International Trade Institutions and Trade Agreements

International Trade: International trade has grown significantly, with businesses operating across borders and global markets becoming more interconnected. Several international institutions and trade agreements have been established to ensure fair practices and address trade issues.

International Trade Institutions

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World Bank

• International Bank for Reconstruction and Development (IBRD) - Founded in 1945, it focuses on long-term economic development.
• International Financial Corporation (IFC) - Established in 1956, it promotes private sector investment in developing countries.
• Multilateral Investment Guarantee Agency (MIGA) - Created in 1988, offers political risk insurance and credit enhancement.
• International Development Association (IDA) - Founded in 1960, provides low-interest loans and grants to the world's poorest countries.
• International Centre for Settlement of Investment Disputes (ICSID) - Established in 1966, facilitates arbitration and conciliation of investment disputes.

Objectives of the World Bank

1. Provide Long-term Capital: Facilitate economic development and reconstruction in member countries by offering long-term financial support.
2. Improve Balance of Payments: Guide and enhance the balance of payments, contributing to balanced international trade.
3. Ensure Successful Project Delivery: Oversee the implementation of development projects, ensuring they are completed effectively and transparently.
4. Offer Loan Guarantees: Provide guarantees against loans for large and small projects in member countries, promoting financial stability.
5. Encourage Capital Investment: Foster capital investment in member countries by offering guarantees for investments and loans, encouraging economic growth.

Functions of the World Bank

1. Support Reconstruction: Provide loans to war-torn countries for reconstruction efforts, drawing on extensive experience and resources.
2. Aid Development: Offer development loans to various governments for projects in sectors such as irrigation, agriculture, water supply, health, and education.
3. Promote Foreign Investment: Guarantee loans to encourage foreign investment in other organizations, supporting economic development.
4. Provide Advisory Services: Provide economic, financial, and technical advice to member countries on all projects, aiding in the formulation of effective policies.
5. Promote Industrial Development: Introduce and support economic reforms to foster industrial development in developing countries, contributing to overall economic growth.

International Monetary Fund (IMF)

Objectives of the IMF

• Promote Global Cooperation: Provide a permanent organization for international cooperation.
• Expand and Balance Global Trade: Promote the expansion and balanced development of global trade, ensuring high employment levels and real income.
• Ensure Trade Stability: Maintain stable trade practices among member nations, ensuring systematic and fair trade techniques.
• Establish Multilateral Payment Systems: Aid in the creation of a multilateral system of payments for current transactions between member countries.

Functions of the IMF

• Promote Global Business Growth: Support the development of global businesses, contributing to increased employment and real income.
• Encourage Trade Stability: Maintain systematic and stable trade relationships among member nations.
• Facilitate Multilateral Fund Exchanges: Help establish a multilateral system for fund exchanges to support transactions between member countries.

World Trade Organisation (WTO)

Functions of the WTO

• Remove Trade Barriers: Work to eliminate barriers to global trade.
• Act as a Dispute Settlement Body: Serve as a forum for resolving trade disputes between member countries.
• Ensure Compliance with Trade Rules: Ensure that member nations follow the established trade regulations for dispute resolution.
• Set Global Trade Regulations: Establish a recognized set of rules for international trade.
• Consult with Other Institutions: Collaborate with various institutions to enhance global economic policymaking and cooperation.

Objectives of the WTO

• Improve Standards of Living: Raise the standard of living and income levels, ensuring full employment and increasing production and trade.
• Encourage Sustainable Development: Promote the optimal use of the world's resources for sustainable development while safeguarding the environment.
• Reduce Tariffs and Trade Barriers: Ensure the reduction of tariffs and other trade barriers imposed by different countries.
• Boost Global Economic Growth: Participate in activities that improve living standards, generate employment, increase income and demand, and encourage higher productivity and trade.
• Promote a Stable Trading System: Foster a coordinated, stable, and durable international trading network.

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Trade Agreements

• Agreement Forming Part of GATT: The General Agreement on Tariffs and Trade (GATT) was revised in 1994 and is now part of the WTO agreements. It includes rules to address specific non-tariff barriers and is a fundamental agreement within the WTO framework.
• Agreement on Textile and Clothing (ATC): The ATC was created to eliminate quota restrictions that developed nations imposed on textiles and clothing imports from developing countries. This agreement aimed to phase out these quotas, which were a departure from GATT's principles of free trade in goods.
• Agreement on Agriculture (AOA): The AOA aims to promote free and fair trade in agricultural products. While GATT rules initially applied to agriculture, they had gaps, such as allowing countries to use tariffs, import quotas, and subsidies to protect local farmers. The AOA addresses these issues, working towards a more systematic and equitable agricultural trade system.
• General Agreement on Trade in Services (GATS): GATS represents a major achievement from the Uruguay Round of negotiations. It extends the rules and disciplines of international trade to services, ensuring that the basic trade principles in goods also apply to services. Services, such as banking or consulting, are intangible acts or performances that cannot be touched or smelled.
• Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS): The TRIPS agreement was developed during the Uruguay Round of GATT negotiations (1986-1994). It introduced rules related to intellectual property rights into the multilateral trading system for the first time. Intellectual property includes commercial information such as ideas, inventions, and creative works.

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