INTERNATIONAL BUSINESS

ASSIGNMENT

ON

Discuss the evolution, objectives and functions of WTO & IBRD

Course Title:- INTERNATIONAL BUSINESS (MBA-302)

Submitted By,

Vishwajeet S. Tekade

MBA-(General) Section – A

ERP I’d :- 0201MBA138

Page 1
 INTERNATIONAL BUSINESS

WTO
(WORLD TRADE ORGANIZATION)

EVOLUTION:-

The World Trade Organization (WTO) is an inter governmental

organization that regulates and facilitates international trade between nations.
Governments use the organization to establish, revise, and enforce the rules that
govern international trade. It officially commenced operations on 1 January 1995,
pursuant to the 1994 Marrakesh Agreement, thus replacing the General Agreement
on Tariffs and Trade (GATT) that had been established in 1948. The WTO is the
world's largest international economic organization, with 164 member states
representing over 98% of global trade and global GDP.
The WTO facilitates trade in goods, services and intellectual property among
participating countries by providing a framework for negotiating trade agreements,
which usually aim to reduce or eliminate tariffs, quotas, and other restrictions;
these agreements are signed by representatives of member governments and
ratified by their legislatures. The WTO also administers independent dispute
resolution for enforcing participants' adherence to trade agreements and resolving
trade-related disputes. The organization prohibits discrimination between trading
partners, but provides exceptions for environmental protection, national security,
and other important goals.
The WTO is headquartered in Geneva, Switzerland. Its top decision making
body is the Ministerial Conference, which is composed of all member states and
usually convenes biennially; consensus is emphasized in all decisions. Day-to-day
functions are handled by the General Council, made up of representatives from all
members. A Secretariat of over 600 personnel, led by the Director-General and
four deputies, provides administrative, professional, and technical services. The
WTO's annual budget is roughly 220 million USD, which is contributed by
members based on their proportion of international trade.
Studies show the WTO has boosted trade and reduced trade barriers. It has
also influenced trade agreement generally; A 2017 analysis found that the vast
majority of preferential trade agreements (PTAs) up to that point explicitly
reference the WTO, with substantial portions of text copied from WTO
agreements. Goal 10 of the United Nations Sustainable Development Goals also
referenced WTO agreements as instruments of reducing inequality. However,

Page 2
 INTERNATIONAL BUSINESS

critics contend that the benefits of WTO-facilitated free trade are not shared
equally, citing the outcomes of negotiations and data showing a continually
widening gap between rich and poor nations.
The WTO precursor General Agreement on Tariffs and Trade (GATT), was
established by a multilateral treaty of 23 countries in 1947 after World War II in
the wake of other new multilateral institutions dedicated to international economic
cooperation—such as the World Bank (founded 1944) and the International
Monetary Fund (founded 1944 or 1945). A comparable international institution for
trade, named the International Trade Organization never started as the U.S. and
other signatories did not ratify the establishment treaty, and so GATT slowly
became a de facto international organization.

Page 3
 INTERNATIONAL BUSINESS

Objectives of WTO :-

The six key objectives of World Trade Organisation have been discussed below.

1. Establishing and Enforcing Rules for International Trade

The international trading rules by the World Trade Organization are established
under three separate agreements – rules relating to the international trade in goods;
the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
and the General Agreement on Trade in Services (GATS).
The enforcement of rules by the WTO takes place by way of a multilateral
system of disputes settlement in the instances of violation of trade rules by member
countries. The members are obligated under ratified agreements to honour and
abide by the procedures and judgments.

2. Acting As A Global Apex Forum

World Trade organisation is the global forum for monitoring and negotiating
further trade liberalisation. The premise of trade liberalisation measures undertaken
by WTO is based on the benefits of member countries to optimally utilise the
position of comparative advantage due to free and fair trade regime.

3. Resolution Of Trade Disputes

Trade disputes, before the WTO, usually arise out of deviation from
agreements between member countries. The resolution of such trade disputes does
not take place unilaterally but through a multilateral system involving set rules and
procedures before the dispute settlement body.

4. Increasing Transparency in The Decision-Making Process

The World Trade Organisation attempts to increase transparency in the
decision-making process by way of more participation in the decision-making and
consensus rule, in particular. The combined effect of such measures helps to
develop institutional transparency.

5. Collaboration Between International Economic Institutions

The global economic institutions include the World Trade Organisation, the
International Monetary Fund, the United Nations Conference on Trade and
Development, and the World Bank.

Page 4
 INTERNATIONAL BUSINESS

With the advent of globalization, close cooperation has become necessary

between multilateral institutions. These institutions are functional in the sector of
formulation and implementation of a global economic policy framework. In the
absence of regular consultation and mutual cooperation, policymaking may be
disrupted.

6. Safeguarding The Trading Interest of Developing Countries

Stringent regulations are implemented by the WTO to protect the trading interests
of developing countries. It supports such member countries to leverage the
capacity for carrying out the mandates of the organisation, managing disputes, and
implementing relevant technical standards.

Page 5
 INTERNATIONAL BUSINESS

Functions of WTO:-
1. To implement rules and provisions related to trade policy review mechanism.

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

trade and tariff.

3. To provide facilities for implementation, administration and operation of

multilateral and bilateral agreements of the world trade.

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

5. To ensure the optimum use of world resources.

6. To assist international organizations such as, IMF and IBRD for establishing
coherence in Universal Economic Policy determination.

7. Operating under the principle of non-discrimination, WTO lowers the

trade barriers across countries to regulate trade through negotiations. It
results in lower cost of production which leads to lower cost of finished
goods thereby reducing the cost of living.

8. WTO functions as a negotiator between countries by making rules that

are acceptable to all. Further, it also provides a dispute resolution channel
between countries.

9. It cuts the cost of doing business internationally; and also stimulates

economic growth and development.

10. WTO encourages good governance by encouraging transparency in

trade transactions.

Page 6
 INTERNATIONAL BUSINESS

11. It helps developing countries foster their economies by providing a

level playing field for developing trade relations across countries.

Page 7
 INTERNATIONAL BUSINESS

IBRD
(International Bank of Reconstruction and Development)
Evolution:-
The International Bank of Reconstruction and Development (IBRD) is one
of the two major institutions that make up the World Bank, with the other being
the International Development Association (IDA). The IDA is a financial
institution dedicated to making developmental loans to the world’s poorest
countries. The IBRD was founded in 1944 with the goal of helping war-torn
European countries rebuild their infrastructure and their economies.

Following the recovery from World War II, the International Bank of
Reconstruction and Development broadened its mandate to increasing global
economic growth and eliminating poverty. Today, the IBRD focuses its services
on middle-income countries or countries where the per capita income ranges from
$1,026 to $12,375 per year. The IBRD adjusts these and other figures a bit yearly
to account for inflation, economic changes within middle-income countries, and
other factors.

These countries, like Indonesia, India, and Thailand, are often home to fast-
growing economies that attract a lot of foreign investment and large infrastructure
building projects. At the same time, middle-income countries are home to 70% of
the world’s poor people, as the benefits of this economic growth are unevenly
distributed across their populations. The success of middle-income countries is
precarious, as many economies that look promising will collapse under the weight
of corruption and economic mismanagement.

The IBRD was founded in anticipation of the end of World War II, during
the Bretton Woods Conference of 1944, a gathering of the 44 Allied Nations of the Second
World War meant to establish the post-war global financial order. Along with establishing
a new global monetary policy regime, the Bretton Woods Conference was also where the
International Monetary Fund and the IBRD were formed. The first loan ever issued by
the International Bank Of Reconstruction and Development was to the government of
France, to help finance the reconstruction of critical infrastructure. Following the
reconstruction of Europe, the IBRD shifted its focus to promoting economic development
in other parts of the world.

Page 8
 INTERNATIONAL BUSINESS

Objectives:-
1. To help in the reconstruction and development of member countries by
facilitating the investment of capital for the productive purposes, including the
restoration and reconstruction of economies devastated by war.
2. To encourage the development of productive resources in developing countries
by supplying them investment capital.
3. To promote private foreign investment through guarantees and participation in
loans and other investment made by private investors.
4. To supplement private foreign investments by direct loans out of its own capital
for productive purposes.
5. To promote long term balances growth of international trade and the
maintenance of equilibrium in the balance payments of member countries by
encouraging long term international investments.
6. To bring about an easy transition from a war economy to a peace time economy.
7. To help in raising productivity, the standard of living and the conditions of
labour in member countries.

Page 9
 INTERNATIONAL BUSINESS

Functions:-
At Present, the World Bank is playing an important role in providing loans
for development works to member countries, especially to underdeveloped
countries. The bank provides loans for various development projects of 5 to 20
years duration.

1. Bank can grant loans to members countries up to 20 % of its share in paid-up

capital.

2. Bank also provides loans to private investors belonging to the members on its
own guarantee, but private investors need to take permission of its native country.
Banks charge 1% to 2% as service charge.

3. The quantum of loan service, interest rate, terms and conditions are decided by
the World Bank itself.

4. Generally bank grant loans for a particular project duly submitted to the bank
by the member country.

5. The debtor nation has to repay either in reserve currencies or in the currencies in
which the loan was sanctioned.

Page
10