World Trade Organisation, World Bank, International Monetary

Fund

• History

• Structure

• Issues

World Bank & International Monetary Fund

• Bretton Woods Conference – 1944

• Stabilise the global economy post World War II

World Bank

• Est. 1945

• To help reconstruct Europe

• HQ – Washington DC

• 186 members

• Now - ‘Working for a world free of Poverty’

World Bank

• The World Bank Group – International Bank for Reconstruction and

Development (IBRD), – International Development Association (IDA) – International Finance Corporation (IFC) – Multilateral Investment Guarantee Agency

(MIGA) – International Centre for the Settlement

of Investment Disputes (ICSID).

World Bank

• IBRD – Established 1944– Loans to middle income countries

• The IDA – established in 1960 as the World Bank’s

agency for concessional financial assistance to the poorest of the developing countries

– grants to poorest countries

World Bank – How it works

• Borrows money from international markets

• Lends it to governments at low rates of interest

International Monetary Fund

• Established 1945

• 186 members

• The IMF intergovernmental institution, established to promote international monetary cooperation, to foster economic growth and high levels of employment and to provide temporary financial assistance to countries to help ease balance of payments adjustment.

• ‘Lender of last resort’

• Global economic advisor

IMF – How it works

• Quotas for each country – ‘based broadly on its relative size in the world economy’ – How much is paid in – ‘one dollar one vote’– How much can be received– Voting rights – not one country one vote!

• Use reserves to borrow on financial markets and to lend to members

Issues - Debt

The total external debt of the South is almost $ 3 Trillion.

Countries of the Global South continue to pay over US$ 100

million per day in debt repayments.

Debt – Where did it come from?

• 1973/74 Arab-Israeli War – 1st Oil Crisis. Oil prices quadruple

• 1970s Higher Oil Prices generate surplus Petro-dollars for oil producing countries– Petro-dollars invested in western banks– Dollars then leant to developing country

governments

• 1979 Second Oil Crisis. Oil prices increase by 150% – weak developed country growth – higher interest rates.

• 1981 Dollar interest rates reach a high of 21.5%

• 1982 Mexican Debt Crisis – Mexico threatens to default on its debt setting off the

Debt crisis of the 80’s and 90’s and beyond.

Why was the money borrowed?

• Investment/Industrialisation

• Arms

• Corruption

• It was cheap!

Why was the money loaned?

• Surplus dollars

• Arms!

• Recycled back to banks

Structural Adjustment

• International Monetary Fund/World Bank conditions for new loans

• Aimed at cutting inflation

• Aimed at suppressing demand to maintain debt repayment capacity

Size of the Debt

• By mid 1980’s Latin America transferring 5% of it’s income to rich countries in interest payments

• By late 1980’s Africa’s debt to export ratio was 500%

Structural Adjustment

• Cut government expenditure

• Raise interest rates

• Devaluation

• Privatisation

• Import-Liberalisation

• Removal of market ‘distortions’ eg labour controls, food subsidies etc

• Export-led growth

The effect of Structural Adjustment

• Less money on health and education - introduction of ‘user fees’

• Interest rates discourage investment in small/medium enterprises

• Devaluation - imports more expensive• Opening of Export Processing Zones• Exports -Much of the benefit to a few -

environmental destruction• Higher food costs

Results

• Lower inflation rates

• but….

• Incomes in Africa fell by 1% a year in the 1980’s

• Latin American income fell by 10% in the 1980s

Debt relief

• 1996 Launch of Highly Indebted Poor Countries Initiative (HIPC I)

• 1998 G8 Meeting in Birmingham UK: 70,000 people protest for Debt cancellation.

• 1999 G8 Meeting in Cologne, Germany: G8 commit to cancelling $100bn of Third World Debt. Launch of HIPC II

• 2005 Gleneagles Debts of 18 (now 19 countries) to the IMF/World Bank/ADB cancelled.

Debt relief works:

Spending on public services has risen by around 20% across all the

countries that have received debt cancellation.

On average, there has been an increase of around 40% on education

spending,

and a massive 70% on healthcare.

Other Issues

• WB as lender to damaging projects

• WB as ‘knowledge broker’ – private sector supported development

• WB as ‘gatekeeper’

What is Ireland’s Role?

• Ireland is a member of the World Bank & IMF.

• Group: Canada, Ireland, 11 Caribbean countries

• Canada (chair) most powerful

WTO

• Failed attempt to found International Trade Organisation (1948)

• General Agreement on Tariffs and Trade – 1948 -1994

• Est. 1995 – Negotiate trade liberalisation– Set of trade rules– Resolve trade disputes

Trade RoundsYear Place/name Countries

1947 Geneva 23

1949 Annecy 13

1951 Torquay 38

1956 Geneva 26

1960-1961 Geneva 26

Dillon Round

1964-1967 Geneva 62

Kennedy Round

1973-1979 Geneva 102

Tokyo Round

1986-1994 Geneva 123

Uruguay Round

WTO – the beginnings – the Uruguay Round

• Established 1995

• From GATT to WTO

• Added: Agreement on Agriculture

• Added: Services,Trade Related Intellectual Property (TRIPS), TRIMs etc

• Added: Dispute Settlement Mechanism

Structure

• 153 members

• One country one vote – decisions by consensus

• HQ in Geneva

• 3 main agreements – Goods , Services, Intellectual Property

New Rules:TRIPS (Trade Related Intellectual

Property)• A part of the World Trade Organisation

agreements.• Deals with ‘intellectual property’ ie non-

tangible property e.g. inventions.

• Imposed a twenty-year patent on every member of the WTO.

• Makes technology more expensive

• Economic cost to developing countries $40 Billion p.a.

• Cost of implementation $1.5 to $2m per country

• Introduction of patents on medicines - 20 years

• Cost of Patented Anti-Retroviral per year in 2001 $10,000

• Cost of generic Anti-Retroviral per year in 2001 $360

• In Thailand new anti-aids drugs (ARVs) 15 times the cost of generic medicines ($6737 compared to $482).

The ‘Doha Development Round’ 2001

• Fast (2005 deadline)

• Broad: 9 parallel negotiations

• Development-focussed:– ‘at the heart of the round’– Special and Differential Treatment– Tariff peaks and escalation– Working groups on Debt, Tech Transfer

The Doha Round Reality, Cancun 2005

• Slow – every deadline missed• Old Testament, not New – ‘Blood on the Floor’• Mercantilism > economics• Market access > development• The North’s attempts to pick off ‘Advanced

Developing Countries’– China on manufacturing(NAMA)– Brazil on agriculture (AoA)– India on services (GATS)

• ‘Singapore Issues’ e.g. Investment

Failure to Failure

• Hong Kong – December 2005

• July 2007 – ‘suspended’

• 2009 – 2010 .....

Agriculture

• Over ¾ of world’s 1.2 billion poor are farmers• 97% of farmers live in developing countries• North: tariff peaks + low average; South has

high average• OECD spend circa $300bn every year on

agricultural support – roughly = sub-Saharan Africa’s GDP. Result: zombie agriculture and dumping.

Case Study: Cotton

• U.S. – 22,000 cotton producers– Production costs per lb $0.68– Subsidies of $3.4 billion in 2002/2003

• West Africa– 10 million dependent on cotton production– Production costs per lb e.g. Benin $0.30– 2002 US aid to Burkina Faso, Togo and Chad: $19.7m– 2002 lost export revenue from cotton subsidies for

Burkina Faso, Togo and Chad $26.7m

What the WTO doesn’t do

• Protect labour standards

• Protect the environment