By Pramitha Perera
The International Monetary Fund (IMF), The World Bank and the World Trade Organisation (WTO) all emerged after the Second World War primarily to promote international economic cooperation. While at first glance, one might consider the WTO to be entirely separate from the IMF and the World Bank, especially since the WTO does not offer monetary loans to developing nations, if one were to look at the global agenda with the formation of the United Nations, it becomes clear why the three organisations intersect. To be more specific, in 1944, the United Nations Monetary and Financial Conference was held in Bretton Woods, New Hampshire (thereby also known as the Bretton Woods Conference). This was held with the intention of formulating international monetary or international economic policies of the post-war period. Consequently, at the end of the conference, the IMF and the World Bank were founded.
A consequence of the conference was also the idea to establish an International Trade Organisation (ITO). While nations strived to establish the charter for the ITO in Havana between 1947 and 1948, the United States’ lack of support led to the ITO never being established. However, its wide influence acted as a precursor to the signing of the General Agreement on Tariffs and Trade (GATT) Agreement in Geneva in October 1947, which led to the subsequent creation of the WTO. Hence, although each organisation appear to be operated separately, they all operate in the interest of guaranteeing economic cooperation. In this blog, I offer an overview of each organisation to understand the multifaceted nature of international economic cooperation.
Each Organisation Has a Central Purpose
At first glance, the mandate of each organisation clearly defines the scope and powers of each institution:
The International Monetary Fund was established in 1944 with the primary goal of promoting global monetary cooperation and secure financial stability among its Member countries, including providingfinancial assistance to Member countries that face balance of payment issues. It further offers policy advice and technical assistance to help its Member countries to maintain their economy in safe zones and get their economies back to the safe zones if they are not.
The World Bank was established in 1944 with the primary aim of providing financial and technical assistance to developing countries to support and encourage projects which are aimed at reducing poverty and promoting economic development.
The World Trade Organization was established in 1995 under the Marrakesh Agreement and its primary aim is to facilitate smooth, predictable, and free international trade among its Member countries. It further provides a comprehensive dispute settlement mechanism where member countries can resort when there occurs a trade dispute between them.
Where Do They Intersect?
If we take the IMF and the World Bank, although their primary responsibilities are sometimes separated from each other, they can sometimes be correlated. For instance, the key primary responsibilities of the IMF consist of macroeconomic analysis, forecasting and policy advice, budgeting and public expenditure management, fiscal and macroeconomic management, institutional arrangements underlying monetary and exchange rate policies, balance of payments adjustment and financing, crisis prevention and resolution, and more. On the other hand, the key primary responsibilities of The World Bank consist of providing national development strategies and policies, poverty analysis and monitoring, social protection, sector strategies and policies, project financing, public administration, public enterprise reform and related aspects.
The key responsibilities of each organisation may seem to be focused on different areas. However, there are mutual responsibilities for both institutions. For example, tax policy and its administration, trade policy, public expenditure policy management, financial sector work and public debt management and the establishment of an environment conducive to private sector development are mutual responsibilities of both institutions. Adding to that, in order to ensure and strengthen the collaboration of both institutions, the IMF and the World Bank initiated a Financial Sector Liaison Committee in 1998 and a joint implementation committee in 2000. That shows the integration between the international institutions in global matters.
How Much Do They Correlate With One Another?
It is not always clear where to draw the line between the responsibilities of each organisation. Here are two key points that need to be highlighted in this respect:
- WTO’s Coherent Mandate
WTO’s coherent mandate has largely contributed to enhance the corporation among WTO, IMF, and the World Bank. Article III (5) of the Marrakesh agreement clearly states that one of the major functions of the WTO is to achieve greater coherence in global economic policymaking by cooperating appropriately with the IMF and with the World Bank.
In order to facilitate that, the Marrakesh Declaration on Coherence was adopted as the solution. The aforementioned declaration has effectively contributed to building cooperation between the institutions by impacting several disciplines such as rules-making, providing technical assistance, surveillance, and contributing to economic analysis, among others. The cooperation among these three institutions helped resolve some major financial crises in the world, including the South-East Asian financial crisis.
In the discipline of rulemaking, the exchange of views and information by these three international institutions on trade and trade-related aspects is held as a predominant requirement. That is because it helps prevent the implementation of trade policies and rules that are inconsistent with one another’s rules. Therefore, it clearly shows the correlation between the three institutions should be maintained when rule-making.
Further, the three institutions have acted in correlation in providing technical assistance to the “WTO technical assistance program”. That is because both the IMF and the World Bank have significant expertise in the areas of trade-related technical assistance and are thus competent to provide their technical knowledge for the WTO technical assistance program. Therefore, these three institutions have acted in accordance with the coherent mandate by working collaboratively and not separately.
Additionally, one of the key agreements under the umbrella of WTO law is the Trade Facilitation Agreement (TFA). It focuses on facilitating smooth trade operations between member countries. The IMF and the World Bank play a crucial role in that area too, by contributing to trade facilitation. The World Bank implements a series of trade-facilitating initiatives, for example, developing new tools to improve the quality of operations, expanding staffing units to multiple areas, and mainly providing technical assistance.
- International Cooperation on Subsidies
The IMF, WTO, and the World Bank played a crucial role in dealing constructively with subsidies in global commerce. The three institutions help by demonstrating a more active role in transparency, analysis, and consultation on subsidy practices for the countries.
For example, the IMF has specialised fiscal expertise and provides technical assistance in conjunction with policy advice to member countries in order to deal with tax, subsidies and expenditure issues. On the other hand, the Word Bank has specialised expertise in fiscal measures, trade and competitiveness, sector management and the environment, and produces research and analysis engaging with different government bodies, for example, government ministries of member countries, to support overcome their challenges of constructively dealing with subsidies. WTO also helps in reviewing subsidy programs of member countries.
Three Individual Organisations, Three Separate Mandates and One Common Goal
In considering how different each organisation is from one another, on one end of the spectrum, it is absolutely clear that they are three separate institutions that have their own mandate. On the other end of the spectrum, it is also clear that they work in correlation to one another. This is specifically because the underlying principle of the formation of all three organisations is to instil international economic cooperation.
The views and opinions expressed in articles submitted to the Comparative Advantage Blog are those of the author and do not necessarily reflect the views of The Moot Court Bench.