International Economic institutions

There are three major international economic institutions, namely, WTO, IMF, and UNCTAD. World Trade Organization: WTO was formed in 1995 to replace the General Agreement on Tariffs and Trade (GATT), which was started in 1948. GATT was replaced by WTO because GATT was biased in favor of developed countries.

Syllabus of UGC Net Commerce (Unit I)

Before proceeding to the topic let's see the relevance of this topic in the new syllabus of UGC Net Commerce examination issued by NTA.

Unit I – Business Environment and International Business 

  • Concepts and elements of business environment: Economic environment- Economic systems, Economic policies(Monetary and fiscal policies); Political environment, Role of government in business; Legal environment- Consumer Protection Act, FEMA; Socio-cultural factors and their influence on business; Corporate Social Responsibility (CSR)
  • Scope and importance of international business; Globalization and its drivers; Modes of entry into international business
  • Theories of international trade; Government intervention in international trade; Tariff and non-tariff barriers; India’s foreign trade policy
  • Foreign direct investment (FDI) and Foreign portfolio investment (FPI); Types of FDI, Costs and benefits of FDI to home and host countries; Trends in FDI; India’s FDI policy
  • Balance of payments (BOP): Importance and components of BOP
  • Regional Economic Integration: Levels of Regional Economic Integration; Trade creation and diversion effects; Regional Trade Agreements: European Union (EU), ASEAN, SAARC, NAFTA
  • International Economic institutions: IMF, World Bank, UNCTAD
  • World Trade Organisation (WTO): Functions and objectives of WTO; Agriculture Agreement; GATS; TRIPS; TRIMS
Check out complete syllabus of UGC Net Commerce - Click Here

International Economic Organizations

International Economic organizations comprise of all the global institutions working in the domain of international economic cooperation and stability. They include UN, World Bank, IMF, WTO, SAARC, NAFTA etc.


The United Nations is an international organization founded in 1945 after the Second World War by 51 countries committed to maintaining international peace and security, developing friendly relations among nations and promoting social progress, better living standards and human rights.

What does UN assist in? 

  •  Peacekeeping 
  • Security 
  • Human Rights 
  • Economic Development 
  • Humanitarian Assistance

Economic and Social Council (ECOSOC)

It is the principal organ to coordinate the economic, social and related work of the United Nations and the specialized agencies and institutions. Voting in the Council is by simple majority; each member has one vote.

Nations Conference on Trade and Development (UNCTAD)

UNCTAD is principal organ of United Nations General Assembly (UNGA) dealing with trade, investment, and development issues. It was established in 1964 and its permanent secretariat is in Geneva. Its primary objective is to formulate policies relating to all aspects of development including trade, aid, transport, finance and technology. It ordinarily meets once in four years.

 It is the principal organ to coordinate the economic, social and related work of the United Nations and the specialized agencies and institutions. Voting in the Council is by simple majority; each member has one vote. 

It is the site of the first world economic conference in July 1944. The International Monetary Fund and the World Bank were both created at an international conference convened in Bretton Woods. The Bretton Woods Agreement is the landmark system for monetary and exchange rate management established in 1944. It was developed at the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire, US from July 1 to July 22, 1944.


World Bank is one of the institutions created at the Breton Woods Conference in 1944. World Bank is part of the United Nations system, but its governance structure is different. The World Bank Group headquarters building in Washington, D.C.

World Bank comprises only two institutions viz. the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). In contrast, World Bank Group comprises three more viz. International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and International Centre for Settlement of Investment Disputes (ICSID).

India is one of the founder members of IBRD, IDA and IFC. However, India is not a member of ICSID (International Centre for Settlement of Investment Disputes).

International Bank for Reconstruction and Development (IBRD)

 Created in 1944 to help Europe rebuild after World War II, IBRD joins with IDA, our fund for the poorest countries, to form the World Bank. They work closely with all institutions of the World Bank Group and the public and private sectors in developing countries to reduce poverty and build shared prosperity.

International Development Association (IDA)

 IDA is the part of the World Bank that helps the world’s poorest countries. Overseen by 170 plus shareholder nations, IDA aims to reduce poverty by providing loans (called “credits”) and grants for programs that boost economic growth, reduce inequalities, and improve people’s living conditions. IDA complements the World Bank’s original lending arm—the International Bank for Reconstruction and Development (IBRD).

International Finance Corporation (IFC)

IFC was established in 1956 to support the growth of the private sector in the developing world. The IFC’s stated mission is “to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives.” While the World Bank (IBRD and IDA) provides credit and non- lending assistance to governments, the IFC provides loans and equity, advice, and technical services to the private sector.

Multilateral Investment Guarantee Agency (MIGA)

MIGA was established in 1988 as an investment insurance facility to encourage confident investment in developing countries. MIGA’s mandate is to promote cross-border investment in developing countries by providing guarantees (political risk insurance and credit enhancement) to investors and lenders.

International Centre for Settlement of Investment Disputes (ICSID)​​​​​​

ICSID was established in 1966 by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). ICSID is the world’s leading institution devoted to international investment dispute settlement. It has extensive experience in this field, having administered the majority of all international investment cases. States have agreed on ICSID as a forum for investor-State dispute settlement in most international investment treaties and in numerous investment laws and contracts.


The World Bank and the IMF performs different functions, but they are often confused with each other either with reference to their functions or with their operation. One must remember that the name World Bank does not refers to a bank in conventional sense (this is because it performs development function) and International Monetary Fund or IMF performs the lending function (which we associate with banks).

Structure and Size of IMF

Members: 190 countries.

Headquarters: Washington, D.C. but has offices in Paris, Tokyo, New York, and Geneva.

Functions of IMF

The IMF is basically a lending institution which gives advances to members in need. It is the mentor of its members’ monetary and exchange rate policies. To maintain the stability in Exchange rate system around the World.

Extended fund facility (EFF) of IMF

The Extended Fund Facility is lending facility of the Fund of the IMF and it was established in 1974 to help countries address medium- and longer-term balance of payments problems. The EFF is prescribed for a country who is suffering from balance of payment problem caused by structural weaknesses and who need fundamental economic reforms.

Poverty Growth and Reduction Facility (PGRF)

The Poverty Reduction and Growth Facility (PRGF) is an arm of the International Monetary Fund which lends to the world's poorest countries. It was created in September 1999, replacing the Enhanced Structural Adjustment Facility.

Quotas in IMF

Every member of IMF has to subscribe a quota of the IMF. An individual member country’s quota broadly reflects its relative position in the world economy. For any member country, out of the quota, 25% should be paid in foreign currency or gold and 75% in domestic currency. Quotas are denominated in Special Drawing Rights (SDRs), the IMF’s unit of account.

Reserve Tranche Position in IMF

Reserve tranche is the component of a member country’s quota with the IMF that is in the form of gold or foreign currency. For any member country, out of the total quota, 25% should be paid in the form of foreign currency or gold. Hence this is called as reserve tranche or gold tranche. The remaining 75% can be in domestic currencies and it is called credit tranche.

Special Drawing Rights

• A reserve asset used by the International Monetary Fund in addition to gold and United States dollars. The Special Drawing Rights (SDRs) as an international reserve asset or reserve money in the international monetary system was established in 1969 with the objective of alleviating the problem of international liquidity.

 • The value of the SDR is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling. The SDRs are allocated to the member countries in proportion to their quota subscriptions. Only the IMF members can participate in SDR facility.

Asian Development Bank (ADB)

Asian Development Bank (ADB) is a regional development bank established on 19 December 1966, which is headquartered in Manila, Philippines. The company also maintains field offices around the world to promote social and economic development in Asia. ADB assists its members, and partners, by providing loans, technical assistance, grants, and equity investments to promote social and economic development. From 31 members at its establishment, ADB now has 67 members, of which 48 are from within Asia and the Pacific and 19 from outside. The ADB was modelled closely on the World Bank, and has a similar weighted voting system where votes are distributed in proportion with members' capital subscriptions.

Asian Infrastructure Investment Bank (AIIB)

 AIIB is multilateral development bank initiated by China. Its purpose is to provide finance to infrastructure development and regional connectivity projects in Asia-Pacific region. It is viewed as Asia’s response to West-dominated Asian Development Bank (ADB) and World Bank (WB). It was officially established in December 2015 with mission to improve social and economic outcomes in Asia and beyond and opened for business in January 2016. It is headquartered in Beijing, China. Its goals are to boost economic development in Asia-Pacific region, provide infrastructure, and promote regional cooperation and partnership. China is largest shareholder of AIIB with 26.06% voting shares. India with 7.5% vote share is second largest shareholder.

New Development Bank (NDB)

NDB is a multilateral development bank promoted by BRICS nations viz. Brazil, Russia, India, China and South Africa. It is outcome of 6th BRICS Summit being held in Fortaleza, Brazil. It is headquartered in Shanghai, China. It will have a regional office in Johannesburg, South Africa. NDB began its operations in July 2015 with an initial capital of 100 billion dollars. The goal of the bank is to fund infrastructure projects in emerging economies for sustainable development. In the NDB, each participant country has been assigned one vote, and none of the countries have veto power.

WTO (World Trade Organization)

World Trade Organization, as an institution was established in 1995. WTO operates a system of trade rules that apply to all its members. The WTO is also a place for Member governments to settle their trade disputes. Its located in Geneva, Switzerland.

General Agreement on Trade and Tariffs (GATT)

WTO replaced General Agreement on Trade and Tariffs (GATT). GATT was signed by 23 nations in Geneva on 30 October 1947 and took effect on 1 January 1948. General Agreement on Tariffs and Trade (GATT) was a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. Various rounds of trade negotiations were held under GATT and eighth round known as Uruguay round (1986-1994) led to formation of WTO. India has been member of GATT since 1948; hence it was party to Uruguay Round and a founding member of WTO. GATT rules applied to trade in goods. The WTO covers not just goods, but also trade in services and trade-related aspects of intellectual property rights.

WTO Agreements

WTO provides to its Member governments a forum for negotiating global trade rules. Negotiations in the WTO are conducted directly and exclusively by the Member governments. WTO agreements are essentially contracts legally binding on Member governments to keep their trade policies within agreed limits. 

TRIMS (Trade Related Investment Measures)

The Agreement on Trade-Related Investment Measures (TRIMS) recognizes that certain investment measures can restrict and distort trade. It states that WTO members may not apply any measure that discriminates against foreign products or that leads to quantitative restrictions, both of which violate basic WTO principles. A list of prohibited TRIMS, such as local content requirements, is part of the Agreement.

Trade Related Intellectual Property Rights (TRIPs)

Intellectual property rights may be defined as “Information with commercial value”. TRIPS agreement lays down minimum standards for protection and enforcement of intellectual property rights in member countries. It includes:
a. Protection of patent
b. Copyright
c. Industrial design
d. Geographical indication
e. Trademarks
f. Trade secrets
g. Layout design (topographies of integral circuits)

Agreement on Agriculture (AOA)

WTO Agreement on Agriculture, which came into force in 1995, represents a significant step towards reforming agricultural trade and making it fairer and more competitive. Negotiations are still going on for some of its aspects. Agreement on agriculture stands on 3 pillars viz. Domestic Support, Market Access, and Export Subsidies.

General Agreement on Trade in Services (GATS)

The General Agreement on Trade in Services (GATS) is the first multilateral agreement covering trade in services. It was negotiated during the last round of multilateral trade negotiations, called the Uruguay Round, and came into force in 1995.

Agreement on subsidies and countervailing measures

The Agreement on Subsidies and Countervailing Measures (“SCM Agreement”) addresses two separate but closely related topics: multilateral disciplines regulating the provision of subsidies, and the use of countervailing measures to offset injury caused by subsidized imports. Part I of the Agreement defines the coverage of the Agreement. In order for a financial contribution to be a subsidy, it must be made by or at the direction of a government or any public body within the territory of a Member. Further, Such Financial contribution must also confer benefit to the industry. Further, there is separate category of ‘Actionable subsidies’.

Actionable Subsidies

These are not prohibited but countries can take ‘Countervailing measures’ against these subsidies or they can be challenged in ‘dispute resolution body’ of WTO. Against such subsidies members can take Countervailing Measures, such as imposing countervailing duties or antidumping duty. These can only be done in a transparent manner and a sunset period should be specified.

Countervailing Duty

It is imposed on imported goods to counterbalance subsidy provided by the exporter country.

Anti-Dumping Duty

At times countries resort to subsidize production or exports so heavily that exporters are able to sell goods below domestic price or even cost of production in foreign markets. It is aimed at wiping out target country’s industry. Anti-Dumping Duty is aimed at counterbalancing such subsidization. .

WTO’s Principle of Non-Discrimination

Non-discrimination is a fundamental principle of the WTO. It has two components: 

 The Most-Favoured Nation (MFN) principle: If a WTO Member grants to a country an advantage, it has to give such advantage to all WTO Members 

 The National Treatment Principle: WTO member should not discriminate between imports and like domestic products from a WTO member. 

 These two principles apply to trade in goods, trade in services as well as trade related aspects of intellectual property rights.


South Asian Association for Regional Cooperation (SAARC) is the regional intergovernmental organization and geopolitical union of nations in South Asia. SAARC comprises 3% of the world’s area, 21% of the world’s population and 3.8% of the global economy, as of 2015. SAARC was founded in Dhaka on 8 December 1985. Its secretariat is based in Kathmandu, Nepal. The organization promotes development of economic and regional integration. It launched the South Asian Free Trade Area in 2006. SAARC maintains permanent diplomatic relations at the United Nations as an observer and has developed links with multilateral entities, including the European Union..


South Asian Free Trade Area (SAFTA) is an agreement reached on January 6, 2004, at the 12th SAARC summit in Islamabad, Pakistan. It created a free trade area of 1.6 billion people in Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka (as of 2011, the combined population is 1.8 billion people). The foreign ministers of the region signed a framework agreement on SAFTA to reduce customs duties of all traded goods in a phased manner.


North American Free Trade Agreement, an agreement signed by Canada, Mexico, and the United States to create a trilateral rules-based trading bloc in North America. The North American Free Trade Agreement is a treaty between Canada, Mexico and the United States. That makes NAFTA the world’s largest free trade agreement. The gross domestic product of its three members is more than $20 trillion. NAFTA is the first time two developed nations signed a trade agreement with an emerging market country. NAFTA is now replaced by USMCA.

European Union

European Union (EU) is a political and economic union of 27 member states that are located primarily in Europe. The EU has developed an internal single market through a standardised system of laws that apply in all member states in those matters, and only those matters, where members have agreed to act as one. EU policies aim to ensure the free movement of people, goods, services and capital within the internal market, enact legislation in justice and home affairs and maintain common policies on trade, agriculture, fisheries and regional development. For travel within the Schengen Area, passport controls have been abolished A monetary union was established in 1999 and came into full force in 2002 and is composed of 19 EU member states which use the euro currency.

Brexit is a word that is used as a shorthand way of saying the UK leaving the EU - merging the words Britain and exit to get Brexit. The UK is due to leave the European Union on 29 March, 2019.


The official common currency of many European Union member countries. The eurozone is a geographic and economic region that consists of all the European Union (EU) countries that have fully incorporated the euro as their national currency..


Central America and Dominican Republic Free Trade Agreement. The Dominican Republic-Central America FTA (CAFTA-DR) is the first free trade agreement between the United States and a group of smaller developing economies: our Central American neighbour Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, as well as the Dominican Republic. The CAFTA-DR promotes stronger trade and investment ties, prosperity, and stability throughout the region and along our Southern border.


Mercosur is an economic and political bloc comprising Argentina, Brazil, Paraguay, Uruguay, and Venezuela. Created during a period when longtime rivals Argentina and Brazil were seeking to improve relations, the bloc saw some early successes, including a tenfold increase in trade within the group in the 1990s


The Association of Southeast Asian Nations (ASEAN) is a regional grouping that promotes economic, political, and security cooperation among its ten members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. ASEAN countries have a population of nearly 640 million people and a combined GDP of $2.57 trillion. The group has spurred economic integration, signing six free-trade agreements with other regional economies.


Pacific Agreement on Closer Economic Relations Plus Negotiations since 2009. The Pacific Agreement on Closer Economic Relations (PACER) is an umbrella agreement between members of the Pacific Islands Forum (the Forum Island Countries plus Australia and New Zealand) which provides a framework for the future development of trade co operation. It was first signed at Nauru on 18 August 2001 and entered into force on 3 October 2002. It is a framework agreement that sets an outline for the future development of trade and economic relations across the Forum region as a whole.

Regional Comprehensive Economic Partnership (RCEP):

Regional Comprehensive Economic Partnership since 2013. Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN) (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) and the six Asia-Pacific states with which ASEAN has existing free trade agreements (Australia, China, India, Japan, South Korea and New Zealand). It is reported that a broad agreement is likely to be reached soon.

GCC (Gulf Cooperation Council):

Cooperation Council for the Arab States of the Gulf, originally known as the Gulf Cooperation Council, is a regional intergovernmental political and economic union consisting of all Arab states of the Persian Gulf except Iraq.

Important MCQs on International Economic Organizations

Looking for PDF Notes on Business Environment and International Business ?

Free Snapshot Course for Net Commerce

(Unitwise Study Material, Strategy Videos, Solved Papers & MCQs for Practice)


Call/Whatsapp: 79880-73332


Launch your GraphyLaunch your Graphy
100K+ creators trust Graphy to teach online
Everstudy Classes 2024 Privacy policy Terms of use Contact us Refund policy