WTO and IMF: Foundations of Global Economic Governance

The Marrakesh Agreement (1994)

The Marrakesh Agreement (1994) is the constitution that defines the WTO’s objectives, functions, institutional structure, and decision-making procedures. Its annexes form a comprehensive system of binding rules, including:

• Trade in goods (GATT 1994)
• Trade in services (GATS)
• Intellectual property (TRIPS)
• Dispute settlement (DSU)
• Plurilateral agreements

WTO Functions

The WTO administers and implements trade agreements, provides a forum for multilateral negotiations, resolves disputes through a legally binding system, reviews national trade policies, and offers technical assistance to developing and least-developed countries.

Core Principles

The organization operates on principles of non-discrimination (MFN and NT), reciprocity, transparency, trade liberalization, special treatment for developing countries, and the rule of law.

Membership and Accession

With 166 members, accession requires a multilateral examination of trade regimes, bilateral negotiations on market access, and acceptance of WTO agreements. Members enjoy legal equality and must comply with WTO rules, ensuring transparency and implementing dispute settlement rulings. The WTO also recognizes observers who participate in discussions without decision-making power.

The IMF and Historical Context

The IMF was created following the 1930s economic instability and the Great Depression (1929). In the 1930s, competitive devaluations, monetary protectionism, and the collapse of international trade led to global economic fragmentation and political instability, contributing to WWII. After the war, the Allied powers recognized the need for a stable international economic framework, leading to the Bretton Woods Conference (1944), where 44 countries created the IMF and World Bank.

The IMF started on December 27, 1945, managing a system of fixed exchange rates pegged to the US dollar, which was convertible to gold. After the collapse of the Bretton Woods system (1971) and the switch to floating exchange rates, the IMF shifted focus to crisis management, structural adjustments, and macroeconomic surveillance, especially in developing economies. The IMF has been central during crises like the Asian Financial Crisis (1997), Global Financial Crisis (2008), and the COVID-19 pandemic.

IMF Articles of Agreement

The treaty is based on the Articles of Agreement, adopted at Bretton Woods (1944), which define the objectives, functions, structure, voting system, quota arrangements, and legal obligations of members. Article I outlines the IMF’s core goals: international monetary cooperation, balanced growth of international trade, exchange rate stability, and providing financial resources to members in need. The Articles grant the IMF legal personality. Over time, amendments like the Second Amendment (1978) recognized floating exchange rates and introduced SDRs as a reserve asset.