International trade law includes the appropriate rules and customs for handling trade between

countries. However, it is also used in legal writings as trade between private sectors, which is not
right. This branch of law is now an independent field of study as most governments has become part
of the world trade, as members of the World Trade Organization (WTO). Since the transaction
between private sectors of different countries is an important part of the WTO activities, this latter
branch of law is now a very important part of the academic works and is under study in many
universities across the world.
Contents
[hide]
1 Overview
2 World Trade Organization
3 Trade in goods
4 Trade and intellectual property
5 Cross-border transactions
6 Dispute settlement
7 See also
8 Notes
9 References
10 External links
Overview[edit]
International trade law should be distinguished from the broader field of international economic law.
The latter could be said to encompass not only WTO law, but also law governing the
international monetary system and currency regulation, as well as the law of international
development.
The body of rules for transnational trade in the 21st century derives from medieval commercial laws
called the lex mercatoria and lex maritima respectively, "the law for merchants on land" and "the
law for merchants on sea." Modern trade law (extending beyond bilateral treaties) began shortly after
the Second World War, with the negotiation of a multilateral treaty to deal with trade in goods:
the General Agreement on Tariffs and Trade (GATT).
International trade law is based on theories of economic liberalism developed in Europe and later
the United States from the 18th century onwards.
International Trade Law is an aggregate of legal rules of international legislation and new lex
mercatoria, regulating relations in international trade. International legislation international
treaties and acts of international intergovernmental organizations regulating relations in international
trade. lex mercatoria - "the law for merchants on land". Alok Narayan defines "lex mercatoria" as
"any law relating to businesses" which was criticised by Professor Julius Stone. and lex maritima -
"the law for merchants on sea. Alok in his recent article criticised this definition to be "too narrow"
and "merely-creative". Professor Dodd and Professor Malcolm Shaw of Leeds University supported
this proposition.
World Trade Organization[edit]
In 1995, the World Trade Organization, a formal international organization to regulate trade, was
established. It is the most important development in the history of international trade law.
The purposes and structure of the organization is governed by the Agreement Establishing The
World Trade Organization, also known as the "Marrakesh Agreement". It does not specify the actual
rules that govern international trade in specific areas. These are found in separate treaties, annexed
to the Marrakesh Agreement.
Scope of WTO :
(a) provide framework for administration and implementation of agreements; (b) forum for further
negotiations; (c) trade policy review mechanism;and (d) promote greater coherence among
members economics policies
Principles of the WTO:
(a) principle of non-discrimination (most-favoured-nation treatment obligation and the national
treatment obligation) (b) market access (reduction of tariff and non-tariff barriers to trade) (c)
balancing trade liberalisation and other societal interests (d) harmonisation of national regulation
(TRIPS agreement, TBT agreement, SPS agreement)
Trade in goods[edit]
The GATT has been the backbone of international trade law throughout most of the twentieth
century. It contains rules relating to "unfair" trading practices dumping andsubsidies.
Trade and intellectual property[edit]
The World Trade Organisation Trade Related Aspects of Intellectual Property Rights (TRIPS)
agreement required signatory nations to raise intellectual property rights (also known as intellectual
monopoly privileges). This arguably has had a negative impact on access to essential medicines in
some nations.
Cross-border transactions[edit]
Cross-border operations are subject to taxation by more than one country. Commercial activity that
occurs among several jurisdictions or countries is called a cross-border transaction. Those involved
in any international business development or international trade should be knowledgeable in tax law,
as every country enforces different laws on foreign businesses. International tax planning ensures
that cross-border businesses stay tax compliant and avoid or lessen double taxation.
[1]

Dispute settlement[edit]
Most prominent in the area of dispute settlement in international trade law is the WTO dispute
settlement system. The WTO dispute settlement body is operational since 1995 and has been very
active since then with 369 cases in the time between 1 January 1995 and 1 December
2007.
[2]
Nearly a quarter of disputes reached an amicable solution, in other cases the parties to the
dispute resorted to adjudication. The WTO dispute settlement body has exclusive and compulsory
jurisdiction over disputes on WTO law (Article 23.1 Dispute Settlement Understanding
[3]
).
The Bretton Woods system of monetary management established the rules for commercial and
financial relations among the world's major industrial states in the mid-20th century. The Bretton
Woods system was the first example of a fully negotiated monetary order intended to govern
monetary relations among independent nation-states.
Preparing to rebuild the international economic system while World War II was still raging, 730
delegates from all 44 Allied nations gathered at the Mount Washington Hotel inBretton Woods, New
Hampshire, United States, for the United Nations Monetary and Financial Conference, also known
as the Bretton Woods Conference. The delegates deliberated during 122 July 1944, and signed the
Agreement on its final day.
Setting up a system of rules, institutions, and procedures to regulate the international monetary
system, the planners at Bretton Woods established the International Monetary Fund (IMF) and
the International Bank for Reconstruction and Development (IBRD), which today is part of the World
Bank Group. These organizations became operational in 1945 after a sufficient number of countries
had ratified the agreement.
The chief features of the Bretton Woods system were an obligation for each country to adopt
a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar and the
ability of the IMF to bridge temporary imbalances of payments. Also, there was a need to address
the lack of cooperation among other countries and to prevent competitive devaluation of the
currencies as well.
On 15 August 1971, the United States unilaterally terminated convertibility of the US dollar to gold,
effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat
currency.
[1]
This action, referred to as the Nixon shock, created the situation in which the United
States dollar became a reserve currency used by many states. At the same time, many fixed
currencies (such as the pound sterling, for example), also became free-floating.
Contents
[hide]
1 Origins
o 1.1 Interwar period
o 1.2 Post war negotiations
1.2.1 Economic security
1.2.2 Rise of governmental intervention
1.2.3 Atlantic Charter
1.2.4 Wartime devastation of Europe and East Asia
2 Design of the financial system
o 2.1 Informal regimes
2.1.1 Previous regimes
2.1.2 Fixed exchange rates
o 2.2 Formal regimes
2.2.1 International Monetary Fund
2.2.1.1 Design
2.2.1.2 Subscriptions and quotas
2.2.1.3 Trade deficits
2.2.1.4 Par value
2.2.1.5 Operations
2.2.2 International Bank for Reconstruction and Development
3 Readjustment
o 3.1 Dollar shortages and the Marshall Plan
o 3.2 Cold War
4 Late application
o 4.1 U.S. balance of payments crisis
o 4.2 Structural changes
4.2.1 Return to convertibility
4.2.2 Growth of international currency markets
4.2.3 Decline
4.2.3.1 U.S. monetary influence
4.2.3.2 Dollar
o 4.3 Paralysis of international monetary management
4.3.1 Floating-rate system during 19681972
4.3.2 Nixon Shock
4.3.3 Smithsonian Agreement
5 Bretton Woods II
o 5.1 The Bretton Woods system after the 2008 crisis
6 Academic legacy
7 Pegged rates
o 7.1 Japanese yen
o 7.2 Deutsche Mark
o 7.3 Pound sterling
o 7.4 French franc
o 7.5 Italian lira
o 7.6 Spanish peseta
o 7.7 Dutch gulden
o 7.8 Belgian franc
o 7.9 Swiss franc
o 7.10 Greek drachma
o 7.11 Danish krone
o 7.12 Finnish markka
8 See also
9 Notes
10 References
11 Further reading
12 External links
Origins[edit]
The political basis for the Bretton Woods system was in the confluence of two key conditions: the
shared experiences of two World Wars, with the sense that failure to deal with economic problems
after the first war had led to the second; and the concentration of power in a small number of states.
Interwar period[edit]
A high level of agreement among the powerful that failure to coordinate exchange rates during the
interwar period had exacerbated political tensions facilitated the decisions reached by the Bretton
Woods Conference. Furthermore, all the participating governments at Bretton Woods agreed that
the monetary chaos of the interwar period had yielded several valuable lessons.
The experience of World War II was fresh in the minds of public officials. The planners at Bretton
Woods hoped to avoid a repeat of the Versailles Treaty after World War I, which had created enough
economic and political tension to lead to WWII. After World War I, Britain owed the US substantial
sums, which Britain could not repay because it had used the funds to support allies such as France
during the War; the Allies could not pay back Britain, so Britain could not pay back the US. The
solution at Versailles seemed to the French, British, and Americans to be to make Germany pay for
it all. If the demands on Germany were unrealistic, then it was unrealistic for France to pay back
Britain, and for Britain to pay back the US.
[2]
Thus, many "assets" on bank balance sheets
internationally were actually unrecoverable loans, which culminated in the 1931 banking crisis.
Intransigent insistence by creditor nations for the repayment of Allied war debts and reparations,
combined with an inclination to isolationism, led to a breakdown of the international financial
system and a worldwide economic depression.
[3]
The so-called "beggar thy neighbor" policies that
emerged as the crisis continued saw some trading nations using currency devaluations in an attempt
to increase their competitiveness (i.e. raise exports and lower imports), though recent research
suggests this de facto inflationary policy probably off set some of the contractionary forces in world
price levels(see Eichengreen "How to Prevent a Currency War").
In the 1920s, international flows of speculative financial capital increased, leading to extremes in
balance of payments situations in various European countries and the US.
[4]
In the 1930s, world
markets never broke through the haphazardly constructed, nationally motivated and imposed
barriers and restrictions on international trade and investment volume. The various anarchic and
often autarkic protectionist and neo-mercantilist national policies often mutually inconsistent that
emerged over the first half of the decade worked inconsistently and self-defeatingly to promote
national import substitution, increase national exports, divert foreign investment and trade flows, and
even prevent certain categories of cross-border trade and investment outright. Global central
bankers attempted to manage the situation by meeting with each other, but their understanding of
the situation as well as difficulties in communicating internationally, hindered their abilities.
[5]
The
lesson was that simply having responsible, hard-working central bankers was not enough.
Britain in the 1930s had an exclusionary trading bloc with nations of the British Empire known as the
"Sterling Area." If Britain imported more than it exported to, say, South Africa, South African
recipients of pounds sterling tended to put them into London banks. This meant that though Britain
was running a trade deficit, she had a financial account surplus, and payments balanced.
Increasingly, Britain's positive balance of payments required keeping the wealth of Empire nations in
British banks. One incentive for, say, South African holders of rand to park their wealth in London
and to keep the money in Sterling, was a strongly valued pound sterling. Unfortunately, as Britain
deindustrialized in the 1920s, the way out of the trade deficit was to devalue the currency. But Britain
couldn't devalue, or the Empire surplus would leave its banking system.
[6]

Nazi Germany also worked with a bloc of controlled nations by 1940. Germany forced trading
partners with a surplus to spend that surplus importing products from Germany.
[7]
Thus, Britain
survived by keeping Sterling nation surpluses in its banking system, and Germany survived by
forcing trading partners to purchase its own products. The US was concerned about a sudden drop-
off in war spending which might return the nation to unemployment levels of the 1930s, and so
wanted Sterling nations and everyone in Europe to be able to import from the US, hence the US
supported free trade and international convertibility of currencies into gold or dollars.
[8]

Post war negotiations[edit]
When many of these same expert observers reared on the 1930s debacle became the architects of
a new, unified, post-war system at Bretton Woods, the watchwords became "no more beggar thy
neighbor" and "control flows of speculative financial capital." Preventing a repetition of this process
of competitive devaluations was desired, but in a way that would not force debtor nations to contract
their industrial bases by keeping exchange rates at a level high enough to attract foreign bank
deposits. John Maynard Keynes was the brain behind Britain's proposal that surplus nations be
forced by a "use-it-or-lose-it" surplus, to either import from debtor nations, build factories in debtor
nations or donate to debtor nations.
[9]
One suspects that US Marshall Plan aid to Europe was
inspired by this logic,
[10]
though the US never agreed to Keynes' plan. The brain at the US Treasury
was Harry Dexter White, and he rejected Keynes' automatic pressures for an International Monetary
Fund which would have enough resources to counteract destabilizing flows of speculative
finance.
[11]
Unlike the modern IMF, White's proposed fund would have counteracted dangerous
speculative flows automatically, with no political strings attachedi.e., no IMF conditionality.
[12]

Today these key 1930s events look different to scholars of the era (see the work of Barry
Eichengreen "Golden Fetters: The Gold Standard and the Great Depression, 19191939" and "How
to Prevent a Currency War"); in particular, devaluations today are viewed with more nuance. Ben
Bernanke's opinion on the subject follows:
"... [T]he proximate cause of the world depression was a structurally flawed and poorly managed
international gold standard... For a variety of reasons, including a desire of theFederal Reserve to
curb the US stock market boom, monetary policy in several major countries turned contractionary in
the late 1920sa contraction that was transmitted worldwide by the gold standard. What was initially
a mild deflationary process began to snowball when the banking and currency crises of 1931
instigated an international "scramble for gold". Sterilization of gold inflows by surplus countries [the
USA and France], substitution of gold for foreign exchange reserves, and runs on commercial banks
all led to increases in the gold backing of money, and consequently to sharp unintended declines in
national money supplies. Monetary contractions in turn were strongly associated with falling prices,
output and employment. Effective international cooperation could in principle have permitted a
worldwide monetary expansion despite gold standard constraints, but disputes over World War I
reparations and war debts, and the insularity and inexperience of the Federal Reserve, among other
factors, prevented this outcome. As a result, individual countries were able to escape the
deflationary vortex only by unilaterally abandoning the gold standard and re-establishing domestic
monetary stability, a process that dragged on in a halting and uncoordinated manner until France
and the other Gold Bloc countries finally left gold in 1936." (from "Great Depression" B. Bernanke)
In 1944 at Bretton Woods, as a result of the collective conventional wisdom of the time,
representatives from all the leading allied nations collectively favored a regulated system of fixed
exchange rates, indirectly disciplined by a US dollar tied to gold a system that relied on a
regulated market economy with tight controls on the values of currencies. Flows of speculative
international finance were curtailed by shunting them through and limiting them via central banks.
This meant that international flows of investment went into foreign direct investment (FDI)--i.e.,
construction of factories overseas, rather than international currency manipulation or bond markets.
Although the various national experts disagreed to some degree on the specific implementation of
this system, all agreed on the need for tight controls.
Economic security[edit]


Cordell Hull, US Secretary of State 193344
Also based on experience of the inter-war years, U.S. planners developed a concept of economic
security that a liberal internationaleconomic system would enhance the possibilities of postwar
peace. One of those who saw such a security link was Cordell Hull, the United States Secretary of
State from 1933 to 1944.
[Notes 1]
Hull believed that the fundamental causes of the two world wars lay
in economic discrimination and trade warfare. Specifically, he had in mind the trade and exchange
controls (bilateral arrangements)
[13]
of Nazi Germany and the imperial preference system practiced
by Britain, by which members or former members of the British Empire were accorded special trade
status, itself provoked by German, French, and American protectionist policies. Hull argued
[U]nhampered trade dovetailed with peace; high tariffs, trade barriers, and unfair economic
competition, with warif we could get a freer flow of tradefreer in the sense of fewer
discriminations and obstructionsso that one country would not be deadly jealous of another and
the living standards of all countries might rise, thereby eliminating the economic dissatisfaction that
breeds war, we might have a reasonable chance of lasting peace.
[14]

Rise of governmental intervention[edit]
The developed countries also agreed that the liberal international economic system required
governmental intervention. In the aftermath of the Great Depression, public management of the
economy had emerged as a primary activity of governments in the developed states.
[citation
needed]
Employment, stability, and growth were now important subjects of public policy.
In turn, the role of government in the national economy had become associated with the assumption
by the state of the responsibility for assuring its citizens of a degree of economic well-being.
[citation
needed]
The system of economic protection for at-risk citizens sometimes called the welfare state grew
out of the Great Depression, which created a popular demand for governmental intervention in the
economy, and out of the theoretical contributions of the Keynesian school of economics, which
asserted the need for governmental intervention to counter market imperfections.
[citation needed]

However, increased government intervention in domestic economy brought with it isolationist
sentiment that had a profoundly negative effect on international economics.
[citation needed]
The priority of
national goals, independent national action in the interwar period, and the failure to perceive that
those national goals could not be realized without some form of international collaborationall
resulted in beggar-thy-neighbor policies such as high tariffs, competitive devaluations that
contributed to the breakdown of the gold-based international monetary system, domestic political
instability, and international war. The lesson learned was, as the principal architect of the Bretton
Woods system New Dealer Harry Dexter White put it:
the absence of a high degree of economic collaboration among the leading nations willinevitably
result in economic warfare that will be but the prelude and instigator of military warfare on an even
vaster scale.

[Notes 2]

To ensure economic stability and political peace, states agreed to cooperate to closely regulate the
production of their individual currencies to maintain fixed exchange rates between countries with the
aim of more easily facilitating international trade.
[citation needed]
This was the foundation of the U.S.
vision of postwar world free trade, which also involved lowering tariffs and, among other things,
maintaining a balance of trade via fixed exchange rates that would be favorable to the capitalist
system.
[citation needed]

Thus, the more developed market economies agreed with the U.S. vision of post-war international
economic management, which was to be designed to create and maintain an effective international
monetary system and foster the reduction of barriers to trade and capital flows.
[citation needed]
In a
sense, the new international monetary system was in fact a return to a system similar to the pre-war
gold standard, only using US dollars as the world's new reserve currency until the world's gold
supply could be reallocated via international trade.
[citation needed]

Thus, the new system would be devoid (initially) of governments meddling with their currency supply
as they had during the years of economic turmoil preceding WWII. Instead, governments would
closely police the production of their currencies and ensure that they would not artificially manipulate
their price levels.
[citation needed]
If anything, Bretton Woods was in fact a return to a time devoid of
increased governmental intervention in economies and currency systems.
[citation needed]

Atlantic Charter[edit]


Roosevelt and Churchill during their secret meeting of 9 12 August, 1941, in Newfoundland resulted in the Atlantic
Charter, which the U.S. and Britain officially announced two days later.
The Atlantic Charter, drafted during U.S. President Franklin D. Roosevelt's August 1941 meeting
with British Prime Minister Winston Churchill on a ship in the North Atlantic, was the most notable
precursor to the Bretton Woods Conference. Like Woodrow Wilson before him, whose "Fourteen
Points" had outlined U.S. aims in the aftermath of the First World War, Roosevelt set forth a range of
ambitious goals for the postwar world even before the U.S. had entered the Second World War.
The Atlantic Charter affirmed the right of all nations to equal access to trade and raw materials.
Moreover, the charter called for freedom of the seas (a principal U.S. foreign policy aim
since France and Britain had first threatened U.S. shipping in the 1790s), the disarmament of
aggressors, and the "establishment of a wider and more permanent system of general security."
As the war drew to a close, the Bretton Woods conference was the culmination of some two and a
half years of planning for postwar reconstruction by the Treasuries of the U.S. and the UK. U.S.
representatives studied with their British counterparts the reconstitution of what had been lacking
between the two world wars: a system of international payments that would allow trade to be
conducted without fear of sudden currency depreciation or wild fluctuations in exchange rates
ailments that had nearly paralyzed world capitalism during theGreat Depression.
Without a strong European market for U.S. goods and services, most policymakers believed, the
U.S. economy would be unable to sustain the prosperity it had achieved during the war.
[citation
needed]
In addition, U.S. unions had only grudgingly accepted government-imposed restraints on their
demands during the war, but they were willing to wait no longer, particularly as inflation cut into the
existing wage scales with painful force. (By the end of 1945, there had already been major strikes in
the automobile, electrical, and steel industries.)
[citation needed]

In early 1945 Bernard Baruch described the spirit of Bretton Woods as: if we can "stop subsidization
of labor and sweated competition in the export markets," as well as prevent rebuilding of war
machines, "oh boy, oh boy, what long term prosperity we will have."
[15]
The United States [c]ould
therefore use its position of influence to reopen and control the [rules of the] world economy, so as to
give unhindered access to all nations' markets and materials.
Wartime devastation of Europe and East Asia[edit]
US States allieseconomically exhausted by the warneeded U.S. assistance to rebuild their
domestic production and to finance their international trade; indeed, they needed it to survive.
[8]

Before the war, the French and the British realized that they could no longer compete with U.S.
industries in an open marketplace.
[citation needed]
During the 1930s, the British created their own
economic bloc to shut out U.S. goods. Churchill did not believe that he could surrender that
protection after the war, so he watered down the Atlantic Charter's "free access" clause before
agreeing to it.
[citation needed]

Yet, U.S. officials were determined to open their access to the British empire. The combined value of
British and U.S. trade was well over half of all the world's trade in goods. For the U.S. to open global
markets, it first had to split the British (trade) empire. While Britain had economically dominated the
19th century, U.S. officials intended the second half of the 20th to be under U.S. hegemony.
[16]

A Senior Official of the Bank of England commented:
One of the reasons Bretton Woods worked was that the US was clearly the most powerful country at
the table and so ultimately was able to impose its will on the others, including an often-dismayed
Britain. At the time, one senior official at the Bank of England described the deal reached at Bretton
Woods as the greatest blow to Britain next to the war, largely because it underlined the way in
which financial power had moved from the UK to the US.

[17]

A devastated Britain had little choice. Two world wars had destroyed the country's principal
industries that paid for the importation of half of the nation's food and nearly all its raw materials
except coal. The British had no choice but to ask for aid. Not until the United States signed an
agreement on 6 December 1945 to grant Britain aid of $4.4 billion did the British Parliament ratify the
Bretton Woods Agreements (which occurred later in December 1945).
[18]

For nearly two centuries, French and U.S. interests had clashed in both the Old World and the New
World.
[citation needed]
During the war, French mistrust of the United States was embodied by
General Charles de Gaulle, president of the French provisional government.
[citation needed]
De Gaulle
bitterly fought U.S. officials as he tried to maintain his country's colonies and diplomatic freedom of
action. In turn, U.S. officials saw de Gaulle as a political extremist.
[citation needed]

But in 1945 de Gaulleat that point the leading voice of French nationalismwas forced to
grudgingly ask the U.S. for a billion-dollar loan.
[citation needed]
Most of the request was granted; in return
France promised to curtail government subsidies and currency manipulation that had given its
exporters advantages in the world market.
[citation needed]

Design of the financial system[edit]

This article needs additional citations for verification. Please
help improve this article by adding citations to reliable sources.
Unsourced material may be challenged and removed. (October 2010)
Free trade relied on the free convertibility of currencies. Negotiators at the Bretton Woods
conference, fresh from what they perceived as a disastrous experience with floating rates in the
1930s, concluded that major monetary fluctuations could stall the free flow of trade.
The new economic system required an accepted vehicle for investment, trade, and payments. Unlike
national economies, however, the international economy lacks a central government that can issue
currency and manage its use. In the past this problem had been solved through the gold standard,
but the architects of Bretton Woods did not consider this option feasible for the postwar political
economy. Instead, they set up a system of fixed exchange rates managed by a series of newly
created international institutions using the U.S. dollar (which was a gold standard currency for
central banks) as a reserve currency.
Informal regimes[edit]
Previous regimes[edit]
In the 19th and early 20th centuries gold played a key role in international monetary transactions.
The gold standard was used to back currencies; the international value of currency was determined
by its fixed relationship to gold; gold was used to settle international accounts. The gold standard
maintained fixed exchange rates that were seen as desirable because they reduced the risk when
trading with other countries.
Imbalances in international trade were theoretically rectified automatically by the gold standard. A
country with a deficit would have depleted gold reserves and would thus have to reduce its money
supply. The resulting fall in demand would reduce imports and the lowering of prices would boost
exports; thus the deficit would be rectified. Any country experiencing inflation would lose gold and
therefore would have a decrease in the amount of money available to spend.
This decrease in the amount of money would act to reduce the inflationary pressure. Supplementing
the use of gold in this period was the British pound. Based on the dominant British economy, the
pound became a reserve, transaction, and intervention currency. But the pound was not up to the
challenge of serving as the primary world currency, given the weakness of the British economy after
the Second World War.
The architects of Bretton Woods had conceived of a system wherein exchange rate stability was a
prime goal. Yet, in an era of more activist economic policy, governments did not seriously consider
permanently fixed rates on the model of the classical gold standard of the 19th century. Gold
production was not even sufficient to meet the demands of growing international trade and
investment. Further, a sizable share of the world's known gold reserves were located in the Soviet
Union, which would later emerge as a Cold War rival to the United States and Western Europe.
The only currency strong enough to meet the rising demands for international currency transactions
was the U.S. dollar. The strength of the U.S. economy, the fixed relationship of the dollar to gold
($35 an ounce), and the commitment of the U.S. government to convert dollars into gold at that price
made the dollar as good as gold. In fact, the dollar was even better than gold: it earned interest and
it was more flexible than gold.
Fixed exchange rates[edit]
The rules of Bretton Woods, set forth in the articles of agreement of the International Monetary
Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), provided for a
system of fixed exchange rates. The rules further sought to encourage an open system by
committing members to the convertibility of their respective currencies into other currencies and to
free trade.
What emerged was the "pegged rate" currency regime. Members were required to establish a parity
of their national currencies in terms of the reserve currency (a "peg") and to maintain exchange rates
within plus or minus 1% of parity (a "band") by intervening in their foreign exchange markets (that is,
buying or selling foreign money).
In theory, the reserve currency would be the bancor (a World Currency Unit that was never
implemented), suggested by John Maynard Keynes; however, the United States objected and their
request was granted, making the "reserve currency" the U.S. dollar. This meant that other countries
would peg their currencies to the U.S. dollar, andonce convertibility was restoredwould buy and
sell U.S. dollars to keep market exchange rates within plus or minus 1% of parity. Thus, the U.S.
dollar took over the role that gold had played under the gold standard in the international financial
system.
[19]

Meanwhile, to bolster faith in the dollar, the U.S. agreed separately to link the dollar to gold at the
rate of $35 per ounce of gold. At this rate, foreign governments and central banks were able to
exchange dollars for gold. Bretton Woods established a system of payments based on the dollar, in
which all currencies were defined in relation to the dollar, itself convertible into gold, and above all,
"as good as gold". The U.S. currency was now effectively the world currency, the standard to which
every other currency was pegged. As the world's key currency, most international transactions were
denominated in US dollars.
[citation needed]

The U.S. dollar was the currency with the most purchasing power and it was the only currency that
was backed by gold. Additionally, all European nations that had been involved in World War II were
highly in debt and transferred large amounts of gold into the United States, a fact that contributed to
the supremacy of the United States
[citation needed]
. Thus, the U.S. dollar was strongly appreciated in the
rest of the world and therefore became the key currency of the Bretton Woods system.
Member countries could only change their par value by more than 10% with IMF approval, which
was contingent on IMF determination that its balance of payments was in a "fundamental
disequilibrium". The formal definition of fundamental disequilibrium was never determined, leading to
uncertainty of approvals and attempts to repeatedly devalue by less than 10% instead.
[20]
Any
country that changed without approval or after being denied was then denied access to the IMF.
Formal regimes[edit]
The Bretton Woods Conference led to the establishment of the IMF and the IBRD (now the World
Bank), which still remain powerful forces in the world economy.
A major point of common ground at the Conference was the goal to avoid a recurrence of the closed
markets and economic warfare that had characterized the 1930s. Thus, negotiators at Bretton
Woods also agreed that there was a need for an institutional forum for international cooperation on
monetary matters. Already in 1944 the British economistJohn Maynard Keynes emphasized "the
importance of rule-based regimes to stabilize business expectations"something he accepted in the
Bretton Woods system of fixed exchange rates. Currency troubles in the interwar years, it was felt,
had been greatly exacerbated by the absence of any established procedure or machinery for
intergovernmental consultation.
As a result of the establishment of agreed upon structures and rules of international economic
interaction, conflict over economic issues was minimized, and the significance of the economic
aspect of international relations seemed to recede.
International Monetary Fund[edit]
Main article: International Monetary Fund
Officially established on 27 December 1945, when the 29 participating countries at the conference of
Bretton Woods signed its Articles of Agreement, the IMF was to be the keeper of the rules and the
main instrument of public international management. The Fund commenced its financial operations
on 1 March 1947. IMF approval was necessary for any change in exchange rates in excess of 10%.
It advised countries on policies affecting the monetary system and lent reserve currencies to nations
that had incurred balance of payment debts.
Design[edit]
The big question at the Bretton Woods conference with respect to the institution that would emerge
as the IMF was the issue of future access to international liquidity and whether that source should be
akin to a world central bank able to create new reserves at will or a more limited borrowing
mechanism.


John Maynard Keynes (right) andHarry Dexter White at the inaugural meeting of the International Monetary Fund's
Board of Governors in Savannah, Georgia, U.S., 8 March 1946
Although attended by 44 nations, discussions at the conference were dominated by two rival plans
developed by the United States and Britain. As the chief international economist at the U.S. Treasury
in 194244, Harry Dexter White drafted the U.S. blueprint for international access to liquidity, which
competed with the plan drafted for the British Treasury by Keynes. Overall, White's scheme tended
to favor incentives designed to create price stability within the world's economies, while Keynes'
wanted a system that encouraged economic growth. The collective agreement was an enormous
international undertaking that took two years prior of the conference to prepare for it consisted of
numerous bilateral and multilateral meetings to reach common ground on what policies would make
up the Bretton Woods system.
At the time, gaps between the White and Keynes plans seemed enormous. White basically wanted a
fund to reverse destabilizing flows of financial capital automatically. White proposed a new monetary
institution called the Stabilization Fund that would be funded with a finite pool of national currencies
and gold that would effectively limit the supply of reserve credit. Keynes wanted incentives for the
US to help Britain and the rest of Europe rebuild after WWII.
[21]
Between the lines, Keynes' thought
that world better off with the elite of the British empire running it, while White sympathized with the
global working class freeing itself from Britain's empire
[7]
Outlining the difficulty of creating a system
that every nation could accept in his speech at the closing plenary session of the Bretton Woods
conference on 22 July 1944, Keynes stated:
We, the delegates of this Conference, Mr. President, have been trying to accomplish something very
difficult to accomplish.[...] It has been our task to find a common measure, a common standard, a
common rule acceptable to each and not irksome to any.

[Notes 3]

Keynes' proposals would have established a world reserve currency (which he thought might be
called "bancor") administered by a central bank vested with the possibility of creating money and
with the authority to take actions on a much larger scale.
In case of balance of payments imbalances, Keynes recommended that both debtors and creditors
should change their policies. As outlined by Keynes, countries with payment surpluses should
increase their imports from the deficit countries, build factories in debtor nations, or donate to them
and thereby create a foreign trade equilibrium.
[22]
Thus, Keynes was sensitive to the problem that
placing too much of the burden on the deficit country would be deflationary.
But the United States, as a likely creditor nation, and eager to take on the role of the world's
economic powerhouse, used White's plan but targeted many of Keynes's concerns. White saw a role
for global intervention in an imbalance only when it was caused by currency speculation.
Although compromise was reached on some points, because of the overwhelming economic and
military power of the United States the participants at Bretton Woods largely agreed on White's plan.
Subscriptions and quotas[edit]
What emerged largely reflected U.S. preferences: a system of subscriptions and quotas embedded
in the IMF, which itself was to be no more than a fixed pool of national currencies and gold
subscribed by each country as opposed to a world central bank capable of creating money. The
Fund was charged with managing various nations' trade deficits so that they would not produce
currency devaluations that would trigger a decline in imports.
The IMF is provided with a fund, composed of contributions of member countries in gold and their
own currencies. The original quotas were to total $8.8 billion. When joining the IMF, members are
assigned "quotas" reflecting their relative economic power, and, as a sort of credit deposit, are
obliged to pay a "subscription" of an amount commensurate to the quota. The subscription is to be
paid 25% in gold or currency convertible into gold (effectively the dollar, which was the only currency
then still directly gold convertible for central banks) and 75% in the member's own currency.
Quota subscriptions are to form the largest source of money at the IMF's disposal. The IMF set out
to use this money to grant loans to member countries with financial difficulties. Each member is then
entitled to withdraw 25% of its quota immediately in case of payment problems. If this sum should be
insufficient, each nation in the system is also able to request loans for foreign currency.
Trade deficits[edit]
In the event of a deficit in the current account, Fund members, when short of reserves, would be
able to borrow foreign currency in amounts determined by the size of its quota. In other words, the
higher the country's contribution was, the higher the sum of money it could borrow from the IMF.
Members were required to pay back debts within a period of 18 months to five years. In turn, the IMF
embarked on setting up rules and procedures to keep a country from going too deeply into debt year
after year. The Fund would exercise "surveillance" over other economies for the U.S. Treasury in
return for its loans to prop up national currencies.
IMF loans were not comparable to loans issued by a conventional credit institution. Instead, they
were effectively a chance to purchase a foreign currency with gold or the member's national
currency.
The U.S.-backed IMF plan sought to end restrictions on the transfer of goods and services from one
country to another, eliminate currency blocs, and lift currency exchange controls.
The IMF was designed to advance credits to countries with balance of payments deficits. Short-run
balance of payment difficulties would be overcome by IMF loans, which would facilitate stable
currency exchange rates. This flexibility meant a member state would not have to induce
a depression to cut its national income down to such a low level that its imports would finally fall
within its means. Thus, countries were to be spared the need to resort to the classical medicine of
deflating themselves into drastic unemployment when faced with chronic balance of payments
deficits. Before the Second World War, European nationsparticularly Britainoften resorted to
this.
Par value[edit]
The IMF sought to provide for occasional discontinuous exchange-rate adjustments (changing a
member's par value) by international agreement. Member nations were permitted to adjust their
currency exchange rate by 10%. This tended to restore equilibrium in their trade by expanding their
exports and contracting imports. This would be allowed only if there was a fundamental
disequilibrium. A decrease in the value of a country's money was called a devaluation, while an
increase in the value of the country's money was called arevaluation.
It was envisioned that these changes in exchange rates would be quite rare. However, the concept
of fundamental disequilibrium, though key to the operation of the par value system, was never
defined in detail.
Operations[edit]
Never before had international monetary cooperation been attempted on a permanent institutional
basis. Even more groundbreaking was the decision to allocate voting rights among governments, not
on a one-state one-vote basis, but rather in proportion to quotas. Since the United States was
contributing the most, U.S. leadership was the key. Under the system of weighted voting, the United
States exerted a preponderant influence on the IMF. The United States held one-third of all IMF
quotas at the outset, enough on its own to veto all changes to the IMF Charter.
In addition, the IMF was based in Washington, D.C., and staffed mainly by U.S. economists. It
regularly exchanged personnel with the U.S. Treasury. When the IMF began operations in 1946,
President Harry S. Truman named White as its first U.S. Executive Director. Since no Deputy
Managing Director post had yet been created, White served occasionally as Acting Managing
Director and generally played a highly influential role during the IMF's first year.
International Bank for Reconstruction and Development[edit]
Main article: International Bank for Reconstruction and Development
The agreement made no provisions for international creation of reserves. New gold production was
assumed to be sufficient. In the event of structural disequilibria, it was expected that there would be
national solutions, for example, an adjustment in the value of the currency or an improvement by
other means of a country's competitive position. The IMF was left with few means, however, to
encourage such national solutions.
It had been recognized in 1944 that the new system could only commence after a return to normality
following the disruption of World War II. It was expected that after a brief transition period of no more
than five years, the international economy would recover and the system would enter into operation.
To promote the growth of world trade and to finance the postwar reconstruction of Europe, the
planners at Bretton Woods created another institution, the International Bank for Reconstruction and
Development (IBRD), which is one of five agencies that make up the World Bank Group and is
perhaps now the most important agency [of the World Bank Group]. The IBRD had an
authorized capitalization of $10 billion and was expected to make loans of its own funds to
underwrite private loans and to issue securities to raise new funds to make possible a speedy
postwar recovery. The IBRD was to be a specialized agency of the United Nations charged with
making loans for economic development purposes.
Readjustment[edit]
Dollar shortages and the Marshall Plan[edit]
The Bretton Woods arrangements were largely adhered to and ratified by the participating
governments. It was expected that national monetary reserves, supplemented with necessary IMF
credits, would finance any temporary balance of payments disequilibria. But this did not prove
sufficient to get Europe out of its conundrum.
Postwar world capitalism suffered from a huge dollar shortage. The United States was running huge
balance of trade surpluses, and the U.S. reserves were immense and growing. It was necessary to
reverse this flow. Even though all nations wanted to buy US exports, dollars had to leave the United
States and become available for international use in order for them to do so. In other words, the
United States would have to reverse the imbalances in global wealth by running a balance of trade
deficit, financed by an outflow of US reserves to other nations (a US financial account deficit). The
US could run a financial deficit by either importing from, building plants in, or donating to foreign
nations. Recall that speculative investment was discouraged by BW. Importing from other nations
was not appealing in the 1950s, because US technology was cutting edge at the time. So
multinationals and global aid which originated from the US burgeoned.
[23]

The modest credit facilities of the IMF were clearly insufficient to deal with Western Europe's huge
balance of payments deficits. The problem was further aggravated by the reaffirmation by the IMF
Board of Governors in the provision in the Bretton Woods Articles of Agreement that the IMF could
make loans only for current account deficits and not for capital and reconstruction purposes. Only
the United States contribution of $570 million was actually available for IBRD lending. In addition,
because the only available market for IBRD bonds was the conservative Wall Street banking market,
the IBRD was forced to adopt a conservative lending policy, granting loans only when repayment
was assured. Given these problems, by 1947 the IMF and the IBRD themselves were admitting that
they could not deal with the international monetary system's economic problems.
[24]

The United States set up the European Recovery Program (Marshall Plan) to provide large-scale
financial and economic aid for rebuilding Europe largely through grants rather than loans. This
included countries belonging to the Soviet bloc, e.g., Poland. In a speech at Harvard University on 5
June 1947, U.S. Secretary of State George Marshall stated:
The breakdown of the business structure of Europe during the war was complete. Europe's
requirements for the next three or four years of foreign food and other essential products
principally from the United States are so much greater than her present ability to pay that she
must have substantial help or face economic, social and political deterioration of a very grave
character.

[Notes 4]

From 1947 until 1958, the U.S. deliberately encouraged an outflow of dollars, and, from 1950 on, the
United States ran a balance of payments deficit with the intent of providing liquidity for the
international economy. Dollars flowed out through various U.S. aid programs: the Truman
Doctrine entailing aid to the pro-U.S. Greek and Turkish regimes, which were struggling to suppress
communist revolution, aid to various pro-U.S. regimes in the Third World, and most important, the
Marshall Plan. From 1948 to 1954 the United States provided 16 Western European countries $17
billion in grants.
To encourage long-term adjustment, the United States promoted European and Japanese trade
competitiveness. Policies for economic controls on the defeated former Axiscountries were
scrapped. Aid to Europe and Japan was designed to rebuild productivity and export capacity. In the
long run it was expected that such European and Japanese recovery would benefit the United States
by widening markets for U.S. exports, and providing locations for U.S. capital expansion.
In 1956, the World Bank created the International Finance Corporation and in 1960 it created
the International Development Association (IDA). Both have been controversial. Critics of the IDA
argue that it was designed to head off a broader based system headed by the United Nations, and
that the IDA lends without consideration for the effectiveness of the program
[citation needed]
. Critics also
point out that the pressure to keep developing economies "open" has led to their having difficulties
obtaining funds through ordinary channels, and a continual cycle of asset buy up by foreign investors
and capital flight by locals
[citation needed]
. Defenders of the IDA pointed to its ability to make large loans
for agricultural programs which aided the "Green Revolution" of the 1960s, and its functioning to
stabilize and occasionally subsidize Third World governments, particularly in Latin America
[citation
needed]
.
Bretton Woods, then, created a system of triangular trade: the United States would use the
convertible financial system to trade at a tremendous profit with developing nations, expanding
industry and acquiring raw materials. It would use this surplus to send dollars to Europe, which
would then be used to rebuild their economies, and make the United States the market for their
products. This would allow the other industrialized nations to purchase products from the Third
World, which reinforced the American role as the guarantor of stability. When this triangle became
destabilized, Bretton Woods entered a period of crisis that ultimately led to its collapse.
Cold War[edit]
In 1945, Roosevelt and Churchill prepared the postwar era by negotiating with Joseph
Stalin at Yalta about respective zones of influence; this same year Germany was divided into four
occupation zones (Soviet, American, British, and French).
Roosevelt and Henry Morgenthau insisted that the Big Four (United States, United Kingdom, the
Soviet Union, and China) participate in the Bretton Woods conference in 1944,
[25]
but their goal was
frustrated when the Soviet Union would not join the IMF. In the past, the reasons why the Soviet
Union chose not to subscribe to the articles by December 1945 have been the subject of
speculation. But since the release of relevant Soviet archives, it is now clear that the Soviet
calculation was based on the behavior of the parties that had actually expressed their assent to the
Bretton Woods Agreements.
[citation needed]
The extended debates about ratification that had taken
place both in the UK and the U.S. were read in Moscow as evidence of the quick disintegration of
the wartime alliance.
[citation needed]

Facing the Soviet Union, whose power had also strengthened and whose territorial influence had
expanded, the U.S. assumed the role of leader of the capitalist camp. The rise of the postwar U.S.
as the world's leading industrial, monetary, and military power was rooted in the fact that the
mainland U.S. was untouched by the war, in the instability of the national states in postwar Europe,
and the wartime devastation of the Soviet and European economies.
Despite the economic effort imposed by such a policy, being at the center of the international market
gave the U.S. unprecedented freedom of action in pursuing its foreign affairs goals. A trade surplus
made it easier to keep armies abroad and to invest outside the U.S., and because other nations
could not sustain foreign deployments, the U.S. had the power to decide why, when and how to
intervene in global crises. The dollar continued to function as a compass to guide the health of the
world economy, and exporting to the U.S. became the primary economic goal of developing or
redeveloping economies. This arrangement came to be referred to as the Pax Americana, in analogy
to the Pax Britannica of the late 19th century and the Pax Romana of the first. (See Globalism)
Late application[edit]
U.S. balance of payments crisis[edit]
After the end of World War II, the U.S. held $26 billion in gold reserves, of an estimated total of $40
billion (approx 65%). As world trade increased rapidly through the 1950s, the size of the gold base
increased by only a few percentage points. In 1950, the U.S. balance of payments swung negative.
The first U.S. response to the crisis was in the late 1950s when the Eisenhower
administration placed import quotas on oil and other restrictions on trade outflows. More drastic
measures were proposed, but not acted upon. However, with a mounting recession that began in
1958, this response alone was not sustainable. In 1960, with Kennedy's election, a decade-long
effort to maintain the Bretton Woods System at the $35/ounce price was begun.
The design of the Bretton Woods System was that nations could only enforce gold convertibility on
the anchor currencythe United States dollar. Gold convertibility enforcement was not required, but
instead, allowed. Nations could forgo converting dollars to gold, and instead hold dollars. Rather
than full convertibility, it provided a fixed price for sales between central banks. However, there was
still an open gold market. For the Bretton Woods system to remain workable, it would either have to
alter the peg of the dollar to gold, or it would have to maintain the free market price for gold near the
$35 per ounce official price. The greater the gap between free market gold prices and central bank
gold prices, the greater the temptation to deal with internal economic issues by buying gold at the
Bretton Woods price and selling it on the open market.
In 1960 Robert Triffin, Belgian American economist, noticed that holding dollars was more valuable
than gold because constant U.S. balance of payments deficits helped to keep the system liquid and
fuel economic growth. What would later come to be known as Triffin's Dilemma was predicted when
Triffin noted that if the U.S. failed to keep running deficits the system would lose its liquidity, not be
able to keep up with the world's economic growth, and, thus, bring the system to a halt. But incurring
such payment deficits also meant that, over time, the deficits would erode confidence in the dollar as
the reserve currency created instability.
[26]

The first effort was the creation of the London Gold Pool on 1 November 1961 between eight
nations. The theory behind the pool was that spikes in the free market price of gold, set by
the morning gold fix in London, could be controlled by having a pool of gold to sell on the open
market, that would then be recovered when the price of gold dropped. Gold's price spiked in
response to events such as the Cuban Missile Crisis, and other smaller events, to as high as
$40/ounce. The Kennedy administration drafted a radical change of the tax system to spur more
production capacity and thus encourage exports. This culminated with the 1963 tax cut program,
designed to maintain the $35 peg.
In 1967, there was an attack on the pound and a run on gold in the sterling area, and on 18
November 1967, the British government was forced to devalue the pound.
[27]
U.S. President Lyndon
Baines Johnson was faced with a brutal choice, either institute protectionist measures, including
travel taxes, export subsidies and slashing the budgetor accept the risk of a "run on gold" and the
dollar. From Johnson's perspective: "The world supply of gold is insufficient to make the present
system workableparticularly as the use of the dollar as a reserve currency is essential to create
the required international liquidity to sustain world trade and growth."
[28]

He believed that the priorities of the United States were correct, and, although there were internal
tensions in the Western alliance, that turning away from open trade would be more costly,
economically and politically, than it was worth: "Our role of world leadership in a political and military
sense is the only reason for our current embarrassment in an economic sense on the one hand and
on the other the correction of the economic embarrassment under present monetary systems will
result in an untenable position economically for our allies."
[citation needed]

While West Germany agreed not to purchase gold from the U.S., and agreed to hold dollars instead,
the pressure on both the dollar and the pound sterling continued. In January 1968 Johnson imposed
a series of measures designed to end gold outflow, and to increase U.S. exports. This was
unsuccessful, however, as in mid-March 1968 a run on gold ensued, the London Gold Pool was
dissolved, and a series of meetings attempted to rescue or reform the existing system.
[29]
But, as
long as the U.S. commitments to foreign deployment continued, particularly to Western Europe,
there was little that could be done to maintain the gold peg.
[citation needed][original research?]

All attempts to maintain the peg collapsed in November 1968, and a new policy program attempted
to convert the Bretton Woods system into an enforcement mechanism of floating the gold peg, which
would be set by either fiat policy or by a restriction to honor foreign accounts. The collapse of the
gold pool and the refusal of the pool members to trade gold with private entitieson 18 March, 1968
the Congress of the United States repealed the 25% requirement of gold backing of the dollar
[30]
as
well as the US pledge to suspend gold sales to governments that trade in the private markets,
[31]
led
to the expansion of the private markets for international gold trade, in which the price of gold rose
much higher than the official dollar price.
[32]

[33]
The US gold reserves continued to be depleted due
to the actions of some nations, notably France,
[33]
who continued to build up their gold reserves.
Structural changes[edit]
Return to convertibility[edit]
In the 1960s and 1970s, important structural changes eventually led to the breakdown of
international monetary management. One change was the development of a high level of monetary
interdependence. The stage was set for monetary interdependence by the return to convertibility of
the Western European currencies at the end of 1958 and of the Japanese yen in 1964. Convertibility
facilitated the vast expansion of international financial transactions, which deepened monetary
interdependence.
Growth of international currency markets[edit]
Another aspect of the internationalization of banking has been the emergence of international
banking consortia. Since 1964 various banks had formed international syndicates, and by 1971 over
three quarters of the world's largest banks had become shareholders in such syndicates.
Multinational banks can and do make huge international transfers of capital not only for investment
purposes but also for hedging and speculating against exchange rate fluctuations.
These new forms of monetary interdependence made possible huge capital flows. During the
Bretton Woods era countries were reluctant to alter exchange rates formally even in cases of
structural disequilibria. Because such changes had a direct impact on certain domestic economic
groups, they came to be seen as political risks for leaders. As a result official exchange rates often
became unrealistic in market terms, providing a virtually risk-free temptation for speculators. They
could move from a weak to a strong currency hoping to reap profits when a revaluation occurred. If,
however, monetary authorities managed to avoid revaluation, they could return to other currencies
with no loss. The combination of risk-free speculation with the availability of huge sums was highly
destabilizing.
Decline[edit]
U.S. monetary influence[edit]
A second structural change that undermined monetary management was the decline of U.S.
hegemony. The U.S. was no longer the dominant economic power it had been for more than two
decades. By the mid-1960s, the E.E.C. and Japan had become international economic powers in
their own right. With total reserves exceeding those of the U.S., with higher levels of growth and
trade, and with per capita income approaching that of the U.S., Europe and Japan were narrowing
the gap between themselves and the United States.
The shift toward a more pluralistic distribution of economic power led to increasing dissatisfaction
with the privileged role of the U.S. dollar as the international currency. As in effect the world's central
banker, the U.S., through its deficit, determined the level of international liquidity. In an increasingly
interdependent world, U.S. policy greatly influenced economic conditions in Europe and Japan. In
addition, as long as other countries were willing to hold dollars, the U.S. could carry out massive
foreign expenditures for political purposesmilitary activities and foreign aidwithout the threat of
balance-of-payments constraints.
Dissatisfaction with the political implications of the dollar system was increased by dtente between
the U.S. and the Soviet Union. The Soviet threat had been an important force in cementing the
Western capitalist monetary system. The U.S. political and security umbrella helped make American
economic domination palatable for Europe and Japan, which had been economically exhausted by
the war. As gross domestic production grew in European countries, trade grew. When common
security tensions lessened, this loosened the transatlantic dependence on defence concerns, and
allowed latent economic tensions to surface.
Dollar[edit]
Reinforcing the relative decline in U.S. power and the dissatisfaction of Europe and Japan with the
system was the continuing decline of the dollarthe foundation that had underpinned the post-1945
global trading system. The Vietnam War and the refusal of the administration of U.S.
President Lyndon B. Johnson to pay for it and its Great Societyprograms through taxation resulted in
an increased dollar outflow to pay for the military expenditures and rampant inflation, which led to
the deterioration of the U.S. balance of trade position.
[citation needed]
In the late 1960s, the dollar was
overvalued with its current trading position, while the Deutsche Mark and the yen were undervalued;
and, naturally, the Germans and the Japanese had no desire to revalue and thereby make their
exports more expensive, whereas the U.S. sought to maintain its international credibility by avoiding
devaluation.
[34]
Meanwhile, the pressure on government reserves was intensified by the new
international currency markets, with their vast pools of speculative capital moving around in search
of quick profits.
[33]

In contrast, upon the creation of Bretton Woods, with the U.S. producing half of the world's
manufactured goods and holding half its reserves, the twin burdens of international management
and the Cold War were possible to meet at first. Throughout the 1950s Washington sustained a
balance of payments deficit to finance loans, aid, and troops for allied regimes. But during the 1960s
the costs of doing so became less tolerable. By 1970 the U.S. held under 16% of international
reserves. Adjustment to these changed realities was impeded by the U.S. commitment to fixed
exchange rates and by the U.S. obligation to convert dollars into gold on demand.
[citation needed]

Paralysis of international monetary management[edit]
Floating-rate system during 19681972[edit]
By 1968, the attempt to defend the dollar at a fixed peg of $35/ounce, the policy of the Eisenhower,
Kennedy and Johnson administrations, had become increasingly untenable. Gold outflows from the
U.S. accelerated, and despite gaining assurances from Germany and other nations to hold gold, the
unbalanced fiscal spending of the Johnson administration had transformed the dollar shortage of the
1940s and 1950s into a dollar glut by the 1960s. In 1967, the IMF agreed in Rio de Janeiro to
replace the tranchedivision set up in 1946. Special drawing rights (SDRs) were set as equal to one
U.S. dollar, but were not usable for transactions other than between banks and the IMF. Nations
were required to accept holding SDRs equal to three times their allotment, and interest would be
charged, or credited, to each nation based on their SDR holding. The original interest rate was 1.5%.
The intent of the SDR system was to prevent nations from buying pegged gold and selling it at the
higher free market price, and give nations a reason to hold dollars by crediting interest, at the same
time setting a clear limit to the amount of dollars that could be held. The essential conflict was that
the American role as military defender of the capitalist world's economic system was recognized, but
not given a specific monetary value. In effect, other nations "purchased" American defense policy by
taking a loss in holding dollars. They were only willing to do this as long as they supported U.S.
military policy. Because of the Vietnam War and other unpopular actions, the pro-U.S. consensus
began to evaporate. The SDR agreement, in effect, monetized the value of this relationship, but did
not create a market for it.
The use of SDRs as paper gold seemed to offer a way to balance the system, turning the IMF, rather
than the U.S., into the world's central banker. The U.S. tightened controls over foreign investment
and currency, including mandatory investment controls in 1968. In 1970, U.S. President Richard
Nixon lifted import quotas on oil in an attempt to reduce energy costs; instead, however, this
exacerbated dollar flight, and created pressure from petro-dollars. Still, the U.S. continued to draw
down reserves. In 1971 it had a reserve deficit of $56 billion; as well, it had depleted most of its non-
gold reserves and had only 22% gold coverage of foreign reserves. In short, the dollar was
tremendously overvalued with respect to gold.
Nixon Shock[edit]
Main article: Nixon Shock
A negative balance of payments, growing public debt incurred by the Vietnam War and Great
Society programs, and monetary inflation by the Federal Reserve caused the dollar to become
increasingly overvalued.
[35]
The drain on US gold reserves culminated with the London Gold
Pool collapse in March 1968.
[36]
By 1970, the U.S. had seen its gold coverage deteriorate from 55%
to 22%. This, in the view of neoclassical economists, represented the point where holders of the
dollar had lost faith in the ability of the U.S. to cut budget and trade deficits.
In 1971 more and more dollars were being printed in Washington, then being pumped overseas, to
pay for government expenditure on the military and social programs. In the first six months of 1971,
assets for $22 billion fled the U.S. In response, on 15 August 1971, Nixon issued Executive
Order 11615 pursuant to the Economic Stabilization Act of 1970, unilaterally imposing 90-day wage
and price controls, a 10% import surcharge, and most importantly "closed the gold window", making
the dollar inconvertible to gold directly, except on the open market. Unusually, this decision was
made without consulting members of the international monetary system or even his own State
Department, and was soon dubbed the Nixon Shock.
Smithsonian Agreement[edit]
The August shock was followed by efforts under U.S. leadership to reform the international monetary
system. Throughout the fall of 1971, a series of multilateral and bilateral negotiations between
the Group of Ten countries took place, seeking to redesign the exchange rate regime.
Meeting in December 1971 at the Smithsonian Institution in Washington D.C., the Group of Ten
signed the Smithsonian Agreement. The US pledged to peg the dollar at $38/ounce with 2.25%
trading bands, and other countries agreed to appreciate their currencies versus the dollar. The group
also planned to balance the world financial system using special drawing rights alone.
The agreement failed to encourage discipline by the Federal Reserve or the United States
government. The Federal Reserve was concerned about an increase in the domestic unemployment
rate due to the devaluation of the dollar. In attempt to undermine the efforts of the Smithsonian
Agreement, the Federal Reserve lowered interest rates in pursuit of a previously established
domestic policy objective of full national employment. With the Smithsonian Agreement, member
countries anticipated return flow of dollars to the U.S, but the reduced interest rates within the United
States caused dollars to continue to flow out of the U.S. and into foreign central banks. The inflow of
dollars into foreign banks continued the monetization process of the dollar overseas, defeating the
aims of the Smithsonian Agreement. As a result, the dollar price in the gold free market continued to
cause pressure on its official rate; soon after a 10% devaluation was announced in February
1973, Japan and the EEC countries decided to let their currencies float. This proved to be the
beginning of the collapse of the Bretton Woods System. A decade later, all industrialized nations had
done so.
[37][38]

Bretton Woods II[edit]
Main article: Bretton Woods II
Dooley, Folkerts-Landau and Garber have referred to the monetary system of today as Bretton
Woods II.
[39]
They argue that in the early 2000s (decade) the international system is composed of a
core issuing the dominant international currency, and a periphery. The periphery is committed to
export-led growth based on the maintenance of an undervalued exchange rate. In the 1960s, the
core was the United States and the periphery was Europe and Japan. This old periphery has
since graduated, and the new periphery is Asia. The core remains the same, the United States. The
argument is that a system of pegged currencies, in which the periphery export capital to the core that
provides a financial intermediary role is both stable and desirable, although this notion is
controversial.
[39]

The Bretton Woods system after the 2008 crisis[edit]
In the wake of the Global financial crisis of 2008, policymakers and others have called for a new
international monetary system that some of them also dub Bretton Woods II. On the other side, this
crisis has revived the debate about Bretton Woods II.
[Notes 5]

On 26 September 2008, French president, Nicolas Sarkozy, said, "we must rethink the financial
system from scratch, as at Bretton Woods.
[40]

On 2425 September 2009 US President Obama hosted the G20 in Pittsburgh. A realignment of
currency exchange rates was proposed. This meeting's policy outcome could be known as the
Pittsburgh Agreement of 2009, where deficit nations may devalue their currencies and surplus
nations may revalue theirs upward.
In March 2010, Prime Minister Papandreou of Greece wrote an op-ed in the International Herald
Tribune, in which he said: "Democratic governments worldwide must establish a new global financial
architecture, as bold in its own way as Bretton Woods, as bold as the creation of the European
Community and European Monetary Union. And we need it fast." In interviews coinciding with his
meeting with President Obama, he indicated that Obama would raise the issue of new regulations
for the international financial markets at the next G20 meetings in June and November 2010.
Over the course of the crisis the IMF progressively relaxed its stance on "free market" principles
such as its guidance against using capital controls. In 2011 the IMF's managing director Dominique
Strauss-Kahn stated that boosting employment and equity "must be placed at the heart" of the IMF's
policy agenda.
[41]
The World Bank indicated a switch towards greater emphases on job
creation.
[42]

[43]

The Bretton Woods Conference, formally known as the United Nations Monetary and Financial
Conference, was the gathering of 730 delegates from all 44 Allied nations at the Mount Washington
Hotel, situated in Bretton Woods, New Hampshire, United States, to regulate the international
monetary and financial order after the conclusion of World War II.
[1]

The conference was held from the 1st to 22nd of July, 1944. Agreements were executed that later
established the International Bank for Reconstruction and Development (IBRD, which is part of
today's World Bank Group) and the International Monetary Fund (IMF).
Purposes and goals[edit]
The Bretton Woods Conference took place in July 1944, but some of its core accords did not
become operative until December 1958, when all European currencies becameconvertible. The IMF
was developed as a permanent international body. The summary of agreements states, "The nations
should consult and agree on international monetary changes which affect each other. They should
outlaw practices which are agreed to be harmful to world prosperity, and they should assist each
other to overcome short-term exchange difficulties." The IBRD was created to speed up post-war
reconstruction, to aid political stability, and to foster peace. This was to be fulfilled through the
establishment of programs for reconstruction and development.
The main terms of this agreement were:
Formation of the IMF and the IBRD, which is today part of the World Bank.
Adjustably pegged foreign exchange market rate system: The exchange rates were fixed, with
the provision of changing them if necessary.
Currencies were required to be convertible for trade related and other current account
transactions. The governments, however, had the power to regulate ostentatious capital flows.
As it was possible that exchange rates thus established might not be favourable to a
country's balance of payments position, the governments had the power to revise them by up to
10%.
All member countries were required to subscribe to the IMF's capital.
Encouraging open markets[edit]
The seminal idea behind the Bretton Woods Conference was the notion of open markets. In Henry
Morgenthau's farewell remarks at the conference, he stated that the establishment of the IMF and
the World Bank marked the end of economic nationalism. This meant countries would maintain their
national interest, but trade blocks and economic spheres of influence would no longer be their
means. The second idea behind the Bretton Woods Conference was joint management of the
Western political-economic order, meaning that the foremost industrial democratic nations must
lower barriers to trade and the movement of capital, in addition to their responsibility to govern the
system.
The Bank for International Settlements controversy[edit]
In the last stages of the Second World War, in 1944 at the Bretton Woods Conference, the Bank for
International Settlements became the crux of a fight that broke out when the Norwegian delegation
put forth evidence that the BIS was guilty of war crimes and put forth a motion to dissolve the bank;
the Americans, specifically President Franklin Delano Roosevelt and Henry Morgenthau, supported
this motion. This resulted in a fight between, on one side, several European nations, the American
and the Norwegian delegation, led by Henry Morgenthau and Harry Dexter White; and on the other
side, the British delegation, headed by John Maynard Keynes and Chase Bank representative Dean
Acheson, who tried to veto the dissolution of the bank.
The problem was that the BIS, formed in 1930, had as the main proponents of its establishment the
then Governor of the Bank of England, Montagu Norman, and his colleagueHjalmar Schacht, later
Adolf Hitler's economics minister. The Bank was, as far as is known, originally primarily intended to
facilitate money transfers arising from settling an obligation from the peace treaty after WWI. After
World War I, the need for the bank was suggested in 1929 by the Young Committee, as a means of
transfer for German reparations payments (see Treaty of Versailles). The plan was agreed in August
of that year at a conference at the Hague, and a charter for the bank was drafted at the International
Bankers Conference at Baden Baden in November. The charter was adopted at a second Hague
Conference on January 20, 1930. The Original board of directors of the BIS included two appointees
of Hitler, Walther Funk and Emil Puhl, as well as Herman Schmitz the director of IG Farben, and
Baron von Schroeder the owner of the J.H. Stein Bank, the bank that held the deposits of the
Gestapo.
As a result of allegations that the BIS had helped the Germans loot assets from occupied countries
during World War II, the United Nations Monetary and Financial Conference recommended the
"liquidation of the Bank for International Settlements at the earliest possible moment."
[2]
This
dissolution, which was originally proposed by Norway and supported by other European delegates,
as well as the United States and Morgenthau and Harry Dexter White, was never accomplished.
[3]

In July 1944, Dean Acheson interrupted Keynes in a meeting, fearing that the BIS would be
dissolved by President Franklin Delano Roosevelt. Keynes went to Henry Morgenthau to prevent or
postpone the dissolution of the BIS, but the next day the dissolution of the BIS was approved. The
British delegation did not give up, however, and the dissolution of the bank was still not
accomplished when Roosevelt died. In April 1945, the new president, Harry S. Truman, and the
British suspended the dissolution and the decision to liquidate the BIS was officially reversed in
1948.
[4]

Monetary order in a post-war world[edit]
The need for postwar Western economic order was resolved with the agreements made
on monetary order and open system of trade at the 1944 Bretton Woods Conference. These allowed
for the synthesis of Britain's desire for full employment and economic stability and the United States'
desire for free trade.
Failed proposals[edit]
International Trade Organization[edit]
The Conference also proposed the creation of an International Trade Organization (ITO) to establish
rules and regulations for international trade. The ITO would have complemented the other two
Bretton Woods proposed international bodies: the IMF and the World Bank. The ITO charter was
agreed on at the U.N. Conference on Trade and Employment (held in Havana, Cuba, in March
1948), but the charter was not ratified by the U.S. Senate. As a result, the ITO never came into
existence. However, in 1995, during the Uruguay Round of GATT negotiations established the World
Trade Organization (WTO) as the replacement body for GATT. The GATT principles and
agreements were adopted by the WTO, which was charged with administering and extending them.
International Clearing Union[edit]
Main article: International Clearing Union


John Maynard Keynes (right) represented the UK at the conference, and Harry Dexter White represented the US.
John Maynard Keynes proposed the ICU as a way to regulate the balance of trade. His concern was
that countries with a trade deficit would be unable to climb out of it, paying ever more interest to
service their ever greater debt, and therefore stifling global growth. The ICU would effectively be a
bank with its own currency (the "bancor"), exchangeable with national currencies at a fixed rate. It
would be the unit for accounting between nations, so their trade deficits or surpluses could be
measured by it.
On top of that, each country would have an overdraft facility in its "bancor" account with the ICU.
Keynes proposed having a maximum overdraft of half the average trade size over five years. If a
country went over that, it would be charged interest, obliging a country to reduce its currency value
and prevent capital exports. But countries with trade surpluses would also be charged interest at
10% if their surplus was more than half the size of their permitted overdraft, obliging them to
increase their currency values and export more capital. If, at the year's end, their credit exceeded the
maximum (half the size of the overdraft in surplus), the surplus would be confiscated.
Lionel Robbins reported that "it would be difficult to exaggerate the electrifying effect on thought
throughout the whole relevant apparatus of government ... nothing so imaginative and so ambitious
had ever been discussed". However, Harry Dexter White, representing America which was the
world's biggest creditor said "We have been perfectly adamant on that point. We have taken the
position of absolutely no."
Instead he proposed an International Stabilisation Fund (now the IMF), which would place the
burden of maintaining the balance of trade on the deficit nations, and imposing no limit on the
surplus that rich countries could accumulate. White also proposed creation of the IBRD (now part of
the World Bank) which would provide capital for economic reconstruction after the war.
The International Monetary Fund (IMF) is an international organization that was initiated in 1944 at
the Bretton Woods Conferenceand formally created in 1945 by 29 member countries. The IMF's
stated goal was to assist in the reconstruction of the world'sinternational payment system post
World War II. Countries contribute funds to a pool through a quota system from which countries with
payment imbalances temporarily can borrow money and other resources. As of the 14th General
Review of Quotas in late 2010 the fund stood at SDR476.8bn, or about US$755.7bn at then-current
exchange rates.
[1]
Through this fund, and other activities such as surveillance of its members'
economies and the demand for self-correcting policies, the IMF works to improve the economies of
its member countries.
[2]

The IMF is a self-described "organization of 188 countries, working to foster global monetary
cooperation, secure financial stability, facilitate international trade, promote high employment and
sustainable economic growth, and reduce poverty around the world.
[3]
The organization's objectives
are stated in the Articles of Agreement
[4]
and can be summarised as: to promote international
economic co-operation, international trade, employment, and exchange-rate stability, including by
making financial resources available to member countries to meet balance of payments needs.
[5]
Its
headquarters are in Washington, D.C., United States.
Contents
[hide]
1 Functions
o 1.1 Surveillance of the global economy
o 1.2 Conditionality of loans
1.2.1 Structural adjustment
1.2.2 Benefits
2 History
o 2.1 Since 2000
3 Member countries
o 3.1 Qualifications
o 3.2 Benefits
4 Leadership
o 4.1 Board of Governors
o 4.2 Executive Board
o 4.3 Managing Director
5 Voting power
o 5.1 Effects of the quota system
5.1.1 Developing countries
5.1.2 United States influence
5.1.3 Overcoming borrower/creditor divide
6 Use
o 6.1 Exceptional Access Framework - Sovereign Debt
7 IMF and globalization
8 Criticisms
o 8.1 Conditionality of Loans
o 8.2 Reform
o 8.3 Support of military dictatorships
o 8.4 Impact on access to food
o 8.5 Impact on public health
o 8.6 Impact on environment
9 Proposed Alternatives
10 In the media
11 See also
12 Notes and references
13 Further reading
14 External links
Functions[edit]
The IMF works to foster global growth and economic stability. It provides policy advice and financing
to members in economic difficulties and also works with developing nations to help them achieve
macroeconomic stability and reduce poverty.
[6]
The rationale for this is that private international
capital markets function imperfectly and many countries have limited access to financial markets.
Such market imperfections, together with balance of payments financing, provide the justification for
official financing, without which many countries could only correct large external payment
imbalances through measures with adverse effects on both national and international economic
prosperity.
[7]
The IMF can provide other sources of financing to countries in need that would not be
available in the absence of an economic stabilization program supported by the Fund.
Upon initial IMF formation, its two primary functions were: to oversee the fixed exchange
rate arrangements between countries,
[8]
thus helping national governments manage theirexchange
rates and allowing these governments to prioritise economic growth,
[9]
and to provide short-term
capital to aid balance of payments.
[8]
This assistance was meant to prevent the spread of
international economic crises. The Fund was also intended to help mend the pieces of the
international economy post the Great Depression and World War II.
[10]

The IMF's role was fundamentally altered after the floating exchange rates post 1971. It shifted to
examining the economic policies of countries with IMF loan agreements to determine if a shortage of
capital was due to economic fluctuations or economic policy. The IMF also researched what types of
government policy would ensure economic recovery.
[11]
The new challenge is to promote and
implement policy that reduces the frequency of crises among the emerging market countries,
especially the middle-income countries that are open to massive capital outflows.
[12]
Rather than
maintaining a position of oversight of only exchange rates, their function became one of
surveillance of the overall macroeconomic performance of its member countries. Their role became
a lot more active because the IMF now manages economic policy instead of just exchange rates.
In addition, the IMF negotiates conditions on lending and loans under their policy
of conditionality,
[8]
which was established in the 1950s.
[10]
Low-income countries can borrow
onconcessional terms, which means there is a period of time with no interest rates, through the
Extended Credit Facility (ECF), the Standby Credit Facility (SCF) and the Rapid Credit Facility
(RCF). Nonconcessional loans, which include interest rates, are provided mainly through Stand-By
Arrangements (SBA), the Flexible Credit Line (FCL), the Precautionary and Liquidity Line (PLL), and
the Extended Fund Facility. The IMF provides emergency assistance via the newly introduced Rapid
Financing Instrument (RFI) to all its members facing urgent balance of payments needs.
[13]

Surveillance of the global economy[edit]
The IMF is mandated to oversee the international monetary and financial system
[14]
and monitor the
economic and financial policies of its 188 member countries. This activity is known as surveillance
and facilitates international co-operation.
[15]
Since the demise of the Bretton Woods system of fixed
exchange rates in the early 1970s, surveillance has evolved largely by way of changes in
procedures rather than through the adoption of new obligations.
[14]
The responsibilities of the Fund
changed from those of guardian to those of overseer of members policies.
The Fund typically analyses the appropriateness of each member countrys economic and financial
policies for achieving orderly economic growth, and assesses the consequences of these policies for
other countries and for the global economy.
[14]



IMF Data Dissemination Systems participants:
IMF member using SDDS
IMF member using GDDS
IMF member, not using any of the DDSystems
non-IMF entity using SDDS
non-IMF entity using GDDS
no interaction with the IMF
In 1995 the International Monetary Fund began work on data dissemination standards with the view
of guiding IMF member countries to disseminate their economic and financial data to the public. The
International Monetary and Financial Committee (IMFC) endorsed the guidelines for the
dissemination standards and they were split into two tiers: The General Data Dissemination System
(GDDS) and the Special Data Dissemination Standard (SDDS).
The International Monetary Fund executive board approved the SDDS and GDDS in 1996 and 1997
respectively, and subsequent amendments were published in a revised Guide to the General Data
Dissemination System. The system is aimed primarily at statisticians and aims to improve many
aspects of statistical systems in a country. It is also part of the World Bank Millennium Development
Goals and Poverty Reduction Strategic Papers.
The primary objective of the GDDS is to encourage IMF member countries to build a framework to
improve data quality and increase statistical capacity building. Upon building a framework, a country
can evaluate statistical needs, set priorities in improving the timeliness, transparency, reliability and
accessibility of financial and economic data. Some countries initially used the GDDS, but later
upgraded to SDDS.
Some entities that are not themselves IMF members also contribute statistical data to the systems:
Palestinian Authority GDDS
Hong Kong SDDS
Macao GDDS
[16]

EU institutions:
the European Central Bank for the Eurozone SDDS
Eurostat for the whole EU SDDS, thus providing data from Cyprus (not using any
DDSystem on its own) and Malta (using only GDDS on its own)
Conditionality of loans[edit]
IMF conditionality is a set of policies or conditions that the IMF requires in exchange for financial
resources.
[8]
The IMF does not require collateral from countries for loans but rather requires the
government seeking assistance to correct its macroeconomic imbalances in the form of policy
reform. If the conditions are not met, the funds are withheld.
[8]
Conditionality is perhaps the most
controversial aspect of IMF policies.
[17]
The concept of conditionality was introduced in an Executive
Board decision in 1952 and later incorporated in the Articles of Agreement.
Conditionality is associated with economic theory as well as an enforcement mechanism for
repayment. Stemming primarily from the work of Jacques Polak in the Fund's research department,
the theoretical underpinning of conditionality was the "monetary approach to the balance of
payments."
[10]

Structural adjustment[edit]
Further information: Structural adjustment
Some of the conditions for structural adjustment can include:
Cutting expenditures, also known as austerity.
Focusing economic output on direct export and resource extraction,
Devaluation of currencies,
Trade liberalisation, or lifting import and export restrictions,
Increasing the stability of investment (by supplementing foreign direct investment with the
opening of domestic stock markets),
Balancing budgets and not overspending,
Removing price controls and state subsidies,
Privatization, or divestiture of all or part of state-owned enterprises,
Enhancing the rights of foreign investors vis-a-vis national laws,
Improving governance and fighting corruption.
These conditions have also been sometimes labelled as the Washington Consensus.
Benefits[edit]
These loan conditions ensure that the borrowing country will be able to repay the Fund and that the
country won't attempt to solve their balance of payment problems in a way that would negatively
impact the international economy.
[18][19]
The incentive problem of moral hazard, which is the actions
of economic agents maximising their own utility to the detriment of others when they do not bear the
full consequences of their actions, is mitigated through conditions rather than providing collateral;
countries in need of IMF loans do not generally possess internationally valuable collateral anyway.
[19]

Conditionality also reassures the IMF that the funds lent to them will be used for the purposes
defined by the Articles of Agreement and provides safeguards that country will be able to rectify its
macroeconomic and structural imbalances.
[19]
In the judgment of the Fund, the adoption by the
member of certain corrective measures or policies will allow it to repay the Fund, thereby ensuring
that the same resources will be available to support other members.
[17]

As of 2004, borrowing countries have had a very good track record for repaying credit extended
under the Fund's regular lending facilities with full interest over the duration of the loan. This
indicates that Fund lending does not impose a burden on creditor countries, as lending countries
receive market-rate interest on most of their quota subscription, plus any of their own-currency
subscriptions that are loaned out by the Fund, plus all of the reserve assets that they provide the
Fund.
[7]

History[edit]


IMF "Headquarters 1" in Washington, D.C.
The International Monetary Fund was originally laid out as a part of the Bretton Woods
system exchange agreement in 1944.
[20]
During the earlier Great Depression, countries sharply
raised barriers to foreign trade in an attempt to improve their failing economies. This led to the
devaluation of national currencies and a decline in world trade.
[21]

This breakdown in international monetary co-operation created a need for oversight. The
representatives of 45 governments met at theBretton Woods Conference in the Mount Washington
Hotel in the area of Bretton Woods, New Hampshire in the United States, to discuss framework for
post-World War II international economic co-operation. The participating countries were concerned
with the rebuilding of Europe and the global economic system after the war.
There were two views on the role the IMF should assume as a global economic institution. British
economist John Maynard Keynesimagined that the IMF would be a cooperative fund upon which
member states could draw to maintain economic activity and employment through periodic crises.
This view suggested an IMF that helped governments and to act as the US government had during
the New Deal in response to World War II. American delegate Harry Dexter White foresaw an IMF
that functioned more like a bank, making sure that borrowing states could repay their debts on
time.
[22]
Most of White's plan was incorporated into the final acts adopted at Bretton Woods.
The International Monetary Fund formally came into existence on 27 December 1945, when the first
29 countries ratified its Articles of Agreement.
[23]
By the end of 1946 the Fund had grown to 39
members.
[24]
On 1 March 1947, the IMF began its financial operations,
[25]
and on 8 May France
became the first country to borrow from it.
[24]

The IMF was one of the key organisations of the international economic system; its design allowed
the system to balance the rebuilding of international capitalism with the maximisation of national
economic sovereignty and human welfare, also known as embedded liberalism.
[26]
The IMF's
influence in the global economy steadily increased as it accumulated more members. The increase
reflected in particular the attainment of political independence by many African countries and more
recently the 1991 dissolution of the Soviet Union because most countries in the Soviet sphere of
influence did not join the IMF.
[21]

The Bretton Woods system prevailed until 1971, when the US government suspended the
convertibility of the US$ (and dollar reserves held by other governments) into gold. This is known as
the Nixon Shock.
[21]

Since 2000[edit]
In May 2010, the IMF participated, in 3:11 proportion, in the first Greek bailout that totalled
110bn.
[27]
This bailout was notable for several reasons: the funds were funnelled directly to the
(largely European) private bondholders, which endured no haircuts to the chagrin of the Swiss,
Brazilian, Indian, Russian, and Argentinian Directors; the Greek authorities (at the time, George
Papandreou and Giorgos Papakonstantinou) themselves ruled out a haircut of the private
bondholders; the Greek private sector was happy to curtail the 13th and 14th month civil service pay
scheme, because the Greek government was otherwise impotent.
[28]
A second bailout package of
more than 100bn was agreed over the course of a few months from October 2011, during which
time Papandreou was forced from office. The so-called Troika, of which the IMF is part, are joint
managers of this programme, which was approved by the Executive Directors of the IMF on 15
March 2012 for SDR23.8bn,
[29]
and which saw private bondholders take a haircut of upwards of
50%. In the interval between May 2010 and February 2012 the private banks of Holland, France and
Germany managed to reduce their exposure to Greek debt from a total of 122bn to a total of
66bn.
[28][30]

As of January 2012, the largest borrowers from the IMF in order were Greece, Portugal,
Ireland, Romania and Ukraine.
[31]

On 25 March 2013, a 10bn international bailout of Cyprus was agreed by the Troika, at the cost to
the Cypriots of its agreement: to close the country's second-largest bank; to impose a one-time bank
deposit levy on all uninsured deposits there.
[32][33]
No insured deposit of 100k or less were to be
affected under the terms of a novel bail-inscheme.
[34][35]

The topic of sovereign debt restructuring was taken up by the IMF in April 2013 for the first time
since 2005, in a report entitled "SOVEREIGN DEBT RESTRUCTURINGRECENT
DEVELOPMENTS AND IMPLICATIONS FOR THE FUNDS LEGAL AND POLICY
FRAMEWORK".
[36]
The paper, which was discussed by the board on 20 May,
[37]
summarised the
recent experiences in Greece, St Kitts and Nevis, Belize and Jamaica. An explanatory interview with
Deputy Director Hugh Bredenkamp was published a few days later,
[38]
as was a deconstruction
by Matina Stevis of the Wall Street Journal.
[39]

In the October 2013 Financial Monitor publication, the IMF suggested that a capital levy capable of
reducing Euro-area government debt ratios to "end-2007 levels" would require a very high tax rate;
about 10 percent.
[40]

The Fiscal Affairs department of the IMF, headed by Dr. Sanjeev Gupta, produced in January 2014
a report entitled "Fiscal Policy and Income Inequality" which stated that "Some taxes levied on
wealth, especially on immovable property, are also an option for economies seeking more
progressive taxation.... Property taxes are equitable and efficient, but underutilized in many
economies.... There is considerable scope to exploit this tax more fully, both as a revenue source
and as a redistributive instrument."
[41]

At the end of March 2014, the IMF secured an $18bn bailout fund for the provisional government of
the Ukraine in the aftermath of the 2014 Ukrainian revolution.
[42][43]

The topic of the US executive board veto was discussed again by some junior members in April
2014. The countries were fed up with the failure to ratify a four-year old agreement to restructure the
lender. Singaporean Finance Minister and IMF steering committee chairman Tharman
Shanmugaratnam said it could cause "disruptive change" in the global economy: "We are more likely
over time to see a weakening of multilateralism, the emergence of regionalism, bilateralism and
other ways of dealing with global problems," and that would make the world a "less safe" place.
[44]

Member countries[edit]


IMF member states
IMF member states not accepting the obligations of Article VIII, Sections 2, 3, and 4
[45]

Since the IMF is affiliated with the UN and falls under its umbrella,
[46]
the 188 corporate members of
the IMF include 187 members of the UN and the Republic of Kosovo
[a]
.
[47][48]
The corporate members
appoint ex-officio voting members, who are listed below. All members of the IMF are
also International Bank for Reconstruction and Development (IBRD) members and vice versa.
[citation
needed]

Former members are Cuba (which left in 1964)
[49]
and the Republic of China, which was ejected
from the UN in 1980 after losing the support of then US President Jimmy Carter and was replaced
by the People's Republic of China.
[50]
However, "Taiwan Province of China" is still listed in the official
IMF indices.
[51]

Apart from Cuba, the other UN states that do not belong to the IMF
are Andorra, Liechtenstein, Monaco, Nauru and North Korea.
The former Czechoslovakia was expelled in 1954 for "failing to provide required data" and was
readmitted in 1990, after the Velvet Revolution. Poland withdrew in 1950allegedly pressured by
the Soviet Unionbut returned in 1986.
[52]

Qualifications[edit]
Any country may apply to be a part of the IMF. Post-IMF formation, in the early postwar period, rules
for IMF membership were left relatively loose. Members needed to make periodic membership
payments towards their quota, to refrain from currency restrictions unless granted IMF permission, to
abide by the Code of Conduct in the IMF Articles of Agreement, and to provide national economic
information. However, stricter rules were imposed on governments that applied to the IMF for
funding.
[53]

The countries that joined the IMF between 1945 and 1971 agreed to keep their exchange rates
secured at rates that could be adjusted only to correct a "fundamental disequilibrium" in the balance
of payments, and only with the IMF's agreement.
[54]

Some members have a very difficult relationship with the IMF and even when they are still members
they do not allow themselves to be monitored. Argentina for example refuses to participate in an
Article IV Consultation with the IMF.
[55]

Benefits[edit]
Member countries of the IMF have access to information on the economic policies of all member
countries, the opportunity to influence other members economic policies, technical assistance in
banking, fiscal affairs, and exchange matters, financial support in times of payment difficulties, and
increased opportunities for trade and investment.
[56]

Leadership[edit]
Board of Governors[edit]
The Board of Governors consists of one governor and one alternate governor for each member
country. Each member country appoints its two governors. The Board normally meets once a year
and is responsible for electing or appointing executive directors to the Executive Board. While the
Board of Governors is officially responsible for approving quota increases, Special Drawing
Right allocations, the admittance of new members, compulsory withdrawal of members, and
amendments to the Articles of Agreement and By-Laws, in practice it has delegated most of its
powers to the IMF's Executive Board.
[57]

The Board of Governors is advised by the International Monetary and Financial Committee and
the Development Committee. The International Monetary and Financial Committee has 24 members
and monitors developments in global liquidity and the transfer of resources to developing
countries.
[58]
The Development Committee has 25 members and advises on critical development
issues and on financial resources required to promote economic development in developing
countries. They also advise on trade and global environmental issues.
[58]

Executive Board[edit]
24 Executive Directors make up Executive Board. The Executive Directors represent all 188
member-countries in a geographically-based roster.
[59]
Countries with large economies have their
own Executive Director, but most countries are grouped in constituencies representing four or more
countries.
[57]

Following the 2008 Amendment on Voice and Participation which came into effect in March
2011,
[60]
eight countries each appoint an Executive Director: the United States, Japan, Germany,
France, the United Kingdom, China, the Russian Federation, and Saudi Arabia.
[59]
The remaining 16
Directors represent constituencies consisting of 4 to 22 countries. The Executive Director
representing the largest constituency of 22 countries accounts for 1.55% of the vote.
[citation needed]
This
Board usually meets several times each week.
[61]
The Board membership and constituency is
scheduled for periodic review every eight years.
[1]

List of Executive Directors of the IMF, as of April 2014
[show]
Managing Director[edit]
The IMF is led by a managing director, who is head of the staff and serves as Chairman of the
Executive Board. The managing director is assisted by a First Deputy managing director and three
other Deputy Managing Directors.
[57]
Historically the IMF's managing director has been European
and the president of the World Bank has been from the United States. However, this standard is
increasingly being questioned and competition for these two posts may soon open up to include
other qualified candidates from any part of the world.
[62][63]

In 2011 the world's largest developing countries, the BRIC nations, issued a statement declaring that
the tradition of appointing a European as managing director undermined the legitimacy of the IMF
and called for the appointment to be merit-based.
[63][64]

Dates Name Nationality Background
6 May 1946 5 May
1951
Camille Gutt Belgium Politician, Minister of Finance
3 August 1951 3
October 1956
Ivar Rooth Sweden Law, Central Banker
21 November 1956 5
May 1963
Per Jacobsson Sweden Law, Economics, League of Nations, BIS
1 September 1963
31 August 1973
Pierre-Paul
Schweitzer
France Law, Central Banker, Civil Servant
1 September 1973
Johan Witteveen
Economics, Professor, Politician,
18 June 1978 Netherlands Minister of Finance
18 June 1978 15
January 1987
Jacques de
Larosire
France Civil Servant
16 January 1987 14
February 2000
Michel
Camdessus
France Economics, Central Banker
1 May 2000 4 March
2004
Horst Khler Germany Economics, EBRD
7 June 2004 31
October 2007
Rodrigo Rato Spain
Law, MBA, Politician, Minister of the
Economy
1 November 2007 18
May 2011
Dominique
Strauss-Kahn
France
Economics, Law, Politician, Minister of
the Economy and Finance
5 July 2011 Christine Lagarde France Law, Politician, Minister of Finance


On 28 June 2011, Christine Lagarde was named managing director of the IMF, replacing Dominique Strauss-Kahn.
Previous managing director Dominique Strauss-Kahn was arrested in connection with charges of
sexually assaulting a New York hotel room attendant. Strauss-Kahn subsequently resigned his
position on 18 May.
[65]
On 28 June 2011 Christine Lagarde was confirmed as managing director of
the IMF for a five-year term starting on 5 July 2011.
[66][67]
In 2012, Lagarde was paid a salary of
US$467,940, and this is automatically increased every year according to inflation. In addition to that,
the director receives an allowance of US$83,760, and additional expenses for entertainment. This
income is tax-free.
[68]

Voting power[edit]
Voting power in the IMF is based on a quota system. Each member has a number of basic
votes (each member's number of basic votes equals 5.502% of the total votes),
[69]
plus one
additional vote for each Special Drawing Right (SDR) of 100,000 of a member country's
quota.
[70]
The Special Drawing Right is the unit of account of the IMF and represents a claim to
currency. It is based on a basket of key international currencies. The basic votes generate a slight
bias in favour of small countries, but the additional votes determined by SDR outweigh this bias.
[70]

The table below shows quota and voting shares for IMF members (Attention: Amendment on
Voice and Participation, and of subsequent reforms of quotas and governance which were
agreed in 2010 but are not yet in effect.
[71]
)
Rank
IMF Member
country
Quota: millions
ofSDRs
Quota: percentage of the
total
Governor Alternate
Number of
votes
Percentage out of total
votes
1 United States 42,122.4 17.69 Jacob J. Lew Janet Yellen 421,961 16.75
2 Japan 15,628.5 6.56 Taro Aso Haruhiko Kuroda 157,022 6.23
3 Germany 14,565.5 6.12 Jens Weidmann Wolfgang Schuble 146,392 5.81
4 France 10,738.5 4.51 Michel Sapin Christian Noyer 108,122 4.29
5 United Kingdom 10,738.5 4.51 George Osborne Mark Carney 108,122 4.29
6 China 9,525.9 4.00 Zhou Xiaochuan Gang Yi 95,996 3.81
7 Italy 7,882.3 3.31 Pier Carlo Padoan Ignazio Visco 79,560 3.16
8 Saudi Arabia 6,985.5 2.93 Ibrahim A. Al-Assaf Fahad Almubarak 70,592 2.80
9 Canada 6,369.2 2.67 Joe Oliver Stephen Poloz 64,429 2.56
10 Russia 5,945.4 2.50 Anton Siluanov Elvira S. Nabiullina 60,191 2.39
11 India 5,821.5 2.44 Arun Jaitley Raghuram Rajan 58,952 2.34
12 Netherlands 5,162.4 2.17 Klaas Knot Hans Vijlbrief 52,361 2.08
13 Belgium 4,605.2 1.93 Luc Coene Marc Monbaliu 46,789 1.86
14 Brazil 4,250.5 1.79 Guido Mantega
Alexandre Antonio
Tombini
43,242 1.72
15 Spain 4,023.4 1.69 Luis de Guindos Luis M. Linde 40,971 1.63
16 Mexico 3,625.7 1.52 Luis Videgaray Agustn Carstens 36,994 1.47
17 Switzerland 3,458.5 1.45 Thomas Jordan
Eveline Widmer-
Schlumpf
35,322 1.40
18 South Korea 3,366.4 1.41 Oh-Seok Hyun Juyeol Lee 34,401 1.37
19 Australia 3,236.4 1.36 Joe Hockey Martin Parkinson 33,101 1.31
20 Venezuela 2,659.1 1.12
Nelson Jos Merentes
Diaz
Julio Cesar Viloria
Sulbaran
27,328 1.08
21 Sweden 2,395.5 1.01 Stefan Ingves Mikael Lundholm 24,692 0.98
22 Argentina 2,117.1 0.89 Axel Kicillof Juan Carlos Fabrega 21,908 0.87
23 Austria 2,113.9 0.89 Ewald Nowotny Andreas Ittner 21,876 0.87
24 Indonesia 2,079.3 0.87
Agus D.W.
Martowardojo
Mahendra Siregar 21,530 0.85
25 Denmark 1,891.4 0.79 Lars Rohde Sophus Garfiel 19,651 0.78
26 Norway 1,883.7 0.79 ystein Olsen Svein Gjedrem 19,574 0.78
27 South Africa 1,868.5 0.78 Pravin J. Gordhan Gill Marcus 19,422 0.77
28 Malaysia 1,773.9 0.74 Najib Razak Zeti Aziz 18,476 0.73
29 Nigeria 1,753.2 0.74 Ngozi Okonjo-Iweala Sarah Alade 18,269 0.73
30 Poland 1,688.4 0.71 Mateusz Szczurek Jacek Dominik 17,621 0.70

The rest of 158
countries
47,844.9 20.11 respective respective 594,895 23.59

Effects of the quota system[edit]
The IMF's quota system was created to raise funds for loans.
[72]
Each IMF member country is
assigned a quota, or contribution, that reflects the country's relative size in the global economy. Each
member's quota also determines its relative voting power. Thus, financial contributions from member
governments are linked to voting power in the organisation.
[70]

This system follows the logic of a shareholder-controlled organisation: wealthy countries have more
say in the making and revision of rules.
[73]
Since decision making at the IMF reflects each member's
relative economic position in the world, wealthier countries that provide more money to the fund
have more influence in the IMF than poorer members that contribute less; nonetheless, the IMF
focuses on redistribution.
[70]

Developing countries[edit]
Quotas are normally reviewed every five years and can be increased when deemed necessary by
the Board of Governors. Currently, reforming the representation of developing countries within the
IMF has been suggested.
[70]
These countries' economies represent a large portion of the global
economic system but this is not reflected in the IMF's decision making process through the nature of
the quota system. Joseph Stiglitz argues "There is a need to provide more effective voice and
representation for developing countries, which now represent a much larger portion of world
economic activity since 1944, when the IMF was created."
[74]
In 2008, a number of quota reforms
were passed including shifting 6% of quota shares to dynamic emerging markets and developing
countries.
[75]

United States influence[edit]
A second criticism is that the United States' transition to neoliberalism and global capitalism also led
to a change in the identity and functions of international institutions like the IMF. Because of the high
involvement and voting power of the United States, the global economic ideology could effectively be
transformed to match the US's. This is consistent with the IMF's function change during the 1970s
after the Nixon Shock ended the Bretton Woods system. Another criticism is that allies of the United
States are able to receive bigger loans with fewer conditions.
[20]

Overcoming borrower/creditor divide[edit]
The IMF's membership is divided along income lines: certain countries provide the financial
resources while others use these resources. Both developed country "creditors" anddeveloping
country "borrowers" are members of the IMF. The developed countries provide the financial
resources but rarely enter into IMF loan agreements; they are the creditors. Conversely, the
developing countries use the lending services but contribute little to the pool of money available to
lend because their quotas are smaller; they are the borrowers. Thus, tension is created around
governance issues because these two groups, creditors and borrowers, have fundamentally different
interests in terms of the conditions of these loans.
[76]

The criticism is that the system of voting power distribution through a quota system institutionalises
borrower subordination and creditor dominance. The resulting division of the Fund's membership
into borrowers and non-borrowers has increased the controversy around conditionality because the
borrowing members are interested in making loan access easier while the creditor members want to
maintain reassurance that the loans will be repaid.
[77]

Use[edit]
A recent source reveals that the average overall use of IMF credit per decade increased, in real
terms, by 21% between the 1970s and 1980s, and increased again by just over 22% percent from
the 1980s to the 19912005 period. Another study has suggested that since 1950 the continent of
Africa alone has received $300 billion from the IMF, the World Bank and affiliate institutions
[78]

A study done by Bumba Mukherjee found that developing democratic countries benefit more from
IMF programs than developing autocratic countries because policy-making, and the process of
deciding where loaned money is used, is more transparent within a democracy.
[78]
One study done
by Randall Stone found that although earlier studies found little impact of IMF programs on balance
of payments, more recent studies using more sophisticated methods and larger samples "usually
found IMF programs improved the balance of payments."
[20]

Exceptional Access Framework - Sovereign Debt[edit]
The Exceptional Access Framework was created in 2003 when John B. Taylor was Under Secretary
of the U.S. Treasury for International Affairs. The new Framework became fully operational in
February 2003 and it was applied in the subsequent decisions on Argentina and Brazil.
[79]
Its
purpose was to place some sensible rules and limits on the way the IMF makes loans to support
governments with debt problemespecially in emerging marketsand thereby move away from the
bailout mentality that came out of the 1990s. Such a reform was essential for ending the terrible
crisis atmosphere that then existed in emerging markets. The reform was closely related to, and put
in place nearly simultaneously with, the actions of several emerging market countries to
place collective action clauses in their bond contracts.
In 2010, the framework was abandoned so the IMF could make loans to Greece in an unsustainable
and political situation.
[80][81]

The topic of sovereign debt restructuring was taken up by IMF staff in April 2013 for the first time
since 2005, in a report entitled "SOVEREIGN DEBT RESTRUCTURINGRECENT
DEVELOPMENTS AND IMPLICATIONS FOR THE FUNDS LEGAL AND POLICY
FRAMEWORK".
[36]
The paper, which was discussed by the board on 20 May,
[37]
summarised the
recent experiences in Greece, St Kitts and Nevis, Belize and Jamaica. An explanatory interview with
Deputy Director Hugh Bredenkamp was published a few days later,
[38]
as was a deconstruction
by Matina Stevis of the Wall Street Journal.
[39]

The staff was directed to formulate an updated policy, which was accomplished on 22 May 2014 with
a report entitled "THE FUNDS LENDING FRAMEWORK AND SOVEREIGN DEBTPRELIMINARY
CONSIDERATIONS", and taken up by the Executive Board on 13 June.
[82]
The staff proposed that
"in circumstances where a (Sovereign) member has lost market access and debt is considered
sustainable... the IMF would be able to provide Exceptional Access on the basis of a debt operation
that involves an extension of maturities," which was labelled a "reprofiling operation". These
reprofiling operations would "generally be less costly to the debtor and creditorsand thus to the
system overallrelative to either an upfront debt reduction operation or a bail-out that is followed by
debt reduction... (and) would be envisaged only when both (a) a member has lost market access
and (b) debt is assessed to be sustainable, but not with high probability... Creditors will only agree if
they understand that such an amendment is necessary to avoid a worse outcome: namely, a default
and/or an operation involving debt reduction... Collective action clauses, which now exist in most
but not allbonds, would be relied upon to address collective action problems."
[82]

IMF and globalization[edit]
Globalization encompasses three institutions: global financial markets and transnational companies,
national governments linked to each other in economic and military alliances led by the US, and
rising "global governments" such as World Trade Organization (WTO), IMF, and World
Bank.
[83]
Charles Derber argues in his book People Before Profit,"These interacting institutions
create a new global power system where sovereignty is globalized, taking power and constitutional
authority away from nations and giving it to global markets and international bodies."
[83]
Titus
Alexander argues that this system institutionalises global inequality between western countries and
the Majority World in a form ofglobal apartheid, in which the IMF is a key pillar.
[84]

The establishment of globalised economic institutions has been both a symptom of and a stimulus
for globalization. The development of the World Bank, the IMF regional development banks such as
the European Bank for Reconstruction and Development (EBRD), and, more recently, multilateral
trade institutions such as the WTO indicates the trend away from the dominance of the state as the
exclusive unit of analysis in international affairs. Globalization has thus been transformative in terms
of a reconceptualising ofstate sovereignty.
[85]

Following US President Bill Clinton's administration's aggressive financial deregulation campaign in
the 1990s, globalisation leaders overturned long-standing restrictions by governments that limited
foreign ownership of their banks, deregulated currency exchange, and eliminated restrictions on how
quickly money could be withdrawn by foreign investors.
[83]

Criticisms[edit]
Overseas Development Institute (ODI) research undertaken in 1980 pointed to five main criticisms of
the IMF which support the analysis that it is a pillar of what activist Titus Alexander calls global
apartheid.
[86]
Firstly, developed countries were seen to have a more dominant role and control
over less developed countries (LDCs) primarily due to the Western bias towards a capitalist form of
the world economy with professional staff being Western trained and believing in the efficacy of
market-oriented policies.
Secondly, the Fund worked on the incorrect assumption that all payments disequilibria were caused
domestically. The Group of 24 (G-24), on behalf of LDC members, and theUnited Nations
Conference on Trade and Development (UNCTAD) complained that the Fund did not distinguish
sufficiently between disequilibria with predominantly external as opposed to internal causes. This
criticism was voiced in the aftermath of the 1973 oil crisis. Then LDCs found themselves with
payments deficits due to adverse changes in their terms of trade, with the Fund prescribing
stabilisation programmes similar to those suggested for deficits caused by government over-
spending. Faced with long-term, externally generated disequilibria, the Group of 24 argued that
LDCs should be allowed more time to adjust their economies and that the policies needed to achieve
such adjustment are different from demand-management programmes devised primarily with
internally generated disequilibria in mind.
The third criticism was that the effects of Fund policies were anti-developmental. The deflationary
effects of IMF programmes quickly led to losses of output and employment in economies where
incomes were low and unemployment was high. Moreover, it was sometimes claimed that the
burden of the deflationary effects was borne disproportionately by the poor.
Fourthly is the accusation that harsh policy conditions were self-defeating where a vicious circle
developed when members refused loans due to harsh conditionality, making their economy worse
and eventually taking loans as a drastic medicine.
Lastly is the point that the Fund's policies lack a clear economic rationale. Its policy foundations were
theoretical and unclear due to differing opinions and departmental rivalries whilst dealing with
countries with widely varying economic circumstances.
ODI conclusions were that the Fund's very nature of promoting market-oriented economic approach
attracted unavoidable criticism, as LDC governments were likely to object when in a tight corner.
Yet, on the other hand, the Fund could provide a 'scapegoat service' where governments could take
loans as a last resort, whilst blaming international bankers for any economic downfall. The ODI
conceded that the fund was to some extent insensitive to political aspirations of LDCs, while its
policy conditions were inflexible.
[87]

Argentina, which had been considered by the IMF to be a model country in its compliance to policy
proposals by the Bretton Woods institutions, experienced a catastrophic economic crisis in
2001,
[88]
which some believe to have been caused by IMF-induced budget restrictionswhich
undercut the government's ability to sustain national infrastructure even in crucial areas such as
health, education, and securityand privatisation of strategically vital national resources.
[89]
Others
attribute the crisis to Argentina's misdesigned fiscal federalism, which caused subnational spending
to increase rapidly.
[90]
The crisis added to widespread hatred of this institution in Argentina and other
South American countries, with many blaming the IMF for the region's economic problems. The
currentas of early 2006trend toward moderate left-wing governments in the region and a
growing concern with the development of a regional economic policy largely independent of big
business pressures has been ascribed to this crisis.
In an interview, the former Romanian Prime Minister Clin Popescu-Triceanu claimed that "Since
2005, IMF is constantly making mistakes when it appreciates the country's economic
performances."
[91]
Former Tanzanian President Julius Nyerere famously questioned, "Who elected
the IMF to be the ministry of finance for every country in the world?" and therefore described it as
the International Ministry of Finance.
[92]
He also claimed that many of debt-ridden African states were
losing their sovereignty to the IMF and the World Bank by agreeing to their support measures.
[93]

Conditionality of Loans[edit]
The IMF has been criticised for being 'out of touch' with local economic conditions, cultures, and
environments in the countries they are requiring policy reform.
[8]
The economic advice the IMF gives
might not always take into consideration the difference between what spending means on paper and
how it is felt by citizens.
[94]

For example, some people believe that Jeffrey Sachs' work shows that "the Fund's usual
prescription is 'budgetary belt tightening to countries who are much too poor to own belts'".
[94]
It has
been said that the IMF's role as a generalist institution specialising in macroeconomic issues needs
reform. Conditionality has also been criticised because a country can pledge collateral of
"acceptable assets" to obtain waivers on certain conditions.
[19]
However, that assumes that all
countries have the capability and choice to provide acceptable collateral.
One view is that conditionality undermines domestic political institutions.
[95]
The recipient
governments are sacrificing policy autonomy in exchange for funds, which can lead to public
resentment of the local leadership for accepting and enforcing the IMF conditions. Political instability
can result from more leadership turnover as political leaders are replaced in electoral
backlashes.
[8]
IMF conditions are often criticised for their bias against economic growth and reduce
government services, thus increasing unemployment.
[10]

Another criticism is that IMF programs are only designed to address poor governance, excessive
government spending, excessive government intervention in markets, and too much state
ownership.
[94]
This assumes that this narrow range of issues represents the only possible problems;
everything is standardised and differing contexts are ignored.
[94]
A country may also be compelled to
accept conditions it would not normally accept had they not been in a financial crisis in need of
assistance.
[17]

On top of that, regardless of what methodologies and data sets used, it comes to same conclusion of
exacerbating income inequality. With Gini coefficient, it became clear that countries with IMF
programs face increased income inequality.
[96]

It is claimed that conditionalities retard social stability and hence inhibit the stated goals of the IMF,
while Structural Adjustment Programs lead to an increase in poverty in recipient countries.
[97]
The
IMF sometimes advocates austerity programmes, cutting public spending and increasing taxes
even when the economy is weak, to bring budgets closer to a balance, thus reducing budget deficits.
Countries are often advised to lower their corporate tax rate. In Globalization and Its
Discontents, Joseph E. Stiglitz, former chief economist and senior vice-president at the World Bank,
criticises these policies.
[98]
He argues that by converting to a more monetarist approach, the purpose
of the fund is no longer valid, as it was designed to provide funds for countries to carry
out Keynesian reflations, and that the IMF "was not participating in a conspiracy, but it was reflecting
the interests and ideology of the Western financial community."
[99]

International politics play an important role in making decision in IMF. The power each member has
is often proportional to the country's size of economy and contribution to IMF finance. During this
process, the member with powerful say can pressure the Fund to do in interest of its own. It is
inevitable fact that United States, the initial founding member of IMF, is getting preferential treatment
from the Fund. Unlike what they do to other developing countries, United States might bail out with
big loans and not complying with IMF conditions. Seeing in the level of domestic politics, often
politicians in developing countries use the conditionality gain leverage over the opposing side of the
population to change policy.
[100]

Reform[edit]
The IMF is only one of many international organisations and it is a generalist institution for
macroeconomic issues only; its core areas of concern in developing countries are very narrow. One
proposed reform is a movement towards close partnership with other specialist agencies to better
productivity. The IMF has little to no communication with other international organisations such as
UN specialist agencies like UNICEF, the Food and Agriculture Organization (FAO), and the United
Nations Development Program (UNDP).
[94]

Jeffrey Sachs argues in The End of Poverty that "international institutions like the International
Monetary Fund (IMF) and the World Bank have the brightest economists and the lead in advising
poor countries on how to break out of poverty, but the problem is development
economics".
[94]
Development economics needs the reform, not the IMF. He also notes that IMF loan
conditions need to be partnered with other reforms such as trade reform in developed nations, debt
cancellation, and increased financial assistance for investments in basic infrastructure to be
effective.
[94]
IMF loan conditions cannot stand alone and produce change; they need to be partnered
with other reforms or other conditions as applicable.
Reforms to give more powers to emerging economies were agreed by the G20 in 2010, however as
of April 2014 the U.S. Congress has not agreed to these reforms, making eventual agreement
uncertain.
[101][102][103]

Support of military dictatorships[edit]
The role of the Bretton Woods institutions has been controversial since the late Cold War period,
due to claims that the IMF policy makers supported military dictatorships friendly to American and
European corporations and other anti-communist regimes. Critics also claim that the IMF is generally
apathetic or hostile to their views of human rights, and labour rights.
[citation needed]
The controversy has
helped spark the Anti-globalization movement.
Arguments in favour of the IMF say that economic stability is a precursor to democracy; however,
critics highlight various examples in which democratised countries fell after receiving IMF loans.
[104]

Impact on access to food[edit]
A number of civil society organisations
[105]
have criticised the IMF's policies for their impact on
people's access to food, particularly in developing countries. In October 2008, former US
president Bill Clinton presented a speech to the United Nations World Food Day, which criticised the
World Bank and IMF for their policies on food and agriculture:
We need the World Bank, the IMF, all the big foundations, and all the governments to admit that, for
30 years, we all blew it, including me when I was president. We were wrong to believe that food was
like some other product in international trade, and we all have to go back to a more responsible and
sustainable form of agriculture.
Former U.S. president Bill Clinton, Speech at United Nations World Food Day, October 16,
2008
[106]

Impact on public health[edit]
In 2009 a study by analysts from Cambridge and Yale universities published on the open-access
Public Library of Science concluded that strict conditions on the international loans by the IMF
resulted in thousands of deaths in Eastern Europe by tuberculosis as public health care had to be
weakened. In the 21 countries to which the IMF had given loans, tuberculosis deaths rose by
16.6%.
[107]

In 2009, a book by Rick Rowden titled The Deadly Ideas of Neoliberalism: How the IMF has
Undermined Public Health and the Fight Against AIDS, claimed that the IMFs monetarist approach
towards prioritising price stability (low inflation) and fiscal restraint (low budget deficits) was
unnecessarily restrictive and has prevented developing countries from being able to scale up long-
term public investment as a percent of GDP in the underlying public health infrastructure. The book
claimed the consequences have been chronically underfunded public health systems, leading to
dilapidated health infrastructure, inadequate numbers of health personnel, and demoralising working
conditions that have fuelled the push factors driving the brain drain of nurses migrating from poor
countries to rich ones, all of which has undermined public health systems and the fight against
HIV/AIDS in developing countries.
[108]

Impact on environment[edit]
IMf policies have been repeatedly criticised for making it difficult for indebted countries to avoid
ecosystem-damaging projects that generate cash flow, in particular oil, coal, and forest-destroying
lumber and agriculture projects. Ecuador for example had to defy IMF advice repeatedly to pursue
the protection of its rain forests, though paradoxically this need was cited in IMF argument to support
that country. The IMF acknowledged this paradox in a March 2010 staff position report
[109]
which
proposed the IMF Green Fund, a mechanism to issue special drawing rights directly to pay for
climate harm prevention and potentially other ecological protection as pursued generally by
other environmental finance.
While the response to these moves was generally positive
[110]
possibly because ecological protection
and energy and infrastructure transformation are more politically neutral than pressures to change
social policy. Some experts voiced concern that the IMF was not representative, and that the IMF
proposals to generate only US$200 billion a year by 2020 with the SDRs as seed funds, did not go
far enough to undo the general incentive to pursue destructive projects inherent in the world
commodity trading and banking systemscriticisms often levelled at the World Trade
Organization and large global banking institutions.
In the context of the May 2010 European banking crisis, some observers also noted that Spain and
California, two troubled economies within Europe and the United States respectively, and also
Germany, the primary and politically most fragile supporter of a euro currency bailout would benefit
from IMF recognition of their leadership in green technology, and directly from Green Fund
generated demand for their exports, which might also improve their credit standing with international
bankers.
[citation needed]

Proposed Alternatives[edit]
In March 2011 the Ministers of Economy and Finance of the African Union proposed to establish
an African Monetary Fund.
[111]

At the 6th BRICS summit in July 2014 the BRICS nations (Brazil, Russia, India, China, and South
Africa) announced the signing of a Treaty for the establishment of the BRICS Contingent Reserve
Arrangement (CRA) with an initial size of US$100 billion. The Agreement is a framework for the
provision of liquidity through currency swaps in response to actual or potential short-term balance of
payments pressures.
[112]

The World Bank is a United Nations international financial institution that
provides loans
[3]
to developing countries forcapital programs. The World Bank is a component of
the World Bank Group, and a member of the United Nations Development Group.
The World Bank's official goal is the reduction of poverty. According to its Articles of Agreement, all
its decisions must be guided by a commitment to the promotion of foreign
investment and international trade and to the facilitation of capitalinvestment.
[4][5]

Contents
[hide]
1 Composition
o 1.1 World Bank Group
2 History
o 2.1 19441968
o 2.2 19681980
o 2.3 19801989
o 2.4 1989present
2.4.1 Criteria
3 Leadership
o 3.1 List of Presidents
4 List of chief economists
5 Members
o 5.1 Voting power
6 List of 20 Largest Countries by Voting Power in Each World Bank Institution
7 Poverty reduction strategies
8 Global Partnerships and Initiatives
o 8.1 Climate Change
o 8.2 Food Security
9 Training wings
o 9.1 World Bank Institute
o 9.2 Global Development Learning Network
9.2.1 GDLN Asia Pacific
o 9.3 The JUSTPAL Network
10 Country assistance strategies
11 Clean Air Initiative
12 United Nations Development Business
13 Open Data initiative
14 Criticisms
o 14.1 Structural adjustment
o 14.2 Fairness of assistance conditions
o 14.3 Sovereign immunity
15 See also
16 References
17 External links
Composition[edit]
World Bank Group[edit]
The World Bank should not be confused with the United Nations World Bank Group, a member of
the United Nations Economic and Social Council, and a family of five international organizations that
make leveraged loans to poor countries:
[6]

International Bank for Reconstruction and Development (IBRD)
International Development Association (IDA)
International Finance Corporation (IFC)
Multilateral Investment Guarantee Agency (MIGA)
International Centre for Settlement of Investment Disputes (ICSID)
History[edit]


Lord Keynes (right) and Harry Dexter White, the "founding fathers" of both the World Bank and the International
Monetary Fund (IMF).
[7]

The World Bank was created at the 1944 Bretton Woods Conference, along with three other
institutions, including the International Monetary Fund (IMF). The World Bank and the IMF are both
based in Washington, D.C., and work closely with each other.
Although many countries were represented at the Bretton Woods Conference, the United States and
United Kingdom were the most powerful in attendance and dominated the negotiations.
[8]:5254

19441968[edit]
Before 1968, the reconstruction and development loans provided by the World Bank were relatively
small. The Bank's staff was aware of the need to instill confidence in the bank. Fiscal
conservatism ruled, and loan applications had to meet strict criteria.
[8]:5660

The first country to receive a World Bank loan was France. The Bank's president at the time, John
McCloy, chose France over two other applicants, Poland and Chile. The loan was for US$250
million, half the amount requested, and it came with strict conditions. France had to agree to produce
a balanced budget and give priority of debt repayment to the World Bank over other governments.
World Bank staff closely monitored the use of the funds to ensure that the French government met
the conditions. In addition, before the loan was approved, the United States State Department told
the French government that its members associated with the Communist Party would first have to be
removed. The French government complied with this diktat and removed the Communist coalition
government. Within hours, the loan to France was approved.
[9]:288, 290291

When the Marshall Plan went into effect in 1947, many European countries began receiving aid from
other sources. Faced with this competition, the World Bank shifted its focus to non-European
countries. Until 1968, its loans were earmarked for the construction of income-producing
infrastructure, such as seaports, highway systems, and power plants, that would generate enough
income to enable a borrower country to repay the loan.
19681980[edit]
From 1968 to 1980, the bank concentrated on meeting the basic needs of people in the developing
world. The size and number of loans to borrowers was greatly increased as loan targets expanded
from infrastructure into social services and other sectors.
[10]

These changes can be attributed to Robert McNamara who was appointed to the presidency in 1968
by Lyndon B. Johnson.
[8]:6063
McNamara imported a technocratic managerial style to the Bank that
he had used as United States Secretary of Defense and President of the Ford Motor
Company.
[8]:62
McNamara shifted bank policy toward measures such as building schools and
hospitals, improving literacy and agricultural reform. McNamara created a new system of gathering
information from potential borrower nations that enabled the bank to process loan applications much
faster. To finance more loans, McNamara told bank treasurer Eugene Rotberg to seek out new
sources of capital outside of the northern banks that had been the primary sources of bank funding.
Rotberg used the global bond market to increase the capital available to the bank.
[11]
One
consequence of the period of poverty alleviation lending was the rapid rise of third world debt. From
1976 to 1980 developing world debt rose at an average annual rate of 20%.
[12][13]

In 1980, the World Bank Administrative Tribunal was established to decide on disputes between the
World Bank Group and its staff where allegation of non-observance of contracts of employment or
terms of appointment had not been honored.
[14]

19801989[edit]
In 1980, McNamara was succeeded by US President Jimmy Carter's nominee, A.W. Clausen.
Clausen replaced many members of McNamara's staff and instituted a new ideological focus. His
1982 decision to replace the bank's Chief Economist, Hollis B. Chenery, with Anne Krueger was an
indication of this new focus. Krueger was known for her criticism of development funding and for
describing Third World governments as "rent-seeking states."
During the 1980s, the bank emphasized lending to service Third-World debt, and structural
adjustment policies designed to streamline the economies of developing nations.UNICEF reported in
the late 1980s that the structural adjustment programs of the World Bank had been responsible for
"reduced health, nutritional and educational levels for tens of millions of children in Asia, Latin
America, and Africa".
[15]

1989present[edit]
Beginning in 1989, in response to harsh criticism from many groups, the bank began including
environmental groups and NGOs in its loans to mitigate the past effects of its development policies
that had prompted the criticism.
[8]:9397
It also formed an implementing agency, in accordance with
the Montreal Protocols, to stop ozone-depletion damage to the Earth's atmosphere by phasing out
the use of 95% of ozone-depleting chemicals, with a target date of 2015. Since then, in accordance
with its so-called "Six Strategic Themes," the bank has put various additional policies into effect to
preserve the environment while promoting development. For example, in 1991, the bank announced
that to protect against deforestation, especially in the Amazon, it would not finance any commercial
logging or infrastructure projects that harm the environment.
In order to promote global public goods, the World Bank tries to control communicable disease such
as malaria, delivering vaccines to several parts of the world and joining combat forces. In 2000, the
bank announced a "war on AIDS", and in 2011, the Bank joined the Stop Tuberculosis
Partnership.
[16]

Traditionally, based on a tacit understanding between the United States and Europe, the president of
the World Bank has always been selected from candidates nominated by the United States. In 2012,
for the first time, two non-US citizens were nominated.
On 23 March 2012, U.S. President Barack Obama announced that the United States would
nominate Jim Yong Kim as the next president of the Bank.
[17]
Jim Yong Kim was elected on 27 April
2012.


The World Bank Group headquarters bldg. inWashington, D.C.
Criteria[edit]
Many achievements have brought the Millennium Development Goals targets for 2015 within reach
in some cases. For the goals to be realized, six criteria must be met: stronger and more inclusive
growth in Africa and fragile states, more effort in health and education, integration of the
development and environment agendas, more and better aid, movement on trade negotiations, and
stronger and more focused support from multilateral institutions like the World Bank.
[18]

1. Eradicate Extreme Poverty and Hunger: From 1990 through 2004, the proportion of
people living in extreme poverty fell from almost a third to less than a fifth. Although results
vary widely within regions and countries, the trend indicates that the world as a whole can
meet the goal of halving the percentage of people living in poverty. Africa's poverty,
however, is expected to rise, and most of the 36 countries where 90% of the world's
undernourished children live are in Africa. Less than a quarter of countries are on track for
achieving the goal of halving under-nutrition.
2. Achieve Universal Primary Education: The percentage of children in school in developing
countries increased from 80% in 1991 to 88% in 2005. Still, about 72 million children of
primary school age, 57% of them girls, were not being educated as of 2005.
3. Promote Gender Equality: The tide is turning slowly for women in the labor market, yet far
more women than men- worldwide more than 60% are contributing but unpaid family
workers. The World Bank Group Gender Action Plan was created to advance women's
economic empowerment and promote shared growth.
4. Reduce Child Mortality: There is some what improvement in survival rates globally;
accelerated improvements are needed most urgently in South Asia and Sub-Saharan Africa.
An estimated 10 million-plus children under five died in 2005; most of their deaths were from
preventable causes.
5. Improve Maternal Health: Almost all of the half million women who die during pregnancy or
childbirth every year live in Sub-Saharan Africa and Asia. There are numerous causes of
maternal death that require a variety of health care interventions to be made widely
accessible.
6. Combat HIV/AIDS, Malaria, and Other Diseases: Annual numbers of new HIV infections
and AIDS deaths have fallen, but the number of people living with HIV continues to grow. In
the eight worst-hit southern African countries, prevalence is above 15 percent. Treatment
has increased globally, but still meets only 30 percent of needs (with wide variations across
countries). AIDS remains the leading cause of death in Sub-Saharan Africa (1.6 million
deaths in 2007). There are 300 to 500 million cases of malaria each year, leading to more
than 1 million deaths. Nearly all the cases and more than 95 percent of the deaths occur in
Sub-Saharan Africa.
7. Ensure Environmental Sustainability: Deforestation remains a critical problem, particularly
in regions of biological diversity, which continues to decline. Greenhouse gas emissions are
increasing faster than energy technology advancement.
8. Develop a Global Partnership for Development: Donor countries have renewed their
commitment. Donors have to fulfill their pledges to match the current rate of core program
development. Emphasis is being placed on the Bank Group's collaboration with multilateral
and local partners to quicken progress toward the MDGs' realization.
To make sure that World Bank-financed operations do not compromise these goals but instead add
to their realisation, environmental, social and legal Safeguards were defined. However, these
Safeguards have not been implemented entirely yet. At the World Bank's annual meeting in Tokyo
2012 a review of these Safeguards has been initiated which was welcomed by several civil society
organisations.
[19]

Leadership[edit]


Jim Yong Kim, the current President of the World Bank Group
The President of the Bank is the president of the entire World Bank Group. The president,
currently Jim Yong Kim, is responsible for chairing the meetings of the Boards of Directors and for
overall management of the Bank. Traditionally, the Bank President has always been a US citizen
nominated by the United States, the largest shareholder in the bank (the Managing Director of
the International Monetary Fund having always been a European). The nominee is subject to
confirmation by the Board of Executive Directors, to serve for a five-year, renewable term. While
most World Bank presidents have had banking experience, some have not.
[20][21]

The vice presidents of the Bank are its principal managers, in charge of regions, sectors, networks
and functions. There are two Executive Vice Presidents, three Senior Vice Presidents, and 24 Vice
Presidents.
[22]

The Boards of Directors consist of the World Bank Group President and 25 Executive Directors. The
President is the presiding officer, and ordinarily has no vote except a deciding vote in case of an
equal division. The Executive Directors as individuals cannot exercise any power nor commit or
represent the Bank unless specifically authorized by the Boards to do so. With the term beginning 1
November 2010, the number of Executive Directors increased by one, to 25.
[23]

List of Presidents[edit]
Name Dates Nationality Background
Eugene
Meyer
1946
1946
United
States
Newspaper publisher
John J.
McCloy
1947
1949
United
States
Lawyer and US Assistant Secretary of War
Eugene R.
Black, Sr.
1949
1963
United
States
Bank executive with Chase and executive director with the
World Bank
George
Woods
1963
1968
United
States
Bank executive with First Boston Corporation
Robert
McNamara
1968
1981
United
States
US Defense Secretary, business executive with Ford Motor
Company
Alden W.
Clausen
1981
1986
United
States
Lawyer, bank executive with Bank of America
Barber
Conable
1986
1991
United
States
New York State Senator and US Congressman
Lewis T.
Preston
1991
1995
United
States
Bank executive with J.P. Morgan
Sir James
Wolfensohn
1995
2005
United
States
Wolfensohn was a naturalised American citizen before taking
office. Corporate lawyer and banker
Paul
Wolfowitz
2005
2007
United
States
Various cabinet and government positions; US Ambassador
to Indonesia, US Deputy Secretary of Defense
Robert
Zoellick
2007
2012
United
States
Bank executive with Goldman Sachs, Deputy Secretary of
State and US Trade Representative
Jim Yong Kim
2012
present
United
States
A naturalised American citizen before taking office. Physician
and anthropologist, co-founder of Partners in Health and 17th
President of Dartmouth College.
[24]
Electedon 16 April 2012.
Jos Antonio Ocampo, Ngozi Okonjo-Iweala, and Jim Yong Kim were candidates for the 2012
election. It was announced on 16 April 2012, that Jim Yong Kim will succeed Robert Zoellick as
president, continuing the chain of successive World Bank president nominees from the United
States.
[25]

List of chief economists[edit]
Main article: World Bank Chief Economist
Hollis B. Chenery (19721982)
Anne Osborn Krueger (19821986)
Stanley Fischer (19881990)
Lawrence Summers (19911993)
Michael Bruno (19931996)
Joseph E. Stiglitz (19972000)
Nicholas Stern (20002003)
Franois Bourguignon (20032007)
Justin Yifu Lin (June 2008 2012 )
Kaushik Basu (September 2012-)
Members[edit]
Main article: List of World Bank members
The International Bank for Reconstruction and Development (IBRD) has 188 member countries,
while the International Development Association (IDA) has 172 members. Each member state of
IBRD should be also a member of the International Monetary Fund (IMF) and only members of IBRD
are allowed to join other institutions within the Bank (such as IDA).
[26]

Voting power[edit]
In 2010, voting powers at the World Bank were revised to increase the voice of developing countries,
notably China. The countries with most voting power are now the United States (15.85%), Japan
(6.84%), China (4.42%), Germany (4.00%), the United Kingdom (3.75%), France
(3.75%), India (2.91%),
[27]
Russia (2.77%), Saudi Arabia (2.77%) andItaly (2.64%). Under the
changes, known as 'Voice Reform Phase 2', countries other than China that saw significant gains
included South Korea, Turkey, Mexico, Singapore,Greece, Brazil, India, and Spain. Most developed
countries' voting power was reduced, along with a few poor countries such as Nigeria. The voting
powers of the United States, Russia and Saudi Arabia were unchanged.
[28][29]

The changes were brought about with the goal of making voting more universal in regards to
standards, rule-based with objective indicators, and transparent among other things. Now,
developing countries have an increased voice in the "Pool Model," backed especially by Europe.
Additionally, voting power is based on economic size in addition to International Development
Association contributions.
[30]

List of 20 Largest Countries by Voting Power in Each
World Bank Institution[edit]
The following table are amounts for 20 largest countries by voting power in the following World Bank
institutions as of July 2014: the International Bank for Reconstruction and Development (IBRD),
the International Finance Corporation (IFC), the International Development Association (IDA), and
the Multilateral Investment Guarantee Agency (MIGA).
[31]

The 20 Largest Countries by voting power (Number of Votes)
Ran
k
Country IBRD Country IFC Country IDA Country
MIG
A

World
2,044,88
4
World
2,649,53
3
World
23,804,70
9
World 218,321
1
United
States
306,793
United
States
570,178
United
States
2,546,503
United
States
32,792
2 Japan 166,048 Japan 163,333 Japan 2,044,447 Japan 9,207
3 China 107,198
Germany
129,707
United
Kingdom
1,409,037
Germany
9,164
The 20 Largest Countries by voting power (Number of Votes)
Ran
k
Country IBRD Country IFC Country IDA Country
MIG
A
4
Germany
93,105 France 121,814
Germany
1,319,536 France 8,793
5 France 82,896
United
Kingdom
121,814 France 908,581
United
Kingdom
8,793
6
United
Kingdom
82,896 India 103,652
Saudi
Arabia
772,020 China 5,758
7 India 62,494 Russia 103,652 India 661,909 Russia 5,756
8
Canada
58,958
Canada
82,141
Canada
623,798
Saudi
Arabia
5,756
9 Italy 51,556 Italy 82,141 Italy 573,632 India 5,599
10 Russia 46,435 China 62,392 China 495,213
Canada
5,453
11
Saudi
Arabia
46,435 Netherland
s
56,930 Poland 474,294 Italy 5,198
12 Spain 42,902 51,409 464,187 4,050
The 20 Largest Countries by voting power (Number of Votes)
Ran
k
Country IBRD Country IFC Country IDA Country
MIG
A
Belgium Netherland
s
Netherland
s
13 Netherland
s
42,302
Australia
48,128
Sweden
463,538
Belgium
3,805
14 Brazil 34,626 Switzerlan
d
44,862 Brazil 389,780
Australia
3,247
15 Switzerlan
d
33,250 Brazil 40,278
Australia
293,625 Switzerlan
d
2,871
16
Belgium
33,018
Argentina
38,928
Belgium
258,893 Brazil 2,834
17 Iran 32,097 Spain 37,825 Switzerlan
d
253,747 Spain 2,493
18
South
Korea
31,566
Indonesia
30,892 Norway 242,552
Argentina
2,438
The 20 Largest Countries by voting power (Number of Votes)
Ran
k
Country IBRD Country IFC Country IDA Country
MIG
A
19
Australia
30,864
Saudi
Arabia
30,861
Denmark
218,104
Indonesia
2,077
20 Turkey 26,247
South
Korea
28,894 Spain 206,661
Sweden
2,077
Poverty reduction strategies[edit]
For the poorest developing countries in the world, the bank's assistance plans are based on poverty
reduction strategies; by combining a cross-section of local groups with an extensive analysis of the
country's financial and economic situation the World Bank develops a strategy pertaining uniquely to
the country in question. The government then identifies the country's priorities and targets for the
reduction of poverty, and the World Bank aligns its aid efforts correspondingly.
Forty-five countries pledged US$25.1 billion in "aid for the world's poorest countries", aid that goes to
the World Bank International Development Association (IDA) which distributes the loans to eighty
poorer countries. While wealthier nations sometimes fund their own aid projects, including those for
diseases, and although IDA is the recipient of criticism, Robert B. Zoellick, the former president of
the World Bank, said when the loans were announced on 15 December 2007, that IDA money "is the
core funding that the poorest developing countries rely on".
[32]

World Bank organizes Development Marketplace Awards which is a competitive grant program that
surfaces and funds innovative, development projects with high potential for development impact that
are scalable and/or replicable. The grant beneficiaries are social enterprises with projects that aim to
deliver a range of social and public services to the most underserved low-income groups.
Global Partnerships and Initiatives[edit]
The World Bank has been assigned temporary management responsibility of the Clean Technology
Fund (CTF), focused on making renewable energy cost-competitive with coal-fired power as quickly
as possible, but this may not continue after UN's Copenhagen climate change conference in
December, 2009, because of the Bank's continued investment in coal-fired power plants.
[33]

Together with the WHO, the World Bank administers the International Health
Partnership (IHP+). IHP+ is a group of partners committed to improving the health of citizens in
developing countries. Partners work together to put international principles for aid effectiveness and
development cooperation into practice in the health sector. IHP+ mobilizes national governments,
development agencies, civil society and others to support a single, country-led national health
strategy in a well-coordinated way.
Climate Change[edit]
World Bank President Jim Yong Kim said in 2012 that:
A 4 degree warmer world can, and must be, avoided we need to hold warming below 2
degrees .... Lack of action on climate change threatens to make the world our children inherit
a completely different world than we are living in today. Climate change is one of the single
biggest challenges facing development, and we need to assume the moral responsibility to
take action on behalf of future generations, especially the poorest.
[34]

A World Bank report into Climate change in 2012 noted that (p. xiii): "Even with the current
mitigation commitments and pledges fully implemented, there is roughly a 20 percent likelihood
of exceeding 4C by 2100." This is despite the fact that the "global community has committed
itself to holding warming below 2C to prevent 'dangerous' climate change"". Furthermore: "A
series of recent extreme events worldwide highlight the vulnerability of all countries. ... No nation
will be immune to the impacts of climate change."
[35]

The World Bank doubled its aid for climate change adaptation from $2.3bn (1.47bn) in 2011 to
$4.6bn in 2012. The planet is now 0.8C warmer than in pre-industrial times. It says that 2C
warming will be reached in 20 to 30 years.
[36][37]

Food Security[edit]
Main article: Food security
1. Global Food Security Program: Launched in April 2010, six countries alongside the Bill
and Melinda Gates Foundation have pledged $925 mn for food security. Till date the
program has helped 8 countries, promoting agriculture, research, trade in agriculture,
etc.
2. Launched Global Food Crisis Response Program: Given grants to approximately 40
nations for seeds, etc. for improving productivity.
3. In process of increasing its yearly spending for agriculture to $6 billion$8 billion from
earlier $4 billion.
4. Runs several nutrition program across the world, e.g., vitamin A doses for children,
school meals, etc.
[citation needed]

Training wings[edit]
World Bank Institute[edit]
The World Bank Institute (WBI) creates learning opportunities for countries, World Bank staff
and clients, and people committed to poverty reduction and sustainable development. WBI's
work program includes training, policy consultations, and the creation and support of knowledge
networks related to international economic and social development.
The World Bank Institute (WBI) can be defined as a "global connector of knowledge, learning
and innovation for poverty reduction". It aims to inspire change agents and prepare them with
essential tools that can help achieve development results. WBI has four major strategies to
approach development problems: innovation for development, knowledge exchange, leadership
and coalition building, and structured learning. World Bank Institute(WBI) was formerly known as
Economic Development Institute (EDI), established on 11 March 1955 with the support of the
Rockefeller and Ford Foundations. The purpose of the institute was to serve as provide an open
place where senior officials from developing countries could discuss development policies and
programs. Over the years, EDI grew significantly and in 2000, the Institute was renamed as the
World Bank Institute. Currently Sanjay Pradhan is the Vice President of the World Bank
Institute.
[38]

Global Development Learning Network[edit]
The Global Development Learning Network (GDLN) is a partnership of over 120 learning centers
(GDLN Affiliates) in nearly 80 countries around the world. GDLN Affiliates collaborate in holding
events that connect people across countries and regions for learning and dialogue on
development issues.
GDLN clients are typically NGOs, government, private sector and development agencies who
find that they work better together on subregional, regional or global development issues using
the facilities and tools offered by GDLN Affiliates. Clients also benefit from the ability of Affiliates
to help them choose and apply these tools effectively, and to tap development practitioners and
experts worldwide. GDLN Affiliates facilitate around 1000 videoconference-based activities a
year on behalf of their clients, reaching some 90,000 people worldwide. Most of these activities
bring together participants in two or more countries over a series of sessions. A majority of
GDLN activities are organized by small government agencies and NGOs.
GDLN Asia Pacific[edit]
The GDLN in the East Asia and Pacific region has experienced rapid growth and Distance
Learning Centers now operate, or are planned in 20 countries: Australia, Mongolia, Cambodia,
China, Indonesia, Singapore, Philippines, Sri Lanka, Japan, Papua New Guinea, South Korea,
Thailand, Laos, Timor Leste, Fiji, Afghanistan, Bangladesh, India, Nepal and New Zealand. With
over 180 Distance Learning Centers, it is the largest development learning network in the Asia
and Pacific region. The Secretariat Office of GDLN Asia Pacific is located in the Center of
Academic Resources of Chulalongkorn University, Bangkok, Thailand.
GDLN Asia Pacific was launched at the GDLN's East Asia and Pacific regional meeting held in
Bangkok from 22 to 24 May 2006. Its vision is to become "the premier network exchanging
ideas, experience and know-how across the Asia Pacific Region". GDLN Asia Pacific is a
separate entity to The World Bank. It has endorsed its own Charter and Business Plan and, in
accordance with the Charter, a GDLN Asia Pacific Governing Committee has been appointed.
The committee comprises China (2), Australia (1), Thailand (1), The World Bank (1) and finally,
a nominee of the Government of Japan (1). The organization is currently hosted by
Chulalongkorn University in Bangkok, Thailand, founding member of the GDLN Asia Pacific.
The Governing Committee has determined that the most appropriate legal status for the GDLN
AP in Thailand is a "Foundation". The World Bank is currently engaging a solicitor in Thailand to
process all documentation in order to obtain this legal status.
GDLN Asia Pacific is built on the principle of shared resources among partners engaged in a
common task, and this is visible in the organizational structures that exist, as the network
evolves. Physical space for its headquarters is provided by the host of the GDLN Centre in
Thailand Chulalongkorn University; Technical expertise and some infrastructure is provided by
the Tokyo Development Learning Centre (TDLC); Fiduciary services are provided by Australian
National University (ANU) Until the GDLN Asia Pacific is established as a legal entity tin
Thailand, ANU, has offered to assist the governing committee, by providing a means of
managing the inflow and outflow of funds and of reporting on them. This admittedly results in
some complexity in contracting arrangements, which need to be worked out on a case by case
basis and depends to some extent on the legal requirements of the countries involved.
The JUSTPAL Network[edit]
A Justice Sector Peer-Assisted Learning (JUSTPAL) Network was launched in April 2011 by the
Poverty Reduction and Economic Management (PREM) Department of the World Banks Europe
and Central Asia (ECA) Region. The JUSTPAL objective is to provide an online and offline
platform for justice professionals to exchange knowledge, good practices and peer-driven
improvements to justice systems and thereby support countries to improve their justice sector
performance, quality of justice and service delivery to citizens and businesses.
The JUSTPAL Network includes representatives of judiciaries, ministries of justice, prosecutors,
anti-corruption agencies and other justice-related entities from across the globe. The Network
currently has active members from more than 50 countries.
To facilitate fruitful exchange of reform experiences and sharing of applicable good practices,
the JUSTPAL Network has organized its activities under (currently) five Communities of Practice
(COPs): (i) Budgeting for the Justice Sector; (ii) Information Systems for Justice Services; (iii)
Justice Sector Physical Infrastructure; (iv) Court Management and Administration; and (v)
Prosecution and Anti-Corruption Agencies.
Country assistance strategies[edit]
As a guideline to the World Bank's operations in any particular country, a Country Assistance
Strategy is produced, in cooperation with the local government and any interested stakeholders
and may rely on analytical work performed by the Bank or other parties.
Clean Air Initiative[edit]
Clean Air Initiative (CAI) is a World Bank initiative to advance innovative ways to improve air
quality in cities through partnerships in selected regions of the world by sharing knowledge and
experiences. It includes electric vehicles.
[39]

United Nations Development Business[edit]
Based on an agreement between the United Nations and the World Bank in 1981, Development
Business became the official source for World Bank Procurement Notices, Contract Awards, and
Project Approvals.
[40]

In 1998, the agreement was re-negotiated, and included in this agreement was a joint venture to
create an electronic version of the publication via the World Wide Web. Today,Development
Business is the primary publication for all major multilateral development banks, United Nations
agencies, and several national governments, many of whom have made the publication of their
tenders and contracts in Development Business a mandatory requirement.
[40]

The World Bank or the World Bank Group is also a sitting observer in the United Nations
Development Group.
[41]

Open Data initiative[edit]
The World Bank collects and processes large amounts of data and generates them on the basis
of economic models. These data and models have gradually been made available to the public
in a way that encourages reuse,
[42]
whereas the recent publications describing them are
available as open access under a Creative Commons Attribution License, for which the bank
received the SPARC Innovator 2012 award.
[43]
The World Bank hosts the Open Knowledge
Repository (OKR)
[44]
as an official open access repository for its research outputs and
knowledge products.
Criticisms[edit]
The World Bank has long been criticized by non-governmental organizations, such as the
indigenous rights group Survival International, and academics, including its former Chief
Economist Joseph Stiglitz, Henry Hazlitt and Ludwig Von Mises.
[45][46][47]
Henry Hazlitt argued
that the World Bank along with the monetary system it was designed within would promote world
inflation and "a world in which international trade is State-dominated" when they were being
advocated.
[48]
Stiglitz argued that the so-called free market reform policies which the Bank
advocates are often harmful to economic development if implemented badly, too quickly ("shock
therapy"), in the wrong sequence or in weak, uncompetitive economies.
[46][49]

One of the strongest criticisms of the World Bank has been the way in which it is governed.
While the World Bank represents 188 countries, it is run by a small number of economically
powerful countries. These countries (which also provide most of the institution's funding) choose
the leadership and senior management of the World Bank, and so their interests dominate the
bank.
[50]:190
Titus Alexander argues that the unequal voting power of western countries and the
World Bank's role in developing countries makes it similar to the South African Development
Bank under apartheid, and therefore a pillar of global apartheid.
[51]:133141

In the 1990s, the World Bank and the IMF forged the Washington Consensus, policies which
included deregulation and liberalization of markets, privatization and the downscaling of
government. Though the Washington Consensus was conceived as a policy that would best
promote development, it was criticized for ignoring equity, employment and how reforms like
privatization were carried out. Joseph Stiglitz argued that the Washington Consensus placed too
much emphasis on the growth of GDP, and not enough on the permanence of growth or on
whether growth contributed to better living standards.
[47]:17

The United States Senate Committee on Foreign Relations report criticized the World Bank and
other international financial institutions for focusing too much "on issuing loans rather than on
achieving concrete development results within a finite period of time" and called on the institution
to "strengthen anti-corruption efforts".
[52]

Criticism of the World Bank often takes the form of protesting as seen in recent events such as
the World Bank Oslo 2002 Protests,
[53]
the October Rebellion,
[54]
and the Battle of
Seattle.
[55]
Such demonstrations have occurred all over the world, even amongst
the Brazilian Kayapo people.
[56]

Another source of criticism has been the tradition of having an American head the bank,
implemented because the United States provides the majority of World Bank funding. "When
economists from the World Bank visit poor countries to dispense cash and advice,"
observed The Economist in 2012, "they routinely tell governments to reject cronyismand fill each
important job with the best candidate available. It is good advice. The World Bank should take
it."
[57]
Jim Yong Kim is the most recently appointed president of the World Bank.
[58]

Structural adjustment[edit]
The effect of structural adjustment policies on poor countries has been one of the most
significant criticisms of the World Bank.
[59]
The 1979 energy crisis plunged many countries into
economic crisis.
[60]:68
The World Bank responded with structural adjustment loans which
distributed aid to struggling countries while enforcing policy changes in order to reduce inflation
and fiscal imbalance. Some of these policies included encouraging production, investment and
labour-intensive manufacturing, changing real exchange rates and altering the distribution of
government resources. Structural adjustment policies were most effective in countries with an
institutional framework that allowed these policies to be implemented easily. For some countries,
particularly in Sub-Saharan Africa, economic growth regressed and inflation worsened. The
alleviation of poverty was not a goal of structural adjustment loans, and the circumstances of the
poor often worsened, due to a reduction in social spending and an increase in the price of food,
as subsidies were lifted.
[60]:69

By the late 1980s, international organizations began to admit that structural adjustment policies
were worsening life for the world's poor. The World Bank changed structural adjustment loans,
allowing for social spending to be maintained, and encouraging a slower change to policies such
as transfer of subsidies and price rises.
[60]:70
In 1999, the World Bank and the IMF introduced the
Poverty Reduction Strategy Paper approach to replace structural adjustment loans.
[61]:147
The
Poverty Reduction Strategy Paper approach has been interpreted as an extension of structural
adjustment policies as it continues to reinforce and legitimize global inequities. Neither approach
has addressed the inherent flaws within the global economy that contribute to economic and
social inequities within developing countries.
[61]:152
By reinforcing the relationship between
lending and client states, many believe that the World Bank has usurped indebted countries'
power to determine their own economic policy.
[62]

Fairness of assistance conditions[edit]
Some critics,
[63]
most prominently the author Naomi Klein, are of the opinion that the World Bank
Group's loans and aid have unfair conditions attached to them that reflect the interests, financial
power and political doctrines (notably the Washington Consensus) of the Bank and, by
extension, the countries that are most influential within it. Amongst other allegations, Klein says
the Group's credibility was damaged "when it forced school fees on students in Ghana in
exchange for a loan; when it demanded that Tanzania privatise its water system; when it made
telecom privatisation a condition of aid for Hurricane Mitch; when it demanded labour "flexibility"
in Sri Lanka in the aftermath of the Asian tsunami; when it pushed for eliminating food subsidies
in post-invasion Iraq."
[64]

Sovereign immunity[edit]
The World Bank requires sovereign immunity from countries it deals with.
[65][66][67]
Sovereign
immunity waives a holder from all legal liability for their actions. It is proposed that this immunity
from responsibility is a "shield which [The World Bank] wants to resort to, for escaping
accountability and security by the people."
[65]
As the United States has veto power, it can
prevent the World Bank from taking action against its interests.
[65]

World Trade Organization
From Wikipedia, the free encyclopedia
"WTO" redirects here. For other uses, see WTO (disambiguation).

World Trade Organization (English)
Organisation mondiale du commerce (French)
Organizacin Mundial del Comercio (Spanish)


Members
Members, dually represented by the EU
Observers
Non-members

Formation
1 January 1995
Headquarters
Centre William Rappard, Geneva,Switzerland
Membership
160 member states
[1]

Official
language
English, French, Spanish
[2]

Director-
General
Roberto Azevdo
Budget
196 million Swiss francs (approx. 209 million
US$) in 2011.
[3]

Staff
640
[4]

Website
wto.org
The World Trade Organization (WTO) is an organization that intends to supervise
and liberalize international trade. The organization officially commenced on 1 January 1995 under
the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which
commenced in 1948.
[5]
The organization deals with regulation of trade between participating
countries by providing a framework for negotiating and formalizing trade agreements and a dispute
resolution process aimed at enforcing participant's adherence to WTO agreements, which are signed
by representatives of member governments
[6]:fol.910
and ratified by their parliaments.
[7]
Most of the
issues that the WTO focuses on derive from previous trade negotiations, especially from
the Uruguay Round (19861994).
The organization is attempting to complete negotiations on the Doha Development Round, which
was launched in 2001 with an explicit focus on addressing the needs of developing countries. As of
June 2012, the future of the Doha Round remained uncertain: the work programme lists 21 subjects
in which the original deadline of 1 January 2005 was missed, and the round is still incomplete.
[8]
The
conflict between free trade on industrial goods and services but retention of protectionism on farm
subsidies to domestic agricultural sector (requested by developed countries) and
the substantiation of the international liberalization of fair trade on agricultural products (requested
by developing countries) remain the major obstacles. These points of contention have hindered any
progress to launch new WTO negotiations beyond the Doha Development Round. As a result of this
impasse, there has been an increasing number of bilateral free trade agreements signed.
[9]
As of
July 2012, there were various negotiation groups in the WTO system for the current agricultural
trade negotiation which is in the condition of stalemate.
[10]

WTO's current Director-General is Roberto Azevdo,
[11][12]
who leads a staff of over 600 people
in Geneva, Switzerland.
[13]
A trade facilitation agreement known as the Bali Package was reached by
all members on 7 December 2013, the first comprehensive agreement in the organization's
history.
[14][15]

Contents
[hide]
1 History
o 1.1 GATT rounds of negotiations
1.1.1 From Geneva to Tokyo
1.1.2 Uruguay Round
o 1.2 Ministerial conferences
o 1.3 Doha Round (Doha Agenda)
2 Functions
3 Principles of the trading system
4 Organizational structure
5 Decision-making
6 Dispute settlement
7 Accession and membership
o 7.1 Accession process
o 7.2 Members and observers
8 Agreements
9 Office of director-general
o 9.1 List of directors-general
10 See also
11 Notes and references
12 External links
History[edit]


The economists Harry White (left) and John Maynard Keynes at theBretton Woods Conference. Both had been
strong advocates of a central-controlled international trade environment and recommended the establishment of three
institutions: theIMF (for fiscal and monetary issues); the World Bank (for financial and structural issues); and
the ITO (for international economic cooperation).
[16]

The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was established
after World War II in the wake of other new multilateral institutions dedicated to international
economic cooperation notably the Bretton Woods institutions known as the World Bankand
the International Monetary Fund. A comparable international institution for trade, named
the International Trade Organization was successfully negotiated. The ITO was to be a United
Nations specialized agency and would address not only trade barriers but other issues indirectly
related to trade, including employment, investment, restrictive business practices, and commodity
agreements. But the ITO treaty was not approved by the U.S. and a few other signatories and never
went into effect.
[17][18][19]

In the absence of an international organization for trade, the GATT would over the years "transform
itself" into a de facto international organization.
[20]

GATT rounds of negotiations[edit]
See also: General Agreement on Tariffs and Trade
The GATT was the only multilateral instrument governing international trade from 1946 until the
WTO was established on 1 January 1995.
[21]
Despite attempts in the mid-1950s and 1960s to create
some form of institutional mechanism for international trade, the GATT continued to operate for
almost half a century as a semi-institutionalized multilateral treaty regime on a provisional basis.
[22]

From Geneva to Tokyo[edit]
Seven rounds of negotiations occurred under GATT. The first real GATT trade rounds concentrated
on further reducing tariffs. Then, theKennedy Round in the mid-sixties brought about a GATT anti-
dumping Agreement and a section on development. The Tokyo Round during the seventies was the
first major attempt to tackle trade barriers that do not take the form of tariffs, and to improve the
system, adopting a series of agreements on non-tariff barriers, which in some cases interpreted
existing GATT rules, and in others broke entirely new ground. Because these plurilateral
agreements were not accepted by the full GATT membership, they were often informally called
"codes". Several of these codes were amended in the Uruguay Round, and turned into multilateral
commitments accepted by all WTO members. Only four remained plurilateral (those on government
procurement, bovine meat, civil aircraft and dairy products), but in 1997 WTO members agreed to
terminate the bovine meat and dairy agreements, leaving only two.
[21]

Uruguay Round[edit]
Main article: Uruguay Round


During the Doha Round, the US government blamed Brazil and India for being inflexible and the EU for impeding
agricultural imports.
[23]
The then-President of Brazil, Luiz Incio Lula da Silva (above right), responded to the
criticisms by arguing that progress would only be achieved if the richest countries (especially the US and countries in
the EU) made deeper cuts in agricultural subsidies and further opened their markets for agricultural goods.
[24]

Well before GATT's 40th anniversary, its members concluded that the GATT system was straining to
adapt to a new globalizing world economy.
[25][26]
In response to the problems identified in the 1982
Ministerial Declaration (structural deficiencies, spill-over impacts of certain countries' policies on
world trade GATT could not manage etc.), the eighth GATT round known as the Uruguay Round
was launched in September 1986, in Punta del Este, Uruguay.
[25]

It was the biggest negotiating mandate on trade ever agreed: the talks were going to extend the
trading system into several new areas, notably trade in services and intellectual property, and to
reform trade in the sensitive sectors of agriculture and textiles; all the original GATT articles were up
for review.
[26]
The Final Act concluding the Uruguay Round and officially establishing the WTO
regime was signed 15 April 1994, during the ministerial meeting at Marrakesh, Morocco, and hence
is known as the Marrakesh Agreement.
[27]

The GATT still exists as the WTO's umbrella treaty for trade in goods, updated as a result of the
Uruguay Round negotiations (a distinction is made between GATT 1994, the updated parts of GATT,
and GATT 1947, the original agreement which is still the heart of GATT 1994).
[25]
GATT 1994 is not
however the only legally binding agreement included via the Final Act at Marrakesh; a long list of
about 60 agreements, annexes, decisions and understandings was adopted. The agreements fall
into a structure with six main parts:
The Agreement Establishing the WTO
Goods and investment the Multilateral Agreements on Trade in Goods including the GATT
1994 and the Trade Related Investment Measures (TRIMS)
Services the General Agreement on Trade in Services
Intellectual property the Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS)
Dispute settlement (DSU)
Reviews of governments' trade policies (TPRM)
[28]

In terms of the WTO's principle relating to tariff "ceiling-binding" (No. 3), the Uruguay Round has
been successful in increasing binding commitments by both developed and developing countries, as
may be seen in the percentages of tariffs bound before and after the 19861994 talks.
[29]

Ministerial conferences[edit]


The World Trade Organization Ministerial Conference of 1998, in thePalace of Nations (Geneva,Switzerland).
The highest decision-making body of the WTO is the Ministerial Conference, which usually meets
every two years. It brings together all members of the WTO, all of which are countries or customs
unions. The Ministerial Conference can take decisions on all matters under any of the multilateral
trade agreements. The inaugural ministerial conference was held in Singapore in 1996.
Disagreements between largely developed and developing economies emerged during this
conference over four issues initiated by this conference, which led to them being collectively referred
to as the "Singapore issues". The second ministerial conference was held in Geneva in Switzerland.
The third conference in Seattle, Washington ended in failure, with massive demonstrations and
police and National Guard crowd-control efforts drawing worldwide attention. The fourth ministerial
conference was held in Doha in the Persian Gulf nation of Qatar. The Doha Development
Round was launched at the conference. The conference also approved the joining of China, which
became the 143rd member to join. The fifth ministerial conference was held in Cancn, Mexico,
aiming at forging agreement on the Doha round. An alliance of 22 southern states, the G20
developing nations (led by India, China,
[30]
Brazil, ASEAN led by the Philippines), resisted demands
from the North for agreements on the so-called "Singapore issues" and called for an end
to agricultural subsidies within the EU and the US. The talks broke down without progress.
The sixth WTO ministerial conference was held in Hong Kong from 1318 December 2005. It was
considered vital if the four-year-old Doha Development Round negotiations were to move forward
sufficiently to conclude the round in 2006. In this meeting, countries agreed to phase out all their
agricultural export subsidies by the end of 2013, and terminate any cotton export subsidies by the
end of 2006. Further concessions to developing countries included an agreement to introduce duty-
free, tariff-free access for goods from the Least Developed Countries, following the Everything but
Arms initiative of the European Union but with up to 3% of tariff lines exempted. Other major
issues were left for further negotiation to be completed by the end of 2010. The WTO General
Council, on 26 May 2009, agreed to hold a seventh WTO ministerial conference session in Geneva
from 30 November-3 December 2009. A statement by chairman Amb. Mario Matus acknowledged
that the prime purpose was to remedy a breach of protocol requiring two-yearly "regular" meetings,
which had lapsed with the Doha Round failure in 2005, and that the "scaled-down" meeting would
not be a negotiating session, but "emphasis will be on transparency and open discussion rather than
on small group processes and informal negotiating structures". The general theme for discussion
was "The WTO, the Multilateral Trading System and the Current Global Economic Environment"
[31]

Doha Round (Doha Agenda)[edit]
Main article: Doha Development Round


The Doha Development Round started in 2001 is at an impasse.
The WTO launched the current round of negotiations, the Doha Development Round, at the fourth
ministerial conference in Doha, Qatar in November 2001. This was to be an ambitious effort to make
globalization more inclusive and help the world's poor, particularly by slashing barriers and subsidies
in farming.
[32]
The initial agenda comprised both further trade liberalization and new rule-making,
underpinned by commitments to strengthen substantial assistance to developing countries.
[33]

The negotiations have been highly contentious. Disagreements still continue over several key areas
including agriculture subsidies, which emerged as critical in July 2006.
[34]
According to a European
Union statement, "The 2008 Ministerial meeting broke down over a disagreement between exporters
of agricultural bulk commodities and countries with large numbers of subsistence farmers on the
precise terms of a 'special safeguard measure' to protect farmers from surges in imports."
[35]
The
position of the European Commission is that "The successful conclusion of the Doha negotiations
would confirm the central role of multilateral liberalisation and rule-making. It would confirm the WTO
as a powerful shield against protectionist backsliding."
[33]
An impasse remains and, as of August
2013, agreement has not been reached, despite intense negotiations at several ministerial
conferences and at other sessions. On 27 March 2013, the chairman of agriculture talks announced
"a proposal to loosen price support disciplines for developing countries public stocks and domestic
food aid." He added: ...we are not yet close to agreementin fact, the substantive discussion of the
proposal is only beginning.
[36]

[show]V T EGATT and WTO trade rounds
[37]

Functions[edit]
Among the various functions of the WTO, these are regarded by analysts as the most important:
It oversees the implementation, administration and operation of the covered agreements.
[38][39]

It provides a forum for negotiations and for settling disputes.
[40][41]

Additionally, it is the WTO's duty to review and propagate the national trade policies, and to ensure
the coherence and transparency of trade policies through surveillance in global economic policy-
making.
[39][41]
Another priority of the WTO is the assistance of developing, least-developed and low-
income countries in transition to adjust to WTO rules and disciplines through technical cooperation
and training.
[42]

(i) The WTO shall facilitate the implementation, administration and operation and further the objec-
tives of this Agreement and of the Multilateral Trade Agreements, and shall also provide the frame
work for the implementation, administration and operation of the multilateral Trade Agreements.
(ii) The WTO shall provide the forum for negotiations among its members concerning their
multilateral trade relations in matters dealt with under the Agreement in the Annexes to this
Agreement.
(iii) The WTO shall administer the Understanding on Rules and Procedures Governing the
Settlement of Disputes.
(iv) The WTO shall administer Trade Policy Review Mechanism.
(v) With a view to achieving greater coherence in global economic policy making, the WTO shall
cooperate, as appropriate, with the international Monetary Fund (IMF) and with the International
Bank for Reconstruction and Development (IBRD) and its affiliated agencies.
[43]

The above five listings are the additional functions of the World Trade Organization. As globalization
proceeds in today's society, the necessity of an International Organization to manage the trading
systems has been of vital importance. As the trade volume increases, issues such as protectionism,
trade barriers, subsidies, violation of intellectual property arise due to the differences in the trading
rules of every nation. The World Trade Organization serves as the mediator between the nations
when such problems arise. WTO could be referred to as the product of globalization and also as one
of the most important organizations in today's globalized society.
The WTO is also a center of economic research and analysis: regular assessments of the global
trade picture in its annual publications and research reports on specific topics are produced by the
organization.
[44]
Finally, the WTO cooperates closely with the two other components of the Bretton
Woods system, the IMF and the World Bank.
[40]

Principles of the trading system[edit]
The WTO establishes a framework for trade policies; it does not define or specify outcomes. That is,
it is concerned with setting the rules of the trade policy games.
[45]
Five principles are of particular
importance in understanding both the pre-1994 GATT and the WTO:
1. Non-discrimination. It has two major components: the most favoured nation (MFN) rule,
and the national treatment policy. Both are embedded in the main WTO rules on goods,
services, and intellectual property, but their precise scope and nature differ across these
areas. The MFN rule requires that a WTO member must apply the same conditions on all
trade with other WTO members, i.e. a WTO member has to grant the most favorable
conditions under which it allows trade in a certain product type to all other WTO
members.
[45]
"Grant someone a special favour and you have to do the same for all other
WTO members."
[29]
National treatment means that imported goods should be treated no less
favorably than domestically produced goods (at least after the foreign goods have entered
the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical
standards, security standards et al. discriminating against imported goods).
[45]

2. Reciprocity. It reflects both a desire to limit the scope of free-riding that may arise because
of the MFN rule, and a desire to obtain better access to foreign markets. A related point is
that for a nation to negotiate, it is necessary that the gain from doing so be greater than the
gain available from unilateral liberalization; reciprocal concessions intend to ensure that
such gains will materialise.
[46]

3. Binding and enforceable commitments. The tariff commitments made by WTO members
in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of
concessions. These schedules establish "ceiling bindings": a country can change its
bindings, but only after negotiating with its trading partners, which could mean compensating
them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the
WTO dispute settlement procedures.
[29][46]

4. Transparency. The WTO members are required to publish their trade regulations, to
maintain institutions allowing for the review of administrative decisions affecting trade, to
respond to requests for information by other members, and to notify changes in trade
policies to the WTO. These internal transparency requirements are supplemented and
facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy
Review Mechanism (TPRM).
[47]
The WTO system tries also to improve predictability and
stability, discouraging the use of quotas and other measures used to set limits on quantities
of imports.
[29]

5. Safety valves. In specific circumstances, governments are able to restrict trade. The WTO's
agreements permit members to take measures to protect not only the environment but also
public health, animal health and plant health.
[48]

There are three types of provision in this direction:
articles allowing for the use of trade measures to attain non-economic objectives;
articles aimed at ensuring "fair competition"; members must not use environmental
protection measures as a means of disguising protectionist policies.
[48]

provisions permitting intervention in trade for economic reasons.
[47]

Exceptions to the MFN principle also allow for preferential treatment of developing countries,
regional free trade areas and customs unions.
[6]:fol.93

Organizational structure[edit]
The General Council has the following subsidiary bodies which oversee committees in different
areas:
Council for Trade in Goods
There are 11 committees under the jurisdiction of the Goods Council each with a specific
task. All members of the WTO participate in the committees. The Textiles Monitoring Body is
separate from the other committees but still under the jurisdiction of Goods Council. The
body has its own chairman and only 10 members. The body also has several groups relating
to textiles.
[49]

Council for Trade-Related Aspects of Intellectual Property Rights
Information on intellectual property in the WTO, news and official records of the activities of
the TRIPS Council, and details of the WTO's work with other international organizations in
the field.
[50]

Council for Trade in Services
The Council for Trade in Services operates under the guidance of the General Council and is
responsible for overseeing the functioning of the General Agreement on Trade in
Services (GATS). It is open to all WTO members, and can create subsidiary bodies as
required.
[51]

Trade Negotiations Committee
The Trade Negotiations Committee (TNC) is the committee that deals with the current trade
talks round. The chair is WTO's director-general. As of June 2012 the committee was tasked
with the Doha Development Round.
[52]

The Service Council has three subsidiary bodies: financial services, domestic
regulations, GATS rules and specific commitments.
[49]
The council has several
different committees, working groups, and working parties.
[53]
There are
committees on the following: Trade and Environment; Trade and Development
(Subcommittee on Least-Developed Countries);Regional Trade Agreements;
Balance of Payments Restrictions; and Budget, Finance and Administration.
There are working parties on the following: Accession. There are working
groups on the following: Trade, debt and finance; and Trade and technology
transfer.
Decision-making[edit]
The WTO describes itself as "a rules-based, member-driven organization all
decisions are made by the member governments, and the rules are the
outcome of negotiations among members".
[54]
The WTO Agreement foresees
votes where consensus cannot be reached, but the practice of consensus
dominates the process of decision-making.
[55]

Richard Harold Steinberg (2002) argues that although the WTO's consensus
governance model provides law-based initial bargaining, trading rounds close
through power-based bargaining favouring Europe and the U.S., and may not
lead to Pareto improvement.
[56]

Dispute settlement[edit]
Main article: Dispute settlement in the WTO
In 1994, the WTO members agreed on the Understanding on Rules and
Procedures Governing the Settlement of Disputes (DSU) annexed to the "Final
Act" signed in Marrakesh in 1994.
[57]
Dispute settlement is regarded by the
WTO as the central pillar of the multilateral trading system, and as a "unique
contribution to the stability of the global economy".
[58]
WTO members have
agreed that, if they believe fellow-members are violating trade rules, they will
use the multilateral system of settling disputes instead of taking action
unilaterally.
[59]

The operation of the WTO dispute settlement process involves the DSB panels,
the Appellate Body, the WTO Secretariat, arbitrators, independent experts and
several specialized institutions.
[60]
Bodies involved in the dispute settlement
process, World Trade Organization.
Accession and membership[edit]
Main article: World Trade Organization accession and membership
The process of becoming a WTO member is unique to each applicant country,
and the terms of accession are dependent upon the country's stage of
economic development and current trade regime.
[61]
The process takes about
five years, on average, but it can last more if the country is less than fully
committed to the process or if political issues interfere. The shortest accession
negotiation was that of the Kyrgyz Republic, while the longest was that of
Russia, which, having first applied to join GATT in 1993, was approved for
membership in December 2011 and became a WTO member on 22 August
2012.
[62]
The second longest was that of Vanuatu, whose Working Party on the
Accession of Vanuatu was established on 11 July 1995. After a final meeting of
the Working Party in October 2001, Vanuatu requested more time to consider
its accession terms. In 2008, it indicated its interest to resume and conclude its
WTO accession. The Working Party on the Accession of Vanuatu was
reconvened informally on 4 April 2011 to discuss Vanuatu's future WTO
membership. The re-convened Working Party completed its mandate on 2 May
2011. The General Council formally approved the Accession Package of
Vanuatu on 26 October 2011. On 24 August 2012, the WTO welcomed Vanuatu
as its 157th member.
[63]
An offer of accession is only given once consensus is
reached among interested parties.
[64]

Accession process[edit]


WTO accession progress:
Members (including dual-representation with the European Union)
Draft Working Party Report or Factual Summary adopted
Goods and/or Services offers submitted
Memorandum on Foreign Trade Regime (FTR) submitted
Observer, negotiations to start later or no Memorandum on FTR submitted
Frozen procedures or no negotiations in the last 3 years
No official interaction with the WTO
A country wishing to accede to the WTO submits an application to the General
Council, and has to describe all aspects of its trade and economic policies that
have a bearing on WTO agreements.
[65]
The application is submitted to the
WTO in a memorandum which is examined by a working party open to all
interested WTO Members.
[66]

After all necessary background information has been acquired, the working
party focuses on issues of discrepancy between the WTO rules and the
applicant's international and domestic trade policies and laws. The working
party determines the terms and conditions of entry into the WTO for the
applicant nation, and may consider transitional periods to allow countries some
leeway in complying with the WTO rules.
[61]

The final phase of accession involves bilateral negotiations between the
applicant nation and other working party members regarding the concessions
and commitments on tariff levels and market access for goods and services.
The new member's commitments are to apply equally to all WTO members
under normal non-discrimination rules, even though they are negotiated
bilaterally.
[65]

When the bilateral talks conclude, the working party sends to the general
council or ministerial conference an accession package, which includes a
summary of all the working party meetings, the Protocol of Accession (a draft
membership treaty), and lists ("schedules") of the member-to-be's
commitments. Once the general council or ministerial conference approves of
the terms of accession, the applicant's parliament must ratify the Protocol of
Accession before it can become a member.
[67]
Some countries may have faced
tougher and a much longer accession process due to challenges during
negotiations with other WTO members, such as Vietnam, whose negotiations
took more than 11 years before it became official member in January 2007.
[68]

Members and observers[edit]
The WTO has 160 members and 24 observer governments.
[69]
In addition to
states, the European Union is a member. WTO members do not have to be
full sovereign nation-members. Instead, they must be a customs territory with
full autonomy in the conduct of their external commercial relations. Thus Hong
Kong has been a member since 1995 (as "Hong Kong, China" since 1997)
predating the People's Republic of China, which joined in 2001 after 15 years of
negotiations. The Republic of China (Taiwan) acceded to the WTO in 2002 as
"Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu" (Chinese
Taipei) despite its disputed status.
[70]
The WTO Secretariat omits the official
titles (such as Counselor, First Secretary, Second Secretary and Third
Secretary) of the members of Chinese Taipei's Permanent Mission to the WTO,
except for the titles of the Permanent Representative and the Deputy
Permanent Representative.
[71]

As of 2007, WTO member states represented 96.4% of global trade and 96.7%
of global GDP.
[72]
Iran, followed by Algeria, are the economies with the largest
GDP and trade outside the WTO, using 2005 data.
[73][74]
With the exception of
the Holy See, observers must start accession negotiations within five years of
becoming observers. A number of international intergovernmental organizations
have also been granted observer status to WTO bodies.
[75]
14 states and two
territories so far have no official interaction with the WTO.
Agreements[edit]
Further information: Uruguay Round
The WTO oversees about 60 different agreements which have the status of
international legal texts. Member countries must sign and ratify all WTO
agreements on accession.
[76]
A discussion of some of the most important
agreements follows. The Agreement on Agriculture came into effect with the
establishment of the WTO at the beginning of 1995. The AoA has three central
concepts, or "pillars": domestic support, market access and export subsidies.
The General Agreement on Trade in Services was created to extend the
multilateral trading system to service sector, in the same way as the General
Agreement on Tariffs and Trade (GATT) provided such a system for
merchandise trade. The agreement entered into force in January 1995.
The Agreement on Trade-Related Aspects of Intellectual Property Rights sets
down minimum standards for many forms of intellectual property (IP) regulation.
It was negotiated at the end of the Uruguay Round of the General Agreement
on Tariffs and Trade (GATT) in 1994.
[77]

The Agreement on the Application of Sanitary and Phytosanitary Measures
also known as the SPS Agreementwas negotiated during the Uruguay
Round of GATT, and entered into force with the establishment of the WTO at
the beginning of 1995. Under the SPS agreement, the WTO sets constraints on
members' policies relating to food safety (bacterial contaminants, pesticides,
inspection and labelling) as well as animal and plant health (imported pests and
diseases). The Agreement on Technical Barriers to Trade is an
international treaty of the World Trade Organization. It was negotiated during
the Uruguay Round of the General Agreement on Tariffs and Trade, and
entered into force with the establishment of the WTO at the end of 1994. The
object ensures that technical negotiations and standards, as well as testing and
certification procedures, do not create unnecessary obstacles to
trade".
[78]
The Agreement on Customs Valuation, formally known as the
Agreement on Implementation of Article VII of GATT, prescribes methods of
customs valuation that Members are to follow. Chiefly, it adopts the "transaction
value" approach.
In December 2013, the biggest agreement within the WTO was signed and
known as the Bali Package.
[79]

The Association of Southeast Asian Nations
[5]
(ASEAN /si.n/ AH-see-ahn,
[6]
/zi.n/ AH-
zee-ahn)
[7][8]
is a political and economic organisation of ten countries located in Southeast Asia,
which was formed on 8 August 1967 by Indonesia, Malaysia,
thePhilippines, Singapore and Thailand.
[9]
Since then, membership has expanded to
include Brunei, Cambodia, Laos, Myanmar (Burma) and Vietnam. Its aims include
accelerating economic growth, social progress, sociocultural evolution among its members,
protection of regional peace and stability, and opportunities for member countries to discuss
differences peacefully.
[10]

ASEAN covers a land area of 4.46 million km, which is 3% of the total land area of Earth, and has a
population of approximately 600 million people, which is 8.8% of the world's population. The sea
area of ASEAN is about three times larger than its land counterpart. In 2012, its combined nominal
GDP had grown to more than US$2.3 trillion.
[11]
If ASEAN were a single entity, it would rank as the
sixth largest economy in the world, behind the US, China, Japan, India and Germany.
Contents
[hide]
1 History
o 1.1 Continued expansion
1.1.1 East Timor and Papua New Guinea
o 1.2 Environment
o 1.3 ASEAN Plus Three
o 1.4 Free Trade
2 The ASEAN way
o 2.1 Critical reception
3 Meetings
o 3.1 ASEAN Summits
o 3.2 East Asia Summit
o 3.3 Commemorative summit
o 3.4 Regional Forum
o 3.5 Other meetings
3.5.1 Another Three
3.5.2 AsiaEurope Meeting
3.5.3 ASEANRussia Summit
3.5.4 ASEAN Foreign Ministers Meeting
4 Economic community
o 4.1 From CEPT to AEC
o 4.2 Comprehensive Investment Area
o 4.3 Trade in Services
o 4.4 Single Aviation Market
o 4.5 Free-trade agreements with other countries
o 4.6 ASEAN six majors
4.6.1 Development gap
o 4.7 From CMI to AMRO
o 4.8 Foreign Direct Investment
o 4.9 Intra-ASEAN travel
o 4.10 Intra-ASEAN trade
o 4.11 ASEAN Capital Market Forum
5 Charter
6 Cultural activities
7 ASEAN Media Cooperation
o 7.1 New media and social media
o 7.2 SEA Write Award
o 7.3 ASAIHL
o 7.4 Heritage Parks
7.4.1 ASEAN Heritage Sites
o 7.5 Songs and music
8 Education and human development
o 8.1 School enrollment and participation
8.1.1 Primary education
8.1.2 Secondary education
o 8.2 Tertiary education
8.2.1 University Network
o 8.3 Public efforts
8.3.1 Financial resources
8.3.2 Scholarship
o 8.4 Education as a determinant of human development
8.4.1 Literacy rates
9 Sports
o 9.1 Southeast Asian Games
o 9.2 ASEAN Para Games
o 9.3 FESPIC Games / Asian Para Games
o 9.4 Football Championship
o 9.5 ASEAN 2030 FIFA World Cup bid
10 ASEAN Defence Industry Collaboration
11 Criticism
12 ASEAN competitions
13 See also
14 Literature
15 References
16 Further reading
17 External links
History[edit]
See also: Member states of the Association of Southeast Asian Nations


A clickable Euler diagram showing the relationships between various Asian regional organisationsv d e


The member states of ASEAN
Burma
(Myanmar)
Laos
Vietnam
Thailand
Cam-
bodia
Philippines
Brunei
Malaysia
Malaysia
Malaysia
Singapore
I n d o n e s i a
I n d o n e s i a
I n d o n e s i a
ASEAN was existing before by an organisation called the Association of Southeast Asia (ASA), a
group consisting of the Philippines, Malaysia and Thailand that was formed in 1961. The bloc itself,
however, was inaugurated on 8 August 1967, when foreign ministers of five countries Indonesia,
Malaysia, the Philippines, Singapore, and Thailand met at the Thai Department of Foreign Affairs
building in Bangkok and signed the ASEAN Declaration, more commonly known as the Bangkok
Declaration. The five foreign ministers Adam Malikof Indonesia, Narciso Ramos of the
Philippines, Abdul Razak of Malaysia, S. Rajaratnam of Singapore, andThanat Khoman of Thailand
are considered the organisation's Founding Fathers.
[12]

The motivations for the birth of ASEAN were so that its members governing elite could concentrate
on nation building, the common fear of communism, reduced faith in or mistrust of external powers in
the 1960s, and a desire for economic development.
The block grew when Brunei Darussalam became the sixth member on 8 January 1984, barely a
week after gaining independence on 1 January.
[13]

Continued expansion[edit]
See also: Enlargement of the Association of Southeast Asian Nations
On 28 July 1995, Vietnam became the seventh member.
[14]
Laos and Myanmar (Burma) joined two
years later on 23 July 1997.
[15]
Cambodia was to have joined together with Laos and Burma, but was
deferred due to the country's internal political struggle. The country later joined on 30 April 1999,
following the stabilisation of its government.
[15][16]

During the 1990s, the bloc experienced an increase in both membership and drive for further
integration. In 1990, Malaysia proposed the creation of an East Asia Economic Caucus
[17]
comprising
the then members of ASEAN as well as the People's Republic of China, Japan, and South Korea,
with the intention of counterbalancing the growing influence of the United States in the Asia-Pacific
Economic Cooperation (APEC) and in the Asian region as a whole.
[18][19]
This proposal failed,
however, because of heavy opposition from the United States and Japan.
[18][20]
Despite this failure,
member states continued to work for further integration and ASEAN Plus Three was created in 1997.
In 1992, the Common Effective Preferential Tariff (CEPT) scheme was signed as a schedule for
phasing tariffs and as a goal to increase the regions competitive advantage as a production base
geared for the world market. This law would act as the framework for the ASEAN Free Trade Area.
After the East Asian Financial Crisis of 1997, a revival of the Malaysian proposal was established
in Chiang Mai, known as the Chiang Mai Initiative, which calls for better integration between the
economies of ASEAN as well as the ASEAN Plus Three countries (China, Japan, and South
Korea).
[21]

Aside from improving each member state's economies, the bloc also focused on peace and stability
in the region. On 15 December 1995, the Southeast Asian Nuclear-Weapon-Free Zone Treaty was
signed with the intention of turning Southeast Asia into a Nuclear-Weapon-Free Zone. The treaty
took effect on 28 March 1997 after all but one of the member states have ratified it. It became fully
effective on 21 June 2001, after the Philippines ratified it, effectively banning all nuclear weapons in
the region.
[22]

East Timor and Papua New Guinea[edit]
East Timor submitted a letter of application to be the eleventh member of ASEAN at the summit in
Jakarta in March 2011. Indonesia has shown a warm welcome to East Timor.
[23][24][25]

Papua New Guinea was accorded Observer status in 1976 and Special Observer status in
1981.
[26]
Papua New Guinea is a Melanesian state. ASEAN embarked on a programme of economic
cooperation following the Bali Summit of 1976. This floundered in the mid-1980s and was only
revived around 1991 due to a Thai proposal for a regional free trade area.
Environment[edit]


Satellite image of the 2006 haze over Borneo
At the turn of the 21st century, issues shifted to include a regional approach to the environment. The
organisation started to discuss environmental agreements. These included the signing of the ASEAN
Agreement on Transboundary Haze Pollution in 2002 as an attempt to control haze pollution in
Southeast Asia.
[27]
Unfortunately, this was unsuccessful due to the outbreaks of the 2005 Malaysian
haze and the 2006 Southeast Asian haze. Other environmental treaties introduced by the
organisation include the Cebu Declaration on East Asian Energy Security,
[28]
the ASEAN Wildlife
Enforcement Network in 2005,
[29]
and the Asia-Pacific Partnership on Clean Development and
Climate, both of which are responses to the potential effects of climate change. Climate change is of
current interest.
Through the Bali Concord II in 2003, ASEAN has subscribed to the notion of democratic peace,
which means all member countries believe democratic processes will promote regional peace and
stability. Also, the non-democratic members all agreed that it was something all member states
should aspire to.
[30]

ASEAN Plus Three[edit]
Leaders of each country felt the need to further integrate the region. Beginning in 1997, the bloc
began creating organisations within its framework with the intention of achieving this goal. ASEAN
Plus Three was the first of these and was created to improve existing ties with the People's Republic
of China, Japan, and South Korea. This was followed by the even larger East Asia Summit, which
now includes these countries as well as India, Australia, New Zealand, United States and Russia.
This new grouping acted as a prerequisite for the planned East Asia Community, which was
supposedly patterned after the now-defunct European Community. The ASEAN Eminent Persons
Group was created to study the possible successes and failures of this policy as well as the
possibility of drafting an ASEAN Charter.
In 2006, ASEAN was given observer status at the United Nations General Assembly.
[31]
As a
response, the organisation awarded the status of "dialogue partner" to the United Nations.
[32]

Free Trade[edit]
2007 was the fortieth anniversary of ASEAN's beginning, and 30 years of diplomatic relations with
the US.
[33]
On 26 August 2007, ASEAN stated that it aims to complete all its free trade
agreements with China, Japan, South Korea, India, Australia and New Zealand by 2013, in line with
the start of the ASEAN Economic Community by 2015.
[34][35]
In November 2007 the ASEAN
members signed the ASEAN Charter, a constitution governing relations among the ASEAN
members and establishing ASEAN itself as an international legal entity.
[citation needed]
During the same
year, the Cebu Declaration on East Asian Energy Security was signed in Cebu on 15 January 2007,
by ASEAN and the other members of theEAS (Australia, People's Republic of China, India, Japan,
New Zealand, South Korea), which is in favour ofenergy security by finding energy
alternatives to conventional fuels.
[citation needed]

On 27 February 2009 a Free Trade Agreement with the ASEAN regional block of 10 countries
and Australia and its close partner New Zealand was signed, it is believed that this FTA would boost
combine GDP across the 12 countries by more than US$48 billion over the period 2000
2020.
[36][37]
ASEAN members together with the groups six major trading partners Australia, China,
India, Japan, New Zealand and South Korea have began the first round of negotiations on 2628
February 2013 in Bali, Indonesia, on establishment of the Regional Comprehensive Economic
Partnership.
[38]

The ASEAN way[edit]


ASEAN members' flags in Jakarta
Since the post-independence phases of Southeast Asian states, efforts were made to implement
regional foreign policies, but with a unifying focus to refrain from interference in domestic affairs of
member states.
There was a move to unify the region under what was called the ASEAN Way based on the ideals
of non-interference, informality, minimal institutionalisation, consultation and consensus, non-use of
force and non-confrontation. ASEAN members (especially Singapore) approved of the term ASEAN
Way to describe a regional method of multilateralism.
Thus the signing of the Treaty of Amity and Cooperation in Southeast Asia adopted fundamental
principles:
[39]

Mutual respect for the independence, sovereignty, equality, territorial integrity, and national
identity of all nations
The right of every State to lead its national existence free from external interference, subversion
or coercion
Non-interference in internal affairs
Settlement of differences or disputes in a peaceful manner
Renunciation of the threat or use of force
Effective regional cooperation
The ASEAN way is said to contribute durability and longevity within the organisation, by promoting
regional identity and enhancing a spirit of mutual confidence and cooperation.
[40]
ASEAN
agreements are negotiated in a close, interpersonal process. The process of consultations and
consensus is designed to engender a democratic approach to decision making. These leaders are
wary of any effort to legitimise efforts to undermine their nation or contain regional co-operation.
Critical reception[edit]


Royal Thai Embassy in Helsinki flying its own national flag as well as Asean flag
The ASEAN way can be seen as divergent from the contextual contemporary political reality at the
formative stages of the association. A critical distinction is made by Amitav Acharya, that the
ASEAN Way indicates a process of regional interactions and cooperation based on discreteness,
informality, consensus building and non-confrontational bargaining styles that contrasts with the
adversarial posturing, majority vote and other legalistic decision-making procedures in Western
multilateral organisations".
[41]

However, critics argue
[who?]
that the ASEAN Way serves as the major stumbling-block to it becoming
a true diplomacy mechanism. Due to the consensus-based approach every member has a veto, so
contentious issues must remain unresolved until agreements can be reached. Moreover, it is
claimed that member nations are directly and indirectly advocating that ASEAN be more flexible and
allow discourse on internal affairs of member countries.
Additionally, the preference for informal discussions to adversarial negotiations limits the leverage of
diplomatic solutions
[which?]
within ASEAN.
Michael Yahuda,
[42]
explains, in his book International Politics of the Asia Pacific (2003) second and
revised edition, the limitations of the ASEAN way. In summary of his argument, unlike the European
Union, the ASEAN Way has made ASEAN members never aspired to an economic and political
union. It was designed to sustain the independence and sovereignty of member states and to
encourage regional and national stability. ASEAN differed in assessment of external threat and they
operated within conditions in which legality and the rule of law were not generally consolidated within
member states. ASEAN wasnt a rule making body subjecting its members to the discipline of
adhering its laws and regulations. It was operated through consensus and informality. Also, the
member states avoided to confront certain issues if they were to result in conflicts.
[43]

Meetings[edit]
ASEAN Summits[edit]


A billboard in Jakarta welcoming ASEAN Summit 2011 delegates
The organisation holds meetings, known as the ASEAN Summit, where heads of government of
each member meet to discuss and resolve regional issues, as well as to conduct other meetings with
other countries outside of the bloc with the intention of promoting external relations.
The ASEAN Leaders' Formal Summit was first held in Bali, Indonesia in 1976. Its third meeting was
held in Manila in 1987 and during this meeting, it was decided that the leaders would meet every five
years.
[44]
Consequently, the fourth meeting was held in Singapore in 1992 where the leaders again
agreed to meet more frequently, deciding to hold the summit every three years.
[44]
In 2001, it was
decided to meet annually to address urgent issues affecting the region. Member nations were
assigned to be the summit host in alphabetical order except in the case of Burma which dropped its
2006 hosting rights in 2004 due to pressure from the United Statesand the European Union.
[45]

By December 2008, the ASEAN Charter came into force and with it, the ASEAN Summit will be held
twice in a year.
The formal summit meets for three days. The usual itinerary is as follows:
Leaders of member states would hold an internal organisation meeting.
Leaders of member states would hold a conference together with foreign ministers of the
ASEAN Regional Forum.
A meeting, known as ASEAN Plus Three, is set for leaders of three Dialogue Partners (People's
Republic of China, Japan, South Korea)
A separate meeting, known as ASEAN-CER, is set for another set of leaders of two Dialogue
Partners (Australia, New Zealand).
[citation needed]

ASEAN Formal Summits
No Date Country Host Host leader
1st 2324 February 1976 Indonesia Bali Soeharto
2nd 45 August 1977 Malaysia Kuala Lumpur Hussein Onn
3rd 1415 December 1987 Philippines Manila Corazon Aquino
4th 2729 January 1992 Singapore Singapore Goh Chok Tong
5th 1415 December 1995 Thailand Bangkok Banharn Silpa-archa
6th 1516 December 1998 Vietnam Hanoi Phan Vn Khi
7th 56 November 2001 Brunei
Bandar Seri
Begawan
Hassanal Bolkiah
8th 45 November 2002 Cambodia Phnom Penh Hun Sen
9th 78 October 2003 Indonesia Bali Megawati Soekarnoputri
10th 2930 November 2004 Laos Vientiane Bounnhang Vorachith
11th 1214 December 2005 Malaysia Kuala Lumpur Abdullah Ahmad Badawi
12th 1114 January 2007
1
Philippines
2
Cebu Gloria Macapagal-Arroyo
13th 1822 November 2007 Singapore Singapore Lee Hsien Loong
14th
3

27 February 1 March
2009
1011 April 2009
Thailand
Cha Am, Hua Hin
Pattaya
Abhisit Vejjajiva
15th 23 October 2009 Thailand Cha Am, Hua Hin
16th
3
89 April 2010 Vietnam Hanoi
Nguyn Tn Dng
17th 2831 October 2010 Vietnam Hanoi
18th
4
78 May 2011 Indonesia Jakarta
Susilo Bambang
Yudhoyono
19th
4
1419 November 2011 Indonesia Bali
20th 34 April 2012 Cambodia Phnom Penh
Hun Sen
21st 1720 November 2012 Cambodia Phnom Penh
22nd 2425 April 2013 Brunei
Bandar Seri
Begawan
Hassanal Bolkiah
23rd 910 October 2013 Brunei
Bandar Seri
Begawan
1
Postponed from 1014 December 2006 due to Typhoon Utor.
2
hosted the summit because Burma backed out due to enormous pressure from US and EU
3
This summit consisted of two parts.
The first part was moved from 1217 December 2008 due to the 2008 Thai political crisis.
The second part was aborted on 11 April due to protesters entering the summit venue.
4
Indonesia hosted twice in a row by swapping years with Brunei, as it will play host
to APEC (and the possibility of hosting the G20 summit which ultimately fell to Russia) in 2013.
During the fifth Summit in Bangkok, the leaders decided to meet "informally" between each formal
summit:
[44]

ASEAN Informal Summits
No Date Country Host Host leader
1st 30 November 1996 Indonesia Jakarta Soeharto
2nd 1416 December 1997 Malaysia Kuala Lumpur Mahathir Mohamad
3rd 2728 November 1999 Philippines Manila Joseph Estrada
4th 2225 November 2000 Singapore Singapore Goh Chok Tong
East Asia Summit[edit]
Main article: East Asia Summit


Participants of the East Asia Summit
ASEAN
ASEAN Plus Three
ASEAN Plus Six
Observer
The East Asia Summit (EAS) is a pan-Asian forum held annually by the leaders of 16 countries in
East Asia and the region, with ASEAN in a leadership position. The summit has discussed issues
including trade, energy and security and the summit has a role inregional community building.
The members of the summit are all 10 members of ASEAN plus China, Japan, South Korea, India,
Australia and New Zealand. These nations represent nearly half of the world's population. In October
2010, Russia and the United States were formally invited to participate as full members, with
presidents of both countries to attend the 2011 summit.
[46]

The first summit was held in Kuala Lumpur on 14 December 2005 and subsequent meetings have
been held after the annual ASEAN Leaders Meeting.
Meeting Country Location Date Note
First
EAS
Malaysia
Kuala
Lumpur
14
December
2005
Russia attended as a guest.
Second
EAS
Philippines Cebu City
15 January
2007
Rescheduled from 13 December 2006.

Cebu Declaration on East Asian Energy
Security
Third
EAS
Singapore Singapore
21
November
2007
Singapore Declaration on Climate Change,
Energy and the Environment
[47]


Agreed to establish Economic Research
Institute for ASEAN and East Asia
Fourth
EAS
Thailand
Cha-
am and Hua
Hin
25 October
2009
The date and location of the venue was
rescheduled several times, and then a
Summit scheduled for 12 April 2009
at Pattaya, Thailand was cancelled when
protesters stormed the venue. The Summit
has been rescheduled for October 2009 and
transferred again from Phuket
[48]
to Cha-am
and Hua Hin.
[49]

Fifth
EAS
Vietnam Hanoi
30 October
2010
[50]

Officially invited the US and Russia to
participate in future EAS as full-fledged
members
[46]

Sixth
EAS
Indonesia Bali
19
November
2011
The United States and Russia to join the
Summit.
Seventh
EAS
Cambodia Phnom Penh
20
November
2012

Eighth
EAS
Brunei
Bandar Seri
Begawan
10 October
2013

Ninth
EAS Burma(Myanmar)
Naypyidaw TBA

Commemorative summit[edit]
Main article: ASEAN Free Trade Area
A commemorative summit is a summit hosted by a non-ASEAN country to mark a milestone
anniversary of the establishment of relations between ASEAN and the host country. The host
country invites the heads of government of ASEAN member countries to discuss future cooperation
and partnership.
Meeting Host Location Date Note
ASEANJapan
Commemorative
Summit
Japan Tokyo
11, 12
December
2003
To celebrate the 30th anniversary of the
establishment of relations between
ASEAN and Japan. The summit was also
notable as the first ASEAN summit held
between ASEAN and a non-ASEAN
country outside the region.
ASEANChina
Commemorative
Summit
China Nanning
30, 31
October
2006
To celebrate the 15th anniversary of the
establishment of relations between
ASEAN and China
ASEANRepublic of
Korea
Commemorative
Summit
Republic
of Korea
Jeju-do
1, 2 June
2009
To celebrate the 20th anniversary of the
establishment of relations between
ASEAN and Republic of Korea
ASEANIndia
Commemorative
Summit
India New Delhi
20, 21
December
2012
To celebrate the 20th anniversary of the
establishment of relations between
ASEAN and India.
Regional Forum[edit]


ASEAN full members
ASEAN observers
ASEAN candidate members
ASEAN Plus Three
East Asia Summit
ASEAN Regional Forum
The ASEAN Regional Forum (ARF) is a formal, official, multilateral dialogue in Asia Pacific region.
As of July 2007, it consists of 27 participants. ARF objectives are to foster dialogue and consultation,
and promote confidence-building and preventive diplomacy in the region.
[51]
The ARF met for the first
time in 1994. The current participants in the ARF are as follows: all the ASEAN members, Australia,
Bangladesh, Canada, the People's Republic of China, the European Union, India, Japan, North
Korea, South Korea, Mongolia, New Zealand, Pakistan, Papua New Guinea, Russia, East Timor,
United States and Sri Lanka.
[52]
The Republic of China(also known as Taiwan) has been excluded
since the establishment of the ARF, and issues regarding the Taiwan Strait are neither discussed at
the ARF meetings nor stated in the ARF Chairman's Statements.
Other meetings[edit]
Aside from the ones above, other regular
[53]
meetings are also held.
[54]
These include the annual
ASEAN Ministerial Meeting
[55]
as well as other smaller committees.
[56]
Meetings mostly focus on
specific topics, such as defence
[53]
or the environment,
[53][57]
and are attended by Ministers, instead
of heads of government.
Another Three[edit]
The ASEAN Plus Three is a meeting between ASEAN, China, Japan, and South Korea, and is
primarily held during each ASEAN Summit. Until now China, Japan and South Korea have not yet
formed Free Trade Area (FTA), the meeting about FTA among them will be held at end of 2012.
[58]

AsiaEurope Meeting[edit]
The AsiaEurope Meeting (ASEM) is an informal dialogue process initiated in 1996 with the intention
of strengthening cooperation between the countries of Europe and Asia, especially members of
the European Union and ASEAN in particular.
[59]
ASEAN, represented by its Secretariat, is one of
the 45 ASEM partners. It also appoints a representative to sit on the governing board of Asia-Europe
Foundation (ASEF), a socio-cultural organisation associated with the Meeting.
ASEANRussia Summit[edit]
The ASEANRussia Summit is an annual meeting between leaders of member states and
the President of Russia.
ASEAN Foreign Ministers Meeting[edit]
The 44th annual meeting was held in Bali on 16 to 23 July 2011. Indonesia proposed a unified
ASEAN travel visa to ease travel within the region for citizens of ASEAN member states.
[60]
The 45th
annual meeting was held in Phnom Penh, Cambodia. For the first time in the history of ASEAN there
was no diplomatic statement issued by the bloc at the end of the meeting. This was due to tensions
over China's claim of ownership over near the entirety of the South China Sea and the counterclaim
to such ownership by neighbouring states.
Economic community[edit]
ASEAN has emphasised regional cooperation in the three pillars, which are security, sociocultural
integration, and economic integration.
[61]
The regional grouping has made the most progress in
economic integration by creating an ASEAN Economic Community (AEC) by 2015.
[62]
The average
economic growths of ASEAN's member nations during 19892009 was Singapore with 6.73 percent,
Malaysia with 6.15 percent, Indonesia with 5.16 percent, Thailand with 5.02 percent, and the
Philippines with 3.79 percent. This economic growth was greater than the average Asia-Pacific
Economic Cooperation (APEC) economic growth, which was 2.83 percent.
[63]

From CEPT to AEC[edit]
A Common Effective Preferential Tariff (CEPT) scheme to promote the free flow of goods within
ASEAN lead to the ASEAN Free Trade Area (AFTA).
[62]
The AFTA is an agreement by the member
nations of ASEAN concerning local manufacturing in all ASEAN countries. The AFTA agreement
was signed on 28 January 1992 in Singapore.
[64]
When the AFTA agreement was originally signed,
ASEAN had six members, namely, Brunei, Indonesia, Malaysia, the Philippines, Singapore and
Thailand. Vietnam joined in 1995, Laos and Burma in 1997, and Cambodia in 1999. The latecomers
have not fully met the AFTA's obligations, but they are officially considered part of the AFTA as they
were required to sign the agreement upon entry into ASEAN, and were given longer time frames in
which to meet AFTA's tariff reduction obligations.
[65]

The next step is ASEAN Economic Community (AEC) with main objectives are to create a:
single market and production base
highly competitive economic region
region of equitable economic development
region fully integrated into the global economy
Since 2007, the ASEAN countries gradually lower their import duties among them and targeted will
be zero for most of the import duties at 2015.
[66]

Since 2011, AEC has agreed to strengthen the position and increase the competitive edges of small
and medium enterprises (SME) in the ASEAN region.
[67]

Comprehensive Investment Area[edit]
The ASEAN Comprehensive Investment Area (ACIA) will encourage the free flow of investment
within ASEAN. The main principles of the ACIA are as follows
[68]

All industries are to be opened up for investment, with exclusions to be phased out according to
schedules
National treatment is granted immediately to ASEAN investors with few exclusions
Elimination of investment impediments
Streamlining of investment process and procedures
Enhancing transparency
Undertaking investment facilitation measures
Full realisation of the ACIA with the removal of temporary exclusion lists in manufacturing
agriculture, fisheries, forestry and mining is scheduled by 2010 for most ASEAN members and by
2015 for the CLMV (Cambodia, Lao PDR, Burma, and Vietnam) countries.
[68]

Trade in Services[edit]
An ASEAN Framework Agreement on Trade in Services was adopted at the ASEAN Summit in
Bangkok in December 1995.
[69]
Under AFAS, ASEAN Member States enter into successive rounds
of negotiations to liberalise trade in services with the aim of submitting increasingly higher levels of
commitments. The negotiations result in commitments that are set forth in schedules of specific
commitments annexed to the Framework Agreement. These schedules are often referred to as
packages of services commitments. At present, ASEAN has concluded seven packages of
commitments under AFAS.
[70]

Single Aviation Market[edit]
The ASEAN Single Aviation Market (ASEAN-SAM), is the region's major aviation policy geared
towards the development of a unified and single aviation market in Southeast Asiaby 2015. The
aviation policy was proposed by the ASEAN Air Transport Working Group, supported by the ASEAN
Senior Transport Officials Meeting, and endorsed by the ASEAN Transport Ministers.
[71]
The
ASEAN-SAM is expected to fully liberalise air travel between member states in the ASEAN region,
allowing ASEAN countries and airlines operating in the region to directly benefit from the growth in
air travel around the world, and also freeing up tourism, trade, investment and services flows
between member states.
[71][72]
Since 1 December 2008, restrictions on the third and fourth freedoms
of the air between capital cities of member states for air passengers services have been
removed,
[73]
while from 1 January 2009, full liberalisation of air freight services in the region took
effect.
[71][72]
On 1 January 2011, full liberalisation on fifth freedom traffic rights between all capital
cities took effect.
[74]

The ASEAN Single Aviation Market policy will supersede existing unilateral, bilateral and multilateral
air services agreements among member states which are inconsistent with its provisions.
Free-trade agreements with other countries[edit]
ASEAN has concluded free trade agreements with China (expecting bilateral trade of $500 billion by
2015),
[75]
Korea, Japan, Australia, New Zealand, and India.
[76]
ASEAN-India bilateral trade crossed
the $70 billion target in 2012 (target was to reach the level only by 2015).
[citation needed]
The agreement
with People's Republic of China created theASEANChina Free Trade Area (ACFTA), which went
into full effect on 1 January 2010. In addition, ASEAN is currently negotiating a free trade agreement
with the European Union.
[77]
Republic of China (Taiwan) has also expressed interest in an
agreement with ASEAN but needs to overcome diplomatic objections from China.
[78]

ASEAN six majors[edit]
ASEAN six majors refer to the six largest economies in the area with economies many times larger
than the remaining four ASEAN countries.
Country GDP (nominal) GDP (PPP) GDP (Per Capita)
Indonesia 867,468,000,000 1,284,789,000,000 5,214
Thailand 400,916,000,000 674,344,000,000 9,875
Malaysia 312,413,000,000 525,039,000,000 17,748
Singapore 297,941,000,000 348,700,000,000 64,584
Philippines 278,260,000,000 471,254,000,000 4,682
Vietnam 170,020,000,000 358,889,000,000 4,012
Development gap[edit]
ASEAN members by
Human Development Index
[79]

Country HDI (2013)
Singapore
0.901 very high
Brunei 0.852 very high
Malaysia 0.773 high
Thailand
0.722 high
Indonesia
0.684 medium
ASEAN
0.669 medium
Philippines 0.660 medium
Vietnam
0.638 medium
Cambodia
0.584 medium
Laos
0.569 medium
Myanmar
0.524 low
When Vietnam, Laos, Myanmar, and Cambodia joined ASEAN in the late 1990s, concerns were
raised about a certain developmental divide regarding a gap in average per capita GDP between
older and the newer members. In response, the Initiative for ASEAN Integration (IAI) was formed by
ASEAN as a regional integration policy with the principal goal of bridging this developmental divide,
which, in addition to disparities inper capita GDP, is manifested by disparities in dimensions of
human development such as life expectancy and literacy rates. Other than the IAI, other
programmes for the development of the Mekong Basin - where all four newer ASEAN members are
located - that tend to focus oninfrastructure development have been effectively enacted. In general,
ASEAN does not have the financial resources to extend substantial grants or loans to the new
members. Therefore, it usually leaves the financing of these infrastructure projects to international
financial institutions and to developed countries. Nevertheless, it has mobilised funding from these
institutions and countries and from the ASEAN-6 (Indonesia, Malaysia, Philippines, Brunei
Darussalam, Singapore, and Thailand) themselves for areas where the development gap needs to
be filled through the IAI programme. Other programmes intended for the development of the
ASEAN-4 take advantage of the geographical proximity of the CLMV countries and tend to focus on
infrastructure development in areas like transport, tourism, and power transmission.
[80]

From CMI to AMRO[edit]
Due to Asian financial crisis of 1997 to 1998 and long and difficult negotiations with International
Monetary Fund, ASEAN+3 agreed to set up a mainly bilateral currency swap scheme known as the
2000 Chiang Mai Initiative (CMI) to anticipate another financial crisis or currency turmoil in the future.
In 2006 they agreed to make CMI with multilateralisation and called as CMIM. On 3 May 2009, they
agreed to make a currency pool consist of contribution $38.4 billion each by China and Japan,
$19.2 billion by South Korea and totally $24 billion by all of ASEAN members, so the total currency
pool was $120 billion.
[81]
A key component has also newly been added, with the establishment of a
surveillance unit.
[82]

The ASEAN+3 Macroeconomic and Research Office (AMRO) started its operation in Singapore in
May 2011.
[83]
It performs a key regional surveillance function as part of the $120 billion of Chiang
Mai Initiative Multilateralisation (CMIM) currency swap facility that was established by Finance
Minister and Central Bank Governors of ASEAN countries plus China, Japan and South Korea in
December 2009.
[84]

According to some analysts, the amount of $120 billion is relatively small (cover only about 20
percent of needs), so coordination or help from International Monetary Fund is still needed.
[85]
On 3
May 2012 ASEAN+3 finance ministers agreed to double emergency reserve fund to $240 billion.
[86]

Foreign Direct Investment[edit]
In 2009, realised Foreign Direct Investment (FDI) was $37.9 billion and increase by two-fold in 2010
to $75.8 billion. 22 percent of FDI came from the European Union, followed by ASEAN countries
themselves by 16 percent and then followed by Japan and US.
Intra-ASEAN travel[edit]
With the institutionalisation of visa-free travel between ASEAN member states, intra-ASEAN travel
has boomed, a sign that endeavours to form an ASEAN Community shall bear fruit in years to come.
In 2010, 47 percent or 34 million out of 73 million tourists in ASEAN member-states were from other
ASEAN countries.
[87]

Intra-ASEAN trade[edit]
Until end of 2010, Intra-Asean trade were still low which mainly of them were mostly exporting to
countries outside the region, except Laos and Myanmar were ASEAN-oriented in foreign trade with
80 percent and 50 percent respectively of their exports went to other ASEAN countries.
[88]

ASEAN Capital Market Forum[edit]
ASEAN Capital Market Forum (ACMF) consist of:
ASEAN Linkage, until end of 2013 only has 3 stock exchange members: Bursa Malaysia,
Singapore Exchange and Stock Exchange of Thailand, but cover 70 percent of transaction
values of 7 ASEAN Stock Exchanges,
[89]
with objective to integrate ASEAN Stock Exchanges to
compete with International Stock Exchanges
Mutual Recognigtion of Disclosure Standards, with objective to harmonise and equal of ASEAN
Standards
Mutual Recognition of Collective of Investment Scheme (CIS), with objective to harmonise all
regulations in ASEAN which related with CIS, some countries are still categorised as Financial
Action Task Force (FATF) Non-Cooperative Country which are not maximum to do with money
laundering and terrorism
Charter[edit]
Main article: ASEAN Charter


The Secretariat of ASEAN at Jalan Sisingamangaraja No.70A, South Jakarta, Indonesia
On 15 December 2008, the members of ASEAN met in the Indonesian capital of Jakarta to launch a
charter, signed in November 2007, with the aim of moving closer to "an EU-style community".
[90]
The
charter turns ASEAN into a legal entity and aims to create a single free-trade area for the region
encompassing 500 million people. President of Indonesia Susilo Bambang Yudhoyono stated that
"This is a momentous development when ASEAN is consolidating, integrating and transforming itself
into a community. It is achieved while ASEAN seeks a more vigorous role in Asian and global affairs
at a time when the international system is experiencing a seismic shift", he added, referring to
climate change and economic upheaval, and concluded "Southeast Asia is no longer the bitterly
divided, war-torn region it was in the 1960s and 1970s". The fundamental principles include:
a) respect for the independence, sovereignty, equality, territorial integrity and national identity of all
ASEAN Member States;
b) shared commitment and collective responsibility in enhancing regional peace, security and
prosperity;
c) renunciation of aggression and of the threat or use of force or other actions in any manner
inconsistent with international law;
d) reliance on peaceful settlement of disputes;
e) non-interference in the internal affairs of ASEAN Member States;
f) respect for the right of every Member State to lead its national existence free from external
interference, subversion and coercion;
g) enhanced consultations on matters seriously affecting the common interest of ASEAN;
h) adherence to the rule of law, good governance, the principles of democracy and constitutional
government;
i) respect for fundamental freedoms, the promotion and protection of human rights, and the
promotion of social justice;
j) upholding the United Nations Charter and international law, including international humanitarian
law, subscribed to by ASEAN Member States;
k) abstention from participation in any policy or activity, including the use of its territory, pursued by
an ASEAN Member State or non-ASEAN State or any non-State actor, which threatens the
sovereignty, territorial integrity or political and economic stability of ASEAN Member States;
l) respect for the different cultures, languages and religions of the peoples of ASEAN, while
emphasising their common values in the spirit of unity in diversity;
m) the centrality of ASEAN in external political, economic, social and cultural relations while
remaining actively engaged, outward-looking, inclusive and non-discriminatory; and
n) adherence to multilateral trade rules and ASEAN's rules-based regimes for effective
implementation of economic commitments and progressive reduction towards elimination of all
barriers to regional economic integration, in a market-driven economy.
[91]

However, the ongoing global financial crisis was stated as being a threat to the goals envisioned by
the charter,
[92]
and also set forth the idea of a proposed human rights body to be discussed at a
future summit in February 2009. This proposition caused controversy, as the body would not have
the power to impose sanctions or punish countries who violate citizens' rights and would therefore be
limited in effectiveness.
[93]
The body was established later in 2009 as the ASEAN Intergovernmental
Commission on Human Rights (AICHR). In November 2012, the Commission adopted the ASEAN
Human Rights Declaration.
Cultural activities[edit]
The organisation hosts cultural activities in an attempt to further integrate the region. These include
sports and educational activities as well as writing awards. Examples of these include the ASEAN
University Network, the ASEAN Centre for Biodiversity, the ASEAN Outstanding Scientist and
Technologist Award, and the Singapore-sponsored ASEAN Scholarship.
ASEAN Media Cooperation[edit]
The ASEAN Media Cooperation (AMC) set digital television standards, policies and create in
preparation for broadcasters to transition from analogue to digital broadcasting, better promote
media collaboration and information exchange to enhance voice, understanding, and perspective
between ASEAN people on the international stage.
The ASEAN member countries aim media sector towards digitalisation and further regional media
coaction. AMC establishes partnerships between ASEAN news media, and cooperate on information
sharing, photo swapping, technical cooperation, exchange programmes, and facilitating joint news
coverage and exchange of news footage.
The concept was stressed during the 11th AMRI Conference
[94]
adopting the theme: Media
Connecting Peoples and Bridging Cultures Towards One ASEAN Nation. ASEAN Ministers believed
that the new and traditional media are important mediums to connect ASEAN people and bridging
the cultural gap.
Accessing information towards the goal of creating a One ASEAN nation requires participation
among the nation members and its citizens. During the 18th ASEAN Summit
[95]
in May 2011, the
Chair stated the important role of a participatory approach among people and stakeholders of
ASEAN towards a people-oriented , people centred and rule-based ASEAN.
Several key initiatives that were initiated under the AMC:
[96]

ASEAN Media Portal, The new ASEAN Media Portal
[97]
was launched 16 November 2007 by the
ASEAN Secretary-General, Mr Ong Keng Yong, and witnessed by Singapores Minister for
Information, Communications and the Arts, Dr Lee Boon Yang. The said portal aims to provide a
one-stop site that contains documentaries, games, music videos, and multimedia clips on the
culture, arts and heritage of the ASEAN countries to showcase the rich ASEAN culture and the
capabilities of its media industry.
ASEAN NewsMaker Project, an initiative launched in 2009 that trains students and teachers to
produce informational video clips about the lifestyle in their country. The project was initiated by
Singapore to work closely with 500 primary and secondary students, aging from 9 to 16 years
old, along with their mentors from the 10 ASEAN countries to produce informative videos
promoting their respective countrys culture. Students underwent training for the NewsMaker
software use, video production and responsible internet use and hope to develop the language
skills and story narration among the said students. Engaging the youth using new media is an
approach to create a One Asean Community as stressed by Dr Soeung Rathchavy, Deputy
Secretary-General of ASEAN for ASEAN Socio-Cultural Community: Raising ASEAN
awareness amongst the youth is part and parcel of our efforts to build the ASEAN Community by
2015. Using ICT and the media, our youths in the region will get to know ASEAN better,
deepening their understanding and appreciation of the cultures, social traditions and values in
ASEAN.
[98]

ASEAN Digital Broadcasting Meeting, an annual forum for ASEAN members to set digital
television standards and policies, and to discuss progress in the implementation of the blueprint
to switchover from analogue to digital TV broadcasting by 2020. During the 11th ASEAN Digital
Broadcasting Meeting,
[99]
members updated the status on DTV implementation and agreed to
inform ASEAN members on the Guidelines for ASEAN Digital Switchover.
[100]
An issue was
raised on the availability and affordability of Set Top Boxes (STB), thus ASEAN members were
asked to make policies to determine funding for the STB, methods of allocation, subsidies and
rebates and other methods for the allocation of STB. It was also agreed in the meeting to form a
task force to develop STB specifications for DVB-T2 to ensure efficiency.
ASEANs Next Top Chef and The Legend of the Golden Talisman, two interactive games
developed to raise awareness about ASEAN, and its people, places and cultures
New media and social media[edit]
During the 11th ASEAN Ministers Responsible for Information meeting held in Kuala Lumpur,
Malaysia, ASEAN leaders recognised the emergence of new and social media as an important tool
for communications and interaction in ASEAN today. The Ministers agreed that efforts should be
made to leverage on social media to promote ASEAN awareness towards achieving an ASEAN
community by 2015. Initially, ASEAN will consolidate the ASEAN Culture and Information Portal and
the ASEAN Media Portal to incorporate new media elements.
SEA Write Award[edit]


Logo of the SEA Write Award
The S.E.A. Write Award is a literary award given to Southeast Asian poets and writers annually since
1979. The award is either given for a specific work or as a recognition of an author's lifetime
achievement. Works that are honoured vary and have included poetry, short stories, novels,
plays, folklore as well as scholarly and religious works. Ceremonies are held in Bangkok and are
presided by a member of the Thai royal family.
ASAIHL[edit]
ASAIHL or the Association of Southeast Asian Institutions of Higher Learning is a non-governmental
organisation founded in 1956 that strives to strengthen higher learning institutions, espescially
in teaching, research, and public service, with the intention of cultivating a sense of regional identity
and interdependence.
Heritage Parks[edit]
ASEAN Heritage Parks
[101]
is a list of nature parks launched 1984 and relaunched in 2004. It aims to
protect the region's natural treasures. There are now 35 such protected areas, including
the Tubbataha Reef Marine Park and the Kinabalu National Park.
[102]

ASEAN Heritage Sites[edit]
Site Country Site Country
Alaungdaw Kathapa National Park Burma Ao Phang-nga Marine National Park Thailand
Apo Natural Park Philippines Imperial City, Hu Vietnam
Bukit Barisan Selatan National Park Indonesia Gunung Leuser National Park Indonesia
Gunung Mulu National Park Malaysia Ha Long Bay Vietnam
Hoi An Ancient Town Vietnam Mounts Iglit-Baco National Park Philippines
Indawgyi Lake Wildlife Sanctuary Burma Inl Lake Wildlife Sanctuary Burma
Kaeng Krachan National Park Thailand Kerinci Seblat National Park Indonesia
Khakaborazi National Park Burma Khao Yai National Park Thailand
Kinabalu National Park Malaysia Komodo National Park Indonesia
Imperial Citadel of Thang Long Vietnam Lampi Kyun Wildlife Reserve Burma
Lorentz National Park Indonesia Meinmhala Kyun Wildlife Sanctuary Burma
Mu Ko Surin-Mu Ko Similan Marine National Park Thailand Nam Ha Protected Area Laos
Phong Nha-Ke Bang National Park Vietnam Preah Monivong (Bokor) National Park Cambodia
Puerto Princesa Subterranean River National Park Philippines Sungei Buloh Wetland Reserve Singapore
Taman Negara National Park Malaysia Tarutao Marine National Park Thailand
Tasek Merimbun Wildlife Sanctuary Brunei Thung Yai-Huay Kha Khaeng National Park Thailand
Ujung Kulon National Park Indonesia

Virachey National Park Cambodia Keraton Yogyakarta Indonesia
M Sn Vietnam Citadel of Ho Dynasty Vietnam
Mount Malindang Philippines Vigan City Philippines
Taal Volcano Philippines Mayon Volcano Philippines
Songs and music[edit]
The ASEAN Way, the official regional anthem of ASEAN. Music by Kittikhun Sodprasert
and Sampow Triudom; lyrics by Payom Valaiphatchra.
ASEAN Song of Unity or ASEAN Hymn. Music by Ryan Cayabyab.
Let Us Move Ahead, an ASEAN song. Composed by Candra Darusman.
ASEAN Rise, ASEAN's 40th Anniversary song. Music by Dick Lee; lyrics by Stefanie
Sun.
Education and human development[edit]
As the "collective entity to enhance regional cooperation in education", the ASEAN Education
Ministers have determined four priorities that ASEAN efforts toward improved education would
address: (1) Promoting ASEAN awareness among ASEAN citizens, particularly youth; (2)
Strengthening ASEAN identity through education; (3) Building ASEANhuman resources in the field
of education; and (4) Strengthening ASEAN university networking.
[103]
Nations such as Malaysia,
Singapore, Indonesia, Thailand, and the Philippines have experienced rapid development over the
past 20 years, and this has been visibly evident in their educational systems. Each country has
developed unique - yet interconnected through ASEAN initiatives - human and physical
infrastructure to provide youth education, a primary determinant in future capabilities and
sustained economic growth for the entire region.
[104]
Various programmes and projects have been
and are currently in the process of being developed to fulfil these directives and to reach these future
goals.
[103]

At the 11th ASEAN Summit in December 2005, ASEAN Leaders set new directions for regional
education collaboration when they welcomed the decision of the ASEAN Education Ministers to
convene the ASEAN Education Ministers Meetings (ASED) on a regular basis. The Leaders also
called for ASEAN Education Ministers to focus on enhancing regional cooperation in
education.
[105]
The ASEAN Education Ministers Meeting, which meets annually, oversees ASEAN
cooperation efforts on education at the ministerial level. With regard to implementation, such
programmes and activities resulting from such efforts are for the most part carried out by the ASEAN
Senior Officials on Education (SOM-ED), which reports to the ASEAN Education Ministers Meeting.
SOM-ED also manages cooperation on higher education through the ASEAN University
Network (AUN). The AUN was established to assist ASEAN in (1) promoting cooperation among
ASEAN scholars, academics, and scientists in the region; (2) developing academic and professional
human resources in the region; (3) promoting information dissemination among the ASEAN
academic community; and (4) enhancing the awareness of regional identity and the sense of
"ASEAN-ness" among members.
[103]

Education indicators outlined hereafter belong to primary, secondary, and tertiary levels. Primary
education is generally defined as the level of education where children are provided with basic
reading, writing, and mathematical skills together with elementary understanding of such subjects as
history, geography, natural science, social science, art, and music. Secondary education continues
to build up on the knowledge provided by primary education and aims at laying the foundations for
lifelong learning and human development with more advanced material and learning
mechanisms. Tertiary education, whether or not leading to an advanced research qualification,
requires minimally the successful completion of secondary education for admission and entails the
level of education within some college or university.
[106]

School enrollment and participation[edit]
Participation in formal education is usually measured by the metric Gross Enrollment Ratio (GER)
and Net Enrollment Ratio (NER). The NER demonstrates the extent of participation in a given age-
specific level of education. The purpose of the GER is to show the total enrollment in a level of
education regardless of age. The GER is expressed as a percentage of the official school-age
population corresponding to the same level of education.
[107]

Primary education[edit]
We can make a few observations based on reported data on primary education enrollment. Brunei
Darussalam had almost reached 100% net enrollment by 2001, while Indonesia has slowly moved
downward from close to that enrolment percentage thereafter. The Philippines has been inching
closer and closer to this target in recent years. The data indicate two groups of countries - one which
has consistently attained a net enrollment ratio of more than 90% (Brunei Darussalam, Indonesia,
the Philippines, and Singapore) and the other group with around 80% (Cambodia, Lao PDR and
Myanmar). Vietnam started in the lower group and has moved to the upper group in the last few
decades. Thailand has not provided data for both sexes, but the separate net enrolment ratio for
girls and boys indicates that the overall ratio would be between 86% and 87%, and as such would be
closer to the higher group. The primary net enrolment ratios of boys were almost always higher than
those of girls for all reporting countries except Malaysia. For Singapore and Indonesia since 1998,
however, the net enrolment ratios for girls and boys were not significantly different. A marked
widening of gender gap was noticeable in the Philippines in 1997 but in 1999 the net enrolment
ratios for girls exceeded that for boys.
[108]

It is also useful to look at retainment and efficiency rates in education throughout ASEAN. The
effectiveness of efforts to extend literacy depends on the ability of the education system to ensure
full participation of school-age children and their successful progression to reach at least grade 5,
which is the stage when they are believed to have firmly acquired literacy and numeracy. The usual
indicator to measure the level of this efficiency achievement is the proportion of pupils starting grade
1 reaching grade 5 of primary education.
[109]

Most reporting countries in ASEAN have steadily improved retention rates of pupils through 5th
grade. At the top are Malaysia, Singapore, and Thailand, which have shown consistent survival rates
of close to 100%, indicating a very high retention of children in school through at least 5th grade.
Among the rest of the countries with rates ranging from 57% to 89% towards the end of the past
century, Myanmar has maintained the largest improvements over the years.
[110]

Secondary education[edit]


High school students in Laos assemble a jigsaw puzzle map of Southeast Asia. Laos is a member of ASEAN but
most students know little about the other 9 member countries. The map is one of many hands-on activities offered
by Big Brother Mouse, a not-for-profit literacy and education project.
By 2001, Brunei Darussalam, Myanmar, Singapore, Malaysia, and the Philippines had achieved
improvements in net enrolment ratios for secondary education of 11%-19% over those of 1990 or
1991. Vietnam experienced the fastest growth rate in net enrolment between the years 1993 and
1998. Singapore, the country with the highest overall achievement, has maintained consistently high
net enrolment rates of above 90% since 1994. With regard to gender differences, the difference in
the ratios of females to males ranges from 0.2%-6% (for the six countries for which these ratios are
available: Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam). "The overall pattern
is that girls seem to exhibit appreciably higher net enrolment ratios for secondary education, except
in the case of Singapore where the ratios for girls and boys converged in the second half of the
reporting period."
[111]

Tertiary education[edit]
While the HPAEs (High Performing Asian Economies) and ASEAN-6 (the 6 oldest ASEAN
members) have invested heavily in public education, and, unlike many other developing nations,
have concentrated on primary and secondary schooling, tertiary education has been left largely to
the private sector.
[112]
Tertiary education in Southeast Asia is, in general, relatively weak. In most
cases universities are focused on teaching and service to government rather than academic
research. Additionally, universities in Southeast Asia, both in terms of academic salaries and
research infrastructure (libraries, laboratories), tend to be nancially handicapped and poorly
supported. Moreover, regional academic journals cater to their 'home' informed audiences and
respond less to international standards which makes universal or regional benchmarking difcult.
[113]

University Network[edit]
The ASEAN University Network (AUN) is a consortium of Southeast Asian universities. It was
originally founded in November 1995 by 11 universities within the member states.
[114]
Currently
AUN comprises 26 Participating Universities.
[115]

The Southeast Asia Engineering Education Development Network (SEED-NET) Project, was
officially established as an autonomous sub-network of the ASEAN University Network (AUN) in
April 2001'. AUN/SEED-Net aimed at promoting human resources development in engineering in
ASEAN. The Network consists of 19 leading Member Institutions (selected by the Ministries in
charge of higher education of respective countries) from 10 ASEAN countries with the support of
11 leading Japanese Supporting Universities (selected by Japanese Government). AUN/SEED-
Net is mainly supported by the Japanese Government through the Japan International
Cooperation Agency (JICA), and partially supported by the ASEAN Foundation. AUN/SEED-Net
activities are implemented by the AUN/SEED-Net Secretariat with the support of the JICA
Project for AUN/SEED-Net, now based at Chulalongkorn University, Thailand.
Public efforts[edit]
Financial resources[edit]
Governments have a vested interest in investing in education and other aspects of human
capital infrastructure, especially those governments of rapidly developing nations such as those
within ASEAN. In the short run, investment spending directly supports aggregate demand and
growth. In the longer term, investments in physical infrastructure, inproductivity enhancements by
businesses, and especially in the public provision of education and health services determine the
potential for growth.
[116]

To measure the investments in education by governments, we use the metrics of public
current expenditure on primary education as a percent of GDP and expenditure per pupil as a
percent of GDP. These two indicators are based on public current expenditure at all government
levels on all public primary schools and subsidies to private educational institutions, teachers and
pupils. In some instances regarding figures used in these calculations, data on current public
expenditure on education may refer only to the Ministry of Education, excluding other ministries that
spend a part of their budget on educational activities.
[106]

Primary education expenditure in the reporting ASEAN countries is usually lower than 3% of GDP,
with the exception of Indonesia, which reported 5%. Two countries that show noticeable rising trends
are the Philippines and Lao PDR. Malaysia has experienced a gradual downward trend throughout
the 1990s but stabilised around the year 2000. Indonesia experienced a sharp decline in primary
education expenditure as a percent of GDP between 1995 and 1999 from almost 10% to 5%.
Singapore has maintained a stable 0.6% up until 2000 and increased slightly to 0.7% in 2001.
[117]

While the public current expenditure on primary education as percentage of GDP can never be close
to 100%, it is theoretically possible to have the public current expenditure per pupil as percentage
of GDP per capita to reach or exceed 100%. Except for Singapore, this indicator fluctuates
somewhat, but seems to have stabilised at around 10% for two reporting countries of ASEAN at the
end of the 1990s decade. Since 1996, the indicator has steadily risen in the Philippines reaching
almost 14% by 1998. Upward or downward trend for this indicator can have many causes which
include sharp changes in enrolment rates of government expenditures on primary education.
[117]

Scholarship[edit]
The ASEAN Scholarship is a scholarship programme offered by Singapore to the 9 other member
states for secondary school, junior college, and university education. It covers accommodation, food,
medical benefits & accident insurance, school fees, and examination fees.
[118]
Scholarship recipients
who then perform well in the GCE Advanced LevelExamination may apply for ASEAN
Undergraduate Scholarships, which are tailored specifically for undergraduate institutions in
Singapore and in other ASEAN member countries.
[119]
Singapore has effectively used this
programme to attract many of the best students from the ASEAN region over the past several years,
and scholars for the most part tend to remain in Singapore to pursue undergraduate studies through
the ASEAN Undergraduate Scholarship programme.
[120]

Education as a determinant of human development[edit]
Statistically, educational attainment (as measured by average years of schooling) strongly correlates
with subsequent income levels and development capabilities. An improvement in educational
attainment will have a positive effect on a country's income and human development
(humanity) growth.
[121]

It is therefore evident that "universal access to, and completion of, primary or basic education is
a self-evident goal upon which the foundations for building the human capacity rests. Increased
participation, regardless of sex, in secondary and tertiary levels of education is a necessary step to
be able to move forward in the process of achieving equity,capacity building, access to information,
and strengthening science."
[117]

Literacy rates[edit]
Literacy indicators provide us with a measure of the number of literate persons within the population
who are capable of using written words in daily and to continue to learn.
[122]
The literacy rate
essentially reflects the cumulative accomplishment of education in spreading literacy. The literacy
rate is usually linked to school enrolment ratios and school retainment rates (through at least grade
5) of primary education, both of which contribute to the literate population.
The data of literacy rates in reporting countries of 15 to 24 years old reflect outcomes of the basic
education process and is therefore considered an accepted measure of the effectiveness of that
country's education system's investment in children. Among the eight ASEAN countries reporting six
have made significant progress towards 100% literacy by 2000. This progress is comprable with
member countries of the Organisation for Economic Co-operation and Development (OECD), an
impressive accomplishment. Overall, there is not much disparity between male and female literacy
with the exceptions of Cambodia and Lao PDR, where the literacy rate for females is about 10%
lower than that of males in 1999. The results of overall improvement in literacy rates, though,
indicate positive effectiveness of the primary education systems of these countries throughout the
1990s.
[123][124]

Country
Year
(most
recent)
Adult
(15+)
Literacy
Rate Total
Adult
Men
Adult
Women
Youth (15-
24)
Literacy
Rate Total
Youth
Men
Youth
Women
Brunei 2009 95% 97% 94% 100% 100% 100%
Cambodia
2008 78% 85% 71% 87% 89% 86%
Indonesia
2008 92% 95% 89% 99% 100% 99%
Laos 2005 73% 82% 63% 84% 89% 79%
Malaysia
2009 92% 95% 90% 99% 98% 99%
Burma 2009 92% 95% 90% 96% 96% 95%
Philippines
2008 95% 95% 96% 98% 97% 98%
Country
Year
(most
recent)
Adult
(15+)
Literacy
Rate Total
Adult
Men
Adult
Women
Youth (15-
24)
Literacy
Rate Total
Youth
Men
Youth
Women
Singapore
2009 95% 97% 92% 100% 100% 100%
Thailand
2005 94% 96% 92% 98% 98% 98%
Vietnam
2009 93% 95% 91% 97% 97% 96%
Looking at adult (defined as the entire population 15 and older) literacy rates, we can see that most
reporting countries have made significant progress in this demographic as well. All but two reporting
countries reached adult literacy rates of around 90% or better. Looking at the differences in literacy
rates by sex, we can see a visible gender gap. This gap is most apparent in Cambodia and Laos,
with percentage differences between adult men and adult women literacy rates of 14% and 19%,
respectively.
[125]
Only in the Philippines is the literacy rate among women higher than among men.
Sports[edit]
Southeast Asian Games[edit]
The Southeast Asian Games, commonly known as the SEA Games, is a biennial multi-sport event
involving participants from the current 11 countries of Southeast Asia. The games is under regulation
of the Southeast Asian Games Federation with supervision by the International Olympic
Committee (IOC) and the Olympic Council of Asia.
ASEAN Para Games[edit]


Logo of the ASEAN Para Games.
The ASEAN Para Games is a biennial multi-sport event held after every Southeast Asian Games for
athletes with physical disabilities. The games are participated by the 11 countries located in
Southeast Asia. The Games, patterned after the Paralympic Games, are played by physically
challenged athletes with mobility disabilities, visual disabilities,
FESPIC Games / Asian Para Games[edit]
The FESPIC Games, also known as the Far East and South Pacific Games for the persons with
disability, was the biggest multi-sports games in Asia and South Pacific region. The FESPIC Games
were held nine times and bowed out, a success
[126]
in December 2006 in the 9th FESPIC Games in
Kuala Lumpur, Malaysia. The Games re-emerged as the 2010 Asian Para Games in Guangzhou,
China. The 2010 Asian Para Games debuted shortly after the conclusion of the 16th Asian Games,
using the same facilities and venue made disability-accessible. The inaugural Asian Para Games,
the parallel event for athletes with physical disabilities, is a multi-sport event held every four years
after every Asian Games.
Football Championship[edit]
The ASEAN Football Championship is a biennial Football competition organised by the ASEAN
Football Federation, accredited by FIFA and contested by the national teams of Southeast Asia
nations. It was inaugurated in 1996 as Tiger Cup, but after Asia Pacific Breweries terminated the
sponsorship deal, "Tiger" was renamed "ASEAN".
ASEAN 2030 FIFA World Cup bid[edit]
January 2011: As a result of ASEAN Foreign ministers at Lombok meeting, they agreed bid to host
the FIFA World Cup in 2030 as a single entity.
[127]

May 2011: ASEAN will go ahead with its bid for the FIFA 2030 World Cup. It was a follow up to the
agreement reached in January before.
[128]

ASEAN Defence Industry Collaboration[edit]
Indonesia, Malaysia, Singapore and Thailand have established defence industries. To cut cost and
plan to be self-sufficient by 2030, Indonesia and Malaysia have agreed to promote the creation of
the ASEAN Defence Industry Collaboration (ADIC).
[129]
The United States military reportedly has
said that ADIC could have additional benefits beyond cost savings for ASEAN members, including
facilitating a set of standards, similar to NATO, that will improve interoperability among ASEAN and
U.S. militaries and increase the effectiveness of regional response to threats to Asia-Pacific peace
and stability.
[130]

Criticism[edit]
Non-ASEAN countries have criticised ASEAN for being too soft in its approach to promoting human
rights and democracy in the junta-led Burma.
[131]
Despite global outrage at the military crack-down
on unarmed protesters in Yangon, ASEAN has refused to suspend Burma as a member and also
rejects proposals for economic sanctions.
[132]
This has caused concern as the European Union, a
potential trade partner, has refused to conduct free trade negotiations at a regional level for these
political reasons.
[133]
International observers view it as a "talk shop",
[134]
which implies that the
organisation is "big on words but small on action".
[135][136]
However, leaders such as the Philippines'
Foreign Affairs Secretary, Alberto Romulo, said it "is a workshop not a talk shop".
[137]
Others have
also expressed similar sentiment.
[138]

Head of the International Institute of Strategic Studies Asia, Tim Huxley cites the diverse political
systems present in the grouping, including many young states, as a barrier to far-reaching
cooperation outside the economic sphere. He also asserts that in the absence of an external threat
to rally against with the end of the Cold War, ASEAN has begun to be less successful at restraining
its members and resolving border disputes such as those between Burma and Thailand and
Indonesia and Malaysia.
[139]

During the 12th ASEAN Summit in Cebu, several activist groups staged anti-
globalisation protests.
[140]
According to the activists, the agenda of economic integration would
negatively affect industries in the Philippines and would cause thousands of Filipinos to lose their
jobs.
[141]