A cross-analysis of the statutes of

inter-state economic organizations:

WTO and IMF
 Outline

• Purposes
• Membership
• Financing
La Lezione sulla Somalia
• Institutional structure
• Decision-making
 IMF purposes

• Genesis of the IMF

– 1944 Bretton Woods conference
– 28 December 1945: entry into force of the IMF
La Lezione sulla Somalia
Articles of Agreement (AoA)
– From 44 (1945) to 189 (2018) members
– 6 amendments to the 1944 AoA text
 • IMF (art. I 1944 Articles of Agreement):
– (i) To promote international monetary cooperation
– (ii) To facilitate the expansion and balanced growth of international
trade, and to contribute thereby to the promotion and maintenance of
high levels of employment and real income …;
– (iii) To promote exchange stability, to maintain orderly exchange
arrangements among members, and to avoid competitive exchange
La Lezione depreciation.
sulla Somalia
– (iv) To assist in the establishment of a multilateral system of payments
in respect of current transactions between members and in the
elimination of foreign exchange restrictions which hamper the growth
of world trade.
– (v) To give confidence to members by making the general resources of
the Fund temporarily available to them … thus providing them with
opportunity to correct maladjustments in their balance of payments
without resorting to measures destructive of national or international
prosperity
 WTO purposes
• Genesis of the WTO
– 1947: General Agreement on Tariffs and Trade (provisional
application)
– 1948: Havana Charter establishing the International Trade
Organization (never entered into force)
– GATT 1947: regulation of trade for almost 50 years
• From
La Lezione sulla 23 (1947) to 111 (1994) contracting parties
Somalia
• 8 rounds of trade negotiations concerning tariffs, quotas, trade
administrative procedures, unfair trade practices (subsidies, …), regulatory
barriers
– 1986-1994: Uruguay round of trade negotiations
• 1995: entry into force of the WTO agreement and its annexes
• 164 members, counting for 98,2% of world merchandise trade
• Trade in goods, trade in services, trade-related matters of intellectual
property rights (17 agreements binding upon all members + 2 agreements
binding members having accepted them)
 • WTO Agreement, preamble: purposes
– National economy purposes:
• raising standards of living
• ensuring full employment and a large and steadily growing volume of real
income and effective demand
• expanding the production of goods and services
– International economy purposes:
• expanding the trade in goods and services
• to ensure that developing countries, and especially the least developed
La Lezione sulla Somalia
among them, secure a share in the growth in international trade
commensurate with the needs of their economic development
• allowing for the optimal use of the world’s resources in accordance with
the objective of sustainable development, seeking both to protect and
preserve the environment
– Instrumental purposes:
• entering into reciprocal and mutually advantageous arrangements
directed to the substantial reduction of tariffs and other barriers to trade
and to the elimination of discriminatory treatment in international trade
relations
()
 Membership
• WTO (arts XI-XII WTOA)
– Original Members (art. XI): contracting parties to GATT 1947 as
of the date of entry into force of the Agreement, and the
European Communities
– Other Members (art. XII – Accession):
• 1. Any State or separate customs territory possessing full
La Lezione sulla Somaliain the conduct of its external commercial relations
autonomy
… may accede to this Agreement, on terms to be agreed
between it and the WTO
• 2.Decisions on accession shall be taken by the Ministerial
Conference, that shall approve the agreement on the terms
of accession by a two-thirds majority of the Members of the
WTO.
 • Admission terms
– Implementation of WTO agreements
– Market access commitments for imports of goods and
La Lezione services
sulla Somalia
– WTO-plus obligations: e.g. China: removal of export tariffs
– WTO-minus rights: e.g. China: product-specific import
restrictions by other members on Chinese exports causing
or threatening to cause market disruption
• Bilateral negotiations with other members
 • IMF (art. II AoA)
• Original members (art. II.1): 44 in 1945
• Other members (art. II.2): 188 in 2017
La Lezione sulla Somalia
– Decision by the Board of Governors, setting out the
terms of admission (i.e. the value of the quota to be
paid by the member)
 How are the IMF and the WTO financed?
• WTO (art. VII WTOA)
– Every year, the General Council adopts the “financial regulation” and
the annual budget of the organization, on the basis of a proposal by
the Director-General (by a two-thirds majority comprising more than
half of the Members of the WTO)
– The decision sets
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• (a) the scale of contributions apportioning the expenses of the
WTO among its Members (on the basis of exports + imports); and
• (b) the measures to be taken in respect of Members in arrears. …
– Each Member shall promptly contribute to the WTO its share in the
expenses of the WTO in accordance with the financial regulations
adopted by the General Council.
 • IMF (arts II and III AoA)
– Quotas paid by Members, constituting the “capital” of the
organization (at present 477 bln Special Drawing Rights = 668 bln USD)
– Each State is assigned a quota
– 75% paid in the Member’s national currency, 25% paid in Special
Drawing Rights (or in a foreign currency; before 1978, gold);
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– Original Members’ quotas
• Negotiated at Bretton Woods; Included in Annex A to the AoA
– Admitted Members’ quotas
• Agreed upon by the Board of Governors in the decision on
admission
• Art. II.2: the terms of membership “including the terms for
subscriptions, shall be based on principles consistent with those
applied to other countries that are already members”
 – Quotas are based on the economic size and strength: States
having similar characteristics have to pay similar quotas
– Mathematical formulas: quotas are calculated on the basis of
• National income
• Value of imports
• Variability
La Lezione sulla Somalia of the exchange rate
• Foreign currencies reserves
– The result of the application of the formula is approved
• At Bretton Woods, formula proposed by the USA
– Annex A established the quotas to be paid by original Members (no
reference to the formula itself → later, nothing prevented the IMF
from using other formulas)
• For new Members, the formula is proposed by the Secretariat
• Current formula: National income (50%); Value of imports (30%);
Variability of the exchange rate (15%); Foreign currencies reserves (5%)
 – Adjustment of quotas (art. III.2)
• Ah hoc: at request of the interested party
• General adjustment: considered every 5 years
• Purposes:
– To increase the IMF’s general resources to be used to provide
La Lezione sulla Somalia
financial assistance
– To adjust quotas to the economic strength of Members
– 2006: last ad hoc adjustment (China, Mexico, Turkey and South
Korea)
– 16 general reviews (8 adjustments approved):
• 2008: quotas of 50 Members increased (most developed Members
renounced)
• 2010: IMF capital doubled (effective since 26 January 2016):
 The IMF and WTO institutional structure

• IMF (art. XII AoA)

• http://www.imf.org/external/np/obp/orgcht.h
tm
La Lezione sulla Somalia
– Board of Governors (art. XII.2 AoA):
• Plenary organ, meeting once a year
• States represented by the Minister of Economy and the
Central Bank Governor
• Exercising all powers conferred by the AoA upon it or
upon the Fund
 – Executive Board (art. XII.3 AoA):
• Consisting of Executive Directors, with the Managing Director as
chairman
• Until 2016
– 5 EDs appointed by the 5 Members with the highest quotas
– 15 EDs elected by other Members (every two years)
– the Board of Governors, by an 85% majority of total
La Lezione sulla Somaliavoting power, may increase or decrease the number of
elected EDs:
– since 1992, 19 EDs are elected
– Constituencies (see Excel)
• Since 2016: all EDs (24) are elected
• Each Executive Director exercises the votes of the State/States
having elected him/her
– IMFC (International Monetary and Financial Committee)
 – Secretariat (art. XII.4 AoA)
• “organ of individuals”
• Headed by the Managing Director, elected by the
Executive
La Lezione sulla Somalia Board
• Political agreement in Bretton Woods
• 2011 election: role of emerging economies
• Duty of independence by the States
• All decisions by the Board of Governors and by the
Executive Board are adopted on the basis of a
Secretariat’s proposal
 • WTO (art. IV AoA)
• https://www.wto.org/english/thewto_e/whatis_e/tif
_e/organigram_e.pdf
– Ministerial conference
• Plenary organ, meeting at least once every two years
• States represented by Trade Ministers
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– General Council
• Plenary organ, meeting when necessary (once a month)
• States represented by diplomats
– Sectorial Councils
• GATT, GATS, TRIPs councils (plenary organ)
– Secretariat
 Decision-making

• WTO (art. IX)

o One State – one vote rule
• EU has a number of votes equal to the number of its
member States
La Lezione sulla Somalia
o Decisions are taken by
• Consensus
• where a decision cannot be arrived at by consensus,
the matter at issue shall be decided by voting
– majority of the votes cast, unless otherwise provided (2/3,
3/4 of Members)
 • IMF (art. XII.5 AoA): weighted votes
– The total votes of each Member shall be the sum of its
basic votes and its quotas-based votes
• the basic votes of each Member shall be the number of
votes
La Lezione sulla that results from the equal distribution among all
Somalia
Members of 5.502% of total votes
• the quota-based votes of each Member shall be the number
of votes that results from the allocation of 1 vote for each
part of its quota equivalent to 100.000 SDR
– Required majorities: Majority of votes cast, 70% or 85% of total
votes
• Practice: consensus