Name: Felix Cassius A. Casas Year & Sec.

BSE 4-A

World Trade Organization (WTO)

The World Trade Organization (WTO) is the only global international organization dealing with the rules
of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the
world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and
services, exporters, and importers conduct their business.

Why did the WTO come into effect?

The WTO formally came into effect in 1995, however it is preceded by the GATT- General Agreement
on Tariffs and Trade - Wikipedia, which in turn was formed on the basis of the still born third child of
Bretton Woods - International Trade Organisation- International Trade Organization

What Happened at Bretton Woods?

Led by the greatest economist of the early mid-20th century John Maynard Keynes and supported by
Harry White who was later proven to be a spy for the USSR, the Bretton Woods Conference of 1944-
Bretton Woods Conference decided to carve up the cake i.e. the world. Bretton Woods rightly recognised
that WW1 due to trade imbalances, protectionism in trade, cornering of markets by established players
and unfair trade practices followed by the people in the lead i.e. UK and France and this also led to WW2.

On the face of it, the aims of WTO are ideal and laudable-

Non-Discrimination.

Reciprocity.

Binding and Enforceable commitments.

Transparency and Safety Valves.

In theory it allows for fair trade and all members benefit, in practice it is far from that.

Countries should trade but keep their eyes and ears open and at the first signs of discrimination, apply the
full force of the state to protect the interests of their own people and their own nations.

Local agriculture, industry and trade must be incentivized and encouraged even if it means there is some
discrimination to the trade policies.

The WTO is neither fair nor transparent nor are its reports binding on the richer nations, keep a look out
for your own interests, because everyone is looking out for their own. Summary- Nation states or
individuals have to stand up for their own rights as no one else is interested in you, these are sad facts of
life.

ETERNAL VIGILANCE IS THE PRICE OF FREEDOM.

Link of references: brettonwoodsproject.org/2019/01/art-320747/

https://www.wto.org/english/thewto_e/thewto_e.htm
Name: Christopher Panis Year & Sec. BSE 4-A

General Agreement on Trades on Tariffs – (GATT)

It’s a free market agreement between a very large number of countries in the world that aims to make free
markets the norm, rather than the exception, by abolishing most import tariffs and trade barriers between
signing countries.

The philosophy behind it is that commerce is a non-zero game. I.e. if two countries freely trade, they both
win, and become richer. Suppose country A produces a lot of potatoes but no beef. Potatoes are dirt
cheap, because they produce more than they are able to consume, but beef is prohibitively expensive,
because there is none available. Then, country B produces a lot of beef, but no potatoes. Beef is cheap, as
there is a surplus, but potatoes are prohibitively expensive.

So, both countries have a poor diet. One only eats potatoes, and they don’t care for them. In fact, they
throw some away. The other only eats beef, and they have the opposite problem.

But, if both start trading, then country A will be able to trade some of the potatoes it threw away for some
precious beef, while country B will trade some of the beef it threw away for precious potatoes. Potato
producers in country A will get paid more for their potatoes, while cow herders in country B will get paid
more for their beef. So, both will be richer as a whole.

This has to do with an economic concept called marginal value of an asset. If you are starving to death,
one single potato will have a tremendous economic value to you, as it means life and death. But, if you
ate 10 kg of potatoes, one extra potato has almost no value to you. You might as well throw it away. So,
the price of potatoes depends highly on its scarcity. By trading an article that is in surplus for a different
article that is scarce, you become richer. But what is abundant and scarce for you is not what is abundant
and scarce for your trading partner. So, it is possible for you both to earn from the trade and become
richer simply by trading.

Trade barriers and tariffs stand in the way of that free exchange of products. So, the rationale for GATT is
to abolish them altogether, so that each country can specialize in creating the products it is best suited for,
without worrying about them becoming too locally abundant, and thus too cheap, because they can sell
them elsewhere, where they are scarce, in return for other products that are locally scarce.

Link of references: https://www.investopedia.com/terms/g/gatt.asp

https://www.youtube.com/watch?v=RIoDKGuip2I
Name: Earl Kenneth D. Cruza Year & Sec. BSE 4-A

Central Banks

Most central banks started as bankers’ banks - a bank could deposit surplus cash with the central bank,
and could sometimes even pay debts to another bank by a transfer on the central bank’s books. The role
has evolved since then so that all the money is created by the central bank. Transfers on the central bank’s
books are no longer just a convenience (which a party to a transaction might decline): instead the book
entries are by definition money, so it makes no sense to demand (or to force onto a creditor bank) any
other form of payment. The main proper role of a modern central bank is to control the quantity of money
and/or related interest rates so that aggregate prices remain stable. It should also provide a decent return
to holders of money.

The management of notes & coin is now secondary. Ordinary banks anticipate customers’ needs for such
tokens, and the central bank simply exchanges them for account entries at par. There is no additional risk
because the central bank’s liability is unchanged. Usually another agency physically creates & destroys
the tokens, but the central bank issues them.

Bank regulation is not necessary for monetary policy. A central bank with a sound portfolio can achieve
its proper objectives without regulating banking, commercial paper, or any other form or finance in which
it is not directly involved. Near monies are liquid only as long as they are convertible into central-bank
money, so proper control of its own issue is all that the central bank needs for price stability.

A central bank should not be answerable for government finance, stability of the banking sector, full
employment, or any other non-monetary objective. We have seen that misguided efforts in those
directions lead to boom-bust cycles and chronic under-performance. The best the central bank can do for
the rest of the economy is to make money fulfil its functions as well as possible.

Commercial Bank

Commercial bank is a financial institution which performs the functions of accepting deposits, granting
loans and making investments, with the aim of earning profits.

Examples of Commercial banks in India- State Bank of India (SBI), Punjab National Bank (PNB), etc.

It is basically a primary unit of Indian Banking system. Like other businesses, they also have profit
motive and for this they offer a variety of services to customers.
Functions of Commercial Banks

The functions of commercial banks can be classified into two main heads namely-

Primary Functions - These include two functions- Accepting deposits and advancing of loans

Secondary functions - These includes Overdraft facility, discounting bills of exchange , some agency
functions like transfer of funds , purchase and sale of foreign exchange and securities , income tax
consultancy , letter of reference, trustee and executor. It also includes general utility functions like locker
facility, letter of credit, underwriting securities etc.

Link of references: https://www.ecb.europa.eu/ecb/educational/explainers/tell-me/html/what-is-a-central-

bank.en.html

https://economictimes.indiatimes.com/definition/commercial-bank