The role, importance and influence of the WTO, World Bank and IMF
BIG = Band (World bank) I = IMF G = Gatt/WTO
World trade organisation (Role influence and importance)
If you are in the game
(You will) gain
But not the same
They’re doing it again
If you are part of WTO you will gain - decisions cause economic growth to rise for all
countries but NOT the same. High income economies gain the most (USA, Canada, Europe)
They’re doing it again = there is another round
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Round 1 to 7 of WTO/Gatt (every decade or so)
 Put forward by Gatt (General agreement on tariffs and trade)
 Favour high income economies.
 Other countries protested, but less benefit.
 Agenda of WTO rounds favoured high income economies - cutting
protectionism for manufactured goods rather than areas which would
assist developing countries and those focusing on agriculture
 Other countries still thought would gain through the trickle down effect
Uruguay round
 Australia and other agricultural countries met in Cairns, Qld to force
agricultural reforms onto the agenda
 122 countries met at Uruguay - Agricultural countries (Cairns group)
thought they could change the rules so they would benefit
 High income economies proposed further manufacturing and service
reforms but Cairns group voted against any reforms. High income
economies realised they had to do something about agriculture or the
round would break down
 The WTO was forced to include agriculture and fibre agreement
 SAIF cards = identify areas of focus Services Agriculture, Intellectual
property and Fibre agreement
 There were reforms to services and intellectual property = what high
income economies wanted
 BUT also reforms to agriculture = trade liberalisation and reduced
protectionism and NEW multi fibre agreement
 OTHER OUTCOME = creation of the World Trade Court to investigate
allegations of breaches of protectionism.
DOHA round (began 2001 - still incomplete)
 # countries involved rose from 122 to 148 in 2005 with many others
wanting to join - countries outside WTO realised the benefit of being
involved in new rules of lowering protectionism for the member countries
 China has now joined the WTO (if you’re in the game, you will gain)
 Balance of power shifting in world as developing countries have gained
through the Uruguay round
 High income economies realised that without further multilateral trade and
investment reforms there would be fewer gains
 5 basic areas to be covered
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Full hand (five) lead cards
Three sought by the high income economies
Labour laws - international labour laws - high income economies pushing
Environmental - sought by high income
Drugs - high income economies looking for protection for patents on
pharmaceuticals
Two sought by the Cairns group
Agriculture - pushed by the Cairns group
Fibre agreement
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Power is shifting from the high income economies - the balance of gains
will shift to developing countries  developing nations have achieved
greater percentage increases in trade in recent years
Doha meant to be finalised in 2005 - but still not finalised
Doha round of WTO
Aim: reduce agriculture protection, lower tariffs on manufacturing, reduce restrictions on
services  greatest benefit for developing nations (who failed to benefit from earlier WTO
agreements)
High income nations refuse to lower barriers on agriculture and intellectual property
Pre GFC WTO estimate Doha would add $500B to world activity and life 140 million from
poverty.
GFC – trade fell 11% (World Bank figures) so DOHA unlikely to be agreed
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Danger of increased protectionism (Rudd $6B car subsidy – buy local.
Trend to bilateral and regional free trade agreements. 27 in 1990  230 in 2008.
 Regionalisation rather than globalisation.
PROBLEM: Regional agreements lower barriers between members and so entrench
inequality as developing nations do not have access. (The Economist)
Proposed free trade agreement b/w ASEAN and China in 2010, India (2011) and Japan (2010)
will make Asia the largest free trade area in world
SUMMARY
Uruguay  falling tariffs
Reduced protection in agriculture
Barriers in textiles and clothing reduced to two tariff levels
Dispute court set up
Establish standards on intellectual property
new rules on liberalisation of trade in services
International Organisations
Rowing into Port
Role of WTO is to promote trade
Influence - waned because of the creation of trade blocs
Influence = shifting towards the developing countries who are gaining more
WORLD BANK ( formerly ‘International bank for Reconstruction and Development’
 Set up to assist countries damaged by WW2 - rebuild infrastructure (roads,
bridges, power supplies, education and health facilities)
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Provide funds for development projects - i.e projects that will raise potential
production  raise standard of living of less developed countries
Millenium Development goals by 2015 = reduce number of people living on
less than $1 per day to half the 1990 level by 2015 (from 29% to 14.5% of
world), universal primary education, reduce infant mortality, Aids, Malaria
Recent focus on “environmentally friendly” projects
IMF (International Monetary Fund)
 Set up after WW2 to assist countries participate in global economy by
overcoming short term currency crises = balance of payments problems
 Country needs supply of foreign currency or gold to trade with other nations if no foreign currency
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Importers cannot purchase items  lack of capital goods and raw
materials  producers cannot produce local products 
unemployment
Crisis may be caused by:
o Sudden loss of export markets due to inflation
o World overproduction of export products  collapse of prices
o Natural disaster destroying crops or other production
AIM: avoid collapse of value of currency.
 Imposes ‘structural adjustment policy’ before will help  force
countries to adopt accepted economic practices - reduce size of
government, privatise government businesses, deregulate markets,
balance budgets  spread of common global practices.
Problems:
 Asian monetary crisis 1990’s - criticised for lack of help given to Russia, East
Asia and Latin America. Too many economies in crisis at one time - IMF had
insufficient funds to help all.
 Criticised for insisting that government contract (reduce spending, raise
interest rates) Strategy made crisis worse for some countries (READ
Cambridge p.67)
 Can require country increase taxes, reduce subsidies on food, fuel as country
living beyond its means - this harms the poor
The major organisation is still WTO/GATT