IMF

The International Monetary Fund (IMF) is an organization of 188 countries, working to foster global monetary cooperation, secure

financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around

the world.

With the end of the Second World War, the job of rebuilding national economies began. The IMF was established with an objective to oversee

the international monetary system to ensure exchange rate stability and encouraging members to eliminate exchange restrictions that hinder

trade. A multinational conference at Bretton Woods, Hampshire in 1944 led t

O establishment of twins - IMF and WB

The end of the Bretton Woods System (1972–81)

After the system of fixed exchange rates collapses in 1971, countries were free to choose their exchange arrangement. Oil shocks occurred in

1973–74 and 1979, and the IMF had to step in to help countries deal with the consequences.

Debt and painful reforms (1982–89)

The oil shocks lead to an international debt crisis, and the IMF assisted in coordinating the global response. The fall of the Berlin wall in 1989

and the dissolution of the Soviet Union in 1991 enabled the IMF to become a (nearly) universal institution. In three years, membership increased

from 152 countries to 172, the most rapid increase since the influx of African members in the 1960s.

The IMF played a central role in helping the countries of the former Soviet bloc transition from central planning to market-driven

economies. This kind of economic transformation had never before been attempted, and sometimes the process was less than smooth. For

most of the 1990s, these countries worked closely with the IMF, benefiting from its policy advice, technical assistance, and financial

support.

By the end of the decade, most economies in transition had successfully graduated to market economy status after several years of intense

reforms, with many joining the European Union in 2004.

Asian Financial Crisis In 1997, a wave of financial crises swept over East Asia, from Thailand to Indonesia to Korea and beyond. Almost every affected country

asked

the IMF for both financial assistance and for help in reforming economic policies. Conflicts arose on how best to cope with the crisis, and

the IMF came under criticism that was more intense and widespread than at any other time in its history.

From this experience, the IMF drew several lessons that would alter its responses to future events.

First, it realized that it would have to pay much more attention to weaknesses in countries’ banking sectors and to the effects of those

weaknesses on macroeconomic stability. In 1999, the IMF—together with the World Bank—launched the Financial Sector Assessment

Program and began conducting national assessments on a voluntary basis.

Second, the Fund realized that the institutional prerequisites for successful liberalization of international capital flows were more daunting

than it had previously thought. Along with the economics profession generally, the IMF dampened its enthusiasm for capital account

liberalization. Third, the severity of the contraction in economic activity that accompanied the Asian crisis necessitated a re-evaluation of

how fiscal policy should be adjusted when a crisis was precipitated by a sudden stop in financial inflows.

Debt relief for poor countries During the 1990s, the IMF worked closely with the World Bank to alleviate the debt burdens of poor countries. The Initiative for Heavily

Indebted Poor Countries was launched in 1996, with the aim of ensuring that no poor country faces a debt burden it cannot manage. In

2005, to help accelerate progress toward the United Nations Millennium Development Goals (MDGs), the HIPC Initiative was

supplemented by the Multilateral Debt Relief Initiative (MDRI).

The latest global crisis uncovered a fragility in the advanced financial markets that soon led to the worst global downturn since the

Great Depression. Suddenly, the IMF was inundated with requests for stand-by arrangements and other forms of financial and

policy support.

The international community recognized that the IMF’s financial resources were as important as ever and were likely to be

stretched thin before the crisis was over. With broad support from creditor countries, the Fund’s lending capacity was tripled to

around $750 billion.

When can a country borrow from the IMF?

A member country may request IMF financial assistance if it has a balance of payments need (actual or potential)—that is, if it cannot

find sufficient financing on affordable terms to meet its net international payments (e.g., imports, external debt redemptions) while

maintaining adequate reserve buffers going forward. An IMF loan provides a cushion that eases the adjustment policies and reforms that a

country must make to correct its balance of payments problem and restore conditions for strong economic growth.

The process of IMF lending

Upon request by a member country, IMF resources are usually made available under a lending “arrangement,” which may, depending on

the lending instrument used, stipulate specific economic policies and measures a country has agreed to implement to resolve its balance of

payments problem. The economic policy program underlying an arrangement is formulated by the country in consultation with the IMF

and is in most cases presented to the Fund’s Executive Board in a “Letter of Intent.” Once an arrangement is approved by the Board, IMF

resources are usually released in phased installments as the program is implemented. Some arrangements provide strong-performing

countries with a one-time up-front access to IMF resources and thus not subject to the observance of policy understandings.

IMF lending instruments

Over the years, the IMF has developed various loan instruments that are tailored to address the specific circumstances of its diverse

membership. Low-income countries may borrow on concessional terms through the Extended Credit Facility (ECF), the Standby Credit

Facility (SCF) and the Rapid Credit Facility (RCF), Concessional loans carry zero interest rates until the end of 2013 (2012 for SCF

loans).

Non concessional loans are provided mainly through Stand-By Arrangements (SBA), the Flexible Credit Line (FCL), the Precautionary

and Liquidity Line (PLL), and the Extended Fund Facility (which is useful primarily for medium- and longer-term needs). The IMF also

provides emergency assistance via the newly-introduced Rapid Financing Instrument (RFI) to all its members facing urgent balance of

payments needs. All non-concessional facilities are subject to the IMF’s market-related interest rate, known as the “rate of charge,” and

large loans (above certain limits) carry a surcharge. The rate of charge is based on the SDR interest rate, which is revised weekly to take

account of changes in short-term interest rates in major international money markets. The maximum amount that a country can borrow

from the IMF, known as its access limit, varies depending on the type of loan, but is typically a multiple of the country’s IMF quota. This

limit may be exceeded in exceptional circumstances. The Stand-By Arrangement, the Flexible Credit Line and the Extended Fund Facility

have no pre-set cap on access.

The new concessional facilities for LICs became effective in January 2010 under the Poverty Reduction and Growth Trust (PRGT) as part

of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of LICs. Access limits and

norms have been approximately doubled compared to pre-crisis levels. Financing terms have been made more concessional, and the

interest rate is reviewed every two years. All facilities support country-owned programs aimed at achieving a sustainable macroeconomic

position consistent with strong and durable poverty reduction and growth.

Where the IMF Gets its Money

Most resources for IMF loans are provided by member countries, primarily through their payment of quotas. Multilateral and bilateral

borrowing arrangements provide a further backstop to IMF resources. In March 2011, the expanded and more flexible New Arrangements to

Borrow (NAB) came into effect and was activated shortly thereafter. In addition, the Fund has signed a number of bilateral loan and note

purchase agreements, which can be used to finance IMF-supported programs approved prior to the NAB activation. In the context of

continued global financial instability, the Fund and creditor members are currently negotiating a 2012 round of bilateral loan and note

purchase agreements to backstop quota and expanded NAB resources. Concessional lending and debt relief for low-income countries are

financed through separate contribution-based trust funds.

The quota system

Each member of the IMF is assigned a quota, based broadly on its relative size in the world economy, which determines its maximum

contribution to the IMF’s financial resources. Upon joining the IMF, a country normally pays up to one-quarter of its quota in the form of

widely accepted foreign currencies (such as the U.S. dollar, euro, yen, or pound sterling) or Special Drawing Rights (SDRs). The

remaining three-quarters are paid in the country’s own currency.

Quotas are reviewed at least every five years. Ad hoc quota increases of 1.8 percent were agreed in 2006 as the first step in a two-year

program of quota and voice reforms. Further ad hoc quota increases were approved by the Board of Governors in April 2008, resulting in

an overall increase of 11.5 percent. The 2008 reform came into effect in March 2011 following ratification of the amendment to the IMF’s

Articles by 117 member countries, representing 85 percent of the IMF’s voting power.

The Fourteenth General Review of Quotas was completed two years ahead of the original schedule in December 2010, with a decision to

double the IMF’s quota resources to SDR 476.8 billion. Members have committed to using best efforts to making quotas under the

Fourteenth Review effective in October 2012.

Earlier reviews concluded in January 2003 and January 2008 resulted in no change in quotas.

Gold holdings

The IMF’s gold holdings amount to about 90.5 million troy ounces (2,814.1 metric tons), making the IMF the third largest official holder

of gold in the world. However, the IMF’s Articles of Agreement strictly limit its use. If approved by an 85 percent majority of voting

power of member countries, the IMF may sell gold or may accept gold as payment by member countries but it is prohibited from buying

gold or engaging in other gold transactions.

In December 2010, the IMF concluded the limited sales program covering 403.3 metric tons of gold, accounting for about one-eighth of

its holdings, as approved by the Executive Board in September 2009. Sales totaling 222 tons were made to official holders, including the

Reserve Bank of India (200 tons), the Bank of Mauritius (2 tons), the Central Bank of Sri Lanka (10 tons), and the Bangladesh Bank

(10 tons). The gold sale program was conducted under strong safeguards to avoid market disruption and all gold sales were at market

prices, including direct sales to official holders.

Profits on the sale will fund an endowment as part of the IMF’s new income model, agreed to put the institution’s finances on a

sustainable footing. The Executive Board also agreed that SDR 0.5–0.6 billion (end-2008 net present value terms) in resources linked to

gold sales would be used to subsidize financing for low-income countries and boost the IMF’s concessional lending. In February 2012,

the Executive Board approved the distribution of SDR 700 million attributed to part of the windfall profits from the recent gold sales from

the IMF’s General Reserve to the membership. The distribution will be made to all member countries in proportion to their quotas on the

date of the distribution, and will be effected only when member countries provide satisfactory assurances that they would make new

PRGT subsidy contributions equivalent to at least 90 percent of the amount distributed (SDR 630 million).

The IMF’s lending capacity

The IMF can use its quota-funded holdings of currencies of financially strong economies to finance lending. The Executive Board selects

these currencies every three months. Most are issued by industrial countries, but the list also has included currencies of lower income

countries such as Botswana, China, and India. The IMF’s holdings of these currencies, together with its own SDR holdings, make up its

own usable resources. If needed, the IMF can temporarily supplement these resources by borrowing (see below).

The amount the IMF has readily available for new (non-concessional) lending is indicated by its forward commitment capacity. This is

determined by its usable resources (including unused amounts under loan and note purchase agreements and amounts available under the

IMF’s two standing multilateral borrowing arrangements (see below)), plus projected loan repayments over the subsequent twelve

months, less the resources that have already been committed under existing lending arrangements, less a prudential balance.

IMF concessional lending and debt relief

The predecessor of the PRGT was established to provide lending to eligible low-income countries in support of the related arrangements

and to subsidize the market rate of interest down to 0.5 percent per year. Loan resources of about $42 billion (SDR 25.8 billion) have

been committed by 23 contributors to the PRGT and its predecessors, while a larger number of member countries have made subsidy

contributions.

In July 2009, the Executive Board approved far-reaching reforms of the concessional facilities, in which the PRGT replaced the PRGF-

ESF Trust. As part of the reform package, the Board also agreed to provide exceptional interest relief on its concessional loans to all low-

income countries, with zero interest payments through end-2011 and subsequently extended to end-2012, to help them cope with the

crisis. These reforms became effective in January 2010, when all lenders and bilateral subsidy contributors to the PRGF-ESF Trust

consented to the reforms.

India: Financial Position in the Fund as of August 31, 2012

I. Membership Status: Joined: December 27, 1945; Article VIII

II. General Resources Account: SDR Million %Quota

Quota 5,821.50 100.00

Fund holdings of currency (Exchange Rate) 4,008.71 68.86

Reserve Tranche Position 1,812.98 31.14

Lending to the Fund

New Arrangements to Borrow 1,020.00

III. SDR Department: SDR Million %Allocation

Net cumulative allocation 3,978.26 100.00

Holdings 2,886.08 72.55

IV. Outstanding Purchases and Loans: None

World Bank Institute

The World Bank Institute (WBI) is a global connector of knowledge, learning and innovation for poverty reduction. It is part of the World

Bank Group. It connects practitioners, networks and institutions to help them find solutions to their develo pment challenges.

World Bank Institute

Bottom of Form

ORGANIZATION

Five Agencies, One Group

The World Bank Group consists of five organizations:

The International Bank for Reconstruction and Development (IBRD)lends to governments of middle-income and

creditworthy low-income countries.

The International Development Association (IDA) provides interest-free loans—called credits— and grants to governments of

the poorest countries.

The International Finance Corporation(IFC) provides loans, equity and technical assistance to stimulate private sector

investment in developing countries.

The Multilateral Investment Guarantee Agency (MIGA) provides guarantees against losses caused by non-commercial risks

to investors in developing countries.

The International Centre for Settlement of Investment Disputes (ICSID) provides international facilities for conciliation and

arbitration of investment disputes.

GATT and WTO.

The original intention was to create a third institution to handle the trade side of international economic cooperation, joining the two “Bretton

Woods” institutions, the World Bank and the International Monetary Fund. Over 50 countries participated in negotiations to create an

International Trade Organization (ITO) as a specialized agency of the United Nations. The draft ITO Charter was ambitious. It extended beyond

world trade disciplines, to include rules on employment, commodity agreements, restrictive business practices, international investment, and services. The aim was to create the ITO at a UN Conference on Trade and Employment in Havana, Cuba in 1947.

Meanwhile, 15 countries had begun talks in December 1945 to reduce and bind customs tariffs. With the Second World War only recently

ended, they wanted to give an early boost to trade liberalization, and to begin to correct the legacy of protectionist measures which remained in

place from the early 1930s.

This first round of negotiations resulted in a package of trade rules and 45,000 tariff concessions affecting $10 billion of trade, about one fifth of

the world’s total. The group had expanded to 23 by the time the deal was signed on 30 October 1947. The tariff concessions came into effect by

30 June 1948 through a “Protocol of Provisional Application”. And so the new General Agreement on Tariffs and Trade was born, with 23 founding members (officially “contracting parties”).

The 23 were also part of the larger group negotiating the ITO Charter. One of the provisions of GATT says that they should accept some of the

trade rules of the draft. This, they believed, should be done swiftly and “provisionally” in order to protect the value of the tariff concessions they

had negotiated. They spelt out how they envisaged the relationship between GATT and the ITO Charter, but they also allowed for the possibility that the ITO might not be created. They were right.

The Havana conference began on 21 November 1947, less than a month after GATT was signed. The ITO Charter was finally agreed in Havana

in March 1948, but ratification in some national legislatures proved impossible. The most serious opposition was in the US Congress, even

though the US government had been one of the driving forces. In 1950, the United States government announced that it would not seek

Congressional ratification of the Havana Charter, and the ITO was effectively dead. So, the GATT became the only multilateral instrument

governing international trade from 1948 until the WTO was established in 1995.

From 1948 to 1994, the General Agreement on Tariffs and Trade (GATT) provided the rules for much of world trade and presided over periods

that saw some of the highest growth rates in international commerce. It seemed well-established, but throughout those 47 years, it was a provisional agreement and organization

For almost half a century, the GATT’s basic legal principles remained much as they were in 1948. There were additions in the form of a section

on development added in the 1960s and “plurilateral” agreements (i.e. with voluntary membership) in the 1970s, and efforts to reduce tariffs

further continued. Much of this was achieved through a series of multilateral negotiations known as “trade rounds” — the biggest leaps forward

in international trade liberalization have come through these rounds which were held under GATT’s auspices

In the early years, the GATT trade rounds concentrated on further reducing tariffs. Then, the Kennedy Round in the mid-sixties brought about a

GATT Anti-Dumping Agreement and a section on development. The Tokyo Round during the seventies was the first major attempt to tackle trade

barriers that do not take the form of tariffs, and to improve the system. The eighth, the Uruguay Round of 1986-94, was the last and most extensive

of all. It led to the WTO and a new set of agreements.

Did GATT succeed? GATT was provisional with a limited field of action, but its success over 47 years in promoting and securing the liberalization

of much of world trade is incontestable. Continual reductions in tariffs alone helped spur very high rates of world trade growth during the 1950s and

1960s — around 8% a year on average. And the momentum of trade liberalization helped ensure that trade growth consistently out-paced production

growth throughout the GATT era, a measure of countries’ increasing ability to trade with each other and to reap the benefits of trade. The rush of

new members during the Uruguay Round demonstrated that the multilateral trading system was recognized as an anchor for development and an

instrument of economic and trade reform.

But all was not well. As time passed new problems arose. The Tokyo Round in the 1970s was an attempt to tackle some of these but its

achievements were limited. This was a sign of difficult times to come.

GATT’s success in reducing tariffs to such a low level, combined with a series of economic recessions in the 1970s and early 1980s, drove

governments to devise other forms of protection for sectors facing increased foreign competition. High rates of unemployment and constant factory

closures led governments in Western Europe and North America to seek bilateral market-sharing arrangements with competitors and to embark on a subsidies race to maintain their holds on agricultural trade. Both these changes undermined GATT’s credibility and effectiveness.

The problem was not just a deteriorating trade policy environment. By the early 1980s the General Agreement was clearly no longer as relevant to

the realities of world trade as it had been in the 1940s. For a start, world trade had become far more complex and important than 40 years before: the

globalization of the world economy was underway, trade in services — not covered by GATT rules — was of major interest to more and more

countries, and international investment had expanded. The expansion of services trade was also closely tied to further increases in world

merchandise trade. In other respects, GATT had been found wanting. For instance, in agriculture, loopholes in the multilateral system were heavily

exploited, and efforts at liberalizing agricultural trade met with little success. In the textiles and clothing sector, an exception to GATT’s normal

disciplines was negotiated in the 1960s and early 1970s, leading to the Multifibre Arrangement. Even GATT’s institutional structure and its dispute

settlement system were causing concern.

These and other factors convinced GATT members that a new effort to reinforce and extend the multilateral system should be attempted. That effort

resulted in the Uruguay Round, the Marrakesh Declaration, and the creation of the WTO.

Year

Place/name Subjects covered Countries

1947 Geneva Tariffs 23

1949 Annecy Tariffs 13

1951 Torquay Tariffs 38

1956 Geneva Tariffs 26

1960-1961 Geneva

Dillon Round

Tariffs 26

1964-1967 Geneva

Kennedy Round

Tariffs and anti-dumping

measures

62

1973-1979 Geneva

Tokyo Round

Tariffs, non-tariff measures,

“framework”

agreements

102

1986-1994 Geneva

Uruguay Round

Tariffs, non-tariff measures,

rules, services, intellectual

property, dispute settlement,

textiles, agriculture, creation

of WTO, etc

123

Essentially, the WTO is a place where member governments go, to try to sort out the trade problems they face with each other. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations.

Simply put: the World Trade Organization (WTO) deals with the rules of trade between nations at a global or near-global level. But there is more to

it than that.

More specifically, the WTO's main activities are:

1. Negotiating the reduction or elimination of obstacles to trade (import tariffs, other barriers to trade) and agreeing on rules governing the conduct

of international trade (e.g. antidumping subsidies, product standards, etc.)

2. Administering and monitoring the application of the WTO's agreed rules for trade in goods, trade in services, and trade-related intellectual property rights

3. Mmonitoring and reviewing the trade policies of our members, as well as ensuring transparency of regional and bilateral trade agreements

4. Settling disputes among our members regarding the interpretation and application of the agreements

5. Building capacity of developing country government officials in international trade matters

6. Assisting the process of accession of some 30 countries who are not yet members of the organization

7. Conducting economic research and collecting and disseminating trade data in support of the WTO's other main activities

8. Explaining to and educating the public about the WTO, its mission and its activities.

There are 157 members on 24 August 2012.

The last and largest GATT round, was the Uruguay Round which lasted from 1986 to 1994 and led to the WTO’s creation. Whereas GATT had

mainly dealt with trade in goods, the WTO and its agreements now cover trade in services, and in traded inventions, creations and designs

(intellectual property).

The WTO began life on 1 January 1995, but its trading system is half a century older. Since 1948, the General Agreement on Tariffs and Trade

(GATT) had provided the rules for the system. (The second WTO ministerial meeting, held in Geneva in May 1998, included a celebration of the 50th anniversary of the system.)

It did not take long for the General Agreement to give birth to an unofficial, de facto international organization, also known informally as GATT.

Over the years GATT evolved through several rounds of negotiations.

1. Most-favoured-nation (MFN): treating other people equally

Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members.

This principle is known as most-favoured-nation (MFN) treatment. It is so important that it is the first article of the General Agreement on

Tariffs and Trade (GATT), which governs trade in goods. MFN is also a priority in the General Agreement on Trade in Services (GATS)

(Article 2) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (Article 4), although in each agreement the principle is handled slightly differently. Together, those three agreements cover all three main areas of trade handled by the WTO.

Some exceptions are allowed. For example, countries can set up a free trade agreement that applies only to goods traded within the group

— discriminating against goods from outside. Or they can give developing countries special access to their markets. Or a country can raise

barriers against products that are considered to be traded unfairly from specific countries. And in services, countries are allowed, in limited

circumstances, to discriminate. But the agreements only permit these exceptions under strict conditions. In general, MFN means that every

time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners —

whether rich or poor, weak or strong.

2. National treatment: Treating foreigners and locals equally Imported and locally-produced goods should be treated equally — at

least after the foreign goods have entered the market. The same should apply to foreign and domestic services, and to foreign and local

trademarks, copyrights and patents. This principle of “national treatment” (giving others the same treatment as one’s own nationals) is also

found in all the three main WTO agreements (Article 3 of GATT, Article 17 of GATS and Article 3 of TRIPS), although once again the principle is handled slightly differently in each of these.

National treatment only applies once a product, service or item of intellectual property has entered the market. Therefore, charging customs

duty on an import is not a violation of national treatment even if locally-produced products are not charged an equivalent tax.

Freer trade: gradually, through negotiation

Lowering trade barriers is one of the most obvious means of encouraging trade. The barriers concerned include customs duties (or tariffs)

and measures such as import bans or quotas that restrict quantities selectively. From time to time other issues such as red tape and exchange rate policies have also been discussed.

Since GATT’s creation in 1947-48 there have been eight rounds of trade negotiations. A ninth round, under the Doha Development

Agenda, is now underway. At first these focused on lowering tariffs (customs duties) on imported goods. As a result of the negotiations, by the mid-1990s industrial countries’ tariff rates on industrial goods had fallen steadily to less than 4%.

But by the 1980s, the negotiations had expanded to cover non-tariff barriers on goods, and to the new areas such as services and intellectual property.

Opening markets can be beneficial, but it also requires adjustment. The WTO agreements allow countries to introduce changes gradually,

through “progressive liberalization”. Developing countries are usually given longer to fulfil their obligations.

Predictability: through binding and transparency

Sometimes, promising not to raise a trade barrier can be as important as lowering one, because the promise gives businesses a clearer view

of their future opportunities. With stability and predictability, investment is encouraged, jobs are created and consumers can fully enjoy the

benefits of competition — choice and lower prices. The multilateral trading system is an attempt by governments to make the business environment stable and predictable.

In the WTO, when countries agree to open their markets for goods or services, they “bind” their commitments. For goods, these bindings

amount to ceilings on customs tariff rates. Sometimes countries tax imports at rates that are lower than the bound rates. Frequently this is the case in developing countries. In developed countries the rates actually charged and the bound rates tend to be the same.

A country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of

trade. One of the achievements of the Uruguay Round of multilateral trade talks was to increase the amount of trade under binding

commitments (see table). In agriculture, 100% of products now have bound tariffs. The result of all this: a substantially higher degree of market security for traders and investors.

The system tries to improve predictability and stability in other ways as well. One way is to discourage the use of quotas and other

measures used to set limits on quantities of imports — administering quotas can lead to more red-tape and accusations of unfair play.

Another is to make countries’ trade rules as clear and public (“transparent”) as possible. Many WTO agreements require governments to

disclose their policies and practices publicly within the country or by notifying the WTO. The regular surveillance of national trade policies

through the Trade Policy Review Mechanism provides a further means of encouraging transparency both domestically and at the multilateral level.

Promoting fair competition

The WTO is sometimes described as a “free trade” institution, but that is not entirely accurate. The system does allow tariffs and, in limited circumstances, other forms of protection. More accurately, it is a system of rules dedicated to open, fair and undistorted competition.

The rules on non-discrimination — MFN and national treatment — are designed to secure fair conditions of trade. So too are those on

dumping (exporting at below cost to gain market share) and subsidies. The issues are complex, and the rules try to establish what is fair or

unfair, and how governments can respond, in particular by charging additional import duties calculated to compensate for damage caused by unfair trade.

Many of the other WTO agreements aim to support fair competition: in agriculture, intellectual property, services, for example. The

agreement on government procurement (a “plurilateral” agreement because it is signed by only a few WTO members) extends competition rules to purchases by thousands of government entities in many countries. And so on.

Encouraging development and economic reforms

The WTO system contributes to development. On the other hand, developing countries need flexibility in the time they take to implement

the system’s agreements. And the agreements themselves inherit the earlier provisions of GATT that allow for special assistance and trade concessions for developing countries.

Over three quarters of WTO members are developing countries and countries in transition to market economies. During the seven and a

half years of the Uruguay Round, over 60 of these countries implemented trade liberalization programmes autonomously. At the same time,

developing countries and transition economies were much more active and influential in the Uruguay Round negotiations than in any previous round, and they are even more so in the current Doha Development Agenda.

At the end of the Uruguay Round, developing countries were prepared to take on most of the obligations that are required of developed

countries. But the agreements did give them transition periods to adjust to the more unfamiliar and, perhaps, difficult WTO provisions —

particularly so for the poorest, “least-developed” countries. A ministerial decision adopted at the end of the round says better-off countries

should accelerate implementing market access commitments on goods exported by the least-developed countries, and it seeks increased

technical assistance for them. More recently, developed countries have started to allow duty-free and quota-free imports for almost all

products from least-developed countries. On all of this, the WTO and its members are still going through a learning process. The current

Doha Development Agenda includes developing countries’ concerns about the difficulties they face in implementing the Uruguay Round

agreements.

The Doha Round

The Doha Round is the latest round of trade negotiations among the WTO membership. Its aim is to achieve major reform of the

international trading system through the introduction of lower trade barriers and revised trade rules. The work programme covers about

20 areas of trade. The Round is also known semi-officially as the Doha Development Agenda as a fundamental objective is to improve the trading prospects of developing countries.

The Round was officially launched at the WTO’s Fourth Ministerial Conference in Doha, Qatar, in November 2001. The Doha

Ministerial Declaration provided the mandate for the negotiations, including on agriculture, services and an intellectual property topic, which began earlier.

In Doha, ministers also approved a decision on how to address the problems developing countries face in implementing the current WTO

agreements.

G-20 major economies

Group of Twenty Finance Ministers and Central Bank Governors

Abbreviation G-20 or G20

Formation 1999

2008 (Heads of State Summits)

Purpose/focus

Bring together systemically important industrialized

and developing economies to discuss key issues in the

global economy.[1]

Membership 20

Current chair Mexico (2012)]

Staff No

Website www.g20.org

The Group of Twenty Finance Ministers and Central Bank Governors (also known as the G-20, G20, and Group of Twenty) is a group of

finance ministers and central bank governors from 20 major economies: 19 countries plus the European Union, which is represented by the

President of the European Council and by the European Central Bank.The G-20 heads of government or heads of state have also periodically

conferred at summits since their initial meeting in 2008. Collectively, the G-20 economies account for more than 80 percent of the gross world

product (GWP),[4] 80 percent of world trade (including EU intra-trade), and two-thirds of the world population.[3] They furthermore account for

84.1 percent and 82.2 percent of the world's economic growth by nominal GDP and GDP (PPP) respectively from the years 2010 to 2016, according to the International Monetary Fund (IMF).

The G-20 was proposed by former Canadian Prime Minister Paul Martin. as a forum for cooperation and consultation on matters pertaining to

the international financial system. The group was formally inaugurated in September 1999, and held its first meeting in December 1999. It

studies, reviews, and promotes high-level discussion of policy issues pertaining to the promotion of international financial stability, and seeks to

address issues that go beyond the responsibilities of any one organization. With the G-20 growing in stature after the 2008 Washington summit, its leaders announced on September 25, 2009, that the group would replace the G8 as the main economic council of wealthy nations..

The heads of the G-20 nations met biannually at G-20 summits between 2008 and 2011. Since the November 2011 Cannes summit, all G-20 summits have been held

The G-20 Summit was created as a response both to the financial crisis of 2007–2010 and to a growing recognition that key emerging countries

were not adequately included in the core of global economic discussion and governance. The G-20 Summits of heads of state or government

were held in addition to the G-20 Meetings of Finance Ministers and Central Bank Governors, who continued to meet to prepare the leaders'

summit and implement their decisions. After the debut summit in Washington, D.C. during 2008, G-20 leaders met twice a year in London and Pittsburgh in 2009, Toronto and Seoul in 2010.[10][11]

Since 2011, when France chaired and hosted the G-20, the summits have been held only once a year.[12] Mexico chaired and hosted the leaders' summit in 2012.[13] Future summits will be held in Russia in 2013, Australia in 2014[14] and Turkey in 2015.

The G-20 operates without a permanent secretariat or staff. The chair rotates annually among the members and is selected from a different

regional grouping of countries. The chair is part of a revolving three-member management group of past, present and future chairs referred to as

the Troika. The incumbent chair establishes a temporary secretariat for the duration of its term, which coordinates the group's work and

organizes its meetings. The role of the Troika is to ensure continuity in the G-20's work and management across host years. The current chair of

the G-20 is Mexico; the chair was handed over from France after the November 2011 G-20 Summit.

Exclusivity of membership

Although the G-20 has stated that the group's "economic weight and broad membership gives it a high degree of legitimacy and influence over

the management of the global economy and financial system," its legitimacy has been challenged. With respect to the membership issue, U.S.

President Barack Obama has noted the difficulty of pleasing everyone: "everybody wants the smallest possible group that includes them. So, if

they're the 21st largest nation in the world, they want the G-21, and think it's highly unfair if they have been cut out." A 2011 report for the

Danish Institute for International Studies, entitled "The G-20 and Beyond: Towards Effective Global Economic Governance", criticised the G-

20's exclusivity, highlighting in particular its under-representation of the African continent. Moreover, the report stated that the G-20's practice

of inviting observers from non-member states is a mere "concession at the margins", and does not grant the organisation representational legitimacy.

Norwegian perspective

In an interview with Der Spiegel, Norwegian Foreign Minister Jonas Gahr Støre called the G-20 "one of the greatest setbacks since World War

II." Although Norway is the seventh-largest contributor to international development programs in the United Nations, it is not a member of the

EU, and thus is not represented in the G-20 even indirectly. Norway, like the other 170 nations not among the G-20, has little or no voice within

the group. Støre characterized the G-20 as a "self-appointed group", arguing that it undermines the legitimacy of organizations set up in the aftermath of World War II, such as the IMF, World Bank and United Nations:

“ The G-20 is a self-appointed group. Its composition is determined by the major countries and powers. It may be more representative

than the G-7 or the G-8, in which only the richest countries are represented, but it is still arbitrary. We no longer live in the 19th

century, a time when the major powers met and redrew the map of the world. No one needs a new Congress of Vienna. ”

Global Governance Group (3G) response

According to Singapore's representative to the United Nations, UN members who are not G-20 members have responded to the G-20's

exclusivity by either reacting with indifference, refusing to acknowledge the G-20's legitimacy, or accepting the G-20's status while hoping to

"engage the G-20 as the latter continues to evolve so that [their] interests are taken on board." Out of this latter group, Singapore has taken a

leading role in organizing an informal "Global Governance Group" of 28 non-G-20 countries, seeking to collectively channel their views into the

G-20 process more effectively. Singapore's chairing of the Global Governance Group was cited as a rationale for inviting Singapore to the

November 2010 G-20 summit in South Korea.

Foreign Policy critiques

The American magazine Foreign Policy has published articles condemning the G-20, in terms of its principal function as an alternative to the so-

called exclusive G8. It furthermore questions the actions of some of the G-20 members, and advances the notion that some nations should not

have membership in the first place. For example, it has suggested that Argentina should be formally replaced with Spain, because Spain's economy is larger.

With the effects of the Great Recession still ongoing, the magazine has criticized the G-20's efforts to implement reforms of the world's financial institutions, branding such efforts as failed.

On 14 June 2012, an essay published by the National Taxpayers Union was forwarded to Foreign Policy, espousing a critical view of the

application of G-20 membership. The essay's authors, Alex Brill and James K. Glassman, used a numerical table with seven criteria to conclude

that Indonesia, Argentina, Russia and Mexico do not qualify for G-20 membership, and that Switzerland, Singapore, Norway and Malaysia had

overtaken some of the current members. But since the gap between current members Mexico and Russia and the lower part of resulting list

(Malaysia, Saudi Arabia) was only slight, it was concluded that there is no obvious group of twenty nations that should be included in the G20

and that fair and transparent metrics are essential, as they justify the difficult decisions that will be required in order to differentiate among

similarly situated countries.

Wider concerns

The G-20's transparency and accountability have been questioned by critics, who call attention to the absence of a formal charter and the fact

that the most important G-20 meetings are closed-door. The economist Frances Stewart proposed an Economic Security Council within the

United Nations as an alternative to the G-20. In such a council, members would be elected by the General Assembly based on their importance in the world economy, and the contribution they are willing to provide to world economic development.

The cost and extent of summit-related security is often a contentious issue in the hosting country, and G-20 summits have attracted protesters

from a variety of backgrounds, including information activists, nationalists, and opponents of Fractional Reserve Banking and crony capitalism. In 2010, the Toronto G-20 summit sparked mass protests and rioting, leading to the largest mass arrest in Canadian history.

NAFTA

NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada, the U.S. and Mexico making it the world’s largest free

trade area (in terms of GDP). NAFTA was launched to reduce trading costs, increase business investment, and help North America be more

competitive in the global marketplace.

President George H.W. Bush, Mexican President Salinas, and Canadian Prime Minister Brian Mulroney signed NAFTA in 1992. It was ratified

by the legislatures of the three countries in 1993. The U.S. House of Representatives approved it by 234 to 200 on November 17, 1993. The U.S.

Senate approved it by 60 to 38 on November 20, three days later. It was signed into law by President Bill Clinton on December 8, 1993 and

entered force January 1, 1994. Although President Bush signed it, it was a priority of President Clinton's, and its passage is considered one of his

first successes.

How Was NAFTA Started?:

The impetus for NAFTA actually began with President Ronald Reagan, who campaigned on a North American common market. In 1984,

Congress passed the Trade and Tariff Act. This is important because it gave the President "fast-track" authority to negotiate free trade

agreements, while only allowing Congress the ability to approve or disapprove, not change negotiating points. Canadian Prime Minister

Mulroney agreed with Reagan to begin negotiations for the Canada-U.S. Free Trade Agreement, which was signed in 1988, went into effect in

1989 and is now suspended due to NAFTA.

Meanwhile, Mexican President Salinas and President Bush began negotiations for a liberalized trade between the two countries. Prior to

NAFTA, Mexican tariffs on U.S. imports were 250% higher than U.S. tariffs on Mexican imports. In 1991, Canada requested a trilateral

agreement, which then led to NAFTA. In 1993, concerns about liberalization of labor and environmental regulations led to the adoption of two

addendums to NAFTA.

Why Was NAFTA Formed?:

Article 102 of the NAFTA agreement outlines its purpose:

Grant the signatories Most Favored Nation status.

Eliminate barriers to trade and facilitate the cross-border movement of goods and services.

Promote conditions of fair competition.

Increase investment opportunities.

Provide protection and enforcement of intellectual property rights.

Create procedures for the resolution of trade disputes.

Establish a framework for further trilateral, regional and multilateral cooperation to expand NAFTA's benefits.

Has NAFTA Fulfilled Its Purpose?:

NAFTA has eliminated trade barriers, increased investment opportunities, and established procedures for resolution of trade disputes. Most

important, it has increased the competitiveness of the three countries involved on the global marketplace. This has become especially important

with the launch of the European Union and the China and other emerging market countries. In 2007, the EU replaced the U.S. as the world's

largest economy.

Despite NAFTA's benefits, it has remained highly controversial. NAFTA's disadvantages are usually pointed out during Presidential

campaigns. In 1992, before NAFTA was even ratified, Independent Presidential candidate Ross Perot famously warned "You're going to hear a

giant sucking sound of jobs being pulled out of this country." Ross predicted that the U.S. would lose 5 million jobs -- a whopping 4% of total

U.S. employment -- to lower-cost Mexican workers. In fact, this never happened as Mexico entered a recession and the U.S. entered a period of

prosperity. True, American workers were displaced by low-cost Mexican imports. But research showed it was more like 2,000 per month.

(Source: Brad Delong, "Jobs and NAFTA")

NAFTA and the 2008 Presidential Campaign:

NAFTA was attacked from all sides during the 2008 Presidential campaign. Barack Obama blamed NAFTA for growing unemployment. He said

it helped businesses at the expense of workers in the U.S. It also did not provide enough protection against exploitation of workers NAFTA all

together. However, Obama hasn't done anything about NAFTA since becoming President.

In 2008, Republican candidate Ron. He said it was responsible for a NAFTA Superhighway and compared it to the European Union. However,

unlike the EU, NAFTA does not enforce a single currency among its signatories. Paul has maintained this position in his 2012 campaign.

Republican nominee John McCain supported NAFTA, as he did all free trade agreements. In fact, he wanted to enforce an existing section

within NAFTA that promised to open up the U.S. to the Mexican trucking industry.

Article 102: Objectives

1. The objectives of this Agreement, as elaborated more specifically through its principles and rules, including national treatment, most-favored-nation treatment and transparency, are to:

a) Eliminate barriers to trade in, and facilitate the cross-border movement of, goods and services between the territories of the Parties;

b) Promote conditions of fair competition in the free trade area;

c) Increase substantially investment opportunities in the territories of the Parties;

d) Provide adequate and effective protection and enforcement of intellectual property rights in each Party's territory;

e) Create effective procedures for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes; and

f) Establish a framework for further trilateral, regional and multilateral cooperation to expand and enhance the benefits of this Agreement.

2. The Parties shall interpret and apply the provisions of this Agreement in the light of its objectives set out in paragraph 1 and in accordance with applicable rules of international law.

Article 103: Relation to Other Agreements

1. The Parties affirm their existing rights and obligations with respect to each other under the General Agreement on Tariffs and Trade and other agreements to which such Parties are party.

2. In the event of any inconsistency between this Agreement and such other agreements, this Agreement shall prevail to the extent of the inconsistency, except as otherwise provided in this Agreement.

Article 104: Relation to Environmental and Conservation Agreements

1. In the event of any inconsistency between this Agreement and the specific trade obligations set out in:

a) The Convention on International Trade in Endangered Species of Wild Fauna and Flora , done at Washington, March 3, 1973, as amended June 22, 1979,

b) The Montreal Protocol on Substances that Deplete the Ozone Layer , done at Montreal, September 16, 1987, as amended June 29, 1990,

c) the Basel Convention on the Control of Tran boundary Movements of Hazardous Wastes and Their Disposal , done at Basel, March 22, 1989, on its entry into force for Canada, Mexico and the United States, or

d) The agreements set out in Annex 104.1,

Such obligations shall prevail to the extent of the inconsistency, if where a Party has a choice among equally effective and reasonably available

means of complying with such obligations, the Party chooses the alternative that is the least inconsistent with the other provisions of this

Agreement.

2. The Parties may agree in writing to modify Annex 104.1 to include any amendment to an agreement referred to in paragraph 1, and any other environmental or conservation agreement.

Article 105: Extent of Obligations

The Parties shall ensure that all necessary measures are taken in order to give effect to the provisions of this Agreement, including their observance, except as otherwise provided in this Agreement, by state and provincial governments

What Are the Advantages of NAFTA?:

NAFTA created the world’s largest free trade area. It allows the 450 million people in the U.S., Canada and Mexico to export to each other at a

lower cost. As a result, it is responsible for $1.6 trillion in goods and services annually. Estimates are that NAFTA increases the U.S. economy,

as measured by GDP, by as much as .5% a year.

What Are the Benefits of NAFTA?:

How does NAFTA benefit trade? First, it eliminates tariffs. This reduces inflation by decreasing the costs of imports. Second, NAFTA creates

agreements on international rights for business investors. This reduces the cost of trade, which spurs investment and growth especially for small

businesses. Third, NAFTA provides the ability for firms in member countries to bid on government contracts. Fourth, NAFTA also protects

intellectual properties.

NAFTA Increased Trade in All Goods and Services:

Trade between the NAFTA signatories more than quadrupled, from $297 billion in 1993 to $1.6 trillion in 2009 (latest data available). Exports

from the U.S. to Canada and Mexico grew from $142 billion to $452 billion in 2007, then declined to $397 billion in 2009, thanks to the 2008

financial crisis. Exports from Canada and Mexico to the U.S. increased from $151 billion to $568 billion in 2007, then down to $438 billion in

2009. (Source: Office of the US Trade Representative, NAFTA)

Boosted U.S. Farm Exports:

Thanks to NAFTA, agricultural exports to Canada and Mexico grew from 22% of total U.S. farm exports in 1993 to 30% in 2007. To put this

into perspective, agricultural exports to Canada and Mexico were greater than exports to the next six largest markets combined. Exports to the

two countries nearly doubled, growing 156% compared to a 65% growth to the rest of the world. (Source: U.S. Foreign Agricultural

Service, NAFTA)

NAFTA increased farm exports because it eliminated high Mexican tariffs. Mexico is the top export destination for U.S.-grown beef, rice,

soybean meal, corn sweeteners, apples and beans. It is the second largest export destination for corn, soybeans and oils. (Source: USTR,NAFTA

Facts, March 2008)

Created Trade Surplus in Services:

More than 40% of U.S. GDP is services, such as financial services and health care. These aren't easily transported, so being able to export them

to nearby countries is important. NAFTA boosted U.S. service exports to Canada and Mexico from $25 billion in 1993 to $106.8 billion in 2007,

which dropped to $63.5 billion in 2009 (latest data available). Imports of services from the two countries were only $35 billion.

NAFTA eliminates trade barriers in nearly all service sectors, which are often highly regulated. NAFTA requires governments to publish all

regulations, lowering hidden costs of doing business.

Reduced Oil and Grocery Prices:

The U.S. imported $116.2 billion in oil from Mexico and Canada as shale oil (down from $157.8 billion in 2007). This also reduces U.S. reliance

on oil imports from the Middle East and Venezuela. It is especially important now that the U.S. no longer imports oil from Iran. Why? Mexico is

a friendly country, whereas Venezuela's president often criticizes the U.S. Both Venezuela and Iran have started selling oil in currencies other

than the dollar, contributing to the decline in the dollar's value.

Since NAFTA eliminates tariffs, oil prices are lower. The same is true for food imports, which totaled $29.8 billion in 2010 (up from $28.9

billion in 2009). Without NAFTA, prices for fresh vegetables, chocolate, fresh fruit (except bananas) and beef would be higher. (Source: USTR

,NAFTA Imports)

Stepped Up Foreign Direct Investment:

Since NAFTA was enacted, U.S. foreign direct investment (FDI) in Canada and Mexico more than tripled to $357 billion in 2009, up from

$348.7 billion in 2007. Canadian and Mexican FDI in the U.S. grew to $237.2 billion, up from $219.2 billion in 2007. That means this much

investment poured into U.S. manufacturing, finance/insurance, and banking companies.

NAFTA reduces investors' risk by guaranteeing they will have the same legal rights as local investors. Through NAFTA, investors can make

legal claims against the government if it nationalizes their industry or takes their property by eminent domain. (Source: USTR, NAFTA Section

Index) (Article updated February 2, 2012)

Disadvantages of NAFTA:

NAFTA has many disadvantages. First and foremost, is that NAFTA made it possible for many U.S. manufacturers to move jobs to lower-cost

Mexico. The manufacturers that remained lowered wages to compete in those industries.

The second disadvantage was that many of Mexico's farmers were put out of business by U.S.-subsidized farm products. NAFTA provisions for

Mexican labor and environmental protection were not strong enough to prevent those workers from being exploited.

U.S. Jobs Were Lost:

Since labor is cheaper in Mexico, many manufacturing industries moved part of their production from high-cost U.S. states. Between 1994 and

2010, the U.S. trade deficits with Mexico totaled $97.2 billion, displacing 682,900 U.S. jobs. (However, 116,400 occurred after 2007, and could

have been a result of the financial crisis.) Nearly 80% of the losses were in manufacturing. California, New York, Michigan and Texas were hit

the hardest because they had high concentrations of the industries that moved plants to Mexico. These industries included motor vehicles,

textiles, computers, and electrical appliances. (Source: Economic Policy Institute, "The High Cost of Free Trade," May 3, 2011)

Were Suppressed:

Not all companies in these industries moved to Mexico. The ones that used the threat of moving during union organizing drives. When it became

a choice between joining the union or losing the factory, workers chose the factory. Without union support, the workers had little bargaining

power. This suppressed wage growth. Between 1993 and 1995, 50% of all companies in the industries that were moving to Mexico used the

threat of closing the factory. By 1999, that rate had grown to 65%.

Mexico's Farmers Were Put Out of Business: U.S. Wages

Thanks to NAFTA, Mexico lost 1.3 million farm jobs. The 2002 Farm Bill subsidized U.S. agribusiness by as much as 40% of net farm income.

When NAFTA removed tariffs, corn and other grains were exported to Mexico below cost. Rural Mexican farmers could not compete. At the

same time, Mexico reduced its subsidies to farmers from 33.2% of total farm income in 1990 to 13.2% in 2001. Most of those subsidies went to

Mexico's large farms, anyway.(Source: International Forum on Globalization, Exposing the Myth of Free Trade, February 25, 2003; The

Economist, Tariffs and Tortillas, January 24, 2008)

Maquiladora Workers Were Exploited:

NAFTA expanded the maquiladora program, in which U.S.-owned companies employed Mexican workers near the border to cheaply assemble

products for export to the U.S. This grew to 30% of Mexico's labor force. These workers have "no labor rights or health protections, workdays

stretch out 12 hours or more, and if you are a woman, you could be forced to take a pregnancy test when applying for a job," according to

Continental Social Alliance. (Source: Worldpress.org, Lessons of NAFTA, April 20, 2001)

Mexico's Environment Deteriorated:

In response to NAFTA competitive pressure, Mexico agribusiness used more fertilizers and other chemicals, costing $36 billion per year in

pollution. Rural farmers expanded into more marginal land, resulting in deforestation at a rate of 630,000 hectares per year. (Source: Carnegie

Endowment, NAFTA's Promise and Reality, 2004)

NAFTA Called for Free Access for Mexican Trucks:

Another agreement within NAFTA has not been implemented. NAFTA would have allowed trucks from Mexico to travel within the United

States beyond the current 20-mile commercial zone limit. A demonstration project by the Department of Transportation (DoT) was set up to

review the practicality of this. In 2008, the House of Representatives terminated this project, and prohibited the DoT from allowing this

provision of NAFTA to ever be implemented without Congressional approval.

Congress was concerned that Mexican trucks would have presented a road hazard. They are not subject to the same safety standards as U.S.

trucks. In addition, the U.S. truckers’ organizations and companies, who would have lost business, opposed this portion of NAFTA. Currently,

Mexican trucks must stop at the 20-mile limit and have their goods transferred to U.S. trucks.

There was also a question of reciprocity. The NAFTA agreement would also have allowed unlimited access for U.S. trucks throughout Mexico.

A similar agreement works well between the other NAFTA partner, Canada. However, U.S. trucks are larger and carry heavier loads. This

violates size and weight restrictions imposed by the Mexican government.