Chapter 4

International Organizations

United Nations (UN)

UN was established in 1945 after the Second World War.

UN has four bodies:

1) General Assembly

2) Security Council

3) UN Specialized Agencies

4) UN Secretariat

UN General Assembly is the essential body of the UN.

It is made up of all member states, each with one vote, regardless of size, wealth, or power.

UN Security Council is composed of five permanent members with veto power and 10 chosen (five each year) for two years terms.

Five permanent members of Security Council are;

China, Russia, France, England (UK), and United States of America (USA)

UN Specialized Agencies

UNICEF WHO FAO

UNIDO ILO UNESCO

UNDP ICAO ITU

UPU WMO IAEA

IFAD UNCTAD IMF

IDA IBRD IFC

UN Secretarait

Headed by by the secretary-general, the secretariat carries out day-to-day administrative functions of UN.

Criticism of UN:1) There are no Muslim countries in the Security

Council.2) Africa and Latin America do not have

representatives in the Security Council.3) Economically powerful states like Japan and

Germany are not in the Security Council.4) Important states like Brazil, Nigeria, and India

want to have a place in the Security Council.5) Security Council is composed of the victorious

states of the Second World War.

Multilateral BanksAfrican Development Bank is trying to support

private enterprises in Africa.Asean Development Bank is trying to develop the

most underdeveloped regions in Asia.Inter-American Development Bank finances

projects in Latin America and Caribbean.European Bank for Reconstruction and

Development (EBRD) intends to aid East European transition economies.

International Bank for Reconstruction and Development (IBRD) is the World Bank.

European Bank for Reconstruction and Development

It was established in 1991 after the fall of Soviet Union in 1991. Its aim is to help the Central and Eastern European ex-Soviet countries to develop their private sectors in democratic environment.

EBRD is owned by 60 countries and two intergovernmental institutions.

It provides project financing for banks, industries, and businesses, both new ventures and investments in existing companies. It supports privatization and restructuring of state-owned firms and improvement of municipal services.

Islamic Development Bank

It is established in 1395H/1975.

The head office is in Jeddah, Saudi Arabia. IDB has regional offices in Kuala Lumpur, Malaysia; Rabat, Moracco; and Almaty Kazakhstan. So it is a multilateral Bank.

The purpose of the bank is to foster economic growth and social progress of member countries and Muslim communities in general according to principles of Shariah

Islamic Bank’s Portfolio (IBP)

In 1987, Islamic Development Bank invited leading Islamic financial institutions to participate in the establishment of Islamic Bank’s Portfolio (IBP).

IBP provides short-term trade financing and medium-term asset-based finance to the firms in Muslim countries. IBP also promotes Islamic financial market.

Organization for Petroleum Exporting Countries (OPEC)

It is established in 1960 in Baghdad by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Qatar, Libya, Indonesia, Abu Dhabi, Algeria, Ecuador, and United Arab Emirates joined later.

Membership is open to any country which is a substantial net exporter of oil and which shares the ideals of the organization.

OPEC members collectively;

• Supply 40% of the world’s oil output,

• Posses more than 75% of the world’s total crude oil reserves,

• Meets 84% of Europe’s oil needs,

• Meets 90% of Japan’s oil needs.

Organization for Economic Cooperation and Development

It is established in 1960 to promote economic cooperation and development.

It has 30 members: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, South Korea, Luxembourg, Mexico, Netherlands, NZ, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland, Turkey, UK, and US.

Its base is in Paris. It helps governments to respond to economic, social, and environmental challenges posed by globalization.

GreenpeaceIt is a non-profit organization with a presence in 40

countries. It focuses on the most crucial worldwide threats to our planet’s biodiversity and environment.

It campaigns to;• Stop climate change,• Protect ancient forests,• Save the oceans, • Stop whaling,• Say “no” to genetic engineering,• Stop the nuclear threat,• Eliminate toxic chemicals,• Encourage sustainable trade.

Rainbow Warriors

They call themselves Rainbow Warriors and argue that; “when the last tree is cut, the last river poisoned, and the last fish dead, we will discover that we can not eat money”.

General Agreement on Tariffs and Trade (GATT)

It was established in 1947, Geneva,

Switzerland.

The purpose was to promote free trade by reducing tariff barriers.

GATT Principles 1) Reciprocity – If one country reduces its tariffs

against another, the second country must likewise lower its tariffs.

2) Nondiscrimination – Members must not grant one country preferential trade treatment over others. Most-favored-nation rule must apply to all the members.

3) Transparency – Members are expected to replace non-tariff barriers (whose effects are hard to measure and detect) with tariffs, which are open to scrutiny and thus more easily reduced through further negotiations.

GATT Negotiating Rounds

Geneva Round...............................1947Annecy Round................................1949Torquay Round...............................1950Geneva Round................................1956Dillion Round...................................1960-61Kennedy Round...............................1964-67Tokyo Round...................................1973-79Uruguay Round...............................1986-92

World Trade Organization (WTO)

It is;• An organization for liberalizing trade,• A forum for govenments to negotiate,• A place for govenments to settle trade

disputes,• An organization operating a system of

trade rules.

Issues to be tackled by the WTO:

1) Agricultural trade has been excluded from previous negotiations. Removal of all trade restrictions on farm products will increase the world trade by $100 billion, yearly.

2) Textiles and clothing trade had been restricted by multi-fiber arrangement (MFA). Exporters were mainly LDCs and importers were wealthy industrialized countries. Expected gains from liberalization is $50 billion.

3) Intellectual property: Protection against infringement of patents, trademarks and other intelelctual property is discussed.

4) Foreign investment: Restrictions on FDI by multinationals are challenged.

5) Internationally traded services: Developed countries attempt to reduce the barriers on service imports like financial services, insurance services, etc.

Topics on the agenda of WTO

• Restrictions on FDI• Government protection of new technology to

protect domestic industry• Antidumping laws• Environmentalists opposition to increase trade• Trade disputes between countries• Setting ground rules for international

commerce

World Bank (IBRD) is responsible for economic development of

countries.

It provides two types of loans:

• Hard loans

• Soft loans

1) Hard loans are made and repayable in hard, convertible currencies at market interest rates with normal

market maturities. They are secure loans not exceeding 25 years.

International Finance Corporation is World Bank’s investment department. IFC finances industries like fertilizers, synthetic fibers, tourism, and paper and cotton fabric. It developed capital market in Brazil.

2) Soft loans can be paid back in soft, non-convertible currencies, carry low or no

interest obligations, are usually long-term up to 40 years and may have grace periods up to 10 years during which no payments are

required.

International Development Association (IDA) provides these loans. Soft loans are given to countries with per capita income less than $750 a year. It is to help the poorest LDCs which need loans to develop, but they can not carry hard currency burden.

International Monetary Fund (IMF)

It was established to promote international monetary cooperation in Bretton Woods in 1945.

The Articles of Agreement:1) Foster orderly foreign exchange arrangements,2) Foster fixed currencies,3) Foster shorter duration and lesser degree

Balance of Payments disequilibria.

In 1971, the second clause was changes as follows:

2) Foster floating exchange rates

And a fourth clause was added as follows:

4) IMF has surveillance powers over the member states, meaning that IMF can influence or even dictate fiscal and monetary policies of the member states.

The world went through many economic and crises after 1971.

Some solutions to debt crises:Debt default is when countries can not pay their

debts; debts are turned into bad debts.

Debt rescheduling is when countries cannot pay their debts on time, debts are rescheduled.

Bank for International Settlements (BIS)

BIS is the most discrete financial institution in the world. Major industrial countries meet 10 times a year to discuss the global financial system in Basel Switzerland. It was established in 1930.

• It is a forum for international monetary cooperation,• It is a center for research,• It is a banker for central banks,• It is an agent for international financial arrangements.

ECONOMIC INTEGRATION

According to Bela Balassa (The Theory of Economic Integration, 1961), there are five degrees of economic integration. At each succeeding state, members surrender a greater measure of their national sovereignty.

Five levels of economic integration:

Free trade area: Members agree to remove all barriers to trade within the group but may continue to pursue their own independent policies with non-members.

Customs union: Free movement of goods among member countries but imposes common system of trade restrictions with outsiders.

Common market: In addition to customs union, there will be unrestricted movement of capital, labor, and entrepreneurship within the union.

Economic union: In addition to common market, economies of member countries are integrated through a common central bank, unified monetary and tax systems, and a common foreign economic policy.

Economic integration: Removal of all barriers to interbloc movement of goods and factors of production is complete, unification of social and economic policies achieved, and all members are subject to the binding decisions of a supranational authority consisting of executive, judicial, and legislative branches.

European Union (EU)

After a devastating Second World War, European countries decided to work together to avoid another war in Europe and to keep coal and steel industries under control.

Treaty of Rome was signed in 1957 creating European Economic Community (EEC) and European Atomic Energy Community (Euratom).

EU Enlargement

Treaty of Rome was signed by six founding states: W. Germany, France, Italy, Belgium, Netherlands, and Luxembourg (Benelux States).

In 1973, United Kingdom, Ireland, and Denmark joined.Following enlargements: Greece (1981), Spain and

Portugal (1986), Austria, Finland, and Sweden (1995), Lithuania, Estonia, Latvia, Slovakia, Malta, Cyprus Greek Republic, Slovenia, Hungary, Check Republic, and Poland (2004), Romania and Bulgaria (2007).

EU hell or heaven?Heaven if,Policemen EnglishCooks FrenchBeer Brewers GermanLovers ItalianOrganization Swiss

Hell if,Policemen GermanCooks EnglishBeer Brewers FrenchLovers SwissOrganization Italian

The New Map of EU

With the latest enlargement, EU has become 27 states. It is the richest region in the world.

           

    

Altiero Spinelli, an Italian resistence fighter is the father of the idea of a

united Europe.

In 1944, he argued for “a federal Europe with a written constitution, a supranational govenment directly responsible to the people of Europe and not national governments, along with an army under its control, with no other military forces being permited”.

EU organizational structure1) Council of Ministers is the policy setting body of the EU. It is made up of

prime ministers of the member states. They meet periodically at summits.

2) European Parliament is the elected body of the EU. The members of the EP are elected by the citizens of the member countries. The representation in the EP is according to the population sizes of the countries.

3) European Commission is the beurocracy of the EU. There are about 20,000 beurocrats and technocrats working in Brussels.

4) European Court of Justice is the legal organ of the EU. It is deciding on issues raised against Treaty of Rome (against Nice Agreement after it is passed from the parliaments of the member states). Its authority supersedes the decisions of the courts in the member states.

Maastricht Treaty

It was signed on 1991 by 12 EU member states. It was a committment to future United States of Europe. Its goals were monetary and economic union with European Central Bank and a single currency replacing national currencies.

Maastricht Treaty set out five convergence criteria which member states must satisfy before they can

accede to European Monetary Union (EMU):

1) Inflation rates should be no more than 1.5% above the average of the three EU countries with the lowest interest rates.

2) Long-term interest rates should be no more than 2% above the average of the three EU countries with the lowest interest rates.

3) National currencies must not have been devalued and must have remained within the normal (15%) bands of the EMS for the previous two years.

4) National budget deficits must be less than 3% of GDP.5) National debt must be less than 60% of GDP.

North American Free Trade Agreement (NAFTA)

NAFTA was established in 1990 by the USA and Canada. Mexico joined later and NAFTA became the largest economic area in the world.

USA alone is accounting for the 28% of world’s GDP.

Association of South East Asian Nations (ASEAN)

It is created in 1967 by Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Cambodia, Laos, Myanmar, and Vietnam.

ASEAN is the fastest growing economic region in the world. Their GDPs enjoyed annual growth rates averaging over 7%.

Economic Community of West African States (ECOWAS)

It was established by Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Cost, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo.

ECOWAS countries produce and export mainly agricultural products (coffee, cacao, palm oil) and minerals including oil.

Commonwealth of Independent Staes (CIS)

After the collapse of Soviet Union in 1991, ex-Soviet Republics formed CIS as a free trade area. Russia, Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan, Kyrgyzstan, Azerbaijan, Georgia, Armenia, Belarus, Ukraine, and Moldova are members of CIS.

The most important state in CIS is Russia which is the world’s largest country (6.5 million square miles).

CIS is very rich in natural resources, including gold, oil, natural gas, minerals, diamonds, and fertile farmland.