LLM Group 2 Business Law Global Trade Under World Trade Organisation 2023 Question Paper with Solutions

For full marks, cover: the conference as an answer to three identified problems, since that is the clearest structure and it shows why there were to be three institutions; then the agreements, and the plural in the stem requires the Final Act, both sets of Articles of Agreement and the trade recommendation; then what happened to the settlement and why a trade lawyer still needs it.

The conference was designed against three problems, and each intended institution answers one of them. The first was monetary: competitive devaluation, exchange controls and bilateral clearing had destroyed the multilateral payments system, so a country facing a temporary deficit had no option but to devalue or to restrict imports. The second was capital: economies destroyed by war could not borrow on private markets at any tolerable rate, and nor could poor countries. The third was commercial: tariff retaliation, of which the American Smoot Hawley Tariff Act of 1930 is the standing example, had helped cut the value of world trade by roughly two thirds between 1929 and 1934. The planners of 1944 believed that this sequence had produced unemployment, then extremism, then war.

The design contest had been settled before the delegates arrived and it shaped everything. Keynes's International Clearing Union would have created an international unit, the bancor, with resources of about twenty six billion dollars and an obligation to adjust falling on surplus as well as deficit countries, enforced by charging interest on excessive credit balances. White's Stabilization Fund was about five billion, financed by subscribed quotas, lending only what it held, with votes weighted by quota and adjustment falling on the deficit country alone. The United States held about two thirds of the world's monetary gold and would be the only large creditor, so White's plan prevailed on every contested point. The consequence, visible in every Fund programme since, is that adjustment and conditionality fall on the borrower.

The agreements that resulted

The Final Act of 22 July 1944 is the umbrella instrument. It annexes the two sets of Articles of Agreement and carries a series of recommendations, of which the one that matters for this subject urges the participating governments to seek agreement as soon as possible on the reduction of obstacles to international trade.

The Articles of Agreement of the International Bank for Reconstruction and Development answer the capital problem, and by a method entirely unlike the Fund's. The Bank's purposes are to assist reconstruction and development by facilitating the investment of capital for productive purposes, to promote private foreign investment by guarantee or participation, and to promote the long range balanced growth of international trade. It borrows on private capital markets against callable capital subscribed by members and lends to governments, or with a government guarantee, project by project, at a small margin over its own cost of funds.

Voting is weighted by shareholding. It opened on 25 June 1946, made its first loan of two hundred and fifty million dollars to France in May 1947, was overtaken in reconstruction by the Marshall Plan of 1948, and turned to development. Four affiliates followed: the International Finance Corporation in 1956, the International Development Association in 1960, the International Centre for Settlement of Investment Disputes in 1966 and the Multilateral Investment Guarantee Agency in 1988.

President Truman declined to submit it to the Senate once ratification became hopeless in 1950. Its commercial policy chapter had already been detached and brought into force on 1 January 1948 as the General Agreement on Tariffs and Trade under a Protocol of Provisional Application, so that the Geneva tariff concessions of 1947 would take effect at once. Two of the three pillars therefore stood, and the third was a provisional agreement for forty seven years until the Marrakesh Agreement of 15 April 1994.

What became of the settlement

The par value system ended between 1971 and 1973. The United States suspended gold convertibility on 15 August 1971; the Smithsonian Agreement of December 1971 devalued the dollar and widened the bands; by March 1973 the major currencies floated. The Second Amendment, in force 1 April 1978, abolished the par value obligation, demonetised gold and substituted surveillance under a revised Article IV. Special Drawing Rights, created by the First Amendment in 1969 and valued on a currency basket since 1974, remain, and the largest allocation in the Fund's history, about six hundred and fifty billion dollars, was made on 23 August 2021.

The one case in which Bretton Woods decided a trade dispute, worked out

India: Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS90/AB/R, Appellate Body report adopted 22 September 1999. This is the case to give, because it is the point at which the monetary institution created in 1944 determined the outcome of a trade case in 1999, and no other authority makes the connection so directly.

The facts. India maintained import restrictions, principally discretionary and non automatic licensing, on 2,714 tariff lines covering agricultural, textile and industrial products. The measures had been in place for decades and were justified under Article XVIII:B of GATT 1994, which permits a developing member to restrict imports to safeguard its external financial position and balance of payments. The United States complained that India's reserves had long since recovered and that the justification had lapsed.

Why it bears on this question. The Final Act of 1944 produced two institutions and recommended a third. The trade pillar, when it finally arrived in 1995, was drafted to defer to the monetary one: Article XV of GATT makes the Fund's findings evidence a panel must accept, and Article III:5 of the Marrakesh Agreement makes coherence with the Fund and the Bank one of the WTO's five functions. India: Quantitative Restrictions is that design working exactly as intended, at India's expense.

Conclusion. The Bretton Woods Conference of 1 to 22 July 1944 was a deliberate institutional response to three identified failures of the interwar economy, monetary, capital and commercial, and it produced answers to the first two. Its agreements are the Final Act of 22 July 1944, the Articles of Agreement of the International Monetary Fund and of the International Bank for Reconstruction and Development, both in force on 27 December 1945, and a recommendation that trade barriers be addressed separately.