3.2A International Organisations

• What role does the IMF have in globalisation?

  Based in Washington DC, the IMF channels loans from rich nations to countries that apply for help. In return, the recipients must agree to run free market economies that are open to outside investment. As a result, TNCs can enter these countries more easily. The USA exerts significance over IMF policy despite the fact it has always had a European President.
• IMF Evaluation

  IMF rules and regulations can be controversial, especially the strict financial conditions imposed on borrowing governments who may be required to cut back on health care, education, sanitation and housing programmes
• What role does the World Bank have in globalisation?

  The World Bank lends money on a global scale and is also headquartered in Washington, D.C.

  For Example, in 2014, a US$470 million loan was granted to the Philippines for a poverty-education programme for instance.

  The World Bank also gives direct grants to developing countries.

  For Example, in 2014, help was given to the Democratic Republic of the Congo to kick-start a stalled mega-dam project
• Evaluation of the World Bank

  In total, the World Bank distributed US$65 billion in loans and grants from 2014. However, like the IMF the World Bank imposes strict conditions on its loans and grants. Controversially, all World Bank presidents have been American Citizens.
• What is the role of the WTO in globalisation?

  The WTO took over from the General Agreement on Trade and Tariffs in 1995. Based in Switzerland, the WTO advocates trade liberalisation, especially for manufactured goods, and asks countries to abandon protectionist attitudes in favour of untaxed trade.

  For example, China as persuaded to lift export restrictions on 'rare earth' minerals in 2014
• Evaluation of the WTO

  The WTO has failed to stop world's richest countries, such as the USA and UK, from subsidising their own food producers. This protectionism is harmful to farmers in developing countries who want to trade on a level playing field.
• World Trade

  • The amount of world trade increased fairly slowly from the 1970s to the mid 1990s. 
  • There was a huge growth in export trade after 2002
  • A sharp dip in 2008-2009 due to the global recession / global financial crisis
  • It returned to 'normal' levels in 2011, but growth has been slow ever since. 
  • In 2014, there is about US $19 trillion world trade in goods, compared with less than $1 trillion in the early 1970s. 
• World Trade

  A number of organisations have helped to promote free trade and end 'protectionism'. In the past, many countries protected their own industries and businesses by:

  • Demanding payment of taxes and tariffs on imported goods, so making them more expensive than home-produced goods.
  • Using quotas to limit the volume of imports, protecting home producers from foreign competition.
  • Banning foreign firms from operating in services like banking, retail and insurance. 
  • Restricting, or banning, foreign companies from investing in their country. 
• World Trade

  Protectionism reduces total trade volume, whereas free trade (no taxes, tariffs, or quotas) increases it. Certain international economic or political organisations promote free trade policies and foreign direct investment (FDI). 
• At the Bretton Woods Conference in the USA in 1944, Allied Powers agreed to set up three IPEOs, the World Bank, the International Monetary Fund and the World Trade Organisation (although this was not founded until 1995). They had the economic objective of rebuilding the world economy following WW2. They also had the political objective in promoting free-market democracy in the face of the looming cold war thread of command economy one-party communism. 
• World Bank (International Bank for Reconstruction and Development)

  • Has the role of lending money and giving grants to the developing world to fund economic development and reduce poverty.
  • In 2014 it gave a US $470 million loan to the Philippines for a poverty reduction programme and a $70 million grant to the Democratic Republic of Congo for the Inga 3 mega-dam HEP project
• World Bank (International Bank for Reconstruction and Development)

  • The World Bank requires recipients to adopt trade liberalisation policies and to open up to FDI by removing legal restrictions and capital controls. It also requires them to adopt structural adjustment programmes to reduce government budget deficits.
• World Bank (International Bank for Reconstruction and Development)

  • Developing countries may therefore prefer to borrow from China, or the Chinese-led Asian Infrastructure Investment Bank, which doesn't impose such conditions.
  • in 2010 China loaned $110 billion - more than the World Bank
• World Bank (International Bank for Reconstruction and Development)

  • Deals with flows of capital
  • Often involves government spending cuts, privatisation of state owned firms and opening up to foreign competition.
  • Has helped developing countries develop deeper ties to the global economy but has been criticised for having policies that put economic development before social development.
  • In theory it had the least to do with free trade, but in practise it requires people to open up to it.
• International Monetary Fund (IMF)

  • Aims to maintain a stable international financial system, and this promotes free trade and globalisation.
  • The IMF provides loans to countries facing short-term balance of payment difficulties.
  • e.g. in 2008 Greece received the first in a series of IMF loans when its foreign currency earnings were insufficient to pay its existing debt obligations.
  • Recipients must adopt structural adjustment and trade liberalisation programmes, including measures opening up the economy to FDI and free trade.
• International Monetary Fund (IMF)

  • The IMF has been criticised for promoting a 'western' model of economic development that works in the interests of developed countries and their TNCs.
• International Monetary Fund (IMF)

  • Deals with flow of capital.
  • Since 1945 the IMF has worked to promote global economic and financial stability, and encourage more open economies.
• ​World Trade Organisation (WTO)

  • An international organisation that works to reduce trade barriers (both tariff and non-tariff) and create free trade.
  • Headquartered in Geneva, Switzerland
  • WTO was created to replace GATT rounds (General Agreement on Tariffs and Trade) in 1995.
  • Deals with the flow of goods and services (commodities), not specifically about FDI
• ​World Trade Organisation (WTO)

  • A series of global agreements has gradually reduced trade barriers and increased free trade, although the latest round of talks began in Doha in 2001, seeking to reduce tariff on agricultural products, to benefit developing countries, and have not been agreed yet. 
  • WTO's 'most favoured nation' requires a country to treat all WTO members to the same low barriers as the most favoured. 
  • GATT Rounds agreed repeated reductions on tariffs on manufactured goods. Mainly benefits developed and emerging countries. 
• • Tariff is tax on goods entering or leaving the country
  • Non-tariff trade barriers include quotas, quantitative limit on imports or exports, and subsidies to domestic producers. 
• • IMF encourages government spending cuts, however these might slow economic growth, making the country less able to pay debts. Cuts are inappropriate for developing countries, since they need to invest in health and education.
• The government budget records payment to the government from taxation and privatisation, and expenditure on health, military &c. Policies to reduce government deficit are known as austerity programmes.
• A balance of payments records inflows of money into the country as payments of exports or as FDI, and outflows like payments for imports or FDI by domestic firms.  
• What organizations were established by WWII allied nations?

  IMF, World Bank, and WTO
• What is the primary purpose of the IMF?

  To foster global monetary cooperation and stability
• How many countries are members of the IMF?

  189 countries
• When was the IMF created?

  In 1945
• What does the IMF ensure stability for?

  The international monetary system
• What was the IMF's mandate updated to include in 2012?

  Macroeconomic and financial sector issues
• What is the World Bank's primary focus?

  Reducing poverty and building shared prosperity
• How many member countries does the World Bank have?

  189 member countries
• What are the three priorities of the World Bank?

  Economic growth, investing in people, building resilience
• What is the World Trade Organization (WTO) primarily responsible for?

  Rules of trade between nations
• What is the main goal of the WTO?

  To promote free trade globally
• When was the WTO established?

  1995
• What is the headquarters of the WTO?

  Geneva, Switzerland
• What are the roles of the IMF, World Bank, and WTO in global trade?

  • IMF: Provides advice, loans, and grants for poverty reduction and economic development.
  • World Bank: Monitors economic development and offers long-term assistance.
  • WTO: Formulates trade policy, agreements, and settles disputes.
• What challenges does the WTO face in negotiations?

  Disagreements on agricultural trade and emerging economies
• What ideology underpins the IMF, World Bank, and WTO?

  The Washington Consensus
• Who is the largest financial contributor to the IMF and World Bank?

  The USA