General Agreement on Tariffs and Trade The General Agreement on Tariffs and Trade (GATT) is a multilateral agreement regulating

international trade. According to its preamble, its purpose is the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis." It was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). GATT was signed in 1947 and lasted until 1993, when it was replaced by the World Trade Organization in 1995. The original GATT text (GATT 1947) is still in effect under the WTO framework, subject to the modifications of GATT 1994. Main Objectives of GATT By reducing tariff barriers and eliminating discrimination in international trade, the GATT aims at: 1. Expansion of international trade; 2. Increase of world production by ensuring full employment in the participating nations; 3. Development and full utilisation of world resources; and 4. Raising standard of living of the world community as a whole. However, the articles of the GATT do not provide directives for attaining these objectives. These are to be indirectly achieved by the GATT through the promotion of free (unrestricted) and multilateral international trade. As such, the rules adopted by GATT are based on the following fundamental principles: 1. Trade should be conducted in a non-discriminatory way;

2. The use of quantitative restrictions should be condemned; and 3. Disagreements should be resolved through consultations. In short, members of GATT agree to reduce trade barriers and to eliminate discrimination in international trade so that, multilateral and free trade may be promoted, leading to wider dimensions of world trade and prosperity.

The Preamble also states the contracting parties belief that reciprocal and mutually advantageous arrangements directed to the substantial reduction in tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce would contribute toward these goals. Importantly, free trade is not the stated objective of GATT. The role of GATT in integrating developing countries into an open multilateral trading system is also of major consequence. The increasing participation of developing countries in the GATT trading system and the pragmatic support provided to them through the flexible application of certain rules helped developing countries to both expand and diversify their trade. It could now be said that a great number of these countries have already become full partners in the system as can be witnessed by their active participation in the Uruguay Round. The task of helping to integrate further the least-developed countries is one of the challenges that lies ahead in the WTO. Similarly, the full integration of countries with economies in transition into the trading system must be achieved in order to strengthen economic interdependence as a basis for greater prosperity and world peace. These negotiations were critical to ensure the future health of the world economy and the trading system. The globalization of the world economy over the past decade has created a greater reliance than ever on an open multilateral trading system. Free trade has become the backbone of economic prosperity and development throughout the world. Partly as a result of this, there has been a shift in trade policy mechanisms from border measures to internal policy measures, substantially affecting the management of trade relations. The Uruguay Round sought to establish a new balance in rights and obligations among trading nations as a result of

this phenomenon. We are gradually moving towards a global marketplace, and for that, we need a global system of rules for trade relations among partners in that market place. The challenges that we face are therefore enormous. The only way back from this globalization in the world economy would be through depression and eventual chaos. We therefore have no choice but to move forward. In doing so, however, we must be sure to preserve to the highest extent possible the spirit and tradition of the GATT, which to a large extent was the key to its success.

THREE BASIC ELEMENTS OF GATT Trade shall be conducted on non-discriminatory basis Protection shall be afforded to domestic industries through customs tariffs rather than quotas Consultation shall be primary method used to solve global trade problems

GATT: provisional for almost half a century From 1948 to 1994, the General Agreement on Tariffs and Trade (GATT) provided the rules for much of world trade and presided over periods that saw some of the highest growth rates in international commerce. It seemed well-established, but throughout those 47 years, it was a provisional agreement and organization. The original intention was to create a third institution to handle the trade side of international economic co-operation, joining the two Bretton Woods institutions, the World Bank and the International Monetary Fund. Over 50 countries participated in negotiations to create an International Trade Organization (ITO) as a specialized agency of the United Nations. The draft ITO Charter was ambitious. It extended beyond world trade disciplines, to include rules on employment, commodity agreements, restrictive business practices, international investment, and services.

Even before the talks concluded, 23 of the 50 participants decided in 1946 to negotiate to reduce and bind customs tariffs. With the Second World War only recently ended, they wanted to give an early boost to trade liberalization, and to begin to correct the legacy of protectionist measures which remained in place from the early 1930s.

This first round of negotiations resulted in 45,000 tariff concessions affecting $10 billion of trade, about one fifth of the worlds total. The 23 also agreed that they should accept some of the trade rules of the draft ITO Charter. This, they believed, should be done swiftly and provisionally in order to protect the value of the tariff concessions they had negotiated. The combined package of trade rules and tariff concessions became known as the General Agreement on Tariffs and Trade. It entered into force in January 1948, while the ITO Charter was still being negotiated. The 23 became founding GATT members (officially, contracting parties). Although the ITO Charter was finally agreed at a UN Conference on Trade and Employment in Havana in March 1948, ratification in some national legislatures proved impossible. The most serious opposition was in the US Congress, even though the US government had been one of the driving forces. In 1950, the United States government announced that it would not seek Congressional ratification of the Havana Charter, and the ITO was effectively dead. Even though it was provisional, the GATT remained the only multilateral instrument governing international trade from 1948 until the WTO was established in 1995. For almost half a century, the GATTs basic legal principles remained much as they were in 1948. There were additions in the form of a section on development added in the 1960s and plurilateral agreements (i.e. with voluntary membership) in the 1970s, and efforts to reduce tariffs further continued. Much of this was achieved through a series of multilateral negotiations known as trade rounds the biggest leaps forward in international trade liberalization have come through these rounds which were held under GATTs auspices. In the early years, the GATT trade rounds concentrated on further reducing tariffs. Then, the Kennedy Round in the mid-sixties brought about a GATT Anti-Dumping Agreement and a section on development. The Tokyo Round

during the seventies was the first major attempt to tackle trade barriers that do not take the form of tariffs, and to improve the system. The eighth, the Uruguay Round of 1986-94, was the last and most extensive of all. It led to the WTO and a new set of agreements. The Tokyo Round: A first try to reform the system The Tokyo Round lasted from 1973 to 1979, with 102 countries participating. It continued GATTs efforts to progressively reduce tariffs. The results included an average one-third cut in customs duties in the worlds nine major industrial markets, bringing the average tariff on industrial products down to 4.7%. The tariff reductions phased in over a period of eight years, involved an element of harmonization the higher the tariff, the larger the cut, proportionally. In other issues, the Tokyo Round had mixed results. It failed to come to grips with the fundamental problems affecting farm trade and also stopped short of providing a modified agreement on safeguards (emergency import measures). Nevertheless, a series of agreements on non-tariff barriers did emerge from the negotiations, in some cases interpreting existing GATT rules, in others breaking entirely new ground. In most cases, only a relatively small number of (mainly industrialized) GATT members subscribed to these agreements and arrangements. Because they were not accepted by the full GATT membership, they were often informally called codes. They were not multilateral, but they were a beginning. Several codes were eventually amended in the Uruguay Round and turned into multilateral commitments accepted by all WTO members. Only four remained plurilateral those on government procurement, bovine meat, civil aircraft and dairy products. In 1997 WTO members agreed to terminate the bovine meat and dairy agreements, leaving only two. Did GATT succeed? GATT was provisional with a limited field of action, but its success over 47 years in promoting and securing the liberalization of much of world trade is incontestable. Continual reductions in tariffs alone helped spur very high rates of world trade growth during the 1950s and 1960s around 8% a year on average. And the momentum of trade liberalization helped ensure that trade growth consistently out-paced production growth throughout the

GATT era, a measure of countries increasing ability to trade with each other and to reap the benefits of trade. The rush of new members during the Uruguay Round demonstrated that the multilateral trading system was recognized as an anchor for development and an instrument of economic and trade reform. But all was not well. As time passed new problems arose. The Tokyo Round in the 1970s was an attempt to tackle some of these but its achievements were limited. This was a sign of difficult times to come. GATTs success in reducing tariffs to such a low level, combined with a series of economic recessions in the 1970s and early 1980s, drove governments to devise other forms of protection for sectors facing increased foreign competition. High rates of unemployment and constant factory closures led governments in Western Europe and

North America to seek bilateral market-sharing arrangements with competitors and to embark on a subsidies race to maintain their holds on agricultural trade. Both these changes undermined GATTs credibility and effectiveness. The problem was not just a deteriorating trade policy environment. By the early 1980s the General Agreement was clearly no longer as relevant to the realities of world trade as it had been in the 1940s. For a start, world trade had become far more complex and important than 40 years before: the globalization of the world economy was underway, trade in services not covered by GATT rules was of major interest to more and more countries, and international investment had expanded. The expansion of services trade was also closely tied to further increases in world merchandise trade. In other respects, GATT had been found wanting. For instance, in agriculture, loopholes in the multilateral system were heavily exploited, and efforts at liberalizing agricultural trade met with little success. In the textiles and clothing sector, an exception to GATTs normal disciplines was negotiated in the 1960s and early 1970s, leading to the Multifibre Arrangement. Even GATTs institutional structure and its dispute settlement system were causing concern. These and other factors convinced GATT members that a new effort to reinforce and extend the multilateral system should be attempted. That

effort resulted in the Uruguay Round, the Marrakesh Declaration, and the creation of the WTO. General Agreements on Tariffs and Trade

1. GATT Toward the end of World War II, representatives of the US and its Allied Forces endeavored to work out the arrangements for a new world order in the post war era. As a result of these negotiations, after World War II the US and its Allies planned to establish three important international institutions to liberalize trade and payment. (i) International Monetary Fund (IMF) was established to facilitate international payments. (ii) International Bank for Reconstruction and Development. After the War, European countries and Japan had to rebuild their production plants; this meant that these countries required a large amount of foreign capital. To encourage free flow of private capital, International Bank for Reconstruction and Development (IBRD, now the World Bank) was also established. (iii) To facilitate free trade, International Trade Organization (ITO) was to be born. (iv) As a political complement to these institutions, United Nations was also established in 1945 to replaced the League of Nations.

Three institutions + UN

What is

GATT was the result of an international conference held at

GATT

Geneva in 1947 to consider a draft charter for the International Trade Organization (ITO). The US initiated negotiations with 22 other countries that led to commitments to regulate 45,000 tariff rates. Technically, GATT was viewed as an agreement under the provisions of US Reciprocal Trade Act of 1934, and hence did not require approval of Congress. It was considered a provisional agreement that would be replaced once the ITO became operational to take over its functions. So GATT began its provisional existence on January 1, 1948, when 23 contracting parties signed the agreement. However, US Congress refused in 1950 to ratify the treaty establishing the ITO.

2. Major Provisions of GATT (i) GATT obligates each country to accord nondiscriminative, most favored nation (MFN) treatment to all other contracting parties with respect to tariffs. 1. Tariff (ii) MFN treatment does not mean free trade or national treatment. Imports from contracting parties are subject to tariffs or quotas. MFN treatment means that no other countries with some exceptions receive better treatment or lower tariffs. Exceptions to MFN (i) Existing tariff preferences such as those between British Commonwealth. (ii) GATT/WTO allows the formation of customs union,

which causes a significant erosion of the MFN principle. (iii) An escape clause allows any contracting party to withdraw or modify tariff concessions, if it threatens a serious injury to domestic producers. 2. Quantitative Restrictions GATT in general prohibits the use of quantitative restrictions on imports and exports. (i) agriculture - when government needs to remove surplus of agricultural and fisheries products. Important to US Exceptions (ii) balance of payments - to safeguard balance of payments. If a country's foreign exchange reserve is low. (iii) Developing countries - LDCs may use import quotas to encourage infant industries. (iv) National Security- Strategic controls on certain exports. Patents, Copyrights, Public Morals 3. Developing Countries Special Provisions to promote the Trade of Developing Countries. In 1965, the contracting parties added Part IV (Trade and Development) to GATT. (i) Developed economies will give high priority to reduction/elimination of tariffs on products of LDCs. (ii) refrain from introducing tariffs and NTBs to such imports. (iii) refrain from imposing internal taxes to discourage consumption of primary products from LDCs (iv) not expect reciprocal commitments from LDCs.

Other provisions

Provisions to eliminate concealed protection such as customs valuation. For example, American Selling Price valuation. By ASP, an ad valorem tariff is imposed on the domestic price. procedural matters: each member is entitled to one vote, decisions are made by majority vote. 2/3 majority is required to waive obligations. settlements of disputes.

3. Achievements and Problems of GATT/WTO [Opinion] GATT has enjoyed a membership of over 100 countries and generated about 85-90% of world trade. (i) trade liberalization in industrial products (Kennedy Round) (ii) Adopted codes on NTBs (Tokyo Round) (iii) No world wars since 1948 (Choi: Increased trade promotes world peace) (iv) replaced by WTO on January 1, 1995. (i) GATT was a provisional agreement by contracting parties with no legal enforcement power.

Achievements

Difference between GATT and WTO

WTO is a binding permanent agreement by members. (ii) GATT only included trade in goods. WTO additionally includes trade in services, international investments and intellectual property rights. (iii) GATT has no provisions to settle trade disputes. WTO set up a dispute settlement body and disputes are quickly resolved. (i) WTO failed to liberalize trade in agricultural products to any significant degree. This was one of the major goals of the Uruguay Round. (ii) steady erosion of MFN principle by the EU, and to a less extent by the NAFTA. Article XXIV permits member countries to form a CU or FTA. The EU adopted VILs to keep out agricultural products, lowered duties to many African and Mediterranean countries, which are not extended to other GATT contracting

Problems

parties. GATT was an executive agreement under the Protocol of Provisional Application. It was only a gentlemen's agreement with no teeth, no enforcement power to discipline parties that violate the rules. Moreover, contracting parties are not obligated to observe rules that are inconsistent with their domestic laws at the time of entry into GATT. Many countries sidestep or bypass the rules by narrowly defining commodities for tariff purposes. (iii) WTO has not done anything to eliminate pirate activities in Africa. It has no military force to discipline rogue nations that disrupt trade. (iv) WTO has not been able to regulate currency manipulation as a protective instrument to restrict imports. There will be more disputes concerning the use of maritime resources outside territorial waters (12 nautical

territorial disputes

miles from coastal states).

4. Trade and Diminishing National Sovereignty (Opinion) A country is presumed to have full sovereignty over its citizens within its territory. Any foreign governments or entities that say any negative things on domestic regulations or problems have been criticized for meddling with internal or domestic politics. This was so at least until GATT was formed in 1948, and GATT was transformed into WTO in January 1995. Members of WTO are agreeing to abide by the rules of WTO, and hence allowing WTO to monitor domestic laws that may be in conflict with trade rules set by the WTO. Similarly, members of International Monetary Fund also allow the Funds surveillance of their exchange rate practices. Thus, increased trade is gained only through reduced national sovereignty. Gains from trade often forces member countries to sacrifice some national sovereignty. For example, Indias patent laws allowed counterfeit copies of drugs without requiring license fees, which made Indian drugs available at low cost to the mass. Now India overturned its Patent Laws for all medicines invented since 1995. This shows Indias attempt to make their internal laws consistent with the rules of WTO. WTO not only governs trade in goods, but also services and foreign direct investment. Similarly, IMF monitors exchange practices that harm other member countries. Increased trade will continually exert its pressure

Sovereignty in autarky

International Organizations encroach on national sovereignty

Example

Services and Foreign Direct

Investment

to harmonize disparate domestic laws on the movement of goods, services and people. This inexorable process will continue until all nations have formed one world government that not only regulates trade, investment, and the movement of people but also harmonizes all aspects of human rights in the world economy. Trading countries are mutually interlocked and their economies are so intertwined that it becomes increasingly difficult for one member country to wage war against others. Global peace can be guaranteed only afterone world government is established much as the presence of the Federal government eliminates civil war in the United States. WTO, IMF and the United Nations may prove to be just stepping stones that lead to one world goverment that may be formed by the end of this century. Most likely, citizens of trading nations will speak one common international language and their own national languages.

Greece' problem

EU monitors Greece's economic policies, and encourages the Greek government to reduce its budget deficit.

China and the GATT/WTO

China was one of the 23 founding members of GATT. became a contracting party on May 21, 1948. The Kuomintang Government moved to Taiwan and withdrew from the GATT, May 5, 1950. In 1982, China was granted observer status in GATT. In June 1986, China requested "resumption" of its contracting party status, on the basis that the withdrawal (by the Kuomintang) was null and void. In May 1987, the GATT established the Working Party on China's Status China became a member of WTO in December 2001.

Slide 2: The General Agreement on Tariffs and Trade (GATT) was first signed in 1947. Was designed To provide an international forum That encouraged free trade between member states By regulating and reducing tariffs on traded goods Providing a common mechanism for resolving trade disputes.

GATT ??? : GATT ??? Was the outcome of the failure of negotiating governments to create the ITO The Bretton Woods Conference introduced the idea for an organization to regulate trade as part of a larger plan for economic recovery after World War II As governments negotiated the ITO, 15 negotiating states began parallel negotiations for the GATT as a way to attain early tariff reductions Once the ITO failed in 1950, only the GATT agreement was left. A Treaty, not an Organization

Objective : Objective The GATT's main objective was the Reduction of Barriers to International Trade This was achieved through the Reduction of Tariff barriers Quantitative Restrictions Subsidies on trade through a series of agreements

History : History 3 Phases First Phase , from 1947 until the Torquay Round A second phase, encompassing three rounds, from 1959 to 1979 The Third phase, consisting only of the Uruguay Round from 1986 to 1994

First Phase : First Phase Commodities which would be covered by the agreement and freezing existing tariff levels

Second Phase : Focused on reducing tariffs Second Phase

Third Phase : Third Phase Extended the agreement fully to new areas such as intellectual property, services, capital, and agriculture. Out of this round the WTO was born.

Did GATT succeed? : Did GATT succeed?

Slide 13: Continual reductions in tariffs helped spur very high rates of world trade growth during the 1950s and 1960s around 8% a year on average Trade growth consistently out-paced production growth The rush of new members during the Uruguay Round demonstrated recognition of multilateral trading system as the anchor for development and an instrument of economic and trade reform.

Slide 15: GATTs success in reducing tariffs to a low level, with a series of economic recessions 1970 -80s drove governments to devise other forms of protection for sectors facing increased foreign competition High rates of unemployment and constant factory closures led governments in Western Europe and North America to seek bilateral market-sharing arrangements with competitors and to embark on a subsidies race to maintain their holds on agricultural trade Both these changes undermined GATTs credibility and effectiveness.

Slide 16: The problem was not just a deteriorating trade policy environment. By the early 1980s the General Agreement was clearly no longer as relevant to the realities of world trade as it had been in the 1940s World trade had become far more complex and important than 40 years before The globalization of the world economy was underway Trade in services not covered by GATT rules Ever increasing international investments

Slide 17: Factors convinced GATT members that a new effort to reinforce and extend the multilateral system should be attempted. That effort resulted in the Uruguay Round, the Marrakesh Declaration, and the creation of the WTO.

Terms which help understanding GATT : Terms which help understanding GATT

TRADE BARRIERSTariff and Non-Tariff Barriers : TRADE BARRIERSTariff and Non-Tariff Barriers While free-trade maximizes world welfare, most nations impose some trade restrictions that benefit special groups in the nation. The most important type of trade restriction historically is the tariff. This is a tax or duty on the imports or exports. When a small nation imposes an import tariff, the domestic price of the importable commodity rises by the full amount of the tariff for individuals in nation. As a result, domestic production of the importable commodity expands while domestic consumption and imports fall. However, the nation as a whole faces the unchanged world price since the nation itself collects the tariff.

Tariffs : Tariffs Tariffs can be ad-Valorem, specific, or compound. Ad-Valorem tariff is expressed as a fixed percentage of the value of the traded commodity. Specific tariff is expressed as a fixed sum per physical unit of the traded commodity. A compound tariff is a combination of an Ad Valorem and a specific tariff.

Trade Restrictions /Trade Barriers : Trade Restrictions /Trade Barriers An import tariff is a duty on the imported commodity, while an export tariff is a duty on the exported commodity. Export tariffs are prohibited by the U.S. Constitution but are often applied by developing countries on their traditional exports (such as Ghana on its cocoa and Brazil on its coffee) to get better prices and revenues. Developing nations rely heavy on export tariff to raise revenues because of their ease of collection. On the other hand, industrial countries invariably impose tariffs or other trade restrictions to protect some(usually laborintensive)industry, while using mostly income taxes to raise revenues.

Trade Barriers (Contd) : Trade Barriers (Contd) According to Stolper-Samuelson theorem , an increase in the relative price of a commodity (for example, as a result of a tariff) raises the return or earnings of the factor used intensively in its production. For example, if a capital-abundant nation imposes an import tariff on the labor intensive commodity, wages in the nation will rise. However, since the nations benefit comes at the expense of other nations, latter are likely to retaliate, so that in the end all nations usually lose.

Trade Barriers (Contd) : Trade Barriers (Contd) Two arguments are that protection is needed to reduce domestic unemployment and a deficit balance of payments. A more valid argument for protection is the infant-industry argument. However, what trade protection can do, direct subsidies and taxes can do better in overcoming purely domestic distortions.The same is true for industries important for national defense.The closest we come to a valid economic argument for protection is the optimal tariff (which,however, invites retaliation). Trade protection in the United States is usually given to lowwage workers and to large, well organized industries producing producing consumer products.

Non-Tariff Barriers : Non-Tariff Barriers International trade also hampered by numerous Technical, administrative, and other regulations. These include safety regulations for automobile and electrical equipment, health regulations for the hygienic Production and packaging of imported food products, and labeling requirements showing origin and contents.

Non Tariff Barrier [Subsidies] : Non Tariff Barrier [Subsidies] National government sometimes grant subsidies to domestic producers to help improve their trade position. Such devices are indirect form of protection provided to domestic businesses, whether they may be import competing producers or exporters. Two types of subsidies can be distinguished: a domestic subsidy , which is sometimes granted to producers of import-competing goods,and an export subsidy, which goes to producers of goods that are to be sold overseas.

Other Non Tariff Barriers : Other Non Tariff Barriers Government Procurement Policies: Because government agencies are large buyers of goods and services, they are attractive customers for foreign suppliers. Most governments however, favor domestic suppliers over foreign ones in the procurement materials and products. E.g, Government often extend preferences to domestic suppliers in the form of buy-national policies campaigns.

Impact of trade barriers : Impact of trade barriers Advanced industrial nations committed themselves after World War II to removing barriers to the free flow of goods, services,and capital between nations This goal was enshrined in the General Agreement on Trade and Tariffs [GATT] Under the umbrella of GATT, eight rounds of negotiations among member states(now numbering 146) have worked to lower barriers to the free flow of goods and services The most recent round of negotiations, known as the Uruguay Round, was completed in Dec,1993.The Uruguay round further reduced trade barriers; extended GATT to cover services as well as manufactured goods; provided enhanced protection for patents, trademarks, and copyrights; and established the World Trade Organization (WTO)to police the international trading system

Impact of trade barriers : Impact of trade barriers In the late 2001, the WTO launched a new round of talks [Doha,Qatar] aimed at further liberalizing the global trade and investment framework. The agenda included cutting tariffs on industrial goods, services,and agricultural products; phasing out subsidies to agricultural producers; reducing barriers to cross border investments; and limiting the antidumping laws. The rich nations spend around $300 billion a year in subsidies to support their farm sectors. The worlds poorer nations have the most to gain from any reductions in agricultural tariffs and subsidies.

Counter Trade : Counter Trade Counter trade denotes whole range of barter like agreements; its principle is to trade goods and services for other goods and services when they cannot be traded for money.Some examples are; 1. An Italian co. that manufactures power generating equipment, ABB SAE Sadelmi SpA, was awarded a720 Million Baht $17.7Mn) contract by the Electricity Generating Authority of Thailand.The contract specified that he company had to accept 218 million baht($5.4 million) of Thai farm products as part payment.

Counter Trade : Counter Trade 2.Saudi Arabia agreed to buy 10 747 jets from Boeing with payment in crude oil, discounted at 10 percent below posted world prices. 3. GE won a contract for a $ 150 million electric generator project in Romania by agreeing to market $150 million of Romanian products in markets to which Romania did not have access. 4.The Venezuelan government negotiated a contract with Caterpillar under which Venezuela would trade 3,50,000 tons of iron ore for Caterpillar earthmoving equipment.

INTERNATIONAL TRADE AND INTERNATIONAL FINANCE : INTERNATIONAL TRADE AND INTERNATIONAL FINANCE Trade and Balance of Payment, Dis-equilibrium in Balance of Payment and its rectification. International Monetary System: Components Foreign Exchange Market International Equity Market and Euro Currency Market. IMF and International Monetary System: Exchange Rate Determination [Concept only], Capital Account Convertibility.

International Monetary Fund [IMF] : International Monetary Fund [IMF] The IMF was established at a conference in Brettonwoods,New Hampshire, U.S.A on July 1-22, 1944.(The conference also established the World Bank).The IMF came in to official existence on December27,1945, and commenced financial operations on March1,1947.It currently has 184 member countries. The statutory purpose of IMF are to promote international monetary co-operation, facilitate the expansion and balanced growth of international trade, promote exchange rate stability, help to establish a multilateral payments system, make the general resources of the IMF temporarily available to its members under adequate safeguards, and shorten the duration and lessen the degree of dis-equilibrium in the international balance of payments of members.

WORLD BANK GROUP : WORLD BANK GROUP The World Bank Group is made of five organizations: The International Bank for Reconstruction and Development(IBRD) The International Development Association(IDA), The International Finance Corporation(IFC) The Multilateral Investment Guarantee Agency (MIGA) The International Center for Settlement of Investment Disputes (ICISD). Established in 1944 at a conference of the world leaders in Bretton woods, New Hampshire,United States, the World Bank is the worlds largest source of development assistance. The World Banks

mission is to fight poverty and improve the living standards of people in the developing world.The World Bank has 184 member countries.