INTERNATIONAL MONETARY SYSTEM
The International Monetary System (IMS) refers to the customs, rules, instruments, facilities, and organisations facilitating international (external) payments.
* An IMS is considered good if it fulfils the following two objectives in an impartial manner.
i) Maximises the flow of foreign trade and foreign investments, and
ii) Leads to an equitable distribution of the gains from trade among the nations of the world.
The evaluation of an IMS is done in terms of adjustment, liquidity and confidence which it manages to wield.
It refers to the process by which the Balance of Payment (BoP) crises of the nations of the world (or the member nations) are corrected. A good IMS tries to minimise the cost of BoP and time for adjustment for the nations.
It refers to the amount of foreign currency reserves available to settle the BoP crises of the nations. A good IMS maintains as much foreign reserves to mitigate such crises of the nations without any inflationary pressures on the nations.
It refers to the faith the nations of the world should show that the adjustment mechanism of the IMS is working adequately and that foreign reserves will retain their absolute and relative values. This confidence is based on the transparent knowledge information about the IMS.
BRETTON WOODS DEVELOPMENT
The International Monetary System (IMF) and the world Bank (with its first group institution IBRD) were set up together popularly called as the Bretton Wood's twins both having their Headquarters in Washington DC, USA.
INTERNATIONAL MONETARY FUND
The International Monetary Fund (IMF) came up in 1944 whose Articles came into force on the 27th of December 1945 with the main functions as exchange rate regulation, purchasing short-term foreign currency liabilities of the member nations from around the world allotting special drawing rights (SDRS) to the member nations and the most important one as the bailor to the member economies in the situations of the BoP crisis.
The main functions of the IMF are as given below:
i) To facilitate international monetary Cooperation.
ii) To promote exchange rate stability and orderly exchange arrangements.
iii) To assist in the establishment of a multilateral system of payments and the elimination of foreign exchange restrictions.
iv) To assist member countries by temporarily providing financial resources to correct maladjustment in their balance of payments(BoPs).
* IMF Publishes the world economic outlook twice a year. As well as the annual International Capital Markets.
The World Bank (WB) Group today consists of five closely associated institutions propitiating the role of development in the member nations in different areas.
The International Bank for Reconstruction and Development (IBRD) is the oldest of the World Bank institutions which started functioning (1945) in the area of Reconstruction of the war-ravaged (World War - II) and later for the development of the middle income and credit worthy poorer economies of the world.
* Human development was the main focus of the developmental lending with a very low interest rate.
* The areas of focus being agriculture, irrigation, urban development, healthcare, family welfare, dairy development, etc.
* It commenced lending for India in 1949.
The International Development Agency (IDA) which is also known as the soft window of the WB was set up in 1960 with the basic aim of developing infrastructural support among the member nations, long - term lending for the development of economic services.
* Its loans, known as credits are extended mainly to economies with less than $895 per capita income.
* The credits are for a period of 35 - 40 years, interest free, except for a small charge to cover administrative costs.
* Repayment begins after a 10 years grace period.
* India had been the biggest beneficiary of the IDA support.
* The total support (IBRD + IDA) for India had been $85.95 billion till date.
The International Finance Corporation (IFC) was setup in 1956 which is also known as the private arm of the WB.
* It lends money to the private sector companies of its member nations.
* The interest rate charged is commercial but comparatively low.
* There are many attractive features of IFC's lending.
* It finances and provides advice for private public ventures and projects in partnership with private investors and, through its advisory work, helps governments of the member nations to create conditions that stimulate the flow of both domestic and foreign private saving and investment.
The Multilateral Investment Guarantee Agency (MIGA) set up in 1988 encourages foreign investment in developing economies by offering insurance to foreign private investors against loss caused by non-commercial (i.e.political) risks, such as currency transfer, expropriation war and civil disturbance.
* It also provides technical assistance to help countries disseminate information on investment opportunities.
The International Centre for Settlement of Investment Disputes (ICSID) set up in 1966 is an investment dispute settlement body whose decisions are binding on the parties.
* India is not its member (that is why the enron issue was out of its preview).
* It is believed that being signatory to it encourages the foreign investment flows into an economy but risks independent sovereign decisions, too.
As part of the economic reforms programme initiated in 1991.
* The foreign investment policy of the Government of India was liberalised and negotiations undertaken with a number of countries to enter into Bilateral Investment Promotion & Protection Agreement (BIPAs) in order to promote and protect on reciprocal basis investment of the investors.
* Government of India have, so far, (as on 9th December 2011) signed BIPAs with 82 countries out of which 72 BIPAs have already came into force and the remaining agreements are in the process of being enforced.
ASIAN DEVELOPMENT BANK
The Asian Development Bank (ADB), with an international partnership of 63 member countries was established in 1966 and has headquarters at Manila, the Philippines.
* India is a founder member of ADB.
Its principal functions are as follows:
i) To make loans and equity investments for the economic and social advancement of its developing member countries.
ii) To provide technical assistance for the preparation and execution of development projects, programmes and advisory services.
iii) To respond to the requests for assistance and co-ordinating development policies and plans of developing member countries.
The Organisation for European Economic Co-operation (OEEC) was established in 1947 to run the US financed Marhsall plan for reconstruction of a continent ravaged by war.
* Encouraged by its success and the prospect of carrying is work forward on a global stage, Canada and U.S joined OEEC members in signing the new OECD convention on 14th December 1960.
The Organisation for Economic Co-operation and Development (OECD) was officially born on 30th september 1961, when the convention entered into force.
* Other countries joined in, starting with japan in 1964.
* Today, 34 OECD member countries world wide regularly turn to one another to identify problems, discuss and analyse them and promote polices to solve them. Together with them, the OECD brings around its table 40 countries that account for 80% of world trade and investment, giving it a pivotal role in addressing the challenges facing the world economy.
WORLD TRADE ORGANISATION (WTO)
The World Trade Organisation (WTO) came into being as a result of the evolution of the multilateral trading system starting with the establishment of the General Agreement on Tariffs and Trade (GATT) in 1947.
WTO and India
India is a founder-member of both GATT and WTO.
* The WTO provides a rule based, transparent and predictable multilateral trading system.
* The WTO rules envisage non-discrimination in the form of National Treatment and Most Favoured Nation (MFN) treatment to India's exports in the markets of other WTO members.
The present strength of WTO Membership is 155.
* Saudi Arabia became the 149th member of the WTO at the Hong Kong Ministerial conference in December 2005.
* There are presently around 30 countries in the process of accession to the WTO.
WTO Ministerial Conferences
* The highest decision-making body of the WTO is the Ministerial Conference, which has to meet at least once every two years.
* It brings together all members of the WTO, all of which are countries with separate customs, territories.
* The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements.
* Since the coming into being of the WTO in January 1995,
Six Ministerial Conferences have been held, namely
Geneva (15th - 17th December 2011)
Geneva (30th November - 2nd December 2009)
Hong Kong (13th - 18th December 2005)
Cancun (10th - 14th September 2003)
Doha (9th - 13th November 2001)
Seattle (November 30th - December 3rd, 1999)
Geneva (18th - 20th May 1998)
Singapore (9th - 13th December 1996)
WTO NEGOTIATIONS AND INDIA
* The Doha Round of trade negotiations in the WTO, effectively, made very little progress after 2008.
* Throughout 2009 and 2010, discussions continued but no head way was made on any substantive issue in the negotiations.
* Discussions continued in Geneva during March and April 2011 in a variety of formats.
* Reports on each area of the negotiations were issued on 21st April 2011.
* The Focus then shifted to the possibility of selecting some issues for finalisation as an early harvest in time for the Eighth Ministerial Conference of the WTO in December 2011.
It began with an attempt to select issues of particular importance to Least Developed Countries (LDCs).
The LDC issue include:
i) Duty Free Quota Free (DFQF) market access.
ii) The rules of origin for DFQF market access.
iii) LDC waiver in services.
iv) Issues relating to cotton (domestic and export subsidies for cotton and tariffs).
* In October - November 2011, concerted efforts were made by some of the developed country members of the WTO to use the G20 Leaders summit in November 2011 to advance an agenda for the Eighth WTO Ministerial conference scheduled to be held in geneva in december 2011.
Specifically they wanted the following things:
i) To set the stage for plurilateral agreements on selected issues in the WTO negotiations (rather than multilateral agreements).
ii) To get WTO members on abjuring the use of export restrictions.
iii) To introduce new issues for negotiation, namely climate change, energy security and food security.
Fifth Trade Policy Review (TPR) of India:
* In order to promote transparency and provide better understanding of the trade policies and practices of its members.
* The WTO has a mechanism for regular review of their trade policies.
* Depending upon its share in world trade, each members trade policy is reviewed by the WTO at fixed periodic intervals.
* India's TPR is carried out every four years.
* The TPR offers an opportunity to other WTO member's to ask questions and raise concerns on different aspects of policies and practices of the country under review.
* The fifth TPR of India was held on 14th and 16th september 2011 in the WTO.
* Before the meeting, the WTO secretariat circulated a compilation of India's written replies to 886 advance questions raised by 26 WTO members.
* During the review, most of the members commended the resilience of the Indian Economy that smoothly with stood the adverse effects of global financial crisis without taking resources to protectionist measures.
* Members appreciated India for using its trade policy to promote sustainable development and inclusive growth.
* The FDI guidelines have been significantly rationalised, simplified and consolidated, with the aim of providing a single policy platform for reference of Foreign investors.
* Several new sectors, such as petroleum and natural gas and civil aviation were either opened up to foreign investment or significantly liberalised during this period.
* Efforts were also being made to stream line and simplify the business environment and make regulations conducive to business.
The provisions on IP protection in these laws are further supplemented by border measures to prevent the import of goods involving copyright piracy and counterfeit trademarks.
* Another initiative taken by Indian customs is the facility for online registration by the right holders through the web based Automatic Recordation and Targeting for IPR protection system.
India explained that the procurement of high tech items and high value tenders, above US $ 50,000 is generally open to international bidders.
Sanitary & Phyto Sanitary (SPS) and Technical Barriers to Trade (TBT):
In response to question on India Fs SPs and TBT measures, India explained that specific trade concerns raised against India have been largely addressed.
* Regulations adopted in the past have been on the basis of scientific risk analysis.
The ban on the export or rice and wheat, had to be extended in 2009 due to a dislocation in production and again in 2010 due to the severest drought in the country in the last forty years.
Bilateral and Regional Co-operation
Some of the recent developments related to major Free Trade Agreements (FTAs) are the following:
1) India - Japan Comprehensive Economic Partnership Agreement (CEPA)
2) India - Malaysia Comprehensive Economic Co-operation Agreement (CECA)
3) India - ASEAN Trade in Goods Agreement
4) India - EU Trade and Investment Agreement Negotiations
5) India - European Free Trade Association (EFTA)
6) BTIA (Iceland, Norway, Liechtenstein and Switzerland)
7) India - New Zealand FTA/CECA
8) India - Australia CECA.