Trade Organizations | CFA Level I Economics
In this lesson, we discuss the functions and objectives of trade organizations like the International Monetary Fund (IMF), World Bank, and World Trade Organisation (WTO).
International Monetary Fund (IMF)
The IMF’s main mandate is to ensure the stability of the international monetary system, which is the system of exchange rates and international payments that enables countries to buy goods and services from each other. More specifically, the IMF:
- Provides a forum for cooperation on international monetary problems
- Facilitates the expansion and balanced growth of international trade
- Supports exchange rate stability and an open system of international payments
- Lends to members experiencing balance of payments difficulties, with adequate safeguards
EXAMPLE
One recent example of IMF lending is in the case of the bailout of Greece. IMF loans were made available to the Greek government on strict economic policy conditions, which included wage cuts, limits on public pensions, increases in taxes, and a reduction in state-owned companies. Through such conditional emergency lending, the IMF has helped prevent a contagious wave of sovereign debt crises in global capital markets.
World Bank
The World Bank’s main objective is to help developing countries fight poverty and enhance environmentally sound economic growth. For developing countries to grow and attract business, they have to:
- Strengthen their governments and fight corruption
- Implement legal systems that encourage business
- Protect individual and property rights and honor contracts
- Develop robust financial systems to support large-scale financing and investments
Given these targets, the World Bank provides funds for a wide range of projects in developing countries worldwide and financial and technical expertise aimed at helping those countries reduce poverty.
The World Bank has two closely affiliated entities—the International Bank for Reconstruction and Development, and the International Development Association. These are non-profit financial institutions that provide low or no-interest loans and grants to countries that have unfavorable or no access to international credit markets.
World Trade Organization (WTO)
The WTO is the only international organization dealing with the global rules of trade between member nations. Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible.
The WTO’s most important functions are:
- Implementation, administration, and operation of individual agreements
- Acting as a platform for negotiations
- Settling disputes between members
The WTO has the mandate to review its members’ trade policies and ensure the coherence and transparency of trade policies. The WTO also provides training and assistance to developing countries to adjust to WTO rules. In addition, it is a major source of economic research and analysis, producing ongoing assessments of global trade in its publications and research reports.
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