimated that about one-third of the value of India’s imports in 1998-99 was still subject to some type of non-tariff barrier. In April 1998, about 30 percent of the 10-digit tariff lines (3,068 of 10.281) under the Harmonized System (HS) of India’s trade classification were subject to non-tariff barriers. The 3,068 restricted tariff lines include 1,379 lines for consumer goods. The import value of these consumer goods is only 0.2 percent of India’s total imports, which reflects the relatively high degree of restrictions. The of 40 percent of agricultural products was still restricted because these were classified as consumer goods.(International Economic Institutions Notes Study Material)

The government of India has made a number of commitments regarding trade liberalization. Being founder member of the WTO has been following the WTO decisions, but as a consequence, certain effects on the Indian economy have become evident:

1. Effects on Indian Industry: WTO has been urging India to lower import duties, remove control on consumer goods imports, reduce quantitative restrictions, etc. Under the Uruguay Round Agreement, India offered to reduce tariff on capital goods, components, intermediate goods and industrial raw materials to 40% in case our tariff were above that percentage; to 25% in case our tariff were between 25 to 40% and to bind the tariff ceiling at 25% in case our tariff were below the that percentage. The reduction of tariff was to be achieved by the year ending 2000.

India was maintaining quantitative restrictions in the form of quotas, import and export licenses on 2007 agricultural commodities textile and industrial products. United States along with Australia, New Zealand, Switzerland, European Economic Community and Canada complained to the WTO Dispute Settlement Machinery. The Dispute Settlement panel gave verdict against India and finally, India has opened the floodgates for foreign consumer goods to enter the Indian market, thereby seriously damaging Indian Industry.

Under this policy India allowed the import of second hand cars, machine tools etc. into India and they seriously damage domestic industry. On the other hands, in recent years Chinese goods are flooding the Indian markets like battery cells, Cigarette lighters, locks, energy saving lamps, VCD player, watches, toys, electronic items and other consumer goods. Not only that, Chinese goods are coming through normal channels of trade, they are being smuggled via Nepal at zero duty. Thus it is very difficult to prepare an anti-dumping case against China.

2. Impact on SSI Units: WTO agreements do not discriminate on the basis of size of industries or enterprises. In the WTO regime, reservation may have to be withdrawn, preferential purchase and other support measures may not be available and thus Small Scale Industries (SSIS) have to compete not only with the large units within the country, but also with cheap imported products. Consequently, a very large number of SSI units becoming sick or have closed down.(BCom International Economic Institutions Notes Study Material)

The real difficulty with the SSI sector is that it does not have adequate resources to prepare the case for anti-dumping duties in the view of prohibitive costs of anti-dumping investigation. Consequently, small industries continue to suffer due to such policy.(BCom International Economic Institutions Notes Study Material)

3. Double Standards of Developed Countries: Developed countries demand so many concessions and reduction of tariff from the developing countries, but they are encouraging free flow of trade, capital and technology across the states. Developed countries have proposed ten long years to reduce quotas in their domestic products, but they pressurize the developing countries to reduce their tariffs, remove quantitative restrictions, introduce Intellectual Property Rights (IPRs) etc. Obviously developed countries play unfair games so far as developing countries are concerned.

GENERAL AGREEMENTS ON TARIFF AND TRADE (GATT)

GATT was established on October 30, 1947 in Geneva with 23 countries as its member. It pursued the objective of free trade in order of encourages growth and development of all member countries. India was one of the founder signatory. The main purpose of was to ensure competition in commodity trade through removal of reduction of trade barriers. The first seven round of negotiations conducted under GATT were aimed at stimulating international trade through reduction in tariff barriers and also by reduction in non-tariff restrictions on imports imposed by member countries. In this way we can say that GATT provides a useful forum for discussion and negotiation on international trade issues.

However, GATT worked for multilateral trade, from the beginning and could be instrumental in reduction of tariff duties but in the matter of quota restrictions and non-tariff barriers it was not very successful. Even then the importance of GATT has been recognized. Therefore, the number of GATT members increased to 118 countries by 1994 when WTO took birth. GATT worked for reduction in tariff and trade restrictions over a period of its existence through eight rounds of tariff negotiations.(BCom International Economic Institutions Notes Study Material)

The GATT agreement has followed by the principle of one country, one vote. However, the developed countries are able to pressurise the developing countries by various new devices, more especially through intellectual property rights and TRIMs. Although Government of India is claiming that very substantial benefits are likely to accrue as a consequence of GATT agreement, but it is premature to reach any definite conclusion. The final act is such a big document that it has wheels-within-wheels and the thrust of the act is to toe the line of developed nations.(BCom International Economic Institutions Notes Study Material)

Mr. R.K. Khurana of the India International centre has rightly summed up the position: “The consensus, however, is that the Uruguay Round has been a game in which more powerful nations lay down the rules. Unfortunately, India is not among the powerful trading nations and it is, therefore, doubtful if the country could have achieved anything significantly more than what negotiations have managed.”(BCom International Economic Institutions Notes Study Material)

The past experience of GATT disclosed that whenever newly industrialized in nations have challenged the competitive strength of the developed they have immediately related by imposing both tariff and non-tariff barriers. They have now enlarged these in the form of TRIPs and TRIMs.

Objectives of GATT

According to the preamble of GATT, the objectives are as follows:

(1) Raising the standard of living

(2) Ensuring full employment

(3) A large and steadily growing volume of real income and effective demand

(4) Developing the full use of the resources of the world.

(5) Expanding the production and exchange of goods.

Uruguay Round of GATT and India

The 8th round of multilateral trade negotiations, popularly known as Uruguay Round was started in 1986 at a special session of GATT Contracting Parties held at Ministerial level. World Trade had undergone a structural change during the four decades since the establishment of GATT in 1948. The share of agriculture in world merchandise trade which was 46 per cent in 1950 had declined to 13 percent in 1987. Simultaneously, the structure of employment and the contribution of various sectors to GDP of developed countries had undergone a qualitative change. The share of service sector in GDP of developed countries has also increased.(BCom International Economic Institutions Notes Study Material)

In the Uruguay Round in the leadership of USA, developed countries of world made negotiations in 15 areas like, Tariffs, Non-tariff measures, Tropical products, Natural resources-based products, Textile and clothing, Agriculture, GATT articles, Safeguards, Multilaterals Trade Negotiations (MTN), Subsidies and Countervailing measures, Dispute settlement, Trade related aspects of Intellectual Property Rights (TRIPs), Trade Related Investment Measures (TRIMs) and trade in service.(BCom International Economic Institutions Notes Study Material)

These negotiations are expected to be conducted in four years but on account of differences of participating countries on certain critical areas, such as agriculture, textiles, TRIPs and anti-dumping measures, agreement could not be reached. To break this deadlock, Mr. Arthur Dunkel, Director General of GATT compiled a very detailed document, popularly known as Dunkel Proposals. The Dunkel Proposal culminated in to the final Act on December 15, 1993 and India signed the agreement along with 117 nations on April 15, 1994.

A big offensive was launched by the left parties, the Janta Dal and Bhartiya Janta Party (BJP) against the acceptance of Dunkel Proposals. The basic thrust of the attack was that the Government has surrendered its sovereignty under pressure from the US Government and the multinationals. There is no doubt that some of the criticisms were politically motivated and value-loaded, and it would be correct to say that to some extent, they were misleading. On the other hand, there is no doubt that the claim of Government of India, that as a consequence of Uruguay Agreement, Indian export would be rise at the rate of 2 billion dollar per year is exaggerated.(BCom International Economic Institutions Notes Study Material)

TRADE RELATED INVESTMENT MEASURES (TRIMs)

Government often imposes conditions on foreign investors to encourage investment in accordance with certain national priorities. Conditions that can affect trade are known as TRIMs. The agreement on TRIMs, which was negotiated in the Uruguay Round, requires countries to push out TRIMs that have been identified as being inconsistent with GATT rules. TRIMs are concerned with the liberalization of foreign investment conditions. Under national treatment rule WTO member states commit themselves to treat foreign enterprises under the same terms and conditions as their domestic enterprises (GATT, 1994, Article III). Member countries also commit themselves to the reduction of all quantitative restrictions on imported goods, including tariffs and non-tariff barriers (GATT, 1994, Article IX).(International Economic Institutions Notes Study Material)

The TRIMs agreement provides a few concessions to safeguard local industries such as the requirement of local content aimed at ensuring that local industries benefit from providing inputs into the production process of foreign companies. It is obvious, however that for countries to benefit from TRIMs they should have a very organized and advanced industrial sector, which would be able to respond to specific input, needs of foreign investors. LDCs generally lack infrastructure to enable them to respond positively to input needs of various foreign investments. If LDCs are to benefit from TRIMs then their governments have to assist in building capacity of small and medium enterprises (SMEs).

TRIMs Agreement-Main Features

(1) Applies only to investment measures related to trade in goods (not trade in services).(BCom International Economic Institutions Notes Study Material)

(2) Focuses on the discriminatory treatment of products (imported/exported).

(3) Does not regulate the entry of foreign investment or investors.

(4) Concerns measures applied to both foreign and local firms.

TRADE RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHT (TRIPs)

The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs) is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation as applied to nationals of other WTO Members. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.(International Economic Institutions Notes Study Material)

The TRIPs agreement introduced intellectual property law into the international trading system for the first time and remains the most comprehensive international agreement on intellectual property to date. In 2001, developing countries, concerned that developed countries were insisting on an overly narrow reading of TRIPs, initiated a round of talks that resulted in the Doha Declaration. The Doha declaration is a WTO statement that clarifies the scope of TRIPs, stating for example that TRIPs can and should be interpreted in light of the goal “to promote access to medicines for all.”

Specifically, TRIPs requires WTO members to provide copyright rights, covering content producers including performers, producers of sound recordings and broadcasting organizations; geographical indications, including appellations of origin: industrial designs; integrated circuit layout-designs; patents: new plant varieties; trademarks; trade dress; and undisclosed or confidential information. TRIPs also specify enforcement procedure, remedies, and dispute resolution procedures. Protection and enforcement of all intellectual property rights shall meet the objectives to contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.

The three main features of the Agreement are:

(i) Standards: In respect of each of the main areas of intellectual property covered by the TRIPs Agreement, the Agreement sets out the minimum standards of protection to be provided by each Member. Each of the main elements of protection is defined, namely the subject-matter to be protected, the rights to be conferred and permissible exceptions to those rights.

(ii) Enforcement: The second main set of provisions deals with domestic procedures and remedies for the enforcement of intellectual property rights. The Agreement lays down certain general principles applicable to all IPR enforcement procedures. In addition, it contains provisions on civil and administrative procedures and remedies, provisional measures, special requirements related to border measures and criminal procedures, which specify, in a certain amount of detail, the procedures and remedies that must be available so that right holders can effectively enforce their rights.

(iii) Dispute Settlement: The Agreement makes disputes between WTO Members about the respect of the TRIPs obligations subject to the WTO’s dispute settlement procedures.(International Economic Institutions Notes Study Material)

In addition the Agreement provides for certain basic principles, such as national and most-favoured-nation treatment, and some general rules to ensure that procedural difficulties in acquiring or maintaining IPRs do not nullify the substantive benefits that should flow from the Agreement. The obligations under the Agreement will apply equally to all Member countries, but developing countries will have a longer period to phase them in. Special transition arrangements operate in the situation where a developing country does not presently provide product patent protection in the area of pharmaceuticals.

Thus, the TRIPs Agreement is a minimum standards agreement, which allows Members to provide more extensive protection of intellectual property if they so wish. Members are left free to determine the appropriate method of implementing the provisions of the Agreement within their own legal system and practice.

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD)

The United Nations Conference on Trade and Development (UNCTAD) was established in 1964 as a permanent intergovernmental body. UNCTAD is the principal organ of the United Nations General Assembly dealing with trade, investment and development issues. The organization’s goals are to: “maximize the trade, investment and development opportunities of developing countries and assist them in their efforts to integrate into the world economy on an equitable basis.(BCom International Economic Institutions Notes Study Material)

The primary objective of UNCTAD is to formulate policies relating to all aspects of development including trade, aid, transport, finance and technology. The conference ordinarily meets once in four years; the permanent secretariat is in Geneva. One of the principal achievements of UNCTAD has been to conceive and implement the Generalized System of Preferences (GSP). It was argued in UNCTAD that to promote exports of manufactured goods from developing countries, it would be necessary to offer special tariff concessions to such exports. Accepting this argument, the developed countries formulated the GSP scheme under which manufacturers’ exports and some agricultural goods from the developing countries enter duty-free or at reduced rates in the developed countries. Since imports of such items from other developed countries are subject to the normal rates of duties, imports of the same items from developing countries would enjoy a competitive advantage.

The creation of UNCTAD in 1964 was based on concerns of developing countries over the international market, multi-national corporations, and great disparity between developed nations and developing nations. The United Nations Conference on Trade and Development was established to provide a forum where the developing countries could discuss the problems relating to their economic development. The organization grew from the view that existing institutions like GATT (now replaced by the World Trade Organization, WTO), the International Monetary Fund (IMF), and World Bank were not properly organized to handle the particular problems of developing countries. Later, in the 1970s and 1980s, UNCTAD was closely associated with the idea of a New International Economic Order (NIEO).(BCom International Economic Institutions Notes Study Material)

The first UNCTAD conference took place in Geneva in 1964, the second in New Delhi in 1968, the third in Santiago in 1972, fourth in Nairobi in 1976, the fifth in Manila in 1979, the sixth in Belgrade in 1983, the seventh in Geneva in 1987, the eighth in Cartagena in 1992, the ninth at Johannesburg (South Africa) in 1996, the tenth in Bangkok (Thailand) in 2000, the eleventh in Sao Paulo (Brazil) in 2004, the twelfth in Accra in 2008 and the thirteenth in Doha (Qatar) in 2012.

Currently, UNCTAD has 194 member states and is headquartered in Geneva, Switzerland. UNCTAD has 400 staff members and a bi-annual 2010-11) regular budget of $ 138 million in core expenditures and $ 72 million in extra-budgetary technical assistance funds. It is a member of the United Nations Development Group. There are non-governmental organizations participating in the activities of UNCTAD.(BCom International Economic Institutions Notes Study Material)

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International Economic Institutions Notes Study Material

BCom International Economic Institutions Notes Study Material