International bodies

1.IMF- SDR regime

2.WTO theory & current
 Post WW2: cooperation than conflict

World
Self study
Bank
Brettonwoods
New Hampshire lecture
IMF
USA
1944 lecture
GATT WTO (1995)
 IMF
BoD Xo.Boar MD Structure
d
All
nations
(188)
FinMin /
Gov.

Annual
Meet
 IMF
1. USA
BoD Xo.Boar MD 2. Structure
UK
d 3. Japan
All 4. Germany
Daily
nations
work 5. France
(188)
FinMin / 24
Gov. members:

Annual 5
Meet reserved
 IMF
BoD Xo.Boar MD Structure
d
5 year
All nations
Daily work (reappoint
(188)
Yes)

FinMin / 24
Washington
Gov. members:

Annual
5 reserved +Staff
Meet
 IMF
1. Surveillance: global, regional and
national.
2. Help members in BoP crisis, thus Functions
help in international trade
3. Technical assistance, training,
advisory role.
 Gold standard Currency
Exchange system
1.Features?
2.Why failed?
Gold Standad Exchange Rate (upto to 70s)

(+1/-1)%
band 1 Rs. = $ 0.30

1 Dollar

Gold pegging
Gold backed
0.30 x 0.88
0.88 gms =0.26 gm
 Gold backed Exchange Rate (upto 70s)

1 SDR =1 $ 1 Rs. = $ 0.30

1 Dollar

Quota contribution 0.30 x 0.88

0.88 gms =0.26 gm
 How does Bank work?
Pay 0-4-9% Pay 10-15-18%

Depositors Borrowers
 IMF SDR

1 SDR =1 $

Depositors
Earn
 IMF SDR

Profit Margin

Depositors Borrowers
Earn Pay
 Cold war years
Arms race
Large subsidies to defense sector
Donations to puppet regimes
Inflation – including gold price
 1970s

1 Ounce Gold = $35

Market price 1 oz= >$40

Nixon stops
1 Ounce Gold = $35
1. 73: floating exchange
2. 92: India also

Market price 1 oz= >$40

 SDR
1. Also called “Paper gold”
2. Upto 70s: 1 SDR = 1 US $ =0.88
grams of gold Meaning
3. Present system: 1 SDR = basket of 4
currency ($, Euro, Pound, Yen)
4. Weight assigned as per their imp. In
international trade
 SDR: weight assigned to 4 currency
Currency WT
1. Yen 9.4
2.Pound 11.3
3. Euro 37.4
4. Dollar 41.9
100
 What’s the value of SDR?
Currency WT RATE WT x Rate
yen 9.4 1y=?$  
Pound 11.3 1$=?pound  
Euro 37.4 1$=Euro
dollar 41.9 1
100 1 SDR = ~1.4 USTOTAL
Dollars
 IMF total reserve = SDR
Size of Economy=> Quota
Quota => SDR contribution
SDR contribution => Voting power
SDR Deposit: 0.05% interest rate paid by IMF
SDR Loan: 1.050% interest rate charged by
IMF
SDR can be converted to member currency
 IMF Quota
Italy BRICS
3% 1/5th World GDP
China Canada 2/5th Population
4% 3% Russia India
France
Saudi 2% 2%
5% 3% Others
UK 43%
5%
Germany
6%
Japan USA
6% 18% Size of economy, GDP,
openness to world economy
 IMF reforms (Quota)-2010
▲ quota of emerging economies
India: 2.4% (11th) => 2.7% (8th)
China: 4% => 6.4%
by ▼ quota of poor nations
Proposal needs 70% votes, hence pending
 IMF Reforms: Governance
BEFORE POST-2010 Reform

Executive board: 24  All directors elected

directors  No permanent chairs
Top-5 Quota holders  Review composition
decide 5 / 24 directors every 8 years
 NEED 85%
votes….PENDING
 CRITICISM
1. Surveillance….FAIL
2. Mexico (1995)
3. East Asian Crisis (1997) IMF
4. Subprime crisis, PIGS-crisis,
European Sovereign debt crisis…X
5. SDR interest rate high
6. Reforms in Quota / governance…X
I’ll do belly-dance,
if USA votes in favor of IMF-Reforms
- Christine Lagarde, October, 2014
 BRICS vs AIIB: comparison for MCQs
BRICS Bank, Shanghai AIIB, Beijing

•AIIB: Asian infra investment bank

6th summit Fortaleza 2014=>ops.to start from 2016 •2014: MoU signed. start work from ’15.
•2014: China+21 member MoU=>2015 starts.

Five members, equal voting power (not in IMF or AIIB.) China + 21 members. S.Korea, Aussie did not join.

•100 billion capital=>Shareholding based on GDP.

capital: 10 million x 5 members •Voting power based on shareholding. China:1st, India:
2nd.
(hence equal voting)
•But, China to dilute shareholding when new members
come.

•as name suggest: infra. investment projects

3 function: loan for infra, sus.Development, BoP crisis. •Structure: Board of governors >> directors >> President
(HQ: Beijing)

For BoP crisis: separate contingency reserve: 100 billion. 2013: Jinping ‘s idea: make profit from forex reserve+
China gave highest. Silkroad finance+ U$ domination reduce.
 BRICS bank and AIIB
Asian Infrastructure Investment Bank LINK
BRICS Bank Link
 WTO: the origin of,
World
Bank Self study
Bretton
Woods
New Hampshire IMF done
Uruguay
1944 Round
GATT Marrakesh
’94
WTO ’95
GS2: IR-Economy
Global grouping-agreements
International Bodies: WTO
1.Structure, function
2.SPS Agreement
3.WTO Food subsidy issues
4.WTO Bali Package
5.WTO TFA
 Ministerial
Conference
Structure
WTO
General
Council

Secretariat
 Latest member: Yemen (2014, June)

160 MEMBERS
Appoint DG
Ministerial
Trade agreements
Conference
WTO Every 2 yr
Structure General
Council 9th @Bali’13

Secretariat
 Ministerial
Conference
WTO Day2day D/M
Structure General Trade Policy
@Geneva
Council review
Bodies
DG Dispute
settlement
 Ministerial
Conference

WTO General Council

Structure
Roberto Azevêdo (Brazil)

DG 4 yrs (reappoint yes)

Secretariat @Geneva
 WTO
1. ▼ Barrier to trade:
i. Tariff
ii. Non-tariff Functions
2. L.D.C get benefit from world trade
3. Make agreements to implement 1+2
4. Dispute settlement if #3s violated
5. Coop. with others sus.Dvlp,
environment
0% Excise duty 36% custom duty
12% CVD
Sales Tax/ VAT / octroi

Tariff
 1. Red tapes in custom
clearance
2. Quotas for each
nation

Non-Tarriff
1. Subsidies @Detroit
2. Cheap electricity
3. Cheap loans
4. Interest subvention
5. EPF contribution

Low cost of production

Non-Tarriff
1. Public procurement
2. First preference
Deny application

Non-Tarriff
 Absurd quality controls
Relaxed norms Safety norms

Non-Tarriff
 Tariff Subsidies
Trade
Barriers Public
Non Procurement
Tariff
TBT
QUALITY
CONTROL
SPS
Syllabus
1. GS2: Policy affecting Indian Alphonso
2. GS3: Food processing American poultry
 WTO
1. Sanitary and phytosanitary (SPS)
measures
SPS
2. Member can ban import to protect Agreement
local plant, animal and human lives.
3. QC must be scientific. FAO-Codex
standards can be used
4. Developing countries be given
additional time to comply
 WTO- SPS
1. 2014, April: EU trade commissioner
bans Indian Alphonso, egg plant &
other veggies EU bans
Indian Mango
2. Reason: fruit fly contamination in
earlier shipment (2013).
3. EU not largest importer but bad
publicity
 WTO
1. From April 2014, only APEDA
certified Indian mangoes exported SPS
EU-Mango
2. Agricultural and Processed Food ban
Products and Export Development
Authority (APEDA)
3. 2015, Jan: finally ban lifted.
 WTO
1. 2007: avian influenza. India bans US
poultry import. India bans
2. But even after that bird flu outbreaks American
in India. Poultry
3. 2012: US challenged ban in WTO
4. 2014: WTO rules in US-favour,
because India gave no scientific
evidence.
 WTO-SPS
1. More US poultry products in Indian
market – cheaper
Poultry
2. Increased competition for desi Interests
players (India 4th largest producer)
3. 2015, Jan: India appealed against
this order.
 Tariff Bali Package

WTO Subsidies Peace clause

Trade
Barriers Non Public TFA
Tariff Procurement
TBT
QUALITY
CONTROL
SPS
Syllabus
1. GS2: Policy affecting Indian Alphonso
2. GS3: Farm subsidies American poultry
WTO: agreements
Indian Alphonso
American poultry

Food subsidies
Peace-clause, TFA
 WTO-AoA
Three pillars
1. ▼ Import Duty Agreement on
2. ▼ Export Subsidy Agriculture
3. ▼ Domestic Subsidy (Amber box)
 No Green R&D, training, pest control
Limits
Fertilizer
Amber Electricity
5%
Subsidies disruptiv
e Diesel
10%
MSP

No Not increase with production

Blue
Limits Iceland, Slovenia
 Amber Box: 86-87 production

$100 Billion De-minimum Level $10 Billion

5% 10%

$5 billion $1 Billion
 AoA: 10%
1. ‘86: production low.
2. US’s 5%>> India’s 10% India
3. Inflation unaccounted Opposed
because
4. Food security for poors
5. Income support for farmers
 Bali Summit
9 Ministerial, Bali Indonesia, Dec’13
th

1. L.D.C. Duty free quota free market THREE

access Packages
2. Peace Clause
3. Trade facilitation agreement (TFA)
 Green No limits

Blue No Limit
AoA
Limits Developed (US): 5%
Subsidies Amber
Developing India: 10%

Peace-Clause
1. WTO won’t hear cases for 4 years (2017)
2. Permanent solution by 11th Conference
3. Subsidies only for food security / pub.stockholding
 Bali Summit
9 Ministerial, Bali Indonesia, Dec’13
th

1. L.D.C. Duty free quota free market THREE

access Packages
2. Peace Clause
3. Trade facilitation agreement (TFA)
 Customs Clearance Trade Facilitation
Agreement (TFA)
Bali Summit,
Dec 2013
BEFORE To be Effective from 2015 AFTER
BENEFIT?
1. Apply, pay fees/taxes Online
2. Single window for docu.-check ▲$1 Trillion GDP
3. Faster clearance to perishable goods ▲ 21 million jobs
4. No middlemen/agent needed
5. Coordination bodies @ Nat.
+Intl.level
 WTO-TFA
1. Deadline to sign: 31 July 2014
st

2. Modi refuses: need permanent To sign

solution to food subsidy or
3. Nov’14: Modi Obama deal NOT to sign?
4. Peace clause extended to infinite
time till solution reached
5. India’s food security programs won’t
be challenged in WTO
6. US will back India @WTO
 FCI-PDS
1. Reduce subsidy burden
2. Direct cash transfer to both farmers Shanta
and poors Kumar (jan.
3. NFSA: 67% => Bottom 40% 2015)
 Shanta Kumar on NFSA

Antyodaya Priority Households

3: rice 50% below MSP

2: wheat Wheat MSP: 14/kg
1: coarse Sell @7/kg
 FCI-PDS
1. Version#1: deliberately asking to
reduce food subsidy, to please USA- Shanta
WTO & first world Kumar (jan.
2. Version#2: Modi unlikely to 2015)
implement after Delhi Defeat
3. GS3 farm subsidy-buffer stock:
click me
IMF quota reform
WTO: structure, SPS-Mango-Poultry
AoA- Food subsides
Bali summit, Peace clause, TFA