International Institutions:

WTO, World Bank and ADB

Government Intervention in IB
 A News Article on WTO

• https://www.google.co.in/amp/s/www.thehind
ubusinessline.com/economy/agri-
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imports/article22762967.ece/amp/
 How Do Governments
Intervene In Markets?
• Governments use various methods to
intervene in markets including
1. Tariffs - taxes levied on imports that
effectively raise the cost of imported
products relative to domestic products
– Specific tariffs - levied as a fixed charge for
each unit of a good imported
– Ad valorem tariffs - levied as a proportion of
the value of the imported good
 How Do Governments
Intervene In Markets?
• Tariffs
– increase government revenues
– force consumers to pay more for certain imports
– are pro-producer and anti-consumer
– reduce the overall efficiency of the world
economy
 How Do Governments
Intervene In Markets?
2. Subsidies - government payments to domestic
producers
– Subsidies help domestic producers
• compete against low-cost foreign imports
• gain export markets
– Consumers typically absorb the costs of subsidies
– Ex)Merchandise Export from Indian Scheme
 How Do Governments
Intervene In Markets?
3. Import Quotas - restrict the quantity of some
good that may be imported into a country
– Tariff rate quotas - a hybrid of a quota and a
tariff where a lower tariff is applied to imports
within the quota than to those over the quota
(Ex.) US tariffs on imports of solar panels
– A quota rent - the extra profit that producers
make when supply is artificially limited by an
import quota
 How Do Governments
Intervene In Markets?
4. Voluntary Export Restraints - quotas on
trade imposed by the exporting country,
typically at the request of the importing
country’s government
– Import quotas and voluntary export restraints
• benefit domestic producers
• raise the prices of imported goods
• Chinese textile industry
 How Do Governments
Intervene In Markets?
5. Local Content Requirements - demand
that some specific fraction of a good be
produced domestically
– benefit domestic producers
– consumers face higher prices

6. Administrative Policies - bureaucratic rules

designed to make it difficult for imports to
enter a country
– Ex.) Various certification requirement
 How Do Governments
Intervene In Markets?
7. Antidumping Policies–also called countervailing
duties–punish foreign firms that engage in
dumping and protect domestic producers from
“unfair” foreign competition
– dumping - selling goods in a foreign market below their
costs of production, or selling goods in a foreign market
below their “fair” market value
WTO, World Bank and ADB
 How Has The Current World
Trading System Emerged?
• Until the Great Depression of the 1930s, most
countries had some degree of protectionism
– Smoot-Hawley Act (1930)

• After WWII, the U.S. and other nations

realized the value of freer trade
– established the General Agreement on Tariffs and
Trade (GATT) - a multilateral agreement to
liberalize trade
 GATT

• multilateral agreement established in 1948

under U.S. leadership.
– Objective is to liberalize trade by eliminating
tariffs, subsidies, and import quotas.
– Nineteen original members grew to more than
120 nations.
 How Has The Current World
Trading System Emerged?
• In the 1980s and early 1990s protectionist
trends emerged
– Japan’s perceived protectionist (neo-mercantilist)
policies created intense political pressures in other
countries
– persistent trade deficits by the U.S
– use of non-tariff barriers increased
 How Has The Current World
Trading System Emerged?
• The Uruguay Round of GATT negotiations
began in 1986 focusing on
1. Services and intellectual property
• going beyond manufactured goods
2. The World Trade Organization
• it was hoped that enforcement mechanisms would
make the WTO a more effective policeman of the
global trade rules
 How Has The Current World
Trading System Emerged?
• The WTO encompassed GATT along with two
sisters organizations
– the General Agreement on Trade in Services
(GATS)
• working to extend free trade agreements to
services
– the Agreement on Trade Related Aspects of
Intellectual Property Rights (TRIPS)
• working to develop common international
rules for intellectual property rights
 How Has The Current World
Trading System Emerged?
• The WTO has emerged as an effective advocate
and facilitator of future trade deals, particularly in
such areas as services
– 159 members in 2013
– resolved more than 400 disputes between 1995
and 2012
– most countries have adopted WTO
recommendations for trade disputes
 Benefits of WTO

• A study estimated the gains to the American

economy from free trade.
• It found that America’s GDP was more than 7
percent higher as a result of reductions in
trade barriers than it would have been if the
barriers remained.
• The study also estimated that if tariffs were
reduced to zero, significant gains would still
result.
Demonstration against WTO (1999)
 World Bank

• Two Goals to achieve by 2030

– End extreme poverty by decreasing the
percentage of people living on less than $1.90 a
day to no more than 3%
– Promote shared prosperity by fostering the
income growth of the bottom 40% for every
country
 World Bank

• Established in 1944, the World Bank Group is

headquartered in Washington, D.C.
• World Bank has more than 10,000
employees in more than 120 offices
worldwide.
 Financial Products and Services

• World Bank provides low-interest loans, zero

to low-interest credits, and grants to
developing countries.
• These support a wide array of investments in
education, health, public administration,
infrastructure, financial and private sector
development, agriculture, and environmental
and natural resource management.
 Innovative Knowledge Sharing

• World Bank offers support to developing

countries through policy advice, research and
analysis, and technical assistance.
• It also sponsors, hosts, or participates in many
conferences and forums on issues of
development.
Asian Development Bank

• The Asian
Development Bank
was conceived in the
early 1960s as a
financial institution.
• It would foster
economic growth and
cooperation in Asian
regions.
 Members of ADB
• Afghanistan; Armenia; Azerbaijan; Bangladesh;
Bhutan; Brunei Darussalam; Cambodia; Cook Islands;
People’s Republic of China; Georgia; India; Indonesia;
Fiji; Hong Kong, China; Kazakhstan; Kiribati; Republic
of Korea; Kyrgyz Republic; Lao People’s Democratic
Republic; Malaysia; Maldives; Marshall Islands;
Federated States of Micronesia; Mongolia; Myanmar;
Nauru; Nepal; Pakistan; Palau; Papua New Guinea;
Philippines; Samoa; Singapore; Solomon Islands; Sri
Lanka; Taipei, China; Tajikistan; Thailand; Timor-
Leste; Tonga; Turkmenistan; Tuvalu; Uzbekistan;
Vanuatu; Viet Nam.
 Asian Development Bank

• Did You Know? Asian Development Bank

– https://www.youtube.com/watch?v=uJmxEN5fMn
A
• Asia Talks Flight
– https://www.youtube.com/watch?v=n9Qjbfs2VkA