introduction to economic integration organization

International Institution WTO, IMF IBRD & UNCTAD

Members Memb ers, dually represented by the EU Observers Non-members

Formation 1 January 1995

Headquarters Centre William Rappard, Geneva, Switzerland

Membership 159 member states [1]

Official languages English, French, Spanish[2]

Director-General Pascal Lamy

Budget 196 million Swiss francs (approx. 209 million US$) in 2011.[3]

Staff 640[4]

Lecture notes prepared for MBA final year students by Komal Singh Chauhan Assitt. Professor VCMT BijnorFor more lecture notes feel free to mail at [email protected] or visit komalsinghchauhan.webs.com

http://en.wikipedia.org/wiki/Centre_William_Rappard

mailto:[email protected]

http://en.wikipedia.org/wiki/World_Trade_Organization#cite_note-4


http://en.wikipedia.org/wiki/Swiss_franc

http://en.wikipedia.org/wiki/Pascal_Lamy

http://en.wikipedia.org/wiki/Director-General_of_the_World_Trade_Organization



http://en.wikipedia.org/wiki/World_Trade_Organization_accession_and_membership

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http://en.wikipedia.org/wiki/File:WTO_members_and_observers.svg%00%E5%A1%B9%EF%92%81%E1%B4%BB%E4%A1%BF%E2%B2%AF%E5%B6%82%E8%97%84%E6%8C%A7%00%00%EA%AE%A5


Website wto.org



http://www.wto.org/


WTO was established on 1st January 1995. In April 1994, the Final Act was signed at a meeting in Marrakesh, Morocco. The Marrakesh Declaration of 15th April 1994 was formed to strengthen the world economy that would lead to better investment, trade, income growth and employment throughout the world. The WTO is the successor to the General Agreement of Tariffs and Trade (GATT). India is one of the founder members of WTO. WTO represents the latest attempts to create an organisational focal point for liberal trade management and to consolidate a global organisational structure to govern world affairs. WTO has attempted to create various organisational attentions for regulation of international trade. WTO created a qualitative change in international trade. It is the only international body that deals with the rules of trades between nations.

Some of the important functions and objectives of WTO are :-

Functions of WTO

The former GATT was not really an organisation; it was merely a legal arrangement. On the other hand, the WTO is a new international organisation set up as a permanent body. It is designed to play the role of a watchdog in the spheres of trade in goods, trade in services, foreign investment, intellectual property rights, etc. Article III has set out the following five functions of WTO;

(i) The WTO shall facilitate the implementation, administration and operation and further the objectives of this Agreement and of the Multilateral Trade Agreements, and shall also provide the frame work for the implementation, administration and operation of the plurilateral Trade Agreements.

(ii) The WTO shall provide the forum for negotiations among its members concerning their multilateral trade relations in matters dealt with under the Agreement in the Annexes to this Agreement.

(iii) The WTO shall administer the Understanding on Rules and Procedures Governing the Settlement of Disputes.

(iv) The WTO shall administer Trade Policy Review Mechanism.

(v) With a view to achieving greater coherence in global economic policy making, the WTO shall cooperate, as appropriate, with the international Monetary Fund (IMF) and with the International Bank for Reconstruction and Development (IBRD) and its affiliated agencies.

Objectives of WTO

Important objectives of WTO are mentioned below:

(i) to implement the new world trade system as visualised in the Agreement;

(ii) to promote World Trade in a manner that benefits every country;

(iii) to ensure that developing countries secure a better balance in the sharing of the advantages resulting from the expansion of international trade corresponding to their developmental needs;




(iv) to demolish all hurdles to an open world trading system and usher in international economic renaissance because the world trade is an effective instrument to foster economic growth;

(v) to enhance competitiveness among all trading partners so as to benefit consumers and help in global integration;

(vi) to increase the level of production and productivity with a view to ensuring level of employment in the world;

(vii) to expand and utilize world resources to the best;

(viii) to improve the level of living for the global population and speed up economic development of the member nations.

WTO Structur



http://www.projects4mba.com/structure-of-wto-world-trade-organization/142/wto-structure/%00%E5%A1%B9%EF%92%81%E1%B4%BB%E4%A1%BF%E2%B2%AF%E5%B6%82%E8%97%84%E6%8C%A7%00%00%EA%AE%A5


The Ministerial Conference (MC) is at the top of the structured organization of the WTO. It is the supreme governing body which takes ultimate decisions on all matters. It is constituted by representative (usually, Ministers of Trade) all the member countries.

The General Council (GC) is composed of the representatives of all the members. It is the real engine of WTO which acts on behalf of the MC. It also acts as the Dispute Settlement Body as well as the Trade Policy Review Body.

There are three councils viz : the Council for Trade Related Aspects of Intellectual Property Rights (TRIPS) operating under the GC. These councils with their subsidiary bodies carry out their specific responsibilities.

Further there are three committee, viz, the committee on Balance of Payments Restrictions (CBOPR) and the committee o Budget, Finance and Administration (CFBA) which execute the functions assigned to them by the WTO Agreement and the GC.

The Administration of the WTO is conducted by the Secretariat which is headed by the Director General (DG) appointed by the MC for the tenure of four years. He is assisted by the four Deputy Directors from different member countries. The annual budget estimates and financial statement of the WTO are presented by the DG to the CBFA for reivew and recommendations for the final approval by the GC.

IMF

During the Great Depression of the 1930s, countries attempted to shore up their failing economies by sharply raising barriers to foreign trade, devaluing their currencies to compete against each other for export markets, and curtailing their citizens' freedom to hold foreign exchange. These attempts proved to be self-defeating. World trade declined sharply (see chart below), and employment and living standards plummeted in many countries.

This breakdown in international monetary cooperation led the IMF's founders to plan an institution charged with overseeing the international monetary system—the system of exchange rates and international payments that enables countries and their citizens to buy goods and services from each other. The new global entity would ensure exchange rate stability and encourage its member countries to eliminate exchange restrictions that hindered trade.

The Bretton Woods agreement

The IMF was conceived in July 1944, when representatives of 45 countries meeting in the town of Bretton Woods, New Hampshire, in the northeastern United States, agreed on a framework for




international economic cooperation, to be established after the Second World War. They believed that such a framework was necessary to avoid a repetition of the disastrous economic policies that had contributed to the Great Depression.

The IMF came into formal existence in December 1945, when its first 29 member countries signed its Articles of Agreement. It began operations on March 1, 1947. Later that year, France became the first country to borrow from the IMF.

The IMF's membership began to expand in the late 1950s and during the 1960s as many African countries became independent and applied for membership. But the Cold War limited the Fund's membership, with most countries in the Soviet sphere of influence not joining.

Par value system

The countries that joined the IMF between 1945 and 1971 agreed to keep their exchange rates (the value of their currencies in terms of the U.S. dollar and, in the case of the United States, the value of the dollar in terms of gold) pegged at rates that could be adjusted only to correct a "fundamental disequilibrium" in the balance of payments, and only with the IMF's agreement. This par value system—also known as the Bretton Woods system—prevailed until 1971, when the U.S. government suspended the convertibility of the dollar (and dollar reserves held by other governments) into gold.

Management Of Fund

The twelve member executive committee manages the affairs of IMF. Five members are the representatives of U.K, U.S.A, China, France and India. The remaining are elected by the other members countries. Its head office in in U.S.A.




Source Of IMF

The initial capital of IMF was 8.5 billion dollar which was contributed by the 49 members. The quota of each member country was fixed in proportion to the national income and volume of foreign trade. Every country was required to pay in the form of gold and domestic currency.

Objectives of the IMF:

In the first article of the Fund’s Charter there have been described the six objectives of IMF. They are as:

1. To increase international cooperation by providing consultancy services regarding international monetary issues.

2. To assist in the balanced growth of world trade, which will be helpful in raising the efficiency, employment and income of the world.

3. To Stabilize the exchange rate and discourage the tendency of competitive devaluation.

4. To abolish those restrictions which are obstacles in the way of World Trade and create a multi-lateral system of payments.

5. The countries facing deficit in their balance of payments can borrow from IMF to finance temporarily.

6. To reduce the volume and time period of disequilibrium (deficit) in balance of payments.

FUNCTIONS OF IMF FUND

1. Merchant Of Currencies:-

IMF main function is to purchase and sell the member countries’ currencies.

2. Helpful For The Debtor Countries :-

If any country is facing adverse balance of payment and facing the difficulty to get the currency of creditor country, it can get short term credit from the fund to clear the debt. The IMF allows the debtor country to purchase foreign currency in exchange for its own currency upto 75% of its quota plus an addition 25% each year. The maximum limit of the quota is 200% in special circumstances.

3. Declared Of Scarce Currency :-

If the demand of any particular country currency increases and its stock with the fund falls below 75% of its quota, the IMF can declare it scare. But IMF also tries to increase its supply by these methods.




1. Purchasing :- IMF purchases the scare currency by gold.

2. Borrowing :- IMF borrows from those countries scare currency who has surplus amount.

3. Permission :- IMF allows the debtor countries to impose restrictions on the imports of creditor country.

4. To promote exchange stability: - The main aim of IMF is to promote exchange stability among the member countries. So it advises the member countries to conduct exchange transactions at agreed rates. On the other hand one country can change the parity of the currency without the consent of the IMF but it should not be more than 10%. If the changes are on large scale and IMF feels that according the circumstances of the country these are essential then it allows. The country can not change the exchange rate if IMF does not allow.

5. Temporary aid for the devalued currency: - When the devaluation policy is indispensable or any country then IMF provides loan to correct the balance of payment of that country.

6. To avoid exchange depreciation: - IMF is very useful to avoid the competitive exchange depreciation which took place before world war 2.

Governance Structure

The Board of Governors is the supreme body of IMF, which is headed by a Governor and an alternate Governor who are appointed by the members of the Fund. The board of Governors deals with the entry of new members, determination of quotas and distribution of SDRs. Board of Governors consists of one Governor from each of its 184 members. 24 of the Governors sit on International Monetary and financial committee and meet twice a year. There is an annual meeting of the Fund which is held once in a year all members participate in it.

The other big authority in the IMF is “Executive Board”. It has a Managing Director who is the Chairman of the executive board and controls day-to-day matters of the Fund. IMF has two committees:

(1) Interim Committee now replaced by IM FC,




(2) Development Committee. The Interim Committee deals with international liquidity and world monetary arrangements. Moreover this committee analyses the amendments of the Articles of the Agreement. Where as the development committee suggests those measures where by the real resources could be transferred to the developing countries. Till the end of 2003 the total staffs of IMF was 2800 which was from 141 countries. The Fund has its headquarters at Washington with its offices at Paris and Genera.




IBRD

The

International Bank for Reconstruction and Development (IBRD), commonly referred to as the World Bank, is an international financial institution whose purposes include assisting the development of its member nation’s territories, promoting and supplementing private foreign investment and promoting long-range balance growth in international trade.

The World Bank was established in December 1945 at the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire. It opened for business in June 1946 and helped in the reconstruction of nations devastated by World War II. Since 1960s the World Bank has shifted its focus from the advanced industrialized nations to developing third-world countries.

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 pointed 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.

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 share 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.

3. The remaining 80% share deposited by the member country only on demand by the World Bank.

Objectives:

The following objectives are assigned by the World Bank:

1. To provide long-run capital to member countries for economic reconstruction and development.

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

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

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




5. 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.Functions:

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.

3. The quantities of loans, interest rate and terms and conditions are determined by the Bank itself.

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 counties where this amount will be collected.




United Nations Conference On Trade And Development (Unctad)

United Nations Conference on Trade and Development (UNCTAD) is a Geneva based UN institution established in 1964. Having a long history in the UN system, UNCTAD can be seen as a product of efforts of developing countries began in early 1960’s to develop a coalition to press for changes in the functioning of the international economic regime by establishing a universal forum to deal with all development-related issues in a comprehensive fashion.1

Integrating developing countries into the world economy by taking into consideration their development needs is the main objective of the UNCTAD. Since its establishment, UNCTAD has become a truly a knowledge-based institution, shaping policy debates on development. The Conference has 194 members as of July 2013.

The three key functions of UNCTAD are:

-being a forum for intergovernmental deliberations;-conducting research, policy analysis and collecting data; and -providing technical assistance especially for the Least Developed Countries (LDCs).

These key functions are mainly undertaken by the Secretariat which can be described as the executive body that provides substantive and technical services to the intergovernmental bodies of UNCTAD in their discussions and deliberations. In pursuit of its tasks, Secretariat works in close cooperation with member governments and other relevant organizations within or outside the scope of the UN System.

1eneralized System of Preferences (GSP)

Generalized System of Preferences (GSP) is one of the most important advantages enabled by UNCTAD for developing and least developed countries.

The aim of the GSP is to increase the share of the developing countries in world trade. Accordingly, GSP provides the opportunity for developing countries and the LDCs to export certain products determined by the preference providing countries duty free or with lower duty rates.

Despite being a developing country, as a result of its Customs Union with the EU, Turkey is both a preference giving and preference receiving country. Within this framework, Turkey benefits from the GSP regimes of the US, Canada, Japan, New Zealand, Russian Federation and Kazakhstan. In order to be able to benefit from the preferential regime, some preference giving countries demand Form A certificate, which is a type of rules of origin document, issued in accordance with the rules and procedures determined by UNCTAD. Within this framework, the examples of the cachet and seals of the organizations authorized to approve these certificates are notified to UNCTAD, annually, by the Ministry of Economy (General Directorate of Agreements) with the aim of informing relevant authorities of preference giving country.




The Secretariat also cooperates with member the private sector, including trade and industry associations, research institutes and universities worldwide in performing its functions.

Since September 1, 2013, the Secretary-General of UNCTAD is Dr. Mukhisa Kituyi from Kenya. The UNCTAD Secretariat has about 460 staff members and an annual regular budget of approximately $70 million and $33 million of extra-budgetary technical assistance funds.

The quadrennial Conference is the highest decision-making body of UNCTAD. During these conferences the member states evaluate current trade and development issues, disscuss available policy options and develop global policy responses for the issues most prominent in global economy for developing countries while at the same time reviewing regular work of the organization. Following first gathering in 1964, there have been thirteen quadrennial conferences, the last of which took place in Doha, Qatar, on 21-26 April 2012. The theme of the last Conference was “Development-centered globalization: Towards inclusive and sustainable growth and development.”

Integration of developing countries, especially the LDC’s, into the world economy is an issue of importance for Turkey. UNCTAD is one of the best appropriate fora to push for development friendly policies in the international economic order. Besides, Turkey actively participates at expert level in UNCTAD organizations and forums where the development problems of the developing countries and LDC’s are discussed and solutions are suggested.



http://www.unctad.org/Templates/StartPage.asp?intItemID=3535&lang=1

introduction to economic integration organization

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