Global Economic Institutions Since World war II, IMF - International Monetary Fund, WTO - World Trade Organization, RTA - Regional Trade Agreements You can follow me if you want to grab other great resources, articles : http://twitter.com/gtabidze

1. International Economic
Institutions Since
World War II

2. Introduction
* The worldwide depression
* The collapse of international trade
* The collapse of the international monetary system
* The collapse of international lending.
* Under these conditions, the world economy continued to suffer
and the prices of goods plummeted by 48% and the value of
international trade dropped by 63%.
1920s and30s
* An international organization to help stabilize exchange rates and
to assist nations that are unable to pay their international debts
* Agreements to reduce trade barriers
* An international organization for providing relief to the war-
damaged nations, and to assist with reconstruction
Discussed Solutions
Worldwide
Problems

3. Introduction
* IMF,
* The World Bank, and
* The Bretton Woods exchange rate
International economic institutions
* Trade should open in all countries. (multilateral opening)
* Nations should not discriminate against other nations.
* In order to ensure the ability of importers to purchase goods
abroad, countries should not limit the buying and selling of
currency when its purpose is to pay for imports.
* An international organization for providing relief to the war-
damaged nations, and to assist with reconstruction
* Exchange rates should be fixed but with the possibility for
periodic adjustment.
Founding principles
The Bretton Woods
Institutions, 1944

4. The IMF, the World Bank, and the WTO
* Began operation on December 27, 1945
* The IMF provides loans to its members under different programs
for the short, medium, and long term.
* Foster global monetary cooperation, secure financial stability,
facilitate international trade, promote high employment and
sustainable economic growth, and reduce poverty around the
world.
* Each member is charged a fee, or quota, as the price of
membership. The size of the quota varies with the size of the
nation’s economy and the importance of its currency in world
trade and payments. A country's quota determines its voting power
and access to financing.
* Important decisions within the IMF are made by vote with the
weight of each nation’s vote proportional to its quota.

5. The IMF, the World Bank, and the WTO
* IMF plays a role in stability of the financial system, either a
national or global.
* Ensure the stability of exchange rates to preserve the development
of world trade.
* The most visible role for the IMF is to intercede, by invitation,
whenever a nation experiences a crisis in its international
payments
- ex. If a country lacks reserves, it cannot pay for its imports,
nor can it pay the interest and principal it owes on its
international borrowings.
Objectives

6. The IMF, the World Bank, and the WTO
Main Functions
* Surveillance
• Assesses in detail the economic situation of each country.
• Discussions with the authorities if economic policies are more
conducive to internal and external stability, including to
promote orderly growth, and offer advice if necessary.
• Economic Outlook and the Global Report on financial
stability in the world
* Technical assistance
• Help countries strengthen their capacity to design and
implement effective policies. Includes the fiscal policy,
monetary policy and exchange control and regulation of the
banking and finance, and statistics.
* Lending operations
• The IMF is also a fund to which countries member can use in
case of difficulties in balance of payments, to help their
recovery.

7. The IMF, the World Bank, and the WTO
GEORGIA
IMF Executive Board Approves US$154 million Stand-by
Arrangement for Georgia
Press Release No.14/377
July 31, 2014

8. The IMF, the World Bank, and the WTO
* The original purpose of the World Bank was to provide financing
mechanisms for rebuilding Europe at the end of World War II
under the International Bank for Reconstruction and Development
* “promote economic and social progress in developing countries
by helping to raise productivity so that people may live a better
and fuller life.”
* Give loans & offers Advice & Training in both the private and
public sectors. Since the 1940s, the World Bank has loaned more
than $330 billion to these developing countries.
* The food Crisis: a Man-Made problem, Safety Nets, Seeds and
Fertilizer, Agriculture research and AgroBusiness, Export bans,
Trade.
• ex. Global Food Response Program ( 2008, $1.2 B)

9. The IMF, the World Bank, and the WTO
GEORGIA, 2008
* Financing envelope of US$823 million from the (IBRD) and
(IDA) and the (MIGA) provided guarantees with a net exposure
of US$22.5 million.
* In the aftermath of the dual crises of 2008, investor confidence
weakened and foreign direct investment (FDI) fell sharply, from
US$1.7 billion in 2007 to about US$680 million in 2009.
* Workers’ remittances declined by about 20 percent and exports by
about 8 percent in real terms.
* In addition, commercial banks’ total assets, loans, and deposits
fell, while nonperforming loans (NPLs) rose and unemployment
reached 17 percent. Poverty and inequality also increased.
SOLUTION

10. The IMF, the World Bank, and the WTO
RESULTS
* Public resource management improved through the introduction
of performance-based budgeting and the establishment of new
local government budgetary systems in all municipalities.
* The overall budget deficit decreased from 9 percent of GDP in
2009 to almost 3 percent in 2012, while the budget share of social
services increased to 40 percent in 2012 from 36 percent in 2009.
* Employment supported by Bank-financed labor-intensive projects
helped mitigate the social impact of the crises. During FY10–13,
Bank-financed transport and regional infrastructure projects
generated about 45,000 person/months of temporary jobs
(exceeding the CPS target of 30,000), and IFC-supported clients
generated over 1,400 permanent jobs.

11. The IMF, the World Bank, and the WTO
RESULTS
* Poverty rates in Georgia decreased from 21 percent in 2010 to
less than 15 percent in 2012, and extreme poverty decreased from
7 percent in 2010 to 4 percent in 2012.
* Systemic banks weathered the crisis. IFC played a critical role in
mobilizing debt and equity financing to support Georgian Banks’
liquidity and capital needs, and helped recapitalize key banks and
restore market confidence. The capital adequacy and liquidity
ratios, returns on assets and equity, and NPL ratio showed a
recovery from the 2009 crisis.
* Regional infrastructure project investments led to tripled daily
water production in the targeted areas and improved access to
water sources for 181,700 people in urban areas and 181,835 in
rural areas. Energy efficiency for water production also doubled,
from 0.63 Kwh/m3 in 2008 to 0.30 Kwh/m3 by May 2013.
* Georgia’s Global Competitiveness and Doing Business rankings
in 2012–13 improved.

12. The IMF, the World Bank, and the WTO
* Oversees the international monetary system.
* Draws its financials resources principally
from the quota subscriptions of its member
countries.
* Promotes exchange stability and order
exchange relations among its member
countries
* Seeks to promote the economic dev. of the
world's poorer countries
* Acquires most of its financial resources by
borrowing on the international bond market
* Provides to the poorest dev. countries whose
per capita GNP is less then $865 a year
special financial assistance through
International Development Association

13. The IMF, the World Bank, and the WTO
* Supplements the currency reserves of its
members through the allocation of SDRs;
To date SDR 21.4 Billion has been issues to
member countries in proportion to their
quotas
* Assists all members - both industrial and
developing countries - that find themselves in
temporary balance of payments difficulties by
providing short-to-medium-term credits
* Encourages private enterprises in developing
countries through its affiliate, the
International Finance Corporation
* Assists developing countries through long-
term financing of development projects and
programs

14. The IMF, the World Bank, and the WTO
Thailand
* During the first half of 1997Primary
contributors to this built up pressure were an
unsustainable current account deficit,
significant appreciation of the real effective
exchange rate, rising foreign debt (in
particular short-term), a deteriorating fiscal
balance, and increasing difficulties in the
financial sector
* On August 20, 1997, the IMF’s Executive Board
approved financial support for Thailand of up to
SDR 2.9 billion or about $4 billion. Additional
financing in the amount of $2.7 billion was
pledged by the World Bank and the Asian
Development Bank while Japan and other
interested countries pledged another $10.5
billion.

15. The IMF, the World Bank, and the WTO
General Agreement on
Tariffs and Trade
* General Agreement on Tariffs and Trade
(GATT) - starts bringing down trade barriers
gradually.
* It was ad hoc & provisional
* It had no provision for creating an
organization
* It allowed contractions in local law & GATT
agreements
* It had contracting parties
* The Uruguay Round created the World Trade
Organization when it began life in 1995
* It is permanent
* It has legal basis because member nations
have verified the WTO agreements
* It doesn't allow any contradictors in local law
* It has members
* The foundation of all WTO and GATT agreements are the principles of national treatment and
nondiscrimination.

16. The IMF, the World Bank, and the WTO
* The WTO has increased economic interdependence and this is
believed to reduce a likelihood of war. It makes it's rules through a
domestic consensus with each country having an equal vote.
* Freer trade cuts the cost of living
* It gives consumers more choice and a broader range of products to
choose from and trade rises incomes and increases employment.
* International trade has grown over the last fifty years from 5
percent of world GDP to over 31 percent in 2011
Liberalizing international trade, a forum for governments to
negotiate trade agreements and to resolve trade disputes

17. The IMF, the World Bank, and the WTO
Liberalizing international trade, a forum for governments to
negotiate trade agreements and to resolve trade disputes
* The first five rounds of negotiations focused exclusively on tariff
reductions in order to increase international trade
* The Kennedy round, focused on tariff reductions, and an anti-
dumping agreement and also included a section of development
* The Tokyo round focused on tariff reductions as well as non-tariff
barrier to trade.
* The Uruguay Round created the World Trade Organization when
it began life in 1995
* The Doha Round focused on agriculture, IP rights, special
differential treatments for small and development countries,
implementation issues

18. The IMF, the World Bank, and the WTO
GEORGIA, member since 2000
* Georgia became the 137th member of the World Trade
Organization today (14 June). The fourth former Soviet republic
to join the WTO and has done so in less than 4 years after
applying for membership.”
* Starting from 2005, the annual trade growth increased rapidly to
17% for export and 19% for import. Georgia’s economy started to
show rather high growth rates of real GDP (an average of 6% per
year in 2003-2011).
* The abrupt trade liberalization and full openness of the market
did not become the engine of economic growth. The main
obstacle to economic growth in Georgia is the low quality of
institutions such as political and institutional stability, law and
order, judicial independence of courts, i.e. property rights in the
broadest sense of the term.

19. Regional Trade Agreements
* Regional Trade Agreements are bilateral (two countries) or
pluryilateral (several countries). The WTO is not an RTA because
it is worldwide in scope and not just regional.
RTA

20. Regional Trade Agreements

21. Regional Trade Agreements
RTA
Reasons for regional trade agreements
* Economic growth
• Larger market creates economic of scale, encourages
specialization, attracts foreign investment
* Non-economic objectives
• Helps manage immigration flows, or enhances regional
security
* Solidifies domestic economic reforms
• East European nations have looked to associations with the
EU as a way of locking in economic reforms

22. Regional Trade Agreements
RTA
Effects of regional trade agreements
* Static effects
• Trade creation effect (consumption effect, production effect)
• Trade diversion effect
* Dynamic effects
• Economies of scale
• Greater competition
• Investment stimulus

23. Regional Trade Agreements
RTA
* When a WTO member signs an RTA, it is
obligated to notify the WTO.
* The GATT and the WTO have allowed RTAs
under the assumption that they create more
new trade than they destroy with their
discriminatory practices. In economic terms,
trade creation must exceed trade diversion.

24. Regional Trade Agreements
RTA
* When a WTO member signs an RTA, it is
obligated to notify the WTO.
* The GATT and the WTO have allowed RTAs
under the assumption that they create more
new trade than they destroy with their
discriminatory practices. In economic terms,
trade creation must exceed trade diversion.

25. The “BIG 3” International Economic Institutions
RTA