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SEPTEMBER 06, 2013

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                                                                                                              INTERNATIONAL ORGANIZATIONS 


It was established on December 27, 1945 at the Brettonwoods Conference. But it started its operations on March 1, 1947. The IMF is an international monetary organization. As on date, the number of member countries of the IMF is 189.



According to ‘Articles of Agreement’ of the IMF, its main objectives are as follows :


1.    To promote international monetary co-operation.

2.    To ensure balanced international trade.

3.    To ensure exchange rate stability.

4.    To grant economic assistance to member countries for eliminating the adverse imbalance in balance of payment



Constitution, Membership and Capital of IMF

The main source of IMF resources is the quotas allotted to member countries. Earlier,  quotas and the assistance provided were denominated in US dollars,  now they are expressed in SDRs (Special Drawing Rights) which is also known as Paper Gold. In 1971, an SDR was assumed to be equivalent to 1dollar but due to subsequent decline in dollar value, one SDR became equivalent to $ 1.585 by the end of April 1995. These days the value of the SDR is being determined by the basket of currencies of 5 largest exporting member countries : US Dollar, Deutsche Mark, Yen, Franc and Pound Sterling.




The quota allotted by the IMF to each member country has to be deposited partly in the member’s own currency and the remainder in the form of foreign exchange. For mobilizing additional resources of IMF, the Board of Governors  has approved the proposals of 11th General Quota Review.  It is proposed to enhance the total quota by 45% which will increase the total quota amount from SDR 146.226 billion (about US $ 197 billion) to SDR 212.29 billion (about $ 287 billion).



The USA will remain the biggest quota holder even after the 11th General Quota Review.



India and IMF

IMF has played an important role in Indian economy. IMF has provided economic assistance from time to time to India and has also provided appropriate consultancy in determination of various policies in the country. India is a founder-member of IMF. The Finance Minister is ex-officio Governor on the IMF Board of Governors. Till 1970, India was among the first five nations having the highest quota with IMF and due to this status India was allotted a permanent place in Executive Board of Directors. India has taken IMF loans for improving its BoP position and also technical consultancy for solving its internal economic problems. The economic reforms programme was launched in India under the aegis of the IMF and its progress is being constantly monitored by the IMF.




The IBRD and its associate institutes as a group are known as the World Bank. The Second World War-damaged economies of the most of the countries particularly of those who were directly involved in the war. In 1945, it was realized to concentrate on reconstructing these war affected economies, Besides, it was also given a thought to develop under-developed economies in a planned way. IBRD was established in December 1945 with the IMF on the basis of the recommendation of the Brettonwoods Conference. That is the reason why IMF and IBRD are called ‘Bretton Wood Twins’. IBRD started functioning in June 1946. World Bank and IMF are complementary institutions.





According to the Clause I of the Agreement made at the time of establishment of World Bank, it was assigned the following objectives :


1.    To provide long-run capital to member countries for economic reconstruction and development. World Bank provides capital mainly for following purposes.

I.    To rehabilitate war-ruined economies (this objective is fully achieved).

II.    To finance productive efforts according to peacetime requirements.

III.    To develop resources and production facilities in under-developed countries.



2.     To induce long-run capital investment for assuring BOP equilibrium and balanced development of international trade. (This objective was adopted to increase the productivity of member countries and to improve economic conditions and standard of living among them).



3.     To promote capital investment in member countries by following ways :

I.    To provide guarantee on private loans or capital investment.

II.    If private capital is not available even after providing guarantee, then IBRD provides loans for productive activities on considerate conditions.



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

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



IMF vs World Bank

Since both these institutions were together formed at the Brettonwoods Conference, they are referred to as “Brettonwoods Twins”. Both the institutions were established to promote international economic co-operation but a basic difference is found in the nature of economic assistance given by these two institutions.  The World Bank provides long-term loans for promoting balanced economic development and finances developmental projects, while the IMF provides short-term loans to member countries for eliminating BOP disequilibrium. Both these institutions are complementary to each other.



Membership and Voting Rights

Generally, every member country of the IMF automatically becomes the member of World Bank. Similarly, any country which quits IMF is automatically expelled from the World Bank’s membership. But under a certain provision a country leaving the membership of IMF can continue its membership with World Bank if 75% members of their Bank vote in its favour. Any member country can be debarred from the membership of World Bank on following grounds :


1.    Any member country can quit the Bank simply by written notice to the Bank, but such country has to repay the granted loans on terms and conditions decided at the time of sanctioning the loan.

2.    Any country working against the guidelines of Bank can be debarred from membership by the Board of Governors.





The IDA is an associate institution of World Bank known as soft loan window of World Bank. IDA was established on September 24, 1960. It kept its membership open to all members of World Bank. At present 159 countries are its member countries and no interest is charged on these long-term loans. These soft loans are provided to the poor countries of the World. During 1995-96 (July-June) India ranked first among the nations getting assistance from IDA. Vietnam and China stood second and third respectively in this list. The resources of IDA include subscribed capital by member countries, general replenishments by developed countries, net income transferred by IBRD etc. The IDA is administered by the same group which manages the working of World Bank.





The World bank established IFC in July 1956. This corporation provides loan to private industries of developing nations without any government guarantee and also promotes the additional capital investment in these countries. Thus, the main work of IFC is to ensure the financial support to private sector in developing countries.





1. To provide loans to the private sector.       

2. To co-ordinate capital and management.

3. To induce capitalist countries to invest in developing countries.




During the Great Depression of the 1930s( actually, it began in 1929), the international trade was badly affected and various countries imposed import restrictions for safeguarding their economies. This resulted in a sharp decline in world trade. In 1945, the USA put forward many proposals for extending international trade and employment. In 1947, 23 countries at Geneva, signed an agreement related to tariffs imposed on trade. This agreement is known as General Agreement on Tariffs and Trade (GATT). It came into force in 1948. Initially GATT was established in the form of a temporary arrangement but later on it took the shape of a permanent agreement. The World Trade Organization (WTO) which came into existence on January 1, 1995 after many years of Uruguay Round negotiations, replaced GATT.





1.    To provide equal opportunities to all countries in international market for trading purpose without any favour.

2.    To increase the effective demand for real income growth and goods.

3.    To minimize tariffs and other restrictions on trade for ensuring mutual benefits and to eliminate favours from international trade.

4.    To provide amicable solution to the disputes related to international trade by giving co-operation and advice to member countries.




These objectives were the guidelines for the GATT which became the guiding force for promoting independent and multilateral trade. GATT also introduced MFN Clause (Most Favoured Nation Clause) according to which every member country was considered as a MFN country. According to this clause, any concession given to any nation was automatically
given to all the member countries.


Rounds of GATT Negotiations

Between 1947 and the last year of GATT there were 8 rounds of negotiations between the participating countries. The first 6 rounds were related to curtailing tariff rates. The 7th round included the non-tariff obstacles. The 8th round was entirely different from the previous rounds because it included a number of new subjects for consideration. This 8th round  is known as ‘Uruguay Round’ which became most controversial. The discussions at this round gave birth to the World Trade Organization (WTO).



Uruguay Round and Dunkel Proposals

The 8th round of GATT popularly known as Uruguay round was started in September 1986. The negotiations were expected to be concluded in 4 years but on account of differences among participating countries on certain critical areas, agreement could not be reached. To break this deadlock Mr. Arthur Dunkel, Director General of GATT, compiled a very detailed document, popularly known as Dunkel Proposals. This proposal culminated into the Final Act on December 15, 1993. India signed this proposal on April 15, 1994. In all 124 countries signed this agreement.  The Uruguay Round contained the mandate to have negotiations in 15 areas.




Some major topics in Part I of the declaration were


2. Non-tariff measures      
3. Natural Resource-Based Products  

4. Textiles and Clothing      
5. Agriculture          
6. GATT articles  

7. Multilateral Trade Agreements and Arrangements          
8. Subsidies      

9. Dispute settlements

10. Trade Related Aspects of Intellectual Property Rights (TRIPS)  
11. Trade Related Investment Measures (TRIMs)

12. Functioning of GATT System




Part II of the declaration contained the following :


1. Market Access          

2. Agriculture          

3. Textiles      

4. TRIMs

5.  TRIPs          

6. Trade in Services      

7. Institutional Matters





The Uruguay Round of GATT (1986-93) gave birth to the World Trade Organization. The members of GATT signed on an agreement of Uruguay Round in April 1994 in Marrakesh (Morocco) for establishing a new organization named WTO. It was officially constituted on January 1, 1995 which took the place of GATT as an effective informal organization. Contrary to the temporary nature of GATT, WTO is a permanent organization  and has international status like IMF and IBRD, but it is not an agency of the UNO.





WTO Administration

The WTO has a General Council for its administration, which includes one permanent representative of each member nation. Generally, it has one meeting per month which is held at Geneva. The highest authority of policy-making is WTO’s Ministerial Conference which is held after every 2 year. The Director General is the highest official of the Organization to look after day to day working. The General Council of the WTO elects the Director-General for 4 years. Four Deputy Directors-General are also elected to assist the Director-General. Like GATT, WTO’s headquarters is also at Geneva.. Applications of other 28 countries were pending with WTO for seeking its membership. There are a number of important committees for administration of WTO, out of which 2 committees play pivotal roles in the WTO.




They are :

1. Dispute Settlement Body – DSB

2. Trade Policy Review Body --- TPRB



The DSB considers the complaints of member-countries against violation of rules by any other member-country. This body appoints a group of experts to investigate into such complaints. This body meets twice a month for such cases. TPRB reviews the trade policy of member countries. The trade policy of all big trade powers of the World are reviewed after every 2 years. All the members of WTO are the members of TPRB.


Other important bodies of WTO are

1. Council for Trade in Goods.   

2. Council for Trade in Services.
3. Council for Trade-Related Aspects of Intellectual Property Rights.




Objectives of WTO

1. To improve standards of living of people in the member countries.
2. To ensure full employment and broad increase in effective demand.      

3. To enlarge production and trade of goods.



The above three objectives were also included in the GATT agreement, but the WTO also included some other objectives which are :

4. To enlarge production and trade of services.       

5. To ensure optimum utilization of world resources.

6. To accept the concept of sustainable development.   

7. To protect the environment.




Functions of WTO

1.    To provide facilities for implementation, administration and operation of multilateral and bilateral agreements of the world trade.

2.    To provide a platform a member countries to decide future strategies related to trade and tariff.

3.    To administer the rules and processes related to dispute settlement.

4.    To implement rules and provisions related to trade policy review mechanism.

5.    To assist IMF and IBRD for establishing coherence in universal economic policy determination.

6.    To ensure the optimum use of world resources.




The Seattle Summit of WTO

The Seattle Ministerial Summit of the WTO held in the USA in December, 1999 primarily focussed on three things:


1. Linking of labour standards with trade issues   

2. Linking of child labour with trade issues

3. Environmental issues.



However, no conclusion could be reached on these issues because of the determined fight put up by the developing countries against the dominating stand of the USA.




At present, UNCTAD has become a permanent organization for promoting international trade. Its headquarter is at Geneva, Switzerland. Generally, UNCTAD has its session after every 4 years. IMF has got the permanent representation in all its bodies. That is the reason why IMF includes all UNCTAD proposals in its policies. UNCTAD recommendations are only suggestions and any country cannot be compelled to accept them.




1.    To promote international trade.

2.    To make policies and principles for international trade and economic development.

3.    To make a plan for implementing these principles and policies.

4.    To assist the Economic and Social Council of the UNO.

5.    To provide a suitable platform for trade dialogues.



Though UNCTAD is functioning as a permanent agency of the UNO, but its membership is fully optional. Any country may join or quit the UNCTAD.





The ADB was established in Dec. 1966 on the recommendations of ECAFE (Economic Commission for Asia and Far East). The aim of this Bank was to promote economic development in Asian countries. The head office of the Bank is located at Manila, Philippines.




India,  Maldives, Pakistan, Bangladesh, Sri Lanka, Bhutan and Nepal constituted an organization known as SAARC, on the recommendations of Dhaka Conference in December, 1985. Its headquarters has been established at Kathmandu. A conference of heads of the countries is held every year but conference were generally delayed for the one reason or the other. The mutual misunderstanding among member nations have created a big question mark in achieving its objectives.


In 1995, the Eighth SAARC Summit at New Delhi decided to establish SAFTA by 2001 A.D. (earlier it was decided to establish it by 2005 A.D.)



Sri Lanka was the first country to propose SAPTA in Sixth SAARC Conference held in December 1991. This proposal was accepted and it was decided to start SAPTA by the end of 1997. SAPTA among SAARC countries became operative since December 1995. It was the success of Eighth SAARC conference held in New Delhi in 1995 where this new concessional trade system of SAPTA was approved. The SAPTA will open all possibilities to establish SAFTA (South Asian Free Trade Area) in the coming years. Among SAARC countries, concessional tariff rates have been introduced for 226 trade items.





ASEAN is a union of South-East Asian Nations. Indonesia, Philippines, Malaysia, Singapore and Thailand  constituted this association in 1967. Brunei also joined the ASEAN in 1984. At present, 9 countries are the member of ASEAN. The object of ASEAN is to promote economic co-operation in South-East Asia and also to ensure economic stability in the region. Its headquarters is in Jakarta but a Secretary of ASEAN lives in the capital of each member country. The post of General Secretary of ASEAN is rotated among each member country alphabetically, after every two years. In 1996, ASEAN gave advisory status or full-dialogue partner status to India. Besides India, China and Russia also got this status. USA got this status earlier. India cannot join the ASEAN as a member due to its geographical location. It is planned to established AFTA (ASEAN Free Trade Area) by 2003 A.D.





OPEC was constituted in Baghdad in 1960. Iran, Iraq, Kuwait, Saudi Arabia and Venezuela were its founder members. The objective of OPEC was to control production and price of petroleum so as to safeguard the interests of oil exporting countries. OPEC also attempts not only to stabilize oil prices but also to seek the maximum oil prices from the oil importing countries. Any country exporting crude oil may join OPEC. Its headquarter is in Vienna (Austria). OPEC has adopted the strategy to limit the oil production with a view to get higher prices of their crude oil in international market.





The South commission is also known as South-South commission which was constituted under non-aligned movement. The objective of this Commission was to protect the interests of Third World from the discriminatory policies of international financial institutions and loan giving countries. Its headquarter was opened at Geneva on October 2, 1987. The ex-President of Tanzania Mr. Julius Nyerere, was appointed commission. Dr. Manmohan Singh of India was its first General Secretary. Mutual economic co-operation among developing countries at the international level was termed as “South-South Co-operation”.



G-7 (NOW G-8)

It is an organization of seven non-socialist highly industrialized countries of the world. G-7 includes USA, Canada, Germany, Britain, France, Italy and Japan and Russia. The first G-7 summit was held at Rambonilet near Paris in November 1975.




G-15 is an organization of 17 non-aligned developing countries. Established 1989 at the Non-aligned Summit (NAM) at Belgrade, Yugoslavia. The member countries are Mexico, Jamaica, Venezuela, Peru, Brazil, Argentina, Senegal, Algeria, Nigeria, Zimbabwe, Egypt, India, Malaysia, Indonesia, Yugoslavia and Kenya, Sri Lanka. The  G-15 Secretariat is in Geneva. But its headquarter is rotated to the country belonging to the Chairman of the group. It is mainly an attempt to make G-77 (group of 77 developing countries) more strong at international forum. G-15 has initiated a number projects. 


This group was constituted under the banner of UNO in 1964. G-77 includes 130 members belonging to Third World - Asia, Africa and Latin America. It is an international economic community of developing countries aiming at protecting economic interest of the member countries.





To rehabilitate the weak economies of Europe after Second World War, an organization named OECD (Organization for Economic Co-operation and Development) was founded. Its headquarter is in Paris (France). The aim of the OECD is to co-ordinate the welfare policies of the member countries and also to induce member countries for promoting welfare activities in their respective economies.




It is a commercial union of Belgium, Netherlands and Luxembourg which was constituted in 1958 for promoting mutual commercial co-operation among these three member countries. Its headquarters is in Brussels (Belgium).





Six European countries known ‘Inner Six’ (France, Belgium, Netherlands, Luxembourg, W. Germany and Italy) constituted EEC on the basis of Rome Treaty (1957). The success of OECD played an important role in inducing these countries to establish EEC. The aim of EEC was to ensure complete free trade among member countries.. Thus, the total membership of EEC went up to 15 in 1995 after the induction of Austria, Finland and Sweden to this Organization. At present, it is the largest commercial community of the world. Its headquarters is in Brussels (Belgium).






The EEC was established in March 1957 as a result of Rome Treaty which was constituted for promoting economic co-operation among non-communist countries of Europe. EEC started its functioning since January 1, 1958. EEC attempted to unite economic policies of all 15 members. In 1991, important decisions relating to political, monetary and economic unification of Europe were taken by Heads of States of the then 12 member countries. This treaty was a major effort in the direction of European unification and is known as the Maastricht Treaty..

Starting November 1, 1993 this treaty was implemented for political and economic unification of these countries. This treaty gave birth to a new organization known as European Union. This treaty and documents of European Union, signed in February, 1992, state that all the countries of the union will make all efforts to implement a homogeneous, economic and monetary policies.





In 1992, a trilateral agreement between USA, Canada and Mexico took place which declared North American region as Free Trade Area. This agreement is known as NAFTA (North American Free Trade Agreement). USA played the dominant role in its establishment. NAFTA was constituted mainly to meet the challenges of EEC and Japanese economic policies. Before NAFTA, free trade was already taking place between USA and Canada  but this free trade facility was has now been extended to Mexico. NAFTA has been in operation among USA, Canada and Mexico since January 1, 1994.






APEC is a new economic grouping appearing on the international forum after EEC and NAFTA. APEC was constituted on the initiative of Australian Prime Minister Mr. Bob Hawk. All the developing and developed economies of the world ranging from Himalayas to Andes and from New Zealand to Canada are the members of APEC. The countries having membership with APEC share more than 40% of the total world trade. Member countries are making all efforts to develop APEC as a free trade zone like EEC and NAFTA. It has been decided to convert Asia Pacific region of the world into a Free Trade Area by 2020 A.D. As on date, APEC is the biggest economic bloc in terms of total business transacted.





Mercosur is a new common market developed among four South American Countries-Brazil, Argentina, Paraguay and Uruguay in 1995 Since 1995 these four countries have abolished all restrictions on mutual trade.






The FAO, as an associate institution of the UNO, was established in 1945 at Quebec (Canada).



The functions of FAO are as follows :

1.    To bridge the gap between the demand for the supply of agriculture products in the world by making a regular supply of food products.

2.    To adopt measures of protecting stored foodgrains from harmful pests.

3.    To look after sick animals.

4.    To provide high-yielding variety seeds of every crop.

5.    To improve standard of living of the people in member countries.

6.    To increase nutrition.

7.    To improve agriculture production and distribution.



The FAO headquarters is situated in Rome. In 1996, the FAO summit was organized in Rome (Italy) which was known as the World Food Summit. FAO has organized a number of important summits like Rio-de-Janeiro Summit On Environment (1992), Cairo Summit On Population (1994), Copenhagen Summit On Social Development (1995). Rome Summit 1996 where it has been declared to eliminate hunger, poverty and malnutrition from the world.





The IORARC was established in 1996 in Mauritius for promoting economic co-operation among the countries in coastal regions of Indian Ocean. This association will work as a bridge between 3 continents-Asia, Africa and Australia. The charter of the union keeps the entry open for all the nations situated in the Rim area of the Indian Ocean.


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