Trade decline across the globe in the 1940s had some negative impacts. Living standards of people fell and unemployment became a chronic issue. Because of this, there was a need to create international organizations to oversee economic relationships between countries. As a result of the July 1944 conference, two main multinational organizations emerged: the World Bank and the International Monetary Fund (IMF). Later, the International Trade Organisation was formed to handle the trade side of the international economic organization.
International Monetary Fund
The IMF lends foreign currencies to its members, so as to aid them during periods of crisis or periods of important external deficits. The many currencies contributed by members enable this operation to be a success. As a result, the IMF’s main role is to ensure the international monetary system stability. Other objectives include:
- Promote exchange stability;
- Establish a multilateral system of payments;
- Ensure confidentiality among members; and
- Enable the expansion and balanced growth of international trade.
The World Trade Organization
The World Trade Organization is unique in the way that it’s the only organization that regulates cross-border trade relationships across the globe. Consequently, it replaced the general agreement on tariffs and trade (GATT) of January 1995. However, the GATT still exists in the form of its 1994 version. Its functions include:
- Administrate, implement and operate individuals agreements, solve disputes, and act as a platform for negotiations;
- Ensure transparency of trade policies by supervising global policy settings;
- Provide training and cooperation to low-income, least developed countries. As a result, this helps them adjust to the rules of the WTO; and
- Act as a source of economic analysis and research.
World Bank Group
World Bank Group’s main objective is to enhance a good environment for normal economic growth and help developing countries curb poverty. Other benefits include:
- Provide funds for projects in developing countries;
- Ensure the capabilities of its partners in developing low-income countries; and
- Help create economic infrastructures to set up domestic financial markets.
Among these trade organizations, which one of them regulates cross-border trade relationship across the globe?
A. World Trade Organization
B. International Monetary Fund
C. World Bank Group
The correct answer is A.
The World trade organization is the only organization that is in charge of cross-border trade.
Reading 19 LOS 19j:
Describe functions and objectives of the international organisations that facilitate trade, including the World Bank, the International Monetary Fund, and the World Trade Organization