General Agreement on Tariffs and Trade

The General Agreement on Tariffs and Trade (typically abbreviated GATT) 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 formed in 1947 and lasted until 1994, 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.[1]

[edit] Inception
Efforts to negotiate international trade agreements began in 1927 at the League of
Nations but were unsuccessful. The precursor organization to the GATT, called the
International Trade Organization (ITO), was first proposed in February 1945 by the
United Nations Economic and Social Council.[2] The negotiating countries of the ITO
began parallel negotiations for the GATT as a way to introduce early tariff cuts. The plan
called for the ITO to take control over GATT, once the ITO was finalized. Owing to the
United States failing to implement the ITO, GATT was the only organization left.

On 1 January, 1948 the agreement was signed by 23 countries: Australia, Belgium,

Brazil, Burma, Canada, Ceylon, Chile, China, Cuba, the Czechoslovak Republic, France,
India, Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Pakistan, Southern
Rhodesia, Syria, South Africa, the United Kingdom, and the United States. According to
GATT's own estimates, the negotiations created 123 agreements that covered 45,000
tariff items that related to approximately one-half of world trade or $10 billion in trade.[2]
[3]

[edit] History

The Bretton Woods Conference had 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. The GATT's main objective was the reduction of barriers to
international trade.

This was achieved through the reduction of tariff barriers, quantitative restrictions and
subsidies on trade through a series of agreements. The GATT was a treaty, not an
organization although a small secretariat occupied what is today the Centre William
Rappard in Geneva, Switzerland. The functions of the GATT were taken over by the
World Trade Organization which was established during the final round of negotiations
in early 1990s.

The history of the GATT can be divided into three phases: the first, from 1947 until the
Torquay Round, largely concerned which commodities would be covered by the

1
agreement and freezing existing tariff levels. A second phase, encompassing three
rounds, from 1959 to 1979, focused on reducing tariffs. The third phase, consisting only
of the Uruguay Round from 1986 to 1994, extended the agreement fully to new areas
such as intellectual property, services, capital, and agriculture. Out of this round the
WTO was born.

GATT signatories occasionally negotiated new trade agreements that all countries would
enter into. Each set of agreements was called a round. In general, each agreement bound
members to reduce certain tariffs. Usually this would include many special-case
treatments of individual products, with exceptions or modifications for each country.

[edit] GATT 1947 in the US

The GATT, as an international agreement, is a treaty. Under United States law it is

classified as a congressional-executive agreement. Based on the Reciprocal Trade
Agreements Act it allowed the executive branch negotiating power over trade agreements
with temporary authority from Congress. At the time it functioned as a provisional, but
promising trade system.

The agreement is based on the "unconditional most favored nation principle" This means
that the conditions applied to the most favored trading nation (i.e. the one with the fewest
restrictions) apply to all trading nations. In the US, there was large opposition against the
International Trade Organization (which had been ratified in several countries), and thus
President Truman never even submitted it to the Congress.

[edit] Rounds
GATT held a total of 8 rounds.

[hide]GATT and WTO trade rounds[4]

Subjects
Name Start Duration Countries Achievements
covered
Signing of
GATT, 45,000
tariff
Geneva April 1947 7 months 23 Tariffs
concessions
affecting $10
billion of trade
Countries
exchanged
Annecy April 1949 5 months 13 Tariffs some 5,000
tariff
concessions
Torquay September 8 months 38 Tariffs Countries
1950 exchanged
some 8,700
tariff

2
 concessions,
cutting the
1948 tariff
levels by 25%
Tariffs, $2.5 billion in
Geneva II January 1956 5 months 26 admission of tariff
Japan reductions
Tariff
concessions
September
Dillon 11 months 26 Tariffs worth $4.9
1960
billion of
world trade
Tariff
concessions
Tariffs, Anti-
Kennedy May 1964 37 months 62 worth $40
dumping
billion of
world trade
Tariff
Tariffs, non-
reductions
tariff
September worth more
Tokyo 74 months 102 measures,
1973 than $300
"framework"
billion dollars
agreements
achieved
The round led
to the creation
of WTO, and
extended the
range of trade
negotiations,
Tariffs, non-
leading to
tariff
major
measures,
reductions in
rules,
tariffs (about
services,
40%) and
intellectual
September agricultural
Uruguay 87 months 123 property,
1986 subsidies, an
dispute
agreement to
settlement,
allow full
textiles,
access for
agriculture,
textiles and
creation of
clothing from
WTO, etc
developing
countries, and
an extension of
intellectual
property
rights.
Doha November ? 141 Tariffs, non- The round is
2001 tariff not yet
measures, concluded.

3
 agriculture,
labor
standards,
environment,
competition,
investment,
transparency,
patents etc

[edit] Annecy Round - 1949

The second round took place in 1949 in Annecy, France. 26 countries took part in the
round. The main focus of the talks was more tariff reductions, around 5000 in total.

[edit] Torquay Round - 1950

The third round occurred in Torquay, England in 1950. 38 countries took part in the
round. 8,700 tariff concessions were made totaling the remaining amount of tariffs to
three-fourths of the tariffs which were in effect in 1948. The contemporaneous rejection
by the United States of the Havana Charter signified the establishment of the GATT as a
governing world body.[5]

[edit] Geneva Round - 1955-1956

The fourth round returned to Geneva in 1955 and lasted until May 1956. 26 countries
took part in the round. $2.5 billion in tariffs were eliminated or reduced.

[edit] Dillon Round - 1960-1962

The fifth round occurred once more in Geneva and lasted from 1960 to 1962. The talks
were named after U.S. Treasury Secretary and former Under Secretary of State, Douglas
Dillon, who first proposed the talks. 26 countries took part in the round. Along with
reducing over $4.9 billion in tariffs, it also yielded discussion relating to the creation of
the European Economic Community (EEC).

[edit] Tokyo Round - 1973-1979

Reduced tariffs and established new regulations aimed at controlling the proliferation of
non-tariff barriers and voluntary export restrictions. 102 countries took part in the round.
Concessions were made on $190 billion worth.

[edit] Uruguay Round - 1986-1993

The Uruguay Round began in 1986. It was the most ambitious round to date, hoping to
expand the competence of the GATT to important new areas such as services, capital,
intellectual property, textiles, and agriculture. 123 countries took part in the round.

4
Agriculture was essentially exempted from previous agreements as it was given special
status in the areas of import quotas and export subsidies, with only mild caveats.
However, by the time of the Uruguay round, many countries considered the exception of
agriculture to be sufficiently glaring that they refused to sign a new deal without some
movement on agricultural products. These fourteen countries came to be known as the
"Cairns Group", and included mostly small and medium sized agricultural exporters such
as Australia, Brazil, Canada, Indonesia, and New Zealand.

The Agreement on Agriculture of the Uruguay Round continues to be the most

substantial trade liberalization agreement in agricultural products in the history of trade
negotiations. The goals of the agreement were to improve market access for agricultural
products, reduce domestic support of agriculture in the form of price-distorting subsidies
and quotas, eliminate over time export subsidies on agricultural products and to
harmonize to the extent possible sanitary and phytosanitary measures between member
countries.

[edit] GATT and the World Trade Organization

Main article: Uruguay Round

In 1993 the GATT was updated (GATT 1994) to include new obligations upon its
signatories. One of the most significant changes was the creation of the World Trade
Organization (WTO). The 75 existing GATT members and the European Communities
became the founding members of the WTO on 1 January 1995. The other 52 GATT
members rejoined the WTO in the following two years (the last being Congo in 1997).
Since the founding of the WTO, 21 new non-GATT members have joined and 29 are
currently negotiating membership. There are a total of 153 member countries in the
WTO.

Of the original GATT members, only the SFR Yugoslavia has not rejoined the WTO.
Since FR Yugoslavia, (renamed to Serbia and Montenegro and with membership
negotiations later split in two), is not recognised as a direct SFRY successor state;
therefore, its application is considered a new (non-GATT) one. The contracting parties
who founded the WTO ended official agreement of the "GATT 1947" terms on 31
December, 1995.

Whereas GATT was a set of rules agreed upon by nations, the WTO is an institutional
body. The WTO expanded its scope from traded goods to trade within the service sector
and intellectual property rights. Although it was designed to serve multilateral
agreements, during several rounds of GATT negotiations (particularly the Tokyo Round)
plurilateral agreements created selective trading and caused fragmentation among
members. WTO arrangements are generally a multilateral agreement settlement
mechanism of GATT.[6]

5
 History of OPEC
The Rise of OPEC
The Organization of the Petroleum Exporting Countries (OPEC) was created
at the Baghdad Conference
in Iraq in September 1960. The founding members of the organization were
Iran, Iraq, Kuwait, Saudi
Arabia and Venezuela. These five states were later joined by eight other
countries: Qatar (1961),
Indonesia (1962), Libya (1962), United Arab Emirates (1967), Algeria
(1969), Nigeria (1971), Ecuador
(1973), and Gabon (1975). Ecuador and Gabon withdrew from the
organization in 1992 and 1994,
respectively.
The purpose of OPEC, as with any cartel, is to limit supplies in the hope of
keeping prices high. The oil
industry has been plagued by production booms and falling prices ever since
Colonel Drakes' discovery
of oil at Titusville, Pennsylvania in 1859. Just as the major oil companies
colluded from the 1920's to the
1960's to prevent prices (and profits) from falling, members of OPEC meet
on a regular basis to set
production levels in the hope of maintaining prices. The essential nature of
oil (no substitutes) coupled
with its limited number of suppliers make it the ideal product for
cartelization.
The rise of OPEC is tied to a shifting balance of power from the
multinational oil companies to the oil
producing countries. Lacking exploration skills, production technology,
refining capacity, and
distribution networks, oil producing countries were unable to challenge the
dominance of the oil
companies prior to World War II. Although Mexico wrestled control of its
oil industry from foreigners in
1938, it quickly receded from the lucrative international market due to
insufficient capital for investment.
However, about the time of World War II the oil exporting countries began
seeking better terms in their

6
oil contracts. In 1943 Venezuela signed the first "fifty-fifty principle"
agreement which provided oil
producers with a lump sum royalty plus a fifty-fifty split of profits (i.e.,
selling price minus production
cost).
In the late 1940's Venezuela revised their tax system to capture a greater
share of the oil profits. The oil
companies responded to this move by shifting oil purchases to countries
with cheaper contracts. In
response, Venezuela contacted Arab producers and encouraged them to
demand similar "fifty-fifty" deals
and reform their tax systems. Saudi Arabia, seeing the value of the fifty-fifty
contract and understanding
the power of acting collectively, quickly demanded and received a similar
contract from Aramco.
In 1947, the Iranian Parliament passed a law demanding the termination of
previous agreements with
Anglo-Iran (referred to as Anglo-Persian prior to 1935 and British Petroleum
after 1954). When
negotiations failed to lead to a compromise, Iranian Prime Minister
Mossadegh nationalized oil
operations by the in May 1951. The collapse of the oil industry pushed the
economy into chaos.
Domestic opponents, aided by the American Central Intelligence Agency,
were able to topple Mossadegh
in 1953. A new British-Iranian agreement was signed the following year.
The newly restored Shah of
Iran became a pillar of American middle east policy until the Iranian
Revolution in 1979.
While world oil demand grew during the 1950s, they were outpaced by the
growth in production. The
problem was exacerbated by the fact that the "fifty-fifty" deals were based
on "posted" prices rather than
"market" prices. (See Table 1 from Danielsen 1982, 136). Given that posted
prices were fixed, oil
producing countries had an incentive to grant additional concessions to
expand oil revenue. Market
prices became divorced from their calculations. The increases in supply
drove market prices even further

7
down and eroded the profits of the multinational oil companies.
The downward push on prices led to a policy debate in Washington.
Although the United States had been
a net exporter of oil until 1948, the expansion of cheaply produced oil from
the middle east led to rising
imports. As prices fell, domestic producers simply could not compete.
Moreover, the Eisenhower
Administration concluded (as the Japanese had prior to World War II),
dependence on foreign oil placed
the country's national security in jeopardy. The U.S. responded with an
import quota. The quota kept
domestic prices artificially high and represented a net transfer of wealth
from American oil consumers to
American oil producers. By 1970, the world price of oil was $1.30 and the
domestic price of oil was
$3.18 (Danielsen 1982, 150).
In order to recapture profits, the multinational oil companies tried to cut the
"posted" price from 1958
onward. In 1959, British Petroleum unilaterally cut oil prices by about 10
percent. It instantly set off
denunciation from the oil exporting countries. In 1960, after a second cut in
the posted price in August,
the five major oil producing countries responded by forming the
Organization of Petroleum Exporting
Countries in September(OPEC).
During its first decade, OPEC was able to halt the free fall in prices.
However, it was not able to raise
prices as most members had hoped. In general, commodity cartels (such as
the tin cartel or the coffee
cartel) collapse because there are many substitutes for the product or there
are many potential producers
of the product. A cartel inspired rise in coffee prices triggers some
consumers to switch to hot tea (i.e.,
demand falls) and encourages new producers to enter the market (i.e., supply
rises). Both the fall in
demand and the rise in supply put downward pressure on prices and
undermine the cartel's effectiveness.
Cartels also suffer from a "collective action problem." That is, every
member has an incentive to cheat on

8
the cartel by increasing its production. For example, an individual country
such as Iran can increase its
oil revenues by expanding production as long as all other members stick to
their quotas. However, all
members have a similar incentive to increase production -- i.e., they all want
to free ride on the collective
good. The incentive to cheat implies that cartels are traditionally short-lived
enterprises.
Although the essential nature of oil and the limited number of suppliers
worked in the OPEC's favor, the
power of the organization remained limited during the first decade for five
reasons. First, OPEC's share
of world production was only 28% in 1960. By 1970, this figure would rise
to 41%. (See Table 2 for
OPEC share of world production and Table 3 for the distribution of output
among OPEC members. Both
tables are from Danielsen 1982, 131-132). Second, the fact that the oil
reserves in the ground belonged to
the multinational corporations (except in Iran)limited the power of the oil
producing countries. Third, the
oil glut of the 1960's made any threat to raise prices incredible. Fourth, the
oil exporting countries were
desperate for revenue to fuel economic development. Sixth, important
political divisions existed in the
Arab world. The revolutionary government of Nasser repeatedly clashed
with the Saudi monarchy. Iraq
threatened to invade its neighbor Kuwait (it was deterred by the deployment
of British forces). Iran and
Saudi Arabia vied for leadership of the Middle East.
History of OPEC
http://www.ssc.upenn.edu/polisci/psci260/OPECweb/OPECHIST.HTM (2 of 5) [8/22/2001 9:34:14 PM]

The First Oil Shock

OPEC's fortunes began to shift in the early 1970's as rising demand for oil
began to outstrip production.
Moreover, the oil producing states began demanding further concessions.
Muammar al-Qaddafi, after
seizing power in military coup in Libya, demanded and received a 20
percent increase in royalties, a
"55-45" profit sharing agreement, and tax concessions (Yergin 1991, 580).
This move triggered a series

9
of new demands that ratcheted up oil prices and oil exporting country
profits.
As the world oil market tightened, the Arab world became more vocal in
calling for use of the oil weapon
to achieve their economic and political objectives. This was most acutely
realized in the oil embargo
during the 1973 October War between Egypt and Israel. Saudi Arabia
refused to increase production in
order to halt rising prices unless the U.S. backed the Arab position. Arab oil
ministers than agreed to an
embargo to further their political objectives. Productin would be cut by 5
percent per month until the
West backed down. States adopting a "freindly" position (from the Arab
perspective) would be
unaffected. When Nixon publicly proposed a $2.2 billion military aid
package for Israel, Arab states
began an oil embargo against the United States (later expanded to the
Netherlands, Portugal, South
Africa, and Rhodesia).
The new official price was agreed among OPEC member countries: $11.65.
As Figure 1, which displays
historical oil prices from 1920-present, shows the jump in prices was
unprecedented. Oil prices jump
from about $3.00 a barrel before the war to $11.65. The embargo, which did
not end until the
Syrian-Israeli disengagement was secured, drove the world economy into
deep recession. Gross national
product in the U.S. declines by 6 percent in the following two years. The
Japanese economy shrinks for
the first time since the Second World War (Yergin 1991).
The Second Oil Shock
The Second Oil Shock began when the Iranian Revolution and ensuing halt
of Iranian petroleum exports
had caused panic and speculations in the world oil market. When the Carter
administration placed an
embargo on the importing of Iranian oil into the United States and froze
Iranian assets in response to the
hostage taking, Iran counterattacked by prohibiting the exporting of Iranian
oil to any American firm.

10
Moreover, the outbreak of the war between Iran and Iraq in 1980 shook the
oil market as well. In its
initial stage, the Iran-Iraq war abruptly removed almost 4 million daily
barrels of oil from the world
market—15 percent of total OPEC output and 8 percent of free world
demand. In 1980 OPEC
representatives (with the exception of Saudi Arabia) agreed to set prices at
thirty-six dollar a barrel As
Figure 1 again shows the jump in prices was unprecedented.
However, the impact of the Second Oil Shock turned out to be short-lived.
The influence of OPEC
appeared to be diminishing as the production by Mexico, Britain, Norway,
and other non-OPEC
countries and Alaska was continuing to increase. Anxious to increase market
share, they were making
significant cuts in their official prices. As a result, OPEC's share of world
output quickly fell by 27
percent (Yergin 1991). As Table 4 shows, oil revenues for OPEC members
plunged after 1981. Saudi
Arabia, the largest producer in OPEC, saw its oil revenues plunge from
$113.2 billion in 1981 to just
$20.0 billion in 1986.
History of OPEC
http://www.ssc.upenn.edu/polisci/psci260/OPECweb/OPECHIST.HTM (3 of 5) [8/22/2001 9:34:14 PM]
Although the Second Oil Shock sent the developed world into recession, the
most serious long run
impact of the second shock was in the developing world. During the 1970s,
the oil producing states
placed a significant portion of their revenue into commercial banks because
they simply could not spend
the money as fast as it came in. The commercial banks loaned this money to
developing countries which
hoped to repay the loans with revenue from their rapidly growing
economies. However, the developed
world responded to the Second Oil Shock by rapidly raising interest rates
which deepened the on-going
recessions. The developing countries saw exports fall, oil import prices rise,
and interest payments
skyrocket. The result was the debt crisis which first appeared in Mexico in
1982 and quickly spread

11
throughout the developing world. In the "lost decade" of the 1980's, years of
hard fought economic gains
were wiped out. From 1980-88, the real income of mecian workers fell by 40
percent (Lairson and
Skidmore 1993, 277).
Since early 1980s, the world petroleum market confronted the OPEC with an
unpalatable choice: cut
prices to regain markets or cut production to maintain price. However, the
OPEC countries did not want
to reduce prices, for fear that they would undermine their whole pricing
structure, lose their great
economic and political gains, and so diminish their political influence.
OPEC did not always organize a
united front against this pressure. For example, Saudi Arabia, whose oil
production far surpassed other
member countries, had championed decisions for low pricing for larger
market-sharing and long-term
gains.
The Persian Gulf War
The third major price spike in Figure 1 occurred in 1990-1 when Iraq
invaded its fellow OPEC member
Kuwait. Iraq had long claimed the territory of Kuwait; in 1961 it appeared
Iraq was going to swallow its
tiny neighbor until the dispatch of troops by the British. In 1991 the on-
going territorial conflict was
exacerbated by two oil issues: (1) the continued pumping of oil by Kuwait
from a field located under
both countries; and (2)low oil revenues for Iraq which made paying off its
war debts (to Kuwait and
others) difficult. A successful invasion would expand reserves, augment
Iraqi power in OPEC, raise oil
prices and revenue, and annul war debts to Kuwait.
Iraq gambled that the U.S. response would be political and economic.
However, the Iraqi invasion
triggered a military response which was supported by an unlikely coalition
of western, developing,
communist, and Arab states. The sudden removal of two major producers,
Kuwait and Iraq, could have

12
sent oil prices through the ceiling. However, Saudi Arabia expanded
production by literally millions of
barrels per day to keep prices from rising a great deal. Since the war, Iraq's
refusal to comply with United
Nations resolutions has resulted in the continuation of an oil embargo.
The Future of OPEC
In any cartel, success in the short run sets in motion events which make
maintaining success nearly
impossible. A successful cartel raises prices which encourages consumers to
cut demand and potential
producers to enter the market. The success of OPEC in the 1970s triggered
conservation, substitution,
and new production in the 1980s.
While oil prices are currently at record lows in real terms (i.e., controlling
for inflation), it is clear that
History of OPEC
http://www.ssc.upenn.edu/polisci/psci260/OPECweb/OPECHIST.HTM (4 of 5) [8/22/2001 9:34:14 PM]
demand for oil will continue to rise. Moreover, the lack of major oil finds in
the last twenty years implies
(but obviously does not guarantee) that supply will grow only slowly. Unless
a cheap alternative source
of energy is discovered in the meantime, this combination of effects will
create an environment
conducive to cartelization.
Further Reading
For a summary of OPEC activities in the 1990s directly from the
organization itself, see Recent History
on the OPEC web page (www.opec.org).
Updated: 1 September 1998
If any of the information contained within these pages is found to be incorrect or if you
have suggestions for improving the
site please contact
David L. Rousseau.
History of OPEC
http://www.ssc.upenn.edu/polisci/psci260/OPECweb/OPECHIST.HTM (5 of 5) [8/22/2001 9:34:14 PM]

Also found in: Acronyms, Wikipedia, Hutchinson

Latin American Free Trade Association

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Integration Association (LAIA), organization formed in (LAIA), organization formed in 1980 by Argentina,
1980 by Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico,
Mexico, Paraguay, Peru, Uruguay, and Venezuela, taking over Paraguay, Peru, Uruguay, and Venezuela, taking
the duties of the Latin American Free Trade Association over the duties of the Latin American Free
(LAFTA), which had Trade Association (LAFTA), which had
..... Click the link for more information. . Mexico should seek free trade with Brazil:
The Columbia Electronic Encyclopedia® Copyright © 2007, Columbia University Calderon by REUTERS / Reuters US Online
Press. Licensed from Columbia University Press. All rights reserved.
www.cc.columbia.edu/cu/cup/ Report World News
(LAIA), organization formed in 1980 by Argentina,
Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico,
Latin American Integration Paraguay, Peru, Uruguay, and Venezuela, taking
over the duties of the Latin American Free
Association (LAIA) Trade Association (LAFTA), which had
Latin American trade agreements, rev. ed by
formerly (until 1980) Latin American Free Trade Association Reference & Research Book News
(LAFTA) (LAIA), organization formed in 1980 by Argentina,
Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico,
Paraguay, Peru, Uruguay, and Venezuela, taking
International association of Latin American countries originally
over the duties of the Latin American Free
dedicated to improving its members' economic well-being
Trade Association (LAFTA), which had
through free trade. At its founding in 1960 LAFTA included
Cuba promotes 'cocomovil' taxi in Brazil by
Argentina, Brazil, Chile, Mexico, Paraguay, Peru, and Uruguay;
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The organization aimed to remove all trade barriers over 12
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made that goal impossible. LAFTA was superseded in 1980 by ?Charity
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according to their level of economic development. Cuba was
admitted with observer status in 1986, and it became a full
member in 1999. See also Inter-American Development Bank.

For more information on Latin American Integration Association (LAIA), visit

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Encyclopædia Britannica, Inc.

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Latin American Integration Association (LAIA), organization formed in 1980 by
Argentina, Bolivia, Brazil, Chile, Colombia,
Ecuador, Mexico, Paraguay, Peru, Uruguay, and
Venezuela, taking over the duties of the Latin
American Free Trade Association (LAFTA),
which had
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(LAIA), organization formed in 1980 by
Argentina, Bolivia, Brazil, Chile, Colombia,
Ecuador, Mexico, Paraguay, Peru, Uruguay, and
Venezuela, taking over the duties of the Latin
American Free Trade Association (LAFTA),
which had
Latin American trade agreements, rev. ed by
Reference & Research Book News
(LAIA), organization formed in 1980 by
Argentina, Bolivia, Brazil, Chile, Colombia,

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Venezuela, taking over the duties of the Latin
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European Free Trade Association

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"EFTA" redirects here. For other uses, see EFTA (disambiguation).
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challenged and removed. (November 2008)

European Free Trade

Association (EFTA)
Association européenne de libre-échange (AELE)
(French)
Europäische Freihandelsassoziation (German)
Fríverslunarsamtök Evrópu (Icelandic)
Det europeiske frihandelsforbund (Norwegian)

16
Secretariat Geneva, Switzerland
German, French, Norwegian, and
Official languages
Icelandic[citation needed]
Type Trade bloc
Iceland
Liechtenstein
Member states
Norway
Switzerland
Leaders
Secretary
- Kåre Bryn
General
Establishment 3 May 1960
EFTA
- 4 January 1960
Convention
Area
529,600 km2
- Total
204,518 sq mi
Population
- 2007 estimate 12,660,623
100.6/km2
- Density
59.82/sq mi
GDP (PPP) 2007 (IMF) estimate
- Total $567.5 billion
- Per capita $44,828
GDP (nominal) 2007 (IMF) estimate
- Total $743.3 billion
- Per capita $58,714
Icelandic króna, Norwegian krone, Swiss
Currency
franc (ISK, NOK, CHF)
Time zone WET / CET (UTC+0 / +1)
- Summer (DST) WEST / CEST (UTC+1 / +2)

The European Free Trade Association (EFTA) is a free trade organisation between
four European countries that operates parallel, and is linked to, the European Union (EU).

EFTA was established on 3 May 1960 as a trade bloc-alternative for European states who
were either unable to, or chose not to, join the then-European Economic Community
(EEC) which has now become the European Union (EU). The Stockholm Convention,
establishing EFTA, was signed on 4 January 1960 in Stockholm by seven countries.

Today, only Iceland, Norway, Switzerland, and Liechtenstein remain members of EFTA
(of which only Norway and Switzerland are the only remaining founding members). The
Stockholm Convention was subsequently replaced by the Vaduz Convention. This
Convention provides for the liberalisation of trade among the member states.

Three of the EFTA countries are part of the European Union Internal Market through the
Agreement on a European Economic Area (EEA), which took effect in 1994; the fourth,

17
Switzerland, opted to conclude bilateral agreements with the EU. In addition, the EFTA
states have jointly concluded free trade agreements with a number of other countries.

In 1999 Switzerland concluded a set of bilateral agreements with the European Union
covering a wide range of areas, including movement of persons, transport and technical
barriers to trade. This development prompted the EFTA States to modernise their
Convention to ensure that it will continue to provide a successful framework for the
expansion and liberalization of trade among them and with the rest of the world.

edit] Political history

British reaction to the creation of the EEC was mixed and complex. Consequently, in
1960 (after the creation of EFTA), France vetoed British membership fearing that the
Anglo-Saxons planned a federal super-state modeled on the USA.[citation needed] Britain was
also preoccupied with the Commonwealth, which was in a critical period. The UK
brought together several countries (including some bordering the EEC) and decided to
form the European Free Trade Association in about 1959, soon after the establishment of
the 6-nation EEC. (France, Germany, Italy, Belgium, Luxembourg, and the Netherlands.
These last three are also known as the Benelux Union)

On January 4, 1960 the Treaty on European Free Trade Association was initialed in the
Golden Hall of the Prince's Palace of Stockholm. This established the progressive
elimination of customs duties on industrial products, but did not affect agricultural
products or maritime trade.

The main difference between the early EEC and the EFTA was the absence of a common
external customs tariff, and therefore each EFTA member was free to establish individual
customs duties against trade with non EFTA countries.

Despite this modest initiative, the financial results were excellent, as it stimulated an
increase of foreign trade volume among its members from 3 522 to 8 172 million US
dollars between 1959 and 1967. This was however rather less than the increase enjoyed
by countries inside the EEC.

After the accession of Denmark and the UK to the EEC EFTA began to falter. For this
reason most countries eased or eliminated their trade tariffs in preparation to join the
EEC, but experienced declining revenue which reduced the importance of EFTA.
Currently there are only 4 members remaining: Switzerland, Norway and Liechtenstein
and Iceland. Iceland applied for EC membership in 2009 following the 2008–2009
Icelandic financial crisis.

[edit] Membership history

18
 EFTA member states Former member states, now EU member states

The founding members of EFTA were Austria, Denmark, Norway, Portugal, Sweden,
Switzerland and the United Kingdom. During the 1960s these countries were often
referred to as the Outer Seven, as opposed to the Inner Six of the then-European
Economic Community (EEC).[1]

Finland became an associate member in 1961 (becoming a full member in 1986) and
Iceland joined in 1970. The United Kingdom and Denmark joined the EEC in 1973
(together with Ireland), and hence ceased to be EFTA members. Portugal also left the
EFTA for the European Community in 1986. Liechtenstein joined in 1991 (previously its
interests in EFTA had been represented by Switzerland). Finally, Austria, Sweden and
Finland joined the EEC (now the EU) in 1995 and thus ceased to be EFTA members.

[edit] Current members

GDP in GDP per
Official Area
Flag State Accession Population Capital millions capita
name (km²)
(PPP) (PPP)
Republic of 1 January
Iceland 320,000 103,000 Reykjavík 12,144 39,168
Iceland 1970
Principality of 1 January
Liechtenstein 34,247 160.4 Vaduz 4,160 118,000
Liechtenstein 1991
Kingdom of
Norway 3 May 1960 4,721,600 385,155 Oslo 247,416 53,152
Norway
Swiss
Confederation
Switzerland 3 May 1960 7,591,400 41,285 Berne 300,186 41,265
(Confoederatio
Helvetica )

[edit] General Secretaries

General Secretaries of EFTA:

• 1960-1965: Frank E. Figgures

19
 • 1965-1972: Sir John Coulson
• 1972-1975: Bengt Rabaeus
• 1976-1981: Charles Müller
• 1981-1988: Per Kleppe
• 1988-1994: Georg Reisch
• 1994-2000: Kjartan Jóhannsson
• 2000-2006: William Rossier
• 2006-present: Kåre Bryn

[edit] Institutions
EFTA is governed by the EFTA Council and serviced by the EFTA Secretariat. In
addition, in connection with the EEA Agreement of 1992, two other EFTA organisations
were established, the EFTA Surveillance Authority and the EFTA Court.

[edit] EEA-related institutions

The EFTA Surveillance Authority and the EFTA Court regulate the activities of the
EFTA members in respect of their obligations in the European Economic Area (EEA).
Since Switzerland is not an EEA member, it does not participate in these institutions.

The EFTA Surveillance Authority performs the European Commission's role as

"guardian of the treaties" for the EFTA countries, while the EFTA Court performs the
European Court of Justice's role for those countries.

The original plan for the EEA lacked the EFTA Court or the EFTA Surveillance
Authority, and instead had the European Court of Justice and the European Commission
were to exercise those roles. However, during the negotiations for the EEA agreement,
the European Court of Justice informed the Council of the European Union by way of
letter that they considered that giving the EU institutions powers with respect to non-EU
member states would be a violation of the treaties, and therefore the current arrangement
was developed instead.

The EEA and Norway Grants are administered by the Financial Mechanism Office,
which is affiliated to the EFTA Secretariat in Brussels.

[edit] Locations

The EFTA Secretariat is headquartered in Geneva, Switzerland. The EFTA Surveillance

Authority has its headquarters in Brussels, Belgium (the same location as the
headquarters of the European Commission), while the EFTA Court has its headquarters
in Luxembourg (the same location as the headquarters of the European Court of Justice).

[edit] Portugal Fund

20
The Portugal Fund was established in 1975 when Portugal was still a member of EFTA,
to provide funding for the development and reconstruction of Portugal after the Carnation
Revolution. When Portugal left EFTA in 1985 to join the EEC, the remaining EFTA
members decided to nonetheless continue the Portugal Fund, so Portugal would continue
to benefit from it. The Fund originally took the form of a low-interest loan from the
EFTA member states to Portugal, to the value of 100 million US dollars. Repayment was
originally to commence in 1988, but EFTA then decided to postpone the start of
repayments until 1998. The Portugal Fund has now been dissolved by the Member States.

[edit] International conventions

EFTA also originated the Hallmarking Convention and the Pharmaceutical Inspection
Convention, both of which are open to non-EFTA states.

[edit] Relationship to the European Economic Area

The EFTA members, except for Switzerland, are also members of the European
Economic Area (EEA).

21
A clickable Euler diagram showing the relationships between various multinational
European organisations.v • d • e

This article may need to be updated. Please update this article to reflect recent
events or newly available information, and remove this template when finished.
Please see the talk page for more information. (March 2009)

[edit] International relationships

22
EFTA has several free trade agreements with non-EU countries as well as declarations on
cooperation and joint workgroups to improve trade. Currently, the EFTA States have
established preferential trade relations with 20 States and Territories, in addition to the 27
Member States of the European Union.[2]

Nations the EFTA has an FTA with in dark blue, negotiating an FTA with in dark cyan,
has a declaration on cooperation with in purple, and is in a "joint workgroup" with in
dark red; the EFTA is light green.

[edit] Free Trade Agreement

• Canada
• Chile
• Croatia
• Egypt
• Israel (Switzerland exempt)[citation needed]
• Jordan
• South Korea
• Lebanon
• Macedonia
• Mexico
• Morocco
• Palestinian National Authority
• Singapore
• Southern African Customs Union (Botswana, Lesotho, Namibia, Swaziland,
South Africa)
• Tunisia
• Turkey

[edit] Signed agreement 2008, not yet ratified

• Colombia

[edit] Signed agreement 2009, not yet ratified

23
 • Gulf Co-operation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United
Arab Emirates)

[edit] Finalised negotiations 2008

• Peru

[edit] Currently negotiating agreements

• Algeria
• Hong Kong
• India
• Thailand

[edit] Declarations on Cooperation

• Albania
• Mercosur (Brazil, Argentina, Uruguay, Paraguay)
• Mongolia
• Serbia
• Ukraine

[edit] Joint workgroups

• Indonesia
• Russia

[edit] Future

The European Union (blue)

and EFTA countries (green)

The Norwegian electorate has rejected treaties of accession to the EU in two referenda.
At the time of the first referendum (1972) their neighbour Denmark joined. The second

24
time (1994) two other Nordic neighbours, Sweden and Finland, joined the EU. The last
two governments of Norway have been unable and unwilling to advance the question, as
they have both been coalition governments consisting of proponents and opponents.

Since Switzerland rejected the EEA in 1992, referenda on EU membership have been
initiated, the last time in 2001. These were rejected by clear majorities.

Iceland, on the other hand, may join the EU in the near future, following the global
financial crisis of 2008, which has particularly affected the local economy. On 16 July
2009, the government formally applied for EU membership.[3]

In mid-2005, representatives of the Faroe Islands hinted at the possibility of their territory
joining EFTA.[4] However, the chances of the Faroes' bid for membership are uncertain
because, according to Article 56 of the EFTA Convention, only states may become
members of the Association.[5] The Faroes already have an extensive bilateral free trade
agreement with Iceland, known as the Hoyvík Agreement.

[edit] EFTA and the European Union

See also: Accession of Iceland to the European Union
See also: Norway and the European Union

This table summarises the various components of EU laws applied in the EFTA countries
and their sovereign territories. Some territories of EU member states also have a special
status in regard to EU laws applied as is the case with some European microstates.

EFTA
member
states Enfor- EU
and ceable EU elec- EU EU
sovereign Application in local citizen- tions Schengen VAT customs EU single Eur
territories of EU law courts? EURATOM? ship? ? area? area? territory? market? zon

No[citation No
Iceland Partial needed] No No No Yes No No Yes[6]
IS

Liechtens Partial Unclear No No No Set to No No Yes[6] No

25
 implement
tein CH
later

Norway, Partial No
Unclear No No No Yes No No Yes[6]
except: NO

Yes[6][9][citation No
Svalbard Partial Unclear No No No No[7] No[8] No needed]
NO

Bouvet Partial Yes[10][citation Yes[6][11][citation No

Unclear No No No needed] No No needed]
Island NO

Peter I Partial Yes[10][citation Yes[6][11][citation No

Unclear No No No needed] No No needed]
Island NO

Queen Partial Yes[10][citation Yes[6][11][citation No

Unclear No No No needed] No No needed]
Maud Land NO

Switzerla Partial No
Unclear No No No Yes No No Yes[12]
nd CH
Member Enfor- EU
EU EU EU
states and Application ceable elec- Schengen EU single Eur
EURATOM? citizen- VAT customs
sovereign of EU law in local tions area? market? zon
ship? area? territory?
territories courts? ?

[show]

26
 v•d•e

Members of the European Free Trade Association (EFTA)

[hide]

v•d•e

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27
International Monetary Fund

International Monetary Fund

IMF member states in green[1]

Headquarters Washington, D.C., USA
Managing Director Dominique Strauss-Kahn
Central Bank of
Currency Special Drawing Rights
ISO 4217 Code XDR
Base borrowing rate 3.49% for SDRs[2]
Website www.imf.org

The International Monetary Fund (IMF) is the international organization that oversees
the global financial system by following the macroeconomic policies of its member
countries, in particular those with an impact on exchange rate and the balance of
payments. It is an organization formed with a stated objective of stabilizing international
exchange rates and facilitating development.[3] It also offers highly leveraged loans,
mainly to poorer countries. Its headquarters are in Washington, D.C., United States.

[edit] Organization and purpose

28
Headquarters in Washington, D.C.

The International Monetary Fund was created in July 1944, originally with 45 members,
[4]
with a goal to stabilize exchange rates and assist the reconstruction of the world's
international payment system. Countries contributed to a pool which could be borrowed
from, on a temporary basis, by countries with payment imbalances (Condon, 2007). The
IMF was important when it was first created because it helped the world stabilize the
economic system. The IMF is still important because it works to improve the economies
of its member countries.[5]

The IMF describes itself as "an organization of 186 countries (as of June 29, 2009),[6][7]
working to foster global monetary cooperation, secure financial stability, facilitate
international trade, promote high employment and sustainable economic growth, and
reduce poverty". With the exception of Taiwan (expelled in 1980),[8] North Korea, Cuba
(left in 1964),[9] Andorra, Monaco, Liechtenstein, Tuvalu and Nauru, all UN member
states participate directly in the IMF. Member states are represented on a 24-member
Executive Board (five Executive Directors are appointed by the five members with the
largest quotas, nineteen Executive Directors are elected by the remaining members), and
all members appoint a Governor to the IMF's Board of Governors.[10]

[edit] History

The International Monetary Fund was conceived in July 1944 during the United Nations
Monetary and Financial Conference. The representatives of 45 governments met in the
Mount Washington Hotel in the area of Bretton Woods, New Hampshire, United States,
with the delegates to the conference agreeing on a framework for international economic
cooperation.[11] The IMF was formally organized on December 27, 1945, when the first
29 countries signed its Articles of Agreement. The statutory purposes of the IMF today
are the same as when they were formulated in 1943 (see #Assistance and reforms).

[edit] Today

The IMF's influence in the global economy steadily increased as it accumulated more
members. The number of IMF member countries has more than quadrupled from the 44
states involved in its establishment, reflecting in particular the attainment of political
independence by many developing countries and more recently the collapse of the Soviet
bloc. The expansion of the IMF's membership, together with the changes in the world
economy, have required the IMF to adapt in a variety of ways to continue serving its
purposes effectively.

In 2008, faced with a shortfall in revenue, the International Monetary Fund's executive
board agreed to sell part of the IMF's gold reserves. On April 27, 2008, IMF Managing
Director Dominique Strauss-Kahn welcomed the board's decision of April 7, 2008 to
propose a new framework for the fund, designed to close a projected $400 million budget
deficit over the next few years. The budget proposal includes sharp spending cuts of $100
million until 2011 that will include up to 380 staff dismissals.[12]

29
At the 2009 G-20 London summit, it was decided that the IMF would require additional
financial resources to meet prospective needs of its member countries during the ongoing
global financial crisis. As part of that decision, the G-20 leaders pledged to increase the
IMF's supplemental cash tenfold to $500 billion, and to allocate to member countries
another $250 billion via Special Drawing Rights.[13][14]

[edit] Data dissemination systems

IMF Data Dissemination Systems participants: IMF member using SDDS IMF
member, using GDDS IMF member, not using any of the DDSystems non-IMF entity
using SDDS non-IMF entity using GDDS no interaction with the IMF

In 1995, the International Monetary Fund began work on data dissemination standards
with the view of guiding IMF member countries to disseminate their economic and
financial data to the public. The International Monetary and Financial Committee (IMFC)
endorsed the guidelines for the dissemination standards and they were split into two tiers:
The General Data Dissemination System (GDDS) and the Special Data Dissemination
Standard (SDDS).

The International Monetary Fund executive board approved the SDDS and GDDS in
1996 and 1997 respectively and subsequent amendments were published in a revised
“Guide to the General Data Dissemination System”. The system is aimed primarily at
statisticians and aims to improve many aspects of statistical systems in a country. It is
also part of the World Bank Millennium Development Goals and Poverty Reduction
Strategic Papers.

The IMF established a system and standard to guide members in the dissemination to the
public of their economic and financial data. Currently there are two such systems:
General Data Dissemination System (GDDS) and its superset Special Data Dissemination
System (SDDS), for those member countries having or seeking access to international
capital markets.

The primary objective of the GDDS is to encourage IMF member countries to build a
framework to improve data quality and increase statistical capacity building. This will

30
involve the preparation of metadata describing current statistical collection practices and
setting improvement plans. Upon building a framework, a country can evaluate statistical
needs, set priorities in improving the timeliness, transparency, reliability and accessibility
of financial and economic data.

Some countries initially used the GDDS, but lately upgraded to SDDS.

Some entities that are not themselves IMF members also contribute statistical data to the
systems:

• Palestinian Authority – GDDS

• Hong Kong – SDDS
• European Union institutions:
o the European Central Bank for the Eurozone – SDDS
o Eurostat for the whole EU – SDDS, thus providing data from Cyprus
(not using any DDSystem on its own) and Malta (using only GDDS
on its own)

The biggest borrowers are Mexico, Hungary and Ukraine.

[edit] Membership qualifications

The application will be considered first by the IMF's Executive Board. After its
consideration, the Executive Board will submit a report to the Board of Governors of the
IMF with recommendations in the form of a "Membership Resolution." These
recommendations cover the amount of quota in the IMF, the form of payment of the
subscription, and other customary terms and conditions of membership. After the Board
of Governors has adopted the "Membership Resolution," the applicant state needs to take
the legal steps required under its own law to enable it to sign the IMF's Articles of
Agreement and to fulfill the obligations of IMF membership. Similarly, any member
country can withdraw from the Fund, although that is rare. For example, in April 2007,
the president of Ecuador, Rafael Correa announced the expulsion of the World Bank
representative in the country. A few days later, at the end of April, Venezuelan president
Hugo Chavez announced that the country would withdraw from the IMF and the World
Bank. Chavez dubbed both organizations as “the tools of the empire” that “serve the
interests of the North”.[15] As of June 2009, both countries remain as members of both
organizations. Venezuela was forced to back down because a withdrawal would have
triggered default clauses in the country's sovereign bonds.

A member's quota in the IMF determines the amount of its subscription, its voting
weight, its access to IMF financing, and its allocation of Special Drawing Rights (SDRs).
A member state cannot unilaterally increase its quota—increases must be approved by the
Executive Board and are linked to formulas that include many variables such as the size
of a country in the world economy. For example, in 2001, China was prevented from
increasing its quota as high as it wished, ensuring it remained at the level of the smallest
G7 economy (Canada).[16] In September 2005, the IMF's member countries agreed to the

31
first round of ad hoc quota increases for four countries, including China. On March 28,
2008, the IMF's Executive Board ended a period of extensive discussion and negotiation
over a major package of reforms to enhance the institution's governance that would shift
quota and voting shares from advanced to emerging markets and developing countries.
The Fund's Board of Governors must vote on these reforms by April 28, 2008.

[edit] Members' quotas and voting power, and Board of

Governors
Major decisions require an 85% supermajority.[17] The United States has always been the
only country able to block a supermajority on its own.[18]

Table showing the top 20 member countries in terms of voting power (2,216,193 votes in
total):[19]

Quota:
IMF Quota: Votes:
millions Alternate Votes:
member percentage Governor percentage
of Governor number
country of total of total
SDRs
United Timothy F.
37149.3 17.09 Ben Bernanke 371743 16.77
States Geithner
Masaaki
Japan 13312.8 6.12 Naoto Kan 133378 6.02
Shirakawa
Axel A. Wolfgang
Germany 13008.2 5.98 130332 5.88
Weber Schäuble
United Alistair
10738.5 4.94 Mervyn King 107635 4.85
Kingdom Darling
Christine Christian
France 10738.5 4.94 107635 4.85
Lagarde Noyer
Zhou
China 8090.1 3.72 Hu Xiaolian 81151 3.66
Xiaochuan
Giulio
Italy 7055.5 3.25 Mario Draghi 70805 3.2
Tremonti
Saudi Ibrahim A. Hamad Al-
6985.5 3.21 70105 3.17
Arabia Al-Assaf Sayari
Canada 6369.2 2.93 Jim Flaherty Mark Carney 63942 2.89
Aleksei Sergey
Russia 5945.4 2.74 59704 2.7
Kudrin Ignatiev
Netherla L.B.J. van
5162.4 2.38 Nout Wellink 51874 2.34
nds Geest
Jean-Pierre
Belgium 4605.2 2.12 Guy Quaden 46302 2.09
Arnoldi
Pranab Duvvuri
India 4158.2 1.91 41832 1.89
Mukherjee Subbarao

32
 Switzerla 3458.5 Jean-Pierre Hans-Rudolf
1.59 34835 1.57
nd Roth Merz
Australia 3236.4 1.49 Wayne Swan Ken Henry 32614 1.47
Agustín Guillermo
Mexico 3152.8 1.45 31778 1.43
Carstens Ortiz
Miguel
Elena
Spain 3048.9 1.40 Fernández 30739 1.39
Salgado
Ordóñez
Guido Henrique
Brazil 3036.1 1.40 30611 1.38
Mantega Meirelles
South Seong Tae
2927.3 1.35 Okyu Kwon 29523 1.33
Korea Lee
Rodrigo
Venezuel Gastón Parra
2659.1 1.22 Cabeza 26841 1.21
a Luzardo
Morales
remaining
166 60081.4 29.14 respective respective 637067 28.78
countries

[edit] Assistance and reforms

Main articles: Washington consensus and Structural adjustment program

The primary mission of the IMF is to provide financial assistance to countries that
experience serious financial and economic difficulties using funds deposited with the
IMF from the institution's 186 member countries. Member states with balance of
payments problems, which often arise from these difficulties, may request loans to help
fill gaps between what countries earn and/or are able to borrow from other official
lenders and what countries must spend to operate, including to cover the cost of
importing basic goods and services. In return, countries are usually required to launch
certain reforms, which have often been dubbed the "Washington Consensus". These
reforms are thought to be beneficial to countries with fixed exchange rate policies that
may engage in fiscal, monetary, and political practices which may lead to the crisis itself.
For example, nations with severe budget deficits, rampant inflation, strict price controls,
or significantly over-valued or under-valued currencies run the risk of facing balance of
payment crises. Thus, the structural adjustment programs are at least ostensibly intended
to ensure that the IMF is actually helping to prevent financial crises rather than merely
funding financial recklessness.

[edit] IMF/World Bank support of military

dictatorships
The role of the Bretton Woods institutions has been controversial since the late Cold War
period, as the IMF policy makers supported military dictatorships friendly to American

33
 and European corporations. Critics also claim that the IMF is generally apathetic or
hostile to their views of democracy, human rights, and labor rights. The controversy has
helped spark the Anti-globalization movement. Arguments in favor of the IMF say that
economic stability is a precursor to democracy; however, critics highlight various
examples in which democratized countries fell after receiving IMF loans.[20]

In the 1960s, the IMF and the World Bank supported the government of Brazil’s military
dictator Castello Branco with tens of millions of dollars of loans and credit that were
denied to previous democratically-elected governments.[21]

Countries that were or are under a military dictatorship whilst being members of the
IMF/World Bank (support from various sources in $Billion):[22]

D
Country indebted In In Debt %[clarification Debt % at end Country
to IMF/World Dictator power power needed] at start of of debts in ge
Bank from to dictatorship dictatorship 1996
bi
Argentina Military dictatorship 1976 1983 9.3 48.9 93.8 39
Bolivia Military dictatorship 1962 1980 0 2.7 5.2 2.7
Brazil Military dictatorship 1964 1985 5.1 105.1 179 10
Chile Augusto Pinochet 1973 1989 5.2 18 27.4 12
El Salvador Military dictatorship 1979 1994 0.9 2.2 2.2 1.3
Ethiopia Mengistu Haile Mariam 1977 1991 0.5 4.2 10 3.7
Haiti Jean-Claude Duvalier 1971 1986 0 0.7 0.9 0.7
Indonesia Suharto 1967 1998 3 129 129 12
Kenya Moi 1979 2002 2.7 6.9 6.9 4.2
Liberia Doe 1979 1990 0.6 1.9 2.1 1.3
Malawi Banda 1964 1994 0.1 2 2.3 1.9
Nigeria Buhari/Babangida/Abacha 1984 1998 17.8 31.4 31.4 13
Pakistan Zia-ul Haq 1977 1988 7.6 17
Pakistan Pervez Musharraf 1999 2008
Paraguay Stroessner 1954 1989 0.1 2.4 2.1 2.3
Philippines Marcos 1965 1986 1.5 28.3 41.2 26
Somalia Siad Barre 1969 1991 0 2.4 2.6 2.4
South Africa apartheid 1948 1992 18.7 23.6 18
Sudan Nimeiry/al-Mahdi 1969 present 0.3 17 17 16
Syria Assad 1970 present 0.2 21.4 21.4 21
Thailand Military dictatorship 1950 1983 0 13.9 90.8 13
Zaire/Democratic
Republic of the Mobutu 1965 1997 0.3 12.8 12.8 12
Congo

34
Notes: Debt at takeover by dictatorship; earliest data published by the World Bank is for
1970. Debt at end of dictatorship (or 1996, most recent date for World Bank data).

[edit] Criticism
Two criticisms from economists have been that financial aid is always bound to so-called
"Conditionalities", including Structural Adjustment Programs (SAP). It is claimed that
conditionalities (economic performance targets established as a precondition for IMF
loans) retard social stability and hence inhibit the stated goals of the IMF, while
Structural Adjustment Programs lead to an increase in poverty in recipient countries.[23]

One of the main SAP conditions placed on troubled countries is that the governments sell
up as much of their national assets as they can, normally to western corporations at
heavily discounted prices.[citation needed]

That said, the IMF sometimes advocates "austerity programmes," increasing taxes even
when the economy is weak, in order to generate government revenue and balance budget
deficits. Countries are often advised to lower their corporate tax rate. These policies were
criticized by Joseph E. Stiglitz, former chief economist and Senior Vice President at the
World Bank, in his book Globalization and Its Discontents.[24] He argued that by
converting to a more Monetarist approach, the fund no longer had a valid purpose, as it
was designed to provide funds for countries to carry out Keynesian reflations, and that
the IMF "was not participating in a conspiracy, but it was reflecting the interests and
ideology of the Western financial community".[25]

Argentina, which had been considered by the IMF to be a model country in its
compliance to policy proposals by the Bretton Woods institutions, experienced a
catastrophic economic crisis in 2001,[26] which some believe to have been caused by IMF-
induced budget restrictions — which undercut the government's ability to sustain national
infrastructure even in crucial areas such as health, education, and security — and
privatization of strategically vital national resources.[27] Others attribute the crisis to
Argentina's misdesigned fiscal federalism, which caused subnational spending to increase
rapidly.[28] The crisis added to widespread hatred of this institution in Argentina and other
South American countries, with many blaming the IMF for the region's economic
problems.[29] The current — as of early 2006 — trend towards moderate left-wing
governments in the region and a growing concern with the development of a regional
economic policy largely independent of big business pressures has been ascribed to this
crisis.

Another example of where IMF Structural Adjustment Programmes aggravated the

problem was in Kenya. Before the IMF got involved in the country, the Kenyan central
bank oversaw all currency movements in and out of the country. The IMF mandated that
the Kenyan central bank had to allow easier currency movement. However, the
adjustment resulted in very little foreign investment, but allowed Kamlesh Manusuklal
Damji Pattni, with the help of corrupt government officials, to siphon off billions of
Kenyan shillings in what came to be known as the Goldenberg scandal, leaving the

35
country worse off than it was before the IMF reforms were implemented.[citation needed] In an
interview, the former Romanian Prime Minister Tăriceanu stated that "Since 2005, IMF
is constantly making mistakes when it appreciates the country's economic performances".
[30]

In September 2007 the IMF said "given the Irish economy's strong fundamentals and the
authorities' commitment to sound policies, the Directors expected economic growth to
remain robust over the medium term".[31] Seventeen months later in April 2009 the New
York Times quoted Nobel prize-winning economist, Paul Krugman, who identified
Ireland as a model for the worst-case scenario for the global economy.[32]

Overall the IMF success record is perceived as limited.[citation needed] While it was created to
help stabilize the global economy, since 1980 critics claim over 100 countries (or
reputedly most of the Fund's membership) have experienced a banking collapse that they
claim have reduced GDP by four percent or more, far more than at any time in Post-
Depression history.[citation needed] The considerable delay in the IMF's response to any crisis,
and the fact that it tends to only respond to them (or even create them)[33] rather than
prevent them, has led many economists to argue for reform. In 2006, an IMF reform
agenda called the Medium Term Strategy was widely endorsed by the institution's
member countries. The agenda includes changes in IMF governance to enhance the role
of developing countries in the institution's decision-making process and steps to deepen
the effectiveness of its core mandate, which is known as economic surveillance or
helping member countries adopt macroeconomic policies that will sustain global growth
and reduce poverty. On June 15, 2007, the Executive Board of the IMF adopted the 2007
Decision on Bilateral Surveillance, a landmark measure that replaced a 30-year-old
decision of the Fund's member countries on how the IMF should analyse economic
outcomes at the country level.

[edit] Impact on access to food

A number of civil society organizations[34] have criticized the IMF's policies for their
impact on peoples' access to food, particularly in developing countries. In October 2008,
former US President Bill Clinton joined this chorus in a speech to the United Nations
World Food Day, which criticized the World Bank and IMF for their policies on food and
agriculture:

We need the World Bank, the IMF, all the big foundations, and all the governments to admit that,
for 30 years, we all blew it, including me when I was President. We were wrong to believe that
food was like some other product in international trade, and we all have to go back to a more
responsible and sustainable form of agriculture.

– Former US President Bill Clinton, Speech at United Nations World Food Day, October 16,
2008 [35]

[edit] Impact on public health

36
In 2008, a study by analysts from Cambridge and Yale universities published on the
open-access Public Library of Science concluded that strict conditions on the
international loans by the IMF resulted in thousands of deaths in Eastern Europe by
tuberculosis as public health care had to be weakened. In the 21 countries to which the
IMF had given loans, tuberculosis deaths rose by 16.6 %.[36]

[edit] Criticism from free-market advocates

Typically the IMF and its supporters advocate a monetarist approach. As such, adherents
of supply-side economics generally find themselves in open disagreement with the IMF.
The IMF frequently advocates currency devaluation, criticized by proponents of supply-
side economics as inflationary. Secondly they link higher taxes under "austerity
programmes" with economic contraction.

Currency devaluation is recommended by the IMF to the governments of poor nations

with struggling economies. Some economists claim these IMF policies are destructive to
economic prosperity.[citation needed]

Complaints have also been directed toward the International Monetary Fund gold reserve
being undervalued. At its inception in 1945, the IMF pegged gold at US$35 per Troy
ounce of gold. In 1973, the Nixon administration lifted the fixed asset value of gold in
favor of a world market price. This need to lift the fixed asset value of gold had largely
come about because Petrodollars outside the United States were worth more than could
be backed by the gold at Fort Knox under the fixed exchange rate system.[citation needed]
Following this, the fixed exchange rates of currencies tied to gold were switched to a
floating rate, also based on market price and exchange. The fixed rate system had only
served to limit the nominal amount of assistance the organization could provide to debt-
ridden countries. Current IMF rules prohibit members from linking their currencies to
gold.[citation needed]

[edit] Attempts to repair image

Research by the Pew Research Center shows that more than 60 percent of Asians and 70
percent of Africans feel that the IMF and the World Bank have a positive effect on their
country. However it is pertinent to note that the survey aggregated international
organizations including the World Trade Organization. Also, a similar percentage of
people in the Western world believed that these international organizations had a positive
effect on their countries. In 2005, the IMF was the first multilateral financial institution to
implement a sweeping debt-relief program for the world's poorest countries known as the
Multilateral Debt Relief Initiative. By year-end 2006, 23 countries mostly in sub-Saharan
Africa and Central America had received total relief of debts owed to the IMF[citation needed].

[edit] Managing Director

Historically the IMF's managing director has been European and the president of the
World Bank has been from the United States. However, this standard is increasingly

37
being questioned and competition for these two posts may soon open up to include other
qualified candidates from any part of the world. Executive Directors, who confirm the
managing director, are voted in by Finance Ministers from countries they represent. The
First Deputy Managing Director of the IMF, the second-in-command, has traditionally
been (and is today) an American.

The IMF is for the most part controlled by the major Western Powers, with voting rights
on the Executive board based on a quota derived from the relative size of a country in the
global economy. Critics claim that the board rarely votes and passes issues contradicting
the will of the US or Europeans, which combined represent the largest bloc of
shareholders in the Fund. On the other hand, Executive Directors that represent emerging
and developing countries have many times strongly defended the group of nations in their
constituency. Alexandre Kafka, who represented several Latin American countries for 32
years as Executive Director (including 21 as the dean of the Board), is a prime example.
Mohamed Finaish from Libya, the Executive Director representing the majority of the
Arab World and Pakistan, was a tireless defender[citation needed] of the developing nations'
rights at the IMF until the 1992 elections.

Rodrigo Rato became the ninth Managing Director of the IMF on June 7, 2004 and
resigned his post at the end of October 2007.

EU ministers agreed on the candidacy of Dominique Strauss-Kahn as managing director

of the IMF at the Economic and Financial Affairs Council meeting in Brussels on July
10, 2007. On September 28, 2007, the International Monetary Fund's 24 executive
directors elected Mr. Strauss-Kahn as new managing director, with broad support
including from the United States and the 27-nation European Union. Strauss-Kahn
succeeded Spain's Rodrigo de Rato, who retired on October 31, 2007.[37] The only other
nominee was Josef Tošovský, a late candidate proposed by Russia. Strauss-Kahn said: "I
am determined to pursue without delay the reforms needed for the IMF to make financial
stability serve the international community, while fostering growth and employment."[38]

Dates Name Country

May 6, 1946 – May 5, 1951 Camille Gutt Belgium

August 3, 1951 – October 3, 1956 Ivar Rooth Sweden

November 21, 1956 – May 5, 1963 Per Jacobsson Sweden

September 1, 1963 – August 31, 1973 Pierre-Paul Schweitzer France

38
September 1, 1973 – June 16, 1978 Johannes Witteveen Netherlands

June 17, 1978 – January 15, 1987 Jacques de Larosière France

January 16, 1987 – February 14, 2000 Michel Camdessus France

May 1, 2000 – March 4, 2004 Horst Köhler Germany

June 7, 2004 – October 31, 2007 Rodrigo Rato Spain

November 1, 2007 – present Dominique Strauss-Kahn France

[edit] Media representation of the IMF

Life and Debt, a documentary film, deals with the IMF's policies' influence on Jamaica
and its economy from a critical point of view. In 1978, one year after Jamaica first
entered a borrowing relationship with the IMF, the Jamaican dollar was still worth more
on the open exchange than the US dollar; by 1995, when Jamaica terminated that
relationship, the Jamaican dollar had eroded to less than 2 cents US. Such observations
lead to skepticism that IMF involvement is not necessarily helpful to a third world
economy.

The Debt of Dictators[39] explores the lending of billions of dollars by the IMF, World
Bank multinational banks and other international financial institutions to brutal dictators
throughout the world. (see IMF/World Bank support of military dictatorships)

Radiohead mentions the IMF in their song "Electioneering" on their 1997 release, OK
Computer. The lyrics state, "It's just business/Cattle prods and the IMF/I trust I can rely
on your vote". Bruce Cockburn mentions the IMF in his song "Call It Democracy". The
lyrics state "IMF dirty MF/takes away everything it can get/always making certain that
there's one thing left/keep them on the hook with insupportable debt". Rage Against The
Machine in "Wind Below" from Evil Empire makes reference to IMF with the lyrics
"Flip this capital eclipse/ Them bury life with IMF shifts, and poison lips". Thievery
Corporation mention the IMF in their song "Vampires" on their album Radio Retaliation:
the lyrics are "Lies and theft/ Guns and debt/ Life and death/ IMF".

World Bank
39
 World Bank

World Bank logo

Formation 27 December 1944
Type International organization
Legal status Treaty
Purpose/focus Crediting
Membership 186 countries
President Robert B. Zoellick
Main organ Board of Directors[1]
Parent organization World Bank Group
Website http://www.worldbank.org/

World Bank is a term used to describe an international financial institution that provides
leveraged loans[2] to developing countries for capital programs. The World Bank has a
stated goal of reducing poverty.

The World Bank differs from the World Bank Group, in that the World Bank comprises
only two institutions: the International Bank for Reconstruction and Development
(IBRD) and the International Development Association (IDA), whereas the latter
incorporates these two in addition to three more:[3] International Finance Corporation
(IFC), Multilateral Investment Guarantee Agency (MIGA), and International Centre for
Settlement of Investment Disputes (ICSID).

[edit] History

40
John Maynard Keynes (right) represented the United Kingdom at the conference, and
Harry Dexter White (left) represented the United States.

The World Bank is one of five institutions created at the Bretton Woods Conference in
1944. The International Monetary Fund, a related institution is the second. Delegates
from many countries attended the Bretton Woods Conference. The most powerful
countries in attendance were the United States and United Kingdom which dominated
negotiations.[4]

Although both are based in Washington, the World Bank is by custom headed by an
American, while the IMF is led by a European.

[edit] 1945–1968

From its conception until 1967 the bank undertook a relatively low level of lending.
Fiscal conservatism and careful screening of loan applications was common. Bank staff
attempted to balance the priorities of providing loans for reconstruction and development
with the need to instill confidence in the bank.[5]

Bank president John McCloy selected France to be the first recipient of World Bank aid;
two other applications from Poland and Chile were rejected. The loan was for $987
million, half the amount requested and came with strict conditions. Staff from the World
Bank monitored the use of the funds, ensuring that the French government would present
a balanced budget and give priority of debt repayment to the World Bank over other
governments. The United States State Department told the French government that
communist elements within the Cabinet needed to be removed. The French Government
complied with this diktat and removed the Communist coalition government. Within
hours the loan to France was approved.[6]

The Marshall Plan of 1947 caused lending by the bank to change as many European
countries received aid that competed with World Bank loans. Emphasis was shifted to

41
non-European countries and until 1968, loans were earmarked for projects that would
enable a borrower country to repay loans (such projects as ports, highway systems, and
power plants).

[edit] 1968–1980

From 1968 to 1980 the bank concentrated on meeting the basic needs of people in the
developing world.[citation needed] The size and number of loans to borrowers was greatly
increased as loan targets expanded from infrastructure into social services and other
sectors.[citation needed]

These changes can be attributed to Robert McNamara who was appointed to the
presidency in 1968 by Lyndon B. Johnson.[7] McNamara imported a technocratic
managerial style to the Bank that he had used as United States Secretary of Defense and
President of the Ford Motor Company.[8] McNamara shifted bank policy toward measures
such as building schools and hospitals, improving literacy and agricultural reform.
McNamara created a new system of gathering information from potential borrower
nations that enabled the bank to process loan applications much faster. To finance more
loans, McNamara told bank treasurer Eugene Rotberg to seek out new sources of capital
outside of the northern banks that had been the primary sources of bank funding. Rotberg
used the global bond market to increase the capital available to the bank.[9] One
consequence of the period of poverty alleviation lending was the rapid rise of third world
debt. From 1976 to 1980 developing world debt rose at an average annual rate of 20%.[10]
[11]

[edit] 1980–1989

In 1980 A.W. Clausen replaced McNamara after being nominated by US President

Jimmy Carter. Clausen replaced a large number of bank staffers from the McNamara era
and instituted a new ideological focus in the bank. The replacement of Chief Economist
Hollis B. Chenery by Anne Krueger in 1982 marked a notable policy shift at the bank.
Krueger was known for her criticism of development funding as well as third world
governments as rent-seeking states.

Lending to service third world debt marked the period of 1980–1989. Structural
adjustment policies aimed at streamlining the economies of developing nations (at the
expense of health and social services) were also a large part of World Bank policy during
this period. UNICEF reported in the late 1980s that the structural adjustment programs of
the World Bank were responsible for the “reduced health, nutritional and educational
levels for tens of millions of children in Asia, Latin America, and Africa”.[12]

[edit] 1989–Present

From 1989 World Bank policy changed in response to criticism from many groups.
Environmental groups and NGOs were incorporated in the lending of the bank in order to

42
mitigate the effects of the past that prompted such harsh criticism.[13] Bank projects
"include" green concerns.

The World Bank headquarters in Washington, D.C.

[edit] Millennium Development Goals

The World Bank's current focus is on the achievement of the Millennium Development
Goals (MDGs), lending primarily to "middle-income countries" at interest rates which
reflect a small mark-up over its own (AAA-rated) borrowings from capital markets; while
the IDA provides low or no interest loans and grants to low income countries with little
or no access to international credit markets. The IBRD is a market-based nonprofit
organization, using its high credit rating to make up for the relatively low interest rate on
its loans, while the IDA is funded primarily by periodic "replenishments" (grants) voted
to the institution by its more affluent member countries. The Bank’s mission is to aid
developing countries and their inhabitants to achieve development and the reduction of
poverty, including achievement of the MDGs, by helping countries develop an
environment for investment, jobs and sustainable growth, thus promoting economic
growth through investment and enabling the poor to share the fruits of economic growth.

[edit] Key Factors

The World Bank sees the five key factors necessary for economic growth and the creation
of an enabling business environment as:

1. Build capacity: Strengthening governments and educating government officials.

2. Infrastructure creation: implementation of legal and judicial systems for the
encouragement of business, the protection of individual and property rights and
the honoring of contracts.
3. Development of Financial Systems: the establishment of strong systems capable
of supporting endeavors from micro credit to the financing of larger corporate
ventures.
4. Combating corruption: Support for countries' efforts at eradicating corruption.
5. Research, Consultancy and Training: the World Bank provides platform for
research on development issues, consultancy and conduct training programs (web
based, on line, tele-/video conferencing and class room based) open for those who

43
 are interested from academia, students, government and non-governmental
organization (NGO) officers etc.

The Bank obtains funding for its operations primarily through the IBRD’s sale of AAA-
rated bonds in the world’s financial markets. The IBRD’s income is generated from its
lending activities, with its borrowings leveraging its own paid-in capital, plus the
investment of its "float". The IDA obtains the majority of its funds from forty donor
countries who replenish the bank’s funds every three years, and from loan repayments,
which then become available for re-lending.

[edit] Criteria

Many achievements have brought the MDG targets for 2015 within reach in some cases.
For the goals to be realized, six criteria must be met: stronger and more inclusive growth
in Africa and fragile states, more effort in health and education, integration of the
development and environment agendas, more and better aid, movement on trade
negotiations, and stronger and more focused support from multilateral institutions like the
World Bank.

1. Eradicate Extreme Poverty and Hunger: From 1990 through 2004, the
proportion of people living in extreme poverty fell from almost a third to less than
a fifth. Although results vary widely within regions and countries, the trend
indicates that the world as a whole can meet the goal of halving the percentage of
people living in poverty. Africa’s poverty, however, is expected to rise, and most
of the 36 countries where 90% of the world’s undernourished children live are in
Africa. Less than a quarter of countries are on track for achieving the goal of
halving under-nutrition.
2. Achieve Universal Primary Education: The number of children in school in
developing countries increased from 80% in 1991 to 88% in 2005. Still, about 72
million children of primary school age, 57% of them girls, were not being
educated as of 2005.
3. Promote Gender Equality and Empower Women: The tide is turning slowly
for women in the labor market, yet far more women than men- worldwide more
than 60% - are contributing but unpaid family workers. The World Bank Group
Gender Action Plan was created to advance women’s economic empowerment
and promote shared growth.
4. Reduce Child Mortality: There is some improvement in survival rates globally;
accelerated improvements are needed most urgently in South Asia and Sub-
Saharan Africa. An estimated 10 million-plus children under five died in 2005;
most of their deaths were from preventable causes.
5. Improve Maternal Health: Almost all of the half million women who die during
pregnancy or childbirth every year live in Sub-Saharan Africa and Asia. There are
numerous causes of maternal death that require a variety of health care
interventions to be made widely accessible.
6. Combat HIV/AIDS, Malaria, and Other Diseases: Annual numbers of new
HIV infections and AIDS deaths have fallen, but the number of people living with

44
 HIV continues to grow. In the eight worst-hit southern African countries,
prevalence is above 15 percent. Treatment has increased globally, but still meets
only 30 percent of needs (with wide variations across countries). AIDS remains
the leading cause of death in Sub-Saharan Africa (1.6 million deaths in 2007).
There are 300 to 500 million cases of malaria each year, leading to more than 1
million deaths. Nearly all the cases and more than 95 percent of the deaths occur
in Sub-Saharan Africa.
7. Ensure Environmental Sustainability: Deforestation remains a critical problem,
particularly in regions of biological diversity, which continues to decline.
Greenhouse gas emissions are increasing faster than energy technology
advancement.
8. Develop a Global Partnership for Development: Donor countries have renewed
their commitment. Donors have to fulfill their pledges to match the current rate of
core program development. Emphasis is being placed on the Bank Group’s
collaboration with multilateral and local partners to quicken progress toward the
MDGs’ realization.

[edit] Leadership
The President of the Bank, currently Robert B. Zoellick, is responsible for chairing the
meetings of the Boards of Directors and for overall management of the Bank.
Traditionally, the Bank President has always been a US citizen nominated by the United
States, the largest shareholder in the bank. The nominee is subject to confirmation by the
Board of Governors, to serve for a five-year, renewable term.[14]

The Executive Directors, representing the Bank's member countries, make up the Board
of Directors, usually meeting twice a week to oversee activities such as the approval of
loans and guarantees, new policies, the administrative budget, country assistance
strategies and borrowing and financing decisions.

The Vice Presidents of the Bank are its principal managers, in charge of regions, sectors,
networks and functions. There are 24 Vice-Presidents, three Senior Vice Presidents and
two Executive Vice Presidents.

[edit] Members
Main article: List of World Bank members

The International Bank for Reconstruction and Development (IBRD) has 186 member
countries, while the International Development Association (IDA) has 168 members.[15]
Each member state of IBRD should be also a member of the International Monetary Fund
(IMF) and only members of IBRD are allowed to join other institutions within the Bank
(such as IDA).[16]

[edit] Poverty reduction strategies

45
For the poorest developing countries in the world, the bank’s assistance plans are based
on poverty reduction strategies; by combining a cross-section of local groups with an
extensive analysis of the country’s financial and economic situation the World Bank
develops a strategy pertaining uniquely to the country in question. The government then
identifies the country’s priorities and targets for the reduction of poverty, and the World
Bank aligns its aid efforts correspondingly.

Forty-five countries pledged US$25.1 billion in "aid for the world's poorest countries",
aid that goes to the World Bank International Development Association (IDA) which
distributes the gifts to eighty poorer countries. While wealthier nations sometimes fund
their own aid projects, including those for diseases, and although IDA is the recipient of
criticism, Robert B. Zoellick, the president of the World Bank, said when the gifts were
announced on December 15, 2007, that IDA money "is the core funding that the poorest
developing countries rely on".[17]

[edit] Clean Technology Fund management

The World Bank has been assigned temporary management responsibility of the Clean
Technology Fund (CTF), focused on making renewable energy cost-competitive with
coal-fired power as quickly as possible, but this may not continue after UN's Copenhagen
climate change conference in December, 2009, because of the Bank's continued
investment in coal-fired power plants.[18]

[edit] Country assistance strategies

As a guideline to the World Bank's operations in any particular country, a Country
Assistance Strategy is produced, in cooperation with the local government and any
interested stakeholders and may rely on analytical work performed by the Bank or other
parties.

[edit] Criticism
The World Bank has long been criticized by non-governmental organizations, such as the
indigenous rights group Survival International, and academics, including its former Chief
Economist Joseph Stiglitz who is equally critical of the International Monetary Fund, the
US Treasury Department, US and other developed country trade negotiators.[19] Critics
argue that the so-called free market reform policies which the Bank advocates are often
harmful to economic development if implemented badly, too quickly ("shock therapy"),
in the wrong sequence or in weak, uncompetitive economies.[20][21]

In Masters of Illusion: The World Bank and the Poverty of Nations (1996), Catherine
Caufield argued that the assumptions and structure of the World Bank harms southern
nations. Caufield criticized its formulaic recipes of "development". To the World Bank,
different nations and regions are indistinguishable and ready to receive the "uniform
remedy of development". She argued that to attain even modest success, Western

46
practices are adopted and traditional economic structures and values abandoned. A
second assumption is that poor countries cannot modernize without money and advice
from abroad.

A number of intellectuals in developing countries have argued that the World Bank is
deeply implicated in contemporary modes of donor and NGO imperialism, and that its
intellectual contributions function to blame the poor for their condition.[22]

One of the strongest criticisms of the World Bank has been the way in which it is
governed. While the World Bank represents 186 countries, it is run by a small number of
economically powerful countries. These countries choose the leadership and senior
management of the World Bank, and so their interests dominate the bank.[23]

The World Bank has dual roles that are contradictory: that of a political organization and
that of a practical organization. As a political organization, the World Bank must meet
the demands of donor and borrowing governments, private capital markets, and other
international organizations. As an action-oriented organization, it must be neutral,
specializing in development aid, technical assistance, and loans. The World Bank’s
obligations to donor countries and private capital markets have caused it to adopt policies
which dictate that poverty is best alleviated by the implementation of "market" policies.
[24]

In the 1990s, the World Bank and the IMF forged the Washington Consensus, policies
which included deregulation and liberalization of markets, privatization and the
downscaling of government. Though the Washington Consensus was conceived as a
policy that would best promote development, it was criticized for ignoring equity,
employment and how reforms like privatization were carried out. Many now agree[citation
needed]
that the Washington Consensus placed too much emphasis on the growth of GDP,
and not enough on the permanence of growth or on whether growth contributed to better
living standards.[25]

Some analysis shows that the World Bank has increased poverty and been detrimental to
the environment, public health and cultural diversity.[26] Some critics also claim that the
World Bank has consistently pushed a neoliberal agenda, imposing policies on
developing countries which have been damaging, destructive and anti-developmental.[27]
[28]

It has also been suggested that the World Bank is an instrument for the promotion of US
or Western interests in certain regions of the world. Even South American nations have
established the Bank of the South in order to reduce US influence in the region.[29]
Criticism of the bank, that the President is always a citizen of the United States,
nominated by the President of the United States (though subject to the "approval" of the
other member countries). There have been accusations that the decision-making structure
is undemocratic as the US has a veto on some constitutional decisions with just over 16%
of the shares in the bank;[30] Decisions can only be passed with votes from countries
whose shares total more than 85% of the bank's shares.[31] A further criticism concerns

47
internal management and the manner in which the World Bank is said to lack
accountability.[32]

Criticism of the World Bank often takes the form of protesting as seen in recent events
such as the World Bank Oslo 2002 Protests,[33] the October Rebellion,[34] and the Battle of
Seattle.[35] Such demonstrations have occurred all over the world, even amongst the
Brazilian Kayapo people.[36]

In 2008, a World Bank report which found that biofuels had driven food prices up 75%
was not published. Officials confided that they believed it was suppressed to avoid
embarrassing the then-President of the United States, George W. Bush.[37]

The World Bank has also been criticized for not publishing reports related to the
Palestinian economic situation in the West Bank and Gaza. Economists in the region have
often written damning reports of the Israeli occupation and its effects on the economy,
but these reports remain internal and are not published.

[edit] Knowledge production

The World Bank has been criticised for the manner in which it engages in “the
production, accumulation, circulation and functioning” of knowledge. The Bank’s
production of knowledge has become integral to the funding and justification of large
capital projects. The Bank relies on “a growing network of translocal scientists,
technocrats, NGOs, and empowered citizens to help generate data and construct
discursive strategies”.[38] Its capacity to produce authoritative knowledge is a response to
intense scrutiny of Bank projects resulting from the successes of growing anti-Bank and
alternative-development movements.[39] “Development has relied exclusively on one
knowledge system, namely, the modern Western one. The dominance of this knowledge
system has dictated the marginalization and disqualification of non-Western knowledge
systems”.[40] It has been remarked that in these alternative knowledge systems,
researchers and activists might find alternative rationales to guide interventionist action
away from Western (Bank-produced) ways of thinking. Knowledge production has
become an asset to the Bank, and “it is generated and used in highly strategic ways”[39] to
provide justifications for development.

[edit] Structural adjustment

The effect of structural adjustment policies on poor countries has been one of the most
significant criticisms of the World Bank. The oil crisis in the late 1970s plunged many
countries into economic crises.[41] The World Bank responded with structural adjustment
loans which distributed aid to struggling countries while enforcing policy changes in
order to reduce inflation and fiscal imbalance. Some of these policies included
encouraging production, investment and labour-intensive manufacturing, changing real
exchange rates and altering the distribution of government resources.[42] Structural
adjustment policies were most effective in countries with an institutional framework that
allowed these policies to be implemented easily.[42] For some countries, particularly in

48
Sub-Saharan Africa, economic growth regressed and inflation worsened.[42] The
alleviation of poverty was not a goal of structural adjustment loans, and the
circumstances of the poor often worsened, due to a reduction in social spending and an
increase in the price of food, as subsidies were lifted.[42]

By the late 1980s, international organizations began to admit that structural adjustment
policies were worsening life for the world’s poor. The World Bank changed structural
adjustment loans, allowing for social spending to be maintained, and encouraging a
slower change to policies such as transfer of subsidies and price rises.[43] In 1999, the
World Bank and the IMF introduced the Poverty Reduction Strategy Paper approach to
replace structural adjustment loans.[44] The Poverty Reduction Strategy Paper approach
has been interpreted as an extension of structural adjustment policies as it continues to
reinforce and legitimize global inequities.[45] Neither approach has addressed the inherent
flaws within the global economy that contribute to economic and social inequities within
developing countries.[46] By reinforcing the relationship between lending and client states,
many believe that the World Bank has usurped indebted countries' power to determine
their own economic policy.[47]

[edit] Water privatization

Sociologist Michael Goldman has argued that “Industry analysts predict that private
water will soon be a capitalized market as precious, and as war-provoking, as oil”.[48]
Goldman says “These days, an indebted country cannot borrow capital from the World
Bank or IMF without a domestic water privatization policy as a precondition”.[49] The
Bank is utilizing “the 'Washington Consensus' model of "development" to promote water
privatization. Following this model, the World Bank is forcing many countries to
commodify their water resources, rather than using their expertise in the public sector to
acknowledge water as a universal human right and an essential public service”.[50] The
push for water privatization development plays upon “the shocking tragedy that much of
the world lacks affordable clean water”. This image creates “new opportunities in
development, though it may have little to do with ultimately quenching” the needs of
impoverished countries. “The problem of water scarcity for the world’s poor has been
analyzed by the World Bank as one in which the public sector has failed to deliver, and
has therefore prevented development from “taking off”, and the economy from
modernizing. If the state cannot deliver something as basic as water and sanitation, the
argument goes, it is a strong indication of a general failure of public-sector capacity”.[51]
However, “with the sale or lease of a public good comes more than simply a privatized
service; alongside it comes a wide set of postcolonial institutional forces that intervene in
state-citizen relations and North-South dynamics”.[52]

[edit] Business and political interests of main stakeholders

Although controversial and far from proven, there is criticism that World Bank and IMF
are used as a means to fulfill business (interests of large corporations to enter the natural
resource markets of the country and obtain the legal guarantees that it can stay there) or
political needs of the main IMF donors (mostly USA), that were previously historically

49
obtained by more direct activity - war, economic blockade, espionage. See for example
Confessions of an Economic Hit Man.

[edit] Sovereign immunity

Despite claiming goals of “good governance and anti-corruption″[53] the World Bank
requires sovereign immunity from countries it deals with.[54][55][56][57][58] Sovereign
immunity waives a holder from all legal liability for their actions. It is proposed that this
immunity from responsibility is a “shield which [The World Bank] wants resort to, for
escaping accountability and security by the people.”[54] As the United States has veto
power, it can prevent the World Bank from taking action against its interests.[54]

[edit] Environmental strategy

The World Bank's ongoing work to develop a strategy on climate change and
environmental threats has been criticized for (i) lacking of a proper overall vision and
purpose, (ii) having a limited focus on its own role in global and regional governance,
and (iii) having limited recognition of specific regional issues, f, ex. issues of rights to
food and land, and sustainable land use. Critics have also commented that only 1% of the
World Bank's lending goes to the environmental sector, narrowly defined.[59]

[show]

v•d•e

Central banks

Bank for International

Settlements · Financial Stability
Global
Board · Basel Committee on
Banking Supervision

[hide]

By continent

AfricaCentral Bank of West African

States · Bank of Central African

50
 States · Bank of Algeria · Central
Bank of Angola · Bank of
Botswana · Bank of the Republic
of Burundi · Bank of Cape
Verde · Central Bank of the
Comoros · Central Bank of the
Congo · Central Bank of
Djibouti · Central Bank of Egypt ·
Bank of Eritrea · National Bank
of Ethiopia · Central Bank of The
Gambia · Bank of Ghana · Central
Bank of the Republic of Guinea ·
Central Bank of Kenya · Central
Bank of Lesotho · Central Bank
of Liberia · Central Bank of
Libya · Reserve Bank of Malawi ·
Bank Al-Maghrib (Morocco) ·
Bank of Namibia · Central Bank
of Nigeria · South African
Reserve Bank · Bank of
Somaliland · Bank of Tanzania ·
Reserve Bank of Zimbabwe

Central Bank of Argentina ·

Central Bank of Barbados ·
Central Bank of Brazil · Bank of
Canada · Central Bank of Chile ·
Eastern Caribbean Central Bank ·
Bank of Mexico · Central Bank of
AmericasHonduras · Central Bank of
Nicaragua · Bank of the
Republic · Central Reserve Bank
of Peru · Federal Reserve System
(United States) · Central Bank of
Venezuela · Central Bank of
Trinidad and Tobago

51
 Reserve Bank of Australia ·
Reserve Bank of Fiji · Reserve
Bank of New Zealand · Bank of
OceaniaPapua New Guinea · Central
Bank of Samoa · Central Bank of
Solomon Islands · National
Reserve Bank of Tonga

Central Bank of Bahrain ·

Bangladesh Bank · Brunei
Currency and Monetary Board ·
People's Bank of China · Reserve
Bank of India · Central Bank of
Iran · Central Bank of Iraq · Bank
of Israel · Bank Indonesia · Bank
of Japan · National Bank of
Kazakhstan · National Bank of
the Kyrgyz Republic · Bank of
Korea · Central Bank of the
Democratic People's Republic of
Korea · Central Bank of Kuwait ·
Banque du Liban · Bank Negara
Asia
Malaysia · Bank of Mongolia ·
Central Bank of Oman · State
Bank of Pakistan · Central Bank
of the Philippines · Qatar Central
Bank · Monetary Authority of
Singapore · Central Bank of
Syria · Central Bank of the
Republic of China (Taiwan) ·
Bank of Thailand · Central Bank
of the United Arab Emirates ·
Central Bank of Uzbekistan ·
State Bank of Vietnam · Hong
Kong Monetary Authority ·
Monetary Authority of Macao

52
 European Central Bank
(Eurozone) · National Bank of the
Republic of Abkhazia · Central
Bank of Azerbaijan · Central
Bank of Bosnia and
Herzegovina · Bank of Albania ·
Bulgarian National Bank ·
Croatian National Bank · Czech
National Bank · Bank of
England · Bank of Estonia ·
EuropeHungarian National Bank ·
National Bank of the Republic of
Macedonia · Central Bank of
Norway · Central Bank of
Kosovo · Polish National Bank ·
National Bank of Romania ·
Central Bank of Russia · Central
Bank of Montenegro · National
Bank of Serbia · Swiss National
Bank · Central Bank of Turkey ·
National Bank of Ukraine

[show]

Policies and implementation

Expansionary monetary policy ·

PoliciesContractionary monetary policy ·
Capital requirement

Open market operations · Capital

control · Discount rate · Money
Implementation
creation · Interest rates · Sovereign
wealth fund

[show]

53
 Bretton Woods system

European Community
The European Community (EC) was the first of the three pillars of the European Union
(EU) between 1992 and 2009. Created by the Maastricht Treaty (1992), it was based
upon the principle of supranationalism and had its origins in the European Economic
Community, the predecessor of the European Union. The Treaty of Lisbon abolished the
entire pillar system when it came into effect in December 2009.

[edit] History
[edit] Creation and evolution

Further information: History of the European Union

Further information: History of the European Communities (1945-1957)
For history of the Community before the EU, see European Economic
Community#History.

54
 The Maastricht Treaty built upon the Single European Act and the Solemn Declaration on
European Union in the creation of the European Union. The treaty was signed on 7
February 1992 and came into force on 1 November 1993. The Union superseded the
European Communities, absorbing the European Economic Community as one of its
three pillars and renaming it the European Community. The first Commission President
following the creation of the EU was Jacques Delors, who briefly continued his previous
EEC tenure before handing over to Jacques Santer in 1994. Only the European
Communities, the Economic Community, the European Coal and Steel Community and
Euratom however had legal personality.

The Treaty of Amsterdam transferred responsibility for free movement of persons (e.g.
visas, illegal immigration, asylum) from the Justice and Home Affairs (JHA) pillar to the
European Community (JHA was renamed Police and Judicial Co-operation in Criminal
Matters (PJCC) as a result).[1] Both Amsterdam and the Treaty of Nice also extended
codecision procedure to nearly all policy areas, giving Parliament equal power to the
Council in the Community.

In 2002, the Treaty of Paris which established the European Coal and Steel Community
(one of the three communities which comprised the European Communities) expired,
having reached its 50 year limit (as the first treaty, it was the only one with a limit). No
attempt was made to renew its mandate; instead, the Treaty of Nice transferred certain of
its elements to the Treaty of Rome and hence its work continued as part of the EEC area
of the Community's remit.

[edit] Abolition

After the entry into force of the Treaty of Lisbon, the pillar structure ceased to exist, and
the legal personality of the European Community pillar was transferred to the newly
consolidated European Union. This was originally proposed under the European
Constitution but that treaty failed ratification in 2005.

Signed 1948 1951 1954 1957 1965 1986 1992 1997 2001 2007
In force 1948 1952 1955 1958 1967 1987 1993 1999 2003 2009
Treaty Brussels Paris Paris Agr. Rome Merger Single Act Maastricht Amsterdam Nice Lisbon

European Communities Three pillars of the European Union

European Atomic Energy
Community (EURATOM)
European Coal and Steel → Europea
Treaty expired in 2002
Community (ECSC) ← n Union
European Economic European (EU)
Community (EEC) Community
→ Justice (EC)
and Home Police and ←
Affairs

55
 Judicial Co-
operation in
(JHA) Criminal Matters
(PJCC)
European Political
Common Foreign and
Cooperation (EPC →
)
Security Policy (CFSP) ←
Unconsolidated
Western European Union (WEU)
bodies

[edit] Policy areas

Further information: Three pillars of the European Union

The Community pillar covers the following areas;[1]

• Border control • Economic and monetary • Trade policy

• EU Citizenship union • Research
• Common Agricultural • Education and Culture • Social policy
Policy • Environmental law • Asylum policy
• Common Fisheries • Employment • Schengen treaty
Policy • Healthcare
• Competition • Immigration
• Consumer protection • Trans-European policy
Networks
• Customs Union and
Single market

[edit] Supranationalism

The three pillars constituting the European Union (clickable)

56
Only the first pillar with the European Communities follow the principles of
supranationalism, and then still underdeveloped as far as their democratic potential is
concerned.[2]

The pillar structure of the EU allowed the areas of European co-operation to be increased,
without leaders handing a large amount of power to supranational institutions. The pillar
system segregated the EU, what was formally the competencies of the EEC fell within
the European Community pillar. Justice and Home Affairs was introduced as a new pillar
while European Political Cooperation became the second pillar (the Common Foreign
and Security Policy).

The EEC institutions became the institutions of the EU but the roles of the institutions
between the pillars are different. The Commission, Parliament and Court of Justice are
largely cut out of activities in the second and third pillars, with the Council dominating
proceedings. This is reflected in the names of the institutions, the Council is formally the
"Council of the European Union" while the Commission is formally the "Commission of
the European Communities". This allowed the new areas to be based on
intergovernmentalism (unanimous agreement between governments) rather than majority
voting and independent institutions according to supranational democracy.

• However, after the Treaty of Maastricht, Parliament gained a much bigger role.
Maastricht brought in the codecision procedure, which gave it equal legislative
power with the Council on Community matters. Hence, with the greater powers of
the supranational institutions and the operation of Qualified Majority Voting in
the Council, the Community pillar could be described as a far more federal
method of decision ma

[show]

v•d•e

European Union topics

Pre-1945 · 1945–1957 · 1958–

Timeline1972 · 1973–1993 · 1993–
1999 · 1999–2004 · since 2004

European Coal and Steel

Community (1951–2002) ·
European Economic
PredecessorsCommunity (1958–1993) ·
Euratom (1958–present) ·
European Communities (1967–
1993) · Details

InstitutionsParliament · European Council ·

Council of Ministers ·
Commission · European Court of

57
 Justice · Central Bank · Court of
Auditors

Eurojust · Europol · Frontex ·

AgenciesEnvironment · Reconstruction ·
Disease Prevention and Control

58