World Trade Organization

It succeeded the General Agreement on Trade and Tariff [1944], an organization set up as part of the Bretton woods conference. The WTO was established in 1995 after Uruguay talks and India was a founding member. HQ - Geneva, Switzerland.

Structure:

1. Ministerial Conference - 164 members; Meets every 2 years.
2. General council - Daily work of implementing decisions; Has representatives of all members.
3. Secretariat - Headed by Director general with a 4 year term.

Afghanisthan is the latest member of WTO in December 2015. 10th meeting of WTO was in Nairobi, Kenya first time in an African country.

Functions:

1. Lower barriers to trade i.e. tariff and non tariff.
2. Least developed countries get benefit of world trade
3. Deliberate on trade agreements to achieve above objectives.
4. Cooperation between members on environment and sustainable development.

General council has two bodies:

1. Dispute settlement
2. Trade policy review.

WTO Agreement on Agriculture

This agreement has three pillars: Market Access ( Reduce import duties) , Export competition (Reduce export subsidies), Domestic support ( reduce amber subsidies).

Within domestic subsidies there are the following types:

1. Green Box - Agriculture research, farmer training, drought relief and pest control.


2. Blue box - Subsidies that do not increase with production like subsidies linked with acreage or number of animals.


3. Amber box - Fertilizer subsidies, power subsidies, irrigation subsidies etc. which cause trade distortions.

WTO wants to limit the Amber box subsidies as follows : developed nations should cap them at 5% of the value of food grains produced and calculated at the base price of 1986-1988, developing nations should cap them at 10% of the value of production and no restrictions on least developed countries.

However countries like India opposed this as it would have prevented them from meeting their obligations of MSP and Food security. There was no logic in keeping the prices capped at 1986 limits as inflation wasn't considered. This meant that India couldn't spend to continue its Food Security programs and Minimum Support Price programs.

During the Bali summit 2013, three important agreement were discussed :

1. Trade facilitation agreement


2. Public stock holding limits - Limits to the subsidies that a government can give to farmers.


3. No duty on Least developed countries exports.

It was on the issue of food stock holding that India opposed the agreement. If India had crossed the 10% limits then any country could have dragged it to WTO alleging violation of protocol and this would have led to sanctions on India. And so a peace clause was adopted till December 2017. Under this no country can challenge the public stock holding norms violations until December 2017. This was later extended to a period till a permanent solution is found.

Trade facilitation Agreement is the biggest deal ever to be sanctioned by the WTO and has the ability to boost world trade by $1 trillion dollars. The TFA basically standardizes and simplifies customs procedures and thus slashing costs, time and complexity of taking goods across the world. The TFA ensures that the procedures of trading shall eliminate any point of contact between the customs officials and the traders and so there shall be no room for any delays or corruption.

World Bank

It is an international financial organization formed after the Bretton woods conference in 1944 in USA. The World bank group has five organizations. The chief goal of World Bank is Reduction of Poverty. HQ - Washington. The president of the World Bank is an American citizen.

Fig 1: World Bank Group

World Bank Group

International Bank for Reconstruction and Development

It provides loans at market rates or debt financing to member countries to fund projects that want to improve access to food, potable water, healthcare, transport, energy, education. Thus the banks mandate is to advance worldwide economic development and eradicate poverty.

International Development Association

It provides concessional loans, soft loans and grants to poorest developing nations of the world. Usually countries with credit risk so prohibitive that they cant afford to seek loans from other World Bank programs are granted funds here.

International Finance Corporation

It offers investment, advisory, asset management services to private sector of developing countries to set up businesses. It works with private sector in developing countries to create opportunities for all.

Multilateral Investment Guarantee Agency

It provides insurance against risks ncluding political risks to private sector in developing countries. Non commercial risks in developing countries are safeguarded by this organisation so that foreign direct investment can safely work here.

International Center for Settlement of Investment Disputes.

It is an arbitration institution that aims to resolve disputes between international investors and developing country governments. The cases arent directly handled by it but it provides for support to organizations that solve such disputes. The disputes must be related to legal aspect of a commercial investment.

e.g. A private sector company seeks compensation from a government for withdrawing previously granted permissions.