***WTO ***
The World Trade Organization (WTO) is the only global international organization
dealing with the rules of trade between nations. At its heart are the WTO agreements,
negotiated and signed by the bulk of the world’s trading nations and ratified in their
parliaments. The goal is to help producers of goods and services, exporters, and
importers conduct their business.
Effects of WTO on Indian economy.:‐
WTO has helped India to improve its export competitiveness. (b.) Lower tariff
barriers and market access has helped India to integrate and participate in the
global economy in a more efficient manner. ... However, at the same time WTO also
poses some serious challenges to the Indian agriculture.
The World Trade organization was established to deal with all the major aspects of
international trade and it had far reaching effects not only on India’s foreign trade but also
on its internaleconomy.The impact of the WTO on the Indian economy can be analysed on
the basis and general concepts.
• IMPACT :
The WTO has both favourable and non-favourable impact on the Indian economy.
• FAVOURABLE IMPACT :
1) Increase in export earnings :Increase in export earnings can be viewed from growth in
merchandise exports and growth in service exports :
• Growth in merchandise exports :
The establishment of the WTO has increased the exports of developing countries because
of reduction in tariff and non-tariff trade barriers.
India’s merchandise exports have increased from 32 billion us $ (1995) to 185 billion u $ .
• Growth in service exports :
The WTO introduced the GATS (general Agreement on Trade in Services ) that proved
beneficial for countries like India.
India’s service exports increased from 5 billion us $ (1995) to 102 billion us $ .
2) Agricultural exports :Reduction of trade barriers and domestic subsidies raise the price of
agricultural products ininternational market,India hopes to benefit from this in the form of
higher export earnings from agriculture3) Textiles and Clothing :The phasing out of the MFA
will largely benefit the textiles sector.It will help the developing countries like India to increa
se the export of textiles and clothing.4) Foreign Direct Investment :As per the TRIMs agreem
ent, restrictions on foreign investment have been withdrawn by themember nations of the
WTO.This has benefited developing countries by way of foreign direct investment, euro equi
ties and portfolio investment.
GATT Vs WTO :‐
While GATT is a simple agreement, there is no institutional existence, but have a
small secretariat. Conversely, WTO is a permanent institution along with
a secretariat. GATT agreement is primarily multilateral, but plurilateral agreement is
added to it later. In contrast, WTO agreements are purely multilateral.
General Agreement on Tariffs and Trade (GATT) was made in the year 1947, that
aimed at initiating an international trade, by liberalizing policies and removing
tariffs. It was succeeded by World Trade Organization (WTO), which is a global
organization, that encourages and facilitates inter-country trade and also helps in
resolving trade disputes.
GATT is a multilateral agreement, between several nations of the world, that
regulates international trade. Its primary objective is to reduce tariffs to a substantial
amount along with abolishing other trade barriers. But, in the year 1995, WTO
replaced GATT. WTO has more powers and augmented functions in dealing with the
international economic affairs. Hence, there is a big difference between these two.
Differences Between GATT and WTO
The points given below explain the difference between GATT and WTO in detail:
1. GATT refers to an international multilateral treaty, signed by 23 nations to
promote international trade and remove cross-country trade barriers. On the
contrary, WTO is a global body, which superseded GATT and deals with the
rules of international trade between member nations.
2. While GATT is a simple agreement, there is no institutional existence, but
have a small secretariat. Conversely, WTO is a permanent institution along
with a secretariat.
3. The participating nations are called as contracting parties in GATT, whereas
for WTO, they are called as member nations.
4. GATT commitments are provisional in nature, which after 47 years the
government can make a choice to treat it as a permanent commitment or not.
On the other hand, WTO commitments are permanent, since the very
beginning.
5. The scope of WTO is wider than that of WTO in the sense that the rules of
GATT are applied only when the trade is made in goods. As opposed to, WTO
whose rules are applicable to services and aspects of intellectual property
along with the goods.
6. GATT agreement is primarily multilateral, but plurilateral agreement is added
to it later. In contrast, WTO agreements are purely multilateral.
7. The domestic legislation is allowed to continue in GATT, while the same is not
possible in the case of WTO.
8. The dispute settlement system of GATT was slower, less automatic and
susceptible to blockages. Unlike WTO, whose dispute settlement system is
very effective.
***** Discuss the objectives and functions of IMF & WORLD
BANK.
The world bank is internationally recognized and supported that provides technical
and financial assistance to many developing countries in the world. Also, it aids
their advancement, in an economy with a primary goal of reducing poverty. World
bank has the largest knowledge of developing countries. Also, they are the largest
source when it comes to funding.
Functions of the World Bank:‐
• It helps the war-divested countries by granting them loans for reconstruction.
• Thus, they provide extensive experience and the financial resources of the bank
help the poor countries increase their economic growth, reducing poverty and
a better standard of living.
• Also, it helps the underdeveloped countries by granting development loans.
• So, it also provides loans to various governments for irrigation, agriculture,
water supply, health, education, etc.
• It promotes foreign investments to other organizations by guaranteeing the
loans.
• Also, the world bank provides economic, monetary, and technical advice to the
member countries for any of their projects.
• Thus, it encourages the development of of-industries in underdeveloped
countries by introducing the various economic reforms.
Objectives of the World Bank
• This includes providing long term capital to its member nations for economic
development and reconstruction.
• Thus, it helps in inducing long term capital for improving the balance of
payments and thereby balancing international trade.
• Also, it helps by providing guarantees against loads granted to large and small
units and other projects for the member nations.
• So, it ensures that the development projects are implemented. Thus, it brings a
sense of transparency for a nation from war-time to a peaceful economy.
• Also, it promotes the capital investment for member nations by providing a
guarantee for capital investment and loans.
• So, if the capital investment is not available than it provides the guarantee and
then IBRD provides loans for promotional activities on specific conditions.
***International Monetary Fund (IMF): General Objectives and
Major Functions!
A landmark in the history of world economic cooperation is the creation of the
International Monetary Fund, briefly called IMF. The IMF was organised in 1946 and
commenced operations in March, 1947.
The fundamental object of the IMF was the avoidance of competitive devaluation and
exchange control that had characterised the era of 1930s. It was set up to administer
a “code of fair practice”, in the field of foreign exchange and to make short-term
loans to member nations experiencing temporary deficits in their balance of
payments, to enable them to meet these payments without resorting to devaluation
or exchange control, while at the same time following’ international policies to
maintain domestic income and employment at high levels.
Thus, basically there are three general objectives of the IMF:
(i) The elimination or reduction of existing exchange controls,
(ii) The establishment and maintenance of currency convertibility with stable
exchange rates, and
(iii) The widest extension of multi-lateral trade and payments.
In essence the Fund is an attempt to achieve the external or international advantages
of gold standard system without subjecting nations to its internal disadvantages, and
at the same time maintaining the internal advantages of paper standard while
bypassing its external disadvantages.
The following are the major functions of the IMF:
1. It functions as a short-term credit institution.
2. It provides machinery for the orderly adjustments of exchange rates.
3. It is a reservoir of the currencies of all the member countries from which a
borrower nation can borrow the currency of other nations.
4. It is a sort of lending institution in foreign exchange. However, it grants loans for
financing current transactions only and not capital transactions.
5. It also provides machinery for altering sometimes the par value of the currency of
a member country. In this way, it tries to provide for an orderly adjustment of
exchange rates, which will improve the long-term balance of payments position of
member countries.
6. It also provides machinery for international consultations.
In fine, the Fund contributes to the promotion and maintenance of high levels of
employment and real income and to the development of the productive resources of
all member nations.
The Fund is an autonomous organisation affiliated to the UNO. IMF’s constitution
represents a departure in the formation of an international organisation. It is
financed by the participating countries, with each country’s contribution fixed in
terms of quotas according to the relative importance of its prevailing national income
and international trade.
Thus, the quota assigned to a country is determined by its contribution to the capital
of the Fund. The quotas of all the countries taken together constitute the total
financial resources of the Fund. Moreover, the contributed quota of a country
determines its borrowing rights and voting strength.
In short, the IMF may be described as a bank of central banks of different countries,
because it collects the resource of the various central banks in the same way in which
a country’s central bank collects cash reserves of all the commercial banks, assists
them in times of emergency.
However, while a central bank can control the credit policy of its member banks, the
Fund cannot control the domestic economic and monetary policies of member
nations. It only seeks to maintain a multiple payments system through an orderly
adjustment of the exchange rates.
