Chapter 7: WTO IMF WB

International Monetary Fund

The IMF was formed after the Bretton Woods conference in 1944 in USA. The main function of IMF is to help members overcome balance of payments crisis.


  1. Board of Directors - Annual meeting. 188 members. Country represented by its Finance minister or Central Bank governor.
  2. Executive board -Daily work of executing decisions of Board of directors. 24 members [all elected], 19 elected by all and 5 "appointed" by Largest quota holders are USA, UK, Japan, Germany, France.
  3. Managing director - 5 year term and reappointment possible. HQ - Washington.
IMF quota statistics
Fig 1: IMF quota statistics

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.


  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.


  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 Agreements
Fig 2: WTO Agreements

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.

    World Bank Group

    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.

    Q.Consider the following statements:
    The India-Africa Summit
    1. held in 2015 was the third such Summit
    2. was actually initiated by Jawaharlal Nehru in 1951
    Which of the statements given above is/are correct? (UPSC CSAT 2016)

    • 1 only

    • 2 only

    • Both 1 and 2

    • Neither 1 nor 2

    Ans . A

    1. Third India-Africa Forum Summit was held in New Delhi(India) in Oct 2015 Theme: “Partners in Progress: Towards a Dynamic and Transformative Development Agenda”

    2. First Summit was held in New Delhi in April 2008

    Q.‘Doctors Without Borders (Medecins Sans Frontieres)’, often in the news, is (UPSC CSAT 2016)

    • a division of World Health Organization

    • a non-governmental international organization

    • an inter-governmental agency sponsored by European Union

    • a specialized agency of the United Nations

    Ans . B

    1. It is a non-governmental and non-military organization established by group of French doctors in 1971 – with its Headquarter in Brussels, Belgium.

    Q.Which of the following is not a member of `Gulf Cooperation Council’? (UPSC CSAT 2016)

    • Iran

    • Saudi Arabia

    • Oman

    • Kuwait

    Ans . A

    Q.‘Belt and Road Initiative’ is sometimes mentioned in the news in the context of the affairs of (UPSC CSAT 2016)

    • African Union

    • Brazil

    • European Union

    • China

    Ans . D

    Q.Consider the following pairs :
    Community sometimes In the affairs of mentioned in the news
    1. Kurd - Bangladesh
    2. Madhesi - Nepal
    3. Rohingya - Myanmar
    Which of the pairs given above is/are correctly matched? (UPSC CSAT 2016)

    • 1 and 2

    • 2 only

    • 2 and 3

    • 3 only

    Ans . C

    1. Kurds are from Turkey and Iraq

    Q.With reference to ‘Organization for the Prohibition of Chemical Weapons (OPCW)’, consider the following statements :
    1. It is an organization of European Union in working relation with NATO and WHO.
    2. It monitors chemical industry to prevent new weapons from emerging.
    3. It provides assistance and protection to States (Parties) against chemical weapons threats.
    Which of the statements given above is/are correct? (UPSC CSAT 2016)

    • 1 only

    • 2 and 3 only

    • 1 and 3 only

    • 1, 2 and 3

    Ans . B

    1. It’s an international organization setup in 1997. By the 2001 Relationship Agreement between the OPCW and the United Nations, the OPCW reports on its inspections and other activities to the UN through the office of the secretary-general.

    Q.With reference to Balance of Payments, which of the following constitutes/constitute the Current Account?
    Balance of trade
    Foreign assets
    Balance of invisibles
    Special Drawing Right
    Select the correct answer using the code given below. (UPSC CSAT 2014)

    • 1 only

    • 2 and 3

    • 1 and 3

    • 1, 2 and 4

    Ans . C

    1. Balance of Trade (1) and Balance of invisibles are part of “Current Account”.

    Q.Which of the following organizations brings out the publication known as ‘World Economic Outlook’? (UPSC CSAT 2014)

    • The International Monetary Fund

    • The United Nations Development Programme

    • The World Economic Forum

    • The World Bank

    Ans . A

    1. World Economic Outlook is released by IMF


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