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International political and economic organisations (P: role of World Trade Organization (WTO), International Monetary Fund (IMF), World Bank) have contributed to globalisation through the promotion of free trade policies and foreign direct investment (FDI).

World trade has seen a boom in growth since the early 1960's and 1970's, with the value of world trade in goods and services being $28.5 trillion in 2021 compared to less than $1 trillion in 1970. However, this growth hasn't always been consistent over this time period. There was a slow but consistent rise from 1950 to the early 2000's, but then a significant rise in trade from 2002 to 2008. Due to the global financial crash, there was a sharp dip in 2008, and since then the level of growth has been highly inconsistent, with major events such as the COVID pandemic massively disrupting trade between nations, globally influential conflicts such as the Russia-Ukraine war causing supply-side shocks, and other events like the protectionist trade war between China and the US in 2018 reducing the exchange of goods and services.

The significant growth in world trade over time can be partially put down to the introduction of inter-governmental organisations (IGO's). After what seemed to be the conclusion of WW2, the Allied Powers (USA, UK, France, etc.) gathered in New Hampshire for the Bretton Woods Conference. Here they agreed to set up three IGO's: the World Trade Organization (WTO), International Monetary Fund (IMF) and the World Bank. Although, the WTO wasn't fully founded until 1995. Their primary objectives were to recover the global economy after WW2, reduce protectionism between nations and promote free market democracy.

World Bank

  • Founded in 1944, it's primary role is to lend money to LIC's and NEE's for economic development and to reduce poverty. In 2023, the World Bank's Board of Executive Directors approved a $1.5 billion Ukraine Relief and Recovery Development Policy Loan, which is part of the greater goal to send $37.5 billion over the next year.

  • To become involved with the World Bank, recipients must employ trade liberalisation policies and open up to FDI, as well as allow for structural adjustment in attempts to reduce government budget deficits.

  • Under these conditions, some command economies or dictatorships (like North Korea) may be politically reluctant to take loans from the World Bank. With the rapid growth in China's economy, many developing countries prefer to borrow from them as there are typically no such conditions for a loan. In July 2023, China loaned out $32 billion (more than the World Bank).

  • However, it has been criticised in the past for prioritising economic growth over social development. Also, it is incredibly politically biased, with the US having a 16.53% voting stake, which is double that of second place (Japan).

International Monetary Fund

  • Founded in 1944, it aims to maintain a stable global financial system, whilst promoting free trade and globalisation.

  • The IMF provides loans to countries with balance of payments difficulties. In 2008, Greece was significantly affected by the global financial crash, requiring consistent instalments of loans from the IMF as its foreign currency earnings weren't sufficient enough to pay off its debts. In 2015, the Greek government missed its $1.7 billion loan payment back to the IMF when its bailout expired on June 30th. This made them the first developed nation to default on a loan to the IMF.

  • To become involved with the IMF, recipients must employ trade liberalisation policies and open up to FDI, as well as allow for structural adjustment in attempts to reduce government budget deficits.

  • However, it has been criticised for being biased towards benefiting Western TNC's as opposed to making decisions in the interest of maximising the welfare of member nations. A lot of the time, the significant wealth of these TNC's has allowed them to lobby officials, bending regulations in their favour (especially in the US).

World Trade Organization

  • Founded in 1995, it seeks to reduce trade barriers, better accommodating for free trade.

  • Not long after the Bretton Woods Conference, in 1947 the General Agreement on Tariffs and Trade was founded during the United Nations Conference on Trade and Employment in Geneva (where the WTO headquarters are now). However, in 1995 this was replaced by the WTO.

  • Talks are hosted between member nations on ways in which they can reduce trade barriers which are mutually beneficial. The first talk was the Uruguay Round of trade negotiations lasting from 1986-1994. The most recent talks began in Doha in 2001 with the aim to reduce the tariff on farming produce, but still no agreement has been reached.

  • The 'Most Favoured Nation' policy they employ requires all member nations to be given the same reduction in trade barriers and access to goods and services as the 'most favoured nation'. The organisations association to Switzerland (a neutral country) reduces the biases (particularly to the US) associated with the other two IGO's I have mentioned.

  • Because of its focus on equality, it mainly benefits LIC's and NEE's. Also, it is much less focused on encouraging FDI than the other two IGO's, and more focused on encouraging free trade.

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