International Trade Institutions and Trade Agreements: Concepts, Examples

The compilation of these International Business Notes makes students exam preparation simpler and organised.

International Trade Institutions and Trade Agreements

Business activities are conducted on a global level and even between nations. There is an emergence of global markets. To keep the trade fair and manage trade-related issues on a global level, various International Institutions and Trade Agreements were established. Let’s understand them to get a better idea of the scenario related to International Business.

International Trade Associations

The nations were influenced financially because of World War 1 and World War 2. The reconstruction couldn’t happen as there was an interruption in the financial system furthermore there was a shortage of resources. At this crossroads, the prominent economist J. M. Keynes with Bretton Woods establish an association with 44 countries to meet this and to reestablish commonship on the planet.

This gathering brought forth the International Monetary Fund (IMF) International bank Of Reconstruction and Development (IBRD) and the International Trade Organization (ITO). These three associations were considered as three columns for the improvement of the global economy.

International Trade Institutions and Trade Agreements

World Bank

The International Bank of Reconstruction and Development (IBRD) is usually known as the World Bank. The fundamental point of IBRD is to remake the war-influenced economies of Europe and help the improvement of underdeveloped economies of the world. The World Bank after 1950 focused more on financially unstable nations and invested heavily into social segments like the health and education of such immature nations.

Currently, the World Bank includes five universal bodies responsible for offering funds to various countries. These bodies and their partners are headquartered in Washington DC taking into account diverse financial requirements and necessities.

As specified before, the World Bank has been allocated the undertaking of financial development and expanding the extent of the international business. Amid its underlying years of foundation, it gave more significance to creating facilitates like transportation, health, energy, and others.

This has profited the underdeveloped nations too, without doubt, however, because of the poor regulatory structure, the absence of institutional system, and absence of accessibility of skilled labour in these nations has prompted disappointment. World Bank and its Affiliates Institutions:

  • International Bank for Reconstruction and Development (IBRD) 1945
  • International Financial Corporation (IFC) 1956
  • Multilateral Investment Guarantee Agency (MIGA) 1988
  • International Development Association (IDA) 1960
  • International Centre for Settlement of Investment Disputes (ICSID) 1966

The World Bank is no longer limited to simply offering money-related help for infrastructure development, agriculture, industry, health, and sanitation. It is somewhat significantly engaged with regions like reducing rural poverty, increasing income of the rural poor, offering specialized help, and beginning research schemes.

International Development Association (IDA)

International Development Association (IDA) was set up in 1960 as a partner of the World Bank. IDA was set up essentially to offer funds to the less developed countries on a soft loan basis. It is because of its intention of providing soft loans that it is called the Soft Loan Window of the IBRD. The objectives of IDA are as follows:

  • To help the underdeveloped countries by giving loans in simple terms.
  • Help at the end of poverty in the poorest nations
  • Give macroeconomics services such as, for example, those relating to health, nutrition, education, human resource advancement, and control of the population.
  • To offer loans at marked down interests in order to energize economic development, the increment in manufacturing limit and good expectations for the standard of living in the underdeveloped nations

International Finance Corporation (IFC)

Established in July 1956, IFC was aimed to assist in terms of finance to the private sector of developing nations. IFC is also an associate of the World Bank, but it has its own separate legal entity, functions, and funds. All the members of the World Bank are entitled to become members of IFC.

Multinational Investment Guarantee Agency (MIGA)

Established in April 1988, The Multinational Investment Guarantee Agency’s aim was to support the task of the World Bank and IFC. Some objectives of the MIGA are

  • Advance the stream of direct foreign investment into less developed member countries.
  • Give protection cover to fund suppliers against political risks.
  • Guarantee extension of current investment, privatization, and economic reconstruction.
  • Provide assurance against noncommercial perils, for example, dangers engaged in currency transfer, war and domestic clashes, and infringement of agreement.

Trade Agreements

Let us take a look at some of the important trade agreements that are a part of the World Bank.

1. Agreement Forming Part of GATT:
The recent General Agreement on Tariffs and Trade (GATT) after a significant alteration in 1994 is especially part of the WTO assertions. GATT likewise incorporates certain particular agreements developed to manage particular non-tariff hindrances. It is one of the important trade agreements of the WTO.

2. Agreement on Textile and Clothing (ATC):
Trade agreements were developed under WTO to phase out the quota restrictions as imposed by the developed nations on the supply of textiles and clothing from the developing countries. The developed countries were imposing different kinds of quota hindrances under the Multi-Fibre Arrangement (MFA) that itself was a major departure from the GATT’s basic principle of free trade in goods.

3. Agreement On Agriculture (AOA):
It is an agreement to make sure free and fair trade in agriculture. Although original GATT rules were applicable to trade in agriculture, these suffered from certain loopholes such as an exemption to member countries to use some non-tariff measures such as customs tariffs, import quotas, and subsidies to protect the interests of the farmers in the home country. AOA is a significant step towards a systematic and fair trade in agricultural products.

4. General Agreement on Trade Services (GATS):
Services mean acts or performances that are essentially intangible and can not be as touched or smelt as goods. GATS is regarded as a landmark achievement of the Uruguay Round as it extends the multilateral rules and disciplines to services. It is because of GATS that the basic rules governing ‘trade-in goods’ have become applicable to ‘trade-in services.

5. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS):
The WTO’s agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) was negotiated in 1986-1994. It was the Uruguay Round of GATT negotiations where for the first time the rules relating to intellectual property rights were discussed and introduced as part of the multilateral trading system. Intellectual property means information with commercial values such as ideas, inventions, creative expression, and others.


Which of the following does not belong to the World Bank group?
(a) IBRD
(b) IDA
(c) MIGA
(d) IMF
(d) IMF.
The International Monetary Fund is an independent body not associated with the World Bank.