International economic institutions and organisations - Business Environment

Given that external factors constrain the ability of governments to regulate their economy, it is appropriate to conclude this analysis of the macroeconomic context of business with a brief review of a number of important international economic institutions and organisations which affect the trading environment. Fore most among these is the European Union, which is examined at length. In the discussions below, attention is focused on the International Monetary Fund (IMF), the Organisation for Economic Co-operation and

Development (OECD), the European Bank for Reconstruction and Development (EBRD), the World Trade Organisation (WTO) and the World Bank (IBRD).

The International Monetary Fund (IMF)
The IMF is an international organisation currently of 184 member countries. It came into being in 1946 following discussions at Bretton Woods in the USA which sought to agree a world financial order for the post-Second World War period that would avoid the problems associated with the world wide depression in the inter war years. In essence, the original role of the institution which today incorporates most countries in the world was to provide a pool of foreign currencies from its member states that would be used to smooth out trade imbalances between countries, there by promoting a structured growth in world trade and encouraging exchange rate stability. In this way, the architects of the Fund believed that the danger of international protectionism would be reduced and that all countries would consequently benefit from the boost given to world trade and the greater stability of the international trading environment.

While this role as international ‘lender of last resort’ still exists, the IMF’s focus in recent years has tended to switch towards international surveillance and to helping the developing economies with their mounting debt problems and assisting eastern Europe with reconstruction, following the break-up of the Soviet empire.9 It has also been recently involved in trying to restore international stability following the global economic turmoil in Asia and else where (see ‘Mini case’ earlier in this section). To some extent its role as an international decision-making body has been diminished by the tendency of the world’s leading economic countries to deal with global economic problems outside the IMF’s institutional framework. The United States, Japan, Germany, France, Italy, Canada, Britain and Russia now meet regularly as the ‘Group of Eight’ (G8) leading industrial economies to discuss issues of mutual interest (e.g. the environment, eastern Europe). These world economic summits, as they are frequently called, have tended to supersede discussions in the IMF and as a result normally attract greater media attention.

The Organisation for Economic Co-operation and Development (OECD)
The OECD is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade. It is a forum of countries committed to democracy and the market economy, providing a platform to compare policy experiences, seek answers to common problems, identify good practices, and co-ordinate domestic and international policies of its members.

The OECD came into being in 1961, but its roots go back to 1948 when the Organisation for European Economic Co-operation (OEEC) was established to coordinate the distribution of Marshall Aid to the war-torn economies of western Europe. Today it comprises 30 members, drawn from the rich industrial countries and including the G7 nations, Australia, New Zealand and most other European states. Collectively, these countries account for less than 20 per cent of the world’s population, but produce around two-thirds of its output hence the tendency of commentators to refer to the OECD as the ‘rich man’s club’.

In essence the OECD is the main forum in which the governments of the world’s leading industrial economies meet to discuss economic matters, particularly questions concerned with promoting stable growth and freer trade and with supporting development in poorer non-member countries. Through its council and committees, and backed by an independent secretariat, the organisation is able to take decisions which set out an agreed view and/or course of action on important social and economic issues of common concern. While it does not have the authority to impose ideas, its influence lies in its capacity for intellectual persuasion, particularly its ability through discussion to promote convergent thinking on international economic problems. To assist in the task, the OECD provides a wide variety of economic data on member countries, using standardized measures for national accounting, unemployment and purchasing-power parities. It is for these data and especially its economic forecasts and surveys that the organisation is perhaps best known

The European Bank for Reconstruction and Development (EBRD)
The aims of the EBRD, which was inaugurated in April 1991, are to facilitate the transformation of the states of central and eastern Europe from centrally planned to
free-market economies and to promote political and economic democracy, respect for human rights and respect for the environment. It is particularly involved with the privatization process, technical assistance, training and investment in upgrading of the infrastructure and in facilitating economic, legal and financial restructuring. It works in co-operation with its members, private companies and organisations such as the IMF, OECD, the World Bank and the United Nations.

The World Trade Organisation (WTO)
The World Trade Organisation, which came into being on 1 January 1995, superseded the General Agreement on Tariffs and Trade (the GATT), which dated back to 1947. Like the IMF and the International Bank for Reconstruction and Development (see below), which were established at the same time, the GATT was part of an attempt to reconstruct the international politico-economic environment in the period after the end of the Second World War. Its replacement by the WTO can be said to mark an attempt to put the question of liberalizing world trade higher up the international political agenda.

With a membership of around 150 states, and which now includes China, the WTO is a permanent international organisation charged with the task of liberalizing world trade within an agreed legal and institutional framework. In addition it administers and implements a number of multilateral agreements in fields such as agriculture, textiles and services and is responsible for dealing with disputes arising from the Uruguay Round Final Act. It also provides a forum for the debate, negotiation and adjudication of trade problems and in the latter context is said to have a much stronger and quicker trade compliance and enforcement mechanism than existed under the GATT. See also Chapter 14.

The World Bank (IBRD)
Established in 1945, the World Bank (more formally known as the International Bank for Reconstruction and Development or IBRD) is a specialized agency of the
United Nations, set up to encourage economic growth in developing countries through the provision of loans and technical assistance. The IBRD currently has over 180 members.

The European Investment Bank (EIB)

The European Investment Bank was created in 1958 under the Treaty of Rome and is the financing institution of the European Union. Its main task is to contribute to the integration, balanced development and the economic and social cohesion of EU Member States. Using funds raised on the markets, it finances capital projects which support EU objectives within the European Union and elsewhere.

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