Module No.

4: Organizations Supporting International Business

International economic institutions and agreements:

• Almost all country exports and imports products to benefit from the growing international
trade.

• The growth of international trade can be increased, if the countries follow a common set of
rules, regulations, and standards related to import and export.

• These common rules and regulations are set by various international economic institutions.
These institutions aim to provide a level playing field for all the countries and develop
economic cooperation.

There are tow categories of these institutions:

International institutions: IMF, WTO

Regional institutions: BRICS, NAFTA

International financial institutions

International
financial
institutions

Funding Non funding

agencies agencies

IMF IBRD GATT/WTO UNCTAD

1. International Monetary Fund (IMF)

• Meaning: The IMF is an international organization created to ensure the stability of the
international monetary system—the system of exchange rates and international payments
that enables countries to transact with each other.

• Objectives:

o Promote international monetary cooperation.

o Facilitate the expansion and balanced growth of international trade.

o Promote exchange stability.

o Assist in the establishment of a multilateral system of payments.

o Provide resources to member countries experiencing balance of payments problems.

 • Functions:

o Surveillance: Monitoring global economic trends and providing policy advice.

o Financial Assistance: Providing loans to countries with balance of payments

problems.

o Technical Assistance and Training: Offering expertise and training in areas such as
fiscal policy, monetary policy, and exchange rate policies.

2. World Trade Organization (WTO)

• Meaning: The WTO is an international organization that regulates international trade by

providing a framework for negotiating trade agreements and a dispute resolution process
aimed at enforcing participants' adherence to WTO agreements.

Structure of WTO

• Ministerial conference: highest decision-making body of WTO

• meets every 2 year

• General council: Permanent body

• Trade policy review body (TPRB)

• Dispute settlement body (DSB)

Read more at: WTO | Understanding the WTO - organization chart

• Objectives:

o Promote trade flows by encouraging nations to adopt transparent trade policies.

o Provide a platform for trade negotiations.

o Settle trade disputes between member countries.

o Monitor national trade policies.

o Ensure coherence and cooperation with other international organizations.

• Functions:

o Trade Negotiations: Facilitating negotiations between member countries.

o Implementation and Monitoring: Ensuring that trade agreements are implemented

and followed.

o Dispute Settlement: Providing a mechanism for resolving trade disputes.

o Building Trade Capacity: Helping developing countries build their trade capacity.

o Outreach: Increasing awareness and understanding of the WTO's work.

3. General Agreement on Tariffs and Trade (GATT)

• Meaning: GATT was a multilateral agreement aimed at promoting international trade by
reducing or eliminating trade barriers such as tariffs and quotas.

• Objectives:

o Expand international trade.

o Eliminate trade barriers.

o Promote economic recovery and development.

• Functions:

o Trade Negotiations: Hosting rounds of negotiations to reduce tariffs and other trade
barriers.

o Trade Rules: Establishing a set of rules for international trade to ensure fair
practices.

o Dispute Resolution: Providing a forum for resolving trade disputes between

countries.
GATS, TRIM, TRIP;

The overhauling if GATT and establishment of WTO is based on certain upgrades in international
trade scenario.

These upgrades are primarily based on three new agreements:

• GATS: General agreement on trade of services

• TRIMs: Trade related investment measures

• TRPS: Trade related intellectual property rights

4. General Agreement on Trade in Services (GATS)

• Meaning: GATS is a treaty of the WTO that extends the multilateral trading system to the
service sector.

• Objectives:

o Create a credible and reliable system of international trade rules.

o Ensure fair and equitable treatment of all participants.

 o Stimulate economic activity through guaranteed policy bindings.

o Promote trade and development through progressive liberalization.

• Functions:

o Market Access: Ensuring that foreign service suppliers have market access.

o National Treatment: Treating foreign service suppliers as favorably as domestic

suppliers.

o Transparency: Ensuring that trade regulations are transparent and clear.

5. Trade-Related Investment Measures (TRIMs)

• Meaning: TRIMs are rules applied by countries to foreign investors that are related to their
investments and that can affect trade.

• Objectives:

o Eliminate investment measures that restrict and distort trade.

• Functions:

o Regulation: Prohibiting certain investment measures that can restrict trade, such as
local content requirements or trade-balancing requirements.

o Implementation: Ensuring that member countries comply with TRIMs rules.

Impact of TRIMs on International Business:

• Investment Environment: Creates a more predictable and stable investment environment by

eliminating discriminatory practices.

• Trade Flows: Facilitates smoother trade flows by removing barriers linked to investment
measures.

• Global Supply Chains: Enhances the efficiency of global supply chains by promoting open and
non-discriminatory investment policies.

6. Trade-Related Aspects of Intellectual Property Rights (TRIPs)

• Meaning: TRIPs is an international legal agreement between all the member nations of the
WTO that establishes minimum standards for the regulation of different forms of intellectual
property.

• Objectives:

o Protect intellectual property rights to promote innovation and creativity.

o Reduce distortions and impediments to international trade.

• Functions:

o Standard Setting: Establishing standards for the protection of intellectual property

rights.
 o Enforcement: Ensuring that intellectual property rights are enforced in member
countries.

o Dispute Resolution: Providing a mechanism for resolving disputes over intellectual

property rights.

Impact of TRIPs on International Business:

• Innovation and R&D: Encourages investment in R&D by providing secure protection for IPRs.

• Market Access: Facilitates market access and competition by ensuring IPR protection.

• Technology Transfer: Promotes technology transfer between developed and developing

countries.

Regional Integration

• European Union (EU)

o Meaning: A political and economic union of 27 member states located primarily in

Europe.

o Objectives:

▪ Promote economic integration and political cooperation.

▪ Create a single market and a customs union.

▪ Ensure free movement of goods, services, people, and capital.

▪ Implement common policies on trade, agriculture, fisheries, and regional

development.

o Functions:

▪ Legislation: Establishing and enforcing EU-wide laws and regulations.

▪ Monetary Policy: Managing the euro and monetary policy through the
European Central Bank.

▪ Trade Policy: Representing EU member states in international trade

negotiations.

▪ Funding: Providing financial support for regional development and other

initiatives.

• North American Free Trade Agreement (NAFTA)

o Meaning: A trade agreement between Canada, Mexico, and the United States aimed
at eliminating trade barriers.

o Objectives:

▪ Remove trade barriers between member countries.

▪ Promote fair competition.

 ▪ Increase investment opportunities.

o Functions:

▪ Tariff Elimination: Reducing and eventually eliminating tariffs on goods

traded between member countries.

▪ Trade Rules: Establishing rules for trade to ensure fair competition.

▪ Dispute Resolution: Providing mechanisms for resolving trade disputes.

• South Asian Association for Regional Cooperation (SAARC)

o Meaning: An economic and geopolitical organization of eight countries in South Asia.

o Objectives:

▪ Promote regional cooperation and development.

▪ Accelerate economic growth, social progress, and cultural development.

o Functions:

▪ Regional Projects: Initiating and implementing regional projects and

programs.

▪ Policy Coordination: Coordinating policies in areas such as agriculture, rural

development, science and technology, and health.

• BRICS (Brazil, Russia, India, China, South Africa)

o Meaning: An association of five major emerging national economies.

o Objectives:

▪ Promote peace, security, and development.

▪ Enhance cooperation in economic, political, and cultural areas.

o Functions:

▪ Economic Cooperation: Promoting trade, investment, and financial

cooperation.

▪ Development Projects: Supporting infrastructure and sustainable

development projects.
▪ Policy Coordination: Coordinating policies on issues such as climate change,
energy, and health.