Download International Institutions

International Institutions
The IMF, GATT and WTO
Mikkeli 2005
Compiled by Rulzion Rattray
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International Monetary Fund (IMF)
• IMF - key role in providing foreign currencies and other
sources of world liquidity to support growth of
international trade. Also stabilisation programmes
provide support for economies in ‘crisis’.
• Countries with balance of trade deficits:
– Low foreign exchange reserves to meet the deficit and likely
to have low GDP per capita, meaning that borrowing is
difficult. Likely to have a poor credit rating. It is for this type
of liquidity problem that the IMF was set up.
– IMF has a pool of foreign currencies that can be used to
‘finance’ temporary balance of payments deficits. This is more
advantageous than deflation, protectionist… policy
alternatives.
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(IMF) Varying conditions on borrowing
• At the ‘hard end’ of the spectrum are IMF Stabilisation
Programmes. The main elements to these are some (or
all) of the following:
– Fiscal contraction - reduction in budget deficit via reduced
public spending or increased tax.
– Monetary contraction - restrictions on credit to public sector
and increases in interest rates.
– Devaluation of the exchange rate (often a pre-condition of a
stabilisation programme)
– Liberalisation of the economy - supply side policies,
privatisation…
– Incomes policies - restrictions on wages, transfer
payments and reduction of subsidies.
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The WTO and GATT
• GATT objectives were to reduce barriers to trade in
belief that freer trade would raise living standards in
all participating countries.
– Since 1947 (when GATT signed) there have been seven
rounds of trade negotiations with the average tariff in
industrialised nations falling from 40% in 1947 to below 5%
in 1995 when GATT was replaced by the WTO.
– WTO has 135 member countries with China’s membership
bringing it to 136. Another 30 are waiting to join. It
continues to seek a reduction in trade barriers and also seeks
to resolve (rule on) trade disputes.
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WTO and Trade Disputes
• Crucially, trade disputes come under the remit
of the WTO.
– Unlike GATT, WTO the findings of dispute panels
cannot be vetoed. Countries in violation must
remove the cause of the violation or pay
compensation. If offending party fails to
comply,WTO ruling can sanction specified
retaliation.
• More than half of the disputes brought to the
WTO involve the USA and Europe!
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GATT / WTO Principles:• Non Discrimination - the benefits of any
bilateral agreements must extend to all
members (I.e. become multilateral).
• Progressive Reduction in Tariff and Nontariff Barriers.
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Trade & the World Economy
Growth in World GDP & Merchandise Trade average annual % change
GDP
Trade
1870-1900
2,9
3,8
1900-13
2,5
4,3
1913-1950
2,0
,6
1950-1973
5,1
8,2
1973-1997
2,8
4,2
Source WTO Statistics, cited in Grifiths, A., & Wall, S., 1999 pp 631
Share of Inter Regional Trade in total trade between nations located in region
Western Europe
Central America
North America
Latin America
Asia
Africa
Middle East
1928
50,7
19,0
25,0
11,1
45,5
10,3
5,0
1938
48,8
13,2
22,4
17,7
66,4
8,8
3,6
1948
41,8
46,4
27,1
17,7
38,9
8,4
20,3
1968
63,0
63,3
36,8
18,7
36,6
9,1
8,7
1979
66,2
54,0
29,9
20,2
41,0
5,6
6,4
1996
68,3
18,7
36,0
21,2
51,9
9,2
7,4
Source WTO Statistics, cited in Grifiths, A., & Wall, S., 1999 pp 632
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GDP Gross Domestic Product
• Gross domestic product is the sum of gross
value added by all resident producers in the
economy plus any product taxes and minus
any subsidies not included in the value of
the products. It is calculated without making
deductions for depreciation of fabricated
assets or for depletion and degradation of
natural resources.
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Some World Economies
1998
Ireland
Finland
Denmark
Norway
Sweden
Spain
China
Italy
France
United Kingdom
Germany
Japan
US
1999
2000
2001
2002
2002
2003
66,988.31 €
76,919.75 €
89,609.95 €
102,840.27 €
114,737.81 €
129,338.49 €
135,857.16 €
106,889.34 €
115,970.02 €
119,985.53 €
130,145.65 €
135,228.65 €
139,716.77 €
143,206.69 €
149,180.02 €
154,054.67 €
162,428.92 €
171,672.48 €
177,871.38 €
183,086.77 €
188,713.52 €
138690.95
133915.38
148308.88
181143.03
189676.51
202462.08
196402.83
218162.59
221347.77
235695.53
259759.76
244879.86
255052.63
266095.79
494140.13
527956.67
565418.96
609732.79
653288.13
696206.41
741216.21
733803.63
850145.05
936911.83
1166896.07
1328469.01
1305632.86
1183647.53
1026282.49
1072872.06
1107996.3
1166547.02
1220144.91
1258347.23
1301078.88
1251128.11
1305628.39
1355096.34
1420130.8
1475577.77
1520796.99
1547579.12
1,171,884.39 € 1,271,355.03 € 1,371,570.56 € 1,562,011.49 € 1,598,130.23 € 1,658,044.52 € 1,573,250.38 €
1,874,711.11 € 1,927,538.60 € 1,978,632.78 € 2,030,028.63 € 2,073,729.42 € 2,110,430.51 € 2,136,532.37 €
3806433.26
3523463.11
4219596.04
5161145.73
4630211.59
4238179.51
3877392.73
7,323,015.87 € 7,802,854.59 € 8,694,559.10 € 10,624,458.87 € 11,273,214.29 € 11,079,069.77 € 9,694,159.30 €
Above figure are based on (Euro Year on year Exchange Rate).
Source of information: World Trade Organisation
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Finland & Ireland
Finland
Finland Population
Ireland
Population Ireland
GDP/Head Finland
GDP/Head Ireland
1997
1998
1999
2000
2001
2002
2003
106889.3
115970 119985.5 130145.7 135228.7 139716.8 143206.7
5139.83
5153.5 5165.69 5177.69
5189.5
5201.1 5212.51
66988.31 76919.75 89609.95 102840.3 114737.8 129338.5 135857.2
3673.09 3714.45 3755.31 3796.78 3839.22 3882.34 3926.11
20.79628 22.50316 23.2274 25.13585 26.05813 26.86293 27.47365
18.23759 20.70825 23.8622 27.08618 29.88571 33.31457 34.6035
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Source of
All figures:
WTO.
30
25
20
GDP/Head Ireland
15
GDP/Head Finland
10
5
0
1997 1998 1999 2000 2001
2002 2003
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References
• Griffiths, A., and Wall, S., (Eds), (1999), “Applied
Economics”, Prentice Hall.
• Tayeb, M., (2000), “International Management;
Theories and Practice”, Prentice Hall.
• Shenkar, O. and Luo, Y.(2004), “International
Business”, John Wiley and Sons, Inc.
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