Introduction
Difference Between IMF & World Bank
IMF Lends Loan to Countries facing BoP Crisis
HDI is by UNDP
Global Financial Development Report by World Bank
Precursor to International Multilateral Economic Organisations
IMF adopted IMS (International Monetary System)
RFI by IMF : Rapid Financing Instrument
PRGT : Poverty Reduction and Growth Trust
IMF - International Monetary Fund
Structure of IMF
Alternate Governor : Governor of Central Bank
Largest Shareholder of IMF : Japan, US, China, Germany, France
IMFC - International Monetary & Financial Committee ; IMFC advised Board of Governors
Concept of Quota, RTP & SDR in IMF
Concept of Quota
Reforms in IMF
Related to Global Governance Architecture
Indian Demand - 3 Primary Demands
- Appointment of IMF President - Merit Based Selection
- Quota Reforms
- Remove Virtual Veto of US
Details about SDR
Chinese Renminbi = Chinese Yuan
- How is SDR for a country decided
- Total SDR is decided by Board of Governors
- SDR is given in proportion to its Quota. IMF issued 470 Billion Dollars as SDR. India got 12.925 Billion dollar in accordance to 2.75%
- What is SDR
- SDR is International Reserve Asset & Not a Currency.
- SDR is a Part of Forex Reserve of that Country
- SDR is called as Paper Gold as it is Freely Convertible into Dollar, Euro, Pound, Yen & Yuan
- SDR is basket of 5 currencies - Dollar, Euro, Pound, Yen, Yuan
- SDR cannot be held by private individuals
- SDR can be used in
- Transactions with IMF - Pay for Quota, Repay Loans, Pay Interest
- Can Sell it to other countries
- Can be used in making of payments to other countries for Imports
- Convert SDR’s into freely usable Global Currencies
- Notes
- 5 Currencies have different weightages in calculation of SDR
- But it is denoted in terms of Dollar
- It is calculated daily based on the changing rate of the 5 constituting currencies
- in 2022, IMF had totally
- SDR is Interest Bearing
Practise MCQ
Quota are expressed and denominated in terms of SDR’s. It is merely initial allocation.
SDRs can be sued for the increasing the IMF Quota → Quota badha toh difference amount pay karne ke liye, SDR ko use kar sakte hain payment karne ke liye
Loans by IMF
Stand by Credit Facility, Extended Credit Facility, Rapid Credit Facility → are part of PRGT (Poverty Reduction and Growth Trust)
PRGT have zero rate of interest
Condition of PRGT → To Reduce Poverty
WB - World Bank
Structure of World Bank
World Bank Group
World Bank = IBRD & IDA
IFC - Issued Masala and Maharaja Bond for the First Time
India is member of ICSID but member of all other Groups
WTO - World Trade Organisation
Precursor to WTO
1944 → Proposal to Set up ITO & International Currency Bancor
1947 → More than 40 Countries came to Multilateral Agreement for Trade and Reduction of Custom Duties under GATT ( General Agreement on Trade and Tariff)
1947 - 1995 → 8 Rounds of Negotiations took place
- Round 1 - Havana Round
- Round 8 - Uruguay Round (1986-1995)
Director General of GATT was Mr Duncan proposed a Draft called Duncan Proposal
This Duncan Proposal led to the creation of WTO → Foundation Document of WTO
Marrakesh Treaty → Led to formation of WTO
Important Landmark Agreements → GATSS, TRIPS, AoA
Difference Between GATT & WTO
- GATT is an Agreement & WTO is an International Institution
- GATT covers Goods & WTO covers Goods, Services, Investment, IPRs etc
- Mandate of WTO is to promote Free & Fair International Trade. For Fair Trade MFN - Most Favored Nation
Structure of WTO
Ministerial Conference is highest decision making body of WTO → Countries are represented by Minister for Commerce & Industry
They meet every two years, normally in the month of december
WTO is more democratic as compared to IMF & WTO
Bodies of WTO
- Decisions of Ministerial Conferences are taken through Consensus. Hence WTO is a slow moving body
- Trade Policy Review Body
- Dispute Settlement Body
Step towards “Free & Fair International Trade”
- Reduce Barriers for Free Trade
- Tariff - Tax Barriers
- Reduce Taxes
- Non Tariff - Non Tax Barriers
- Quota under WTO - Quantitative Restriction on Import
- Import Licensing
- Delay in Customer Clearance
- Sanitary & Phytosanitary Measures - If we import something from another country, it will have adverse impact on Plant, Animal & Humans
- Technical Standards to Trade
- Introduction to MFN
- Exception to MFN
- MFN does not work in cases of FTA. FTA is an exception to MFN
- Generalised System of Preferences (GSP) by UNCTAD
- National Treatment
- Note :
- India Pak didn't gave MFN Status to each other. in 1991 India gave MFN to Pak but Pak didn't give MFN to India.
- After Pulwama Attack, India withdrew MFN Status of Pak
Example : Pesticide Residue is a common thing in Rice. But WTO can say that Rice with Zero Pesticide Residue will only be imported
Some Standards can be laid which can be unnecessary to reduce trade
2. To Promote Fair Trade
MFN - Most Favored Nation & National Treatment
All Member countries of WTO will assign status of MFN to each other
Trade Concession offered to one member country automatically extends to all other member country
It Ensures that one country treats all others Equally
United Nations Conference on Trade and Development
Here, Developed countries import goods and services from poor & developing countries at lower custom duty
National treatment stands alongside MFN treatment as one of the central principles of the WTO Agreement. Under the national treatment rule, Members must not accord discriminatory treatment among imports and “like” domestic products(with the exception of the imposition of tariffs, which is a border measure).
Types of Agreements in WTO - Multilateral and Plurilateral Agreements
Special and Differential Treatment is like CBDR (Common But Differentiated Responsibilities)
- Examples of Organisations
- Multilateral Organisation
- AoA - Agreement on Agriculture
- TRIPS - Trade Related Aspect of Intellectual Property
- TRIMs - Agreement on Trade-Related Investment Measures
- Plurilateral Organisations
- ITA - Information Technology Agreement (ITA)
- E Commerce Negotiations
Prelims Pointer on WTO
WTO Categorisation of Developing Countries
China still calls itself as Developing Country and Claims Special and Differential Treatment
WTO Dispute Resolution Mechanism
WTO Agreement on Agriculture
WTO Agreement on Agriculture
Agreement of Agriculture seeks to put limit on Member Countries.
The Three Pillars of Agreement on Agriculture 👇👇👇👇
Green Box - Good Subsidies - No Limit
No Limit wrt to Income Support
For Dev of New Var of Seeds ; For Indian Agri Uni ; Farmer can use it for any purpose
Example : PM Kisan Central Sector Rs 6000
Blue Box - To Limit Production of Agri Product
Example to Limit Production : Year on Year Bumper Production of a Particular Product. Govt will provide Compensation to Farmers to not grow the Crops
Example is of Scandinavian Countries
Amber Box - Trade Distorting Subsidies
1986-88 - Uruguay Round 8 of WTO Started
Limit here is both - Total Limit and Crop Specific Limit
Under Member Countries
- LDC → Should be allowed to give more Subsidies, without any Limit
- Developing Countries → Limit is Higher → USA only 10% of production
- Developed Countries → Limit is Lower → USA only 5% of production
Development Box - For LDC & Developing Countries
Example : Afghanistan
Controversy on Agreement on Agriculture
NFSA, 2013 → Food Security to Almost 67% of Indian Population
initially India was opposed by USA saying that India was violating the agreement on agriculture but at the same time India argued that it had a look after the food security of its citizens.
What started as an issue between Juventus and India later developed into issue between developing countries and developed countries where India led the developing countries and USA let the developed countries USA was backed by European Union. India told other developing countries that it is issue of food security for India today but in the coming years when it will be issue of food security for other developing countries, India will also support them.
Following are the concerns raised by India
US Peace Clause : India Could Violate Subsidy Limit under AoA. US could implement Trade Facilitation Agreement (TFA). Its a Temporary Solution, this will be implemented until Permanent Solution is found.
TFA - To Reduce Red Tapism for Import and Export between US and Other Countries, Especially India
WTO TRIPS Agreement
TRIPS : Trade Related Aspect of Intellectual Property Rights
- Case of Compulsory Licensing for Nexavar
Example of Compulsory Licensing by India is by Nexavar. Monthly Dosage of 1.8 Lakhs Per Month was needed
India asked NATCO, to produce Nexavar, Cost of Production reduced to Rs 8800
- Parallel Imports or Grey Imports
When a product made legally (i.e. not pirated) abroad is imported without the permission of the intellectual property right-holder
(e.g. the trademark or patent owner). Some countries allow this, others do not
- Characteristics of Patent
- Patent is Territorial in Nature, It has to be applied to each country. But for PCT : Patent Cooperation Treaty ; If Patent is applied to any country, it is applicable to other countries.
- Computer Applications are Copyrighted and not patented.
- Discoveries cannot be patented.
- Evergreening of Patent
The evergreening of patents is a practice of tweaking drugs in order to extend their patent term and thus their profitability. The Indian Patents Act 1970 introduced many provisions to prevent the mischievous practice of “evergreening” of patents.
Modification According to SC should be Major Modification and not a Minor One. To decide Major or Minor Modification is a Grey Area and is Subject to Interpretation.
- For Plants Patent is
PPV & FR Act → Protection of Plant Varieties and Farmers' Rights Authority by Ministry of Agriculture and Farmers Welfare
