INTERNATIONAL BUSINESS ENVIROMENT

PRESENTATION
ON

WORLD TRADE ORGANISATION(WTO)

AND
INTERNATIONAL MONETARY FUND(IMF)

Submitted To:

Submitted By:

Ms. Ankita Chitkara

Sunny

Khandelwal
Saurabh Negi
Vaishali Chhikara
Sahil Chowdhary
Tushar Arora
Rachit Sharma
Tripti Verma

WTO (Background)
The world war II, which lasted from 1939-1945, left many countries in Europe and
Asia totally ravaged. Something had to be done to put these war ravaged economies
back in shape.

In this background the UNITED NATIONS ORGANISATON (UNO) was born on

the collective wisdom of the world.

UNO formed various forums and agencies. One such forum under UNO was
GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT).

GATT
GATT emerged from ashes of the Havana Charter. In international conference on
trade and employment in Havana in 1947-1948, 53 nations drew up and signed a
charter for establishing ITO ( INTERNATIONAL TRADE ORGANIZATION)

The US congress did not ratify the Havana charter.

Simultaneously, 23 nations agreed to continue extensive tariff negotiations for trade

concessions at Geneva, which were incorporated in a GATT.

This was signed on 30th October 1947 and came in force from 1st January 1948.

GATT is a decision making body with a code of rules for the conduct of international
trade and mechanism for trade liberalization.

It is a forum where the contracting parties meet from time to time to discuss and solve
their trade problems.

The GATT rules provide for the settlement for: Trade disputes, Call for consultations,
Waive trade obligations, Authorize retaliatory measures.

Function to call international conferences to decide on trade liberalizations on a

multilateral basis.

GATT Rounds

First Round: Countries formed GATT exchanged tariff concessions on 45000

products, 23 countries.

Second Round: Customs an tariffs on 5000 additional items of international trade

were reduced.

Third Round: 38 countries participated, they adopted tariff reduction on 8700 items

Fourth Round: Countries decided to further cut duties on goods entering IB

Fifth Round: Negotiations covered approval of common external tariff(CET) of

European countries and cut in custom duties on 4400 items, 26 members.

Sixth Round: Tariff reductions , 62 countries

Seventh Round or Tokyo Round: Round of multilateral trade negotiations( MTN)

Declaration of negotiations in following 6 areas:

Tariff reduction
Reduction of elimination of non-tariff barriers
Coordinated reduction of all trade barriers in selected sectors
Discussion on multilateral safeguard system
Trade liberalization in agricultural sector
Special treatment of tropical products

Eight Round or Uruguay Round: it had two components

1. WTO
2. Ministerial decisions and declarations

WTO

Established on January 1 , 1995

WTO has nearly 153 members accounting for over 97% of world trade.

76 governments became member of WTO on its first day

It has a legal status and composed of ministerial conference(MC) and general

council(GC).

Ministerial conference is the executive of WTO and responsible for carrying out the
functions of WTO, meet at least once every two years.

The general council discharges the functions of ministerial conference during the
intervals between the meetings of MC

The GC has three functional councils:

Council for trade in goods

Council for trade in services
Council for Trade Related Aspects Of Intellectual Property Rights(TRIPs)

The WTO secretariat, based in Geneva, has around 600 staff and is headed by a
Director-General. Its annual budget is roughly 160 million Swiss Francs. It does not
have branch offices outside Geneva. Since decisions are taken by the members
themselves, the secretariat does not have the decision making the role that other
international bureaucracies are given.

The secretariats main duties

to supply technical support for the various councils and committees and the
ministerial conferences,

to provide technical assistance for developing countries,

to analyze world trade and to explain WTO affairs to the public and media.

The secretariat also provides some forms of legal assistance in the dispute settlement
process and advises governments wishing to become members of the WTO.

OBJECTIVES OF WTO
Growth of developing countries in international trade
To improve the standard of living of people in the member countries.
To ensure full employment and broad increase in effective demand.
To enlarge production and trade of goods.
To increase the trade of services.
To ensure optimum utilization of world resources.
To protect the environment.
To accept the concept of sustainable development.
To develop more viable and durable multilateral trading
To ensure linkages between trade policies, environment policies, and sustainable
developments
To achieve these objectives with mutually advantageous agreements.

FUNCTIONS OF WTO
To implement rules and provisions related to trade policy review mechanism.
To provide a platform to member countries to decide future strategies related to trade
and tariff.
To provide facilities for implementation, administration and operation of multilateral
and bilateral agreements of the world trade.
To administer the rules and processes related to dispute settlement.
To ensure the optimum use of world resources.
To assist international organizations such as, IMF and IBRD for establishing
coherence in Universal Economic Policy determination.

IMFA landmark in the history of world economic cooperation is the creation of the
International Monetary Fund, briefly called IMF. The IMF was organized in 1946 and
commenced operations in March, 1947.

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.

MEMBERSHIP
There are two types of members:

ORIGINAL MEMBERS: All those countries whose representatives took part in

BRETTONWOODS CONFERENCE and who agreed to be the members of the fund
prior to 31st December,1945.

ORDINARY MEMBERS: All those who became its members subsequently. BANK
has the authority to suspend any member and similarly every member is free to resign.

OBJECTIVES OF THE IMF:

The widest extension of multi-lateral trade and payments.

International monetary co operation

To facilitate expansion and balanced growth of international trade

To promote exchange stability

Generating higher employment and income

Abolition of exchange restriction

Aid to members during emergency

To shorten the duration and lessen the degree of disequilibrium in the international
balance of payments of members

The establishment and maintenance of currency convertibility with stable exchange

rates, and

FUNCTIONS OF IMF
Economic Surveillance
IMF prepares reports on the economies of its member countries and gives it to them. The
idea here is to prevent a crisis to some extent before it actually occurs. Giving Loans to
countries with financial crisis IMF has till now given loans of about $180 billion to member
countries during financial crisis.
Technical Assistance & Economic Training
IMF provides assistance and training to member countries about what they can actually do
when a financial or economic crisis arises suddenly.
Balance of Payment Adjustment
Trade deficit (Balance of Payment), which causes damage to both the countries which has it
and the country which buys from it, IMF helps in managing such situations

WHERE DOES IMF GET THE MONEY FROM?

Member countries contribution fund
To become a member of IMF, countries had to deposit some money in the form of quota
which depends on the economy size of the country. US is the highest quota holder in IMF.
Countries have to keep on investing in IMF after every 5 years once they join it.
Gold Holdings
IMF owns about 2,814.4 metric tons of gold. IMF is the 3rd largest owner of gold in the
world. According to IMF rules IMF can take gold as payment by the company, can sell it but
cannot exchange it and cannot involve in gold transactions.
Interest on Loans
IMF lends to its member countries and charges interest in return. This interest is an earning
of IMF.
Borrowing
IMF has a borrowing capacity of $559 billion dollars. It can borrow the money from World
Bank or its member countries and other associations when it feels that its funds are not
sufficient to meet the financial needs of all its member countries.

CONCLUSION

The IMFs primary purpose is to safeguard the stability of the international monetary
system the system of exchange rates and international payments that enables countries
(and their citizens) to buy goods and services from each other. This is essential for
achieving sustainable economic growth and raising living standards, providing advice
to members on adopting policies that can help them prevent or resolve a financial
crisis, achieve macroeconomic stability, accelerate economic growth, and alleviate
poverty;

Making financing temporarily available to member countries to help them address

balance of payments problemsthat is, when they find themselves short of foreign
exchange because their payments to other countries exceed their foreign exchange
earnings; and

Offering technical assistance and training to countries at their request, to help them
build the expertise and institutions they need to implement sound economic policies