World Trade Organization (WTO)

Study Guide

Table of Contents Table of Contents ...... 2 Welcome Letter ...... 3 Introduction to the WTO ...... 4 Topic A: The future of Free trade: Application of agricultural and related subsidies in the global economy ...... 6 Introduction ...... 6 Defining and Explaining the Key Terms ...... 6 The History of Agricultural and Related Subsidies ...... 8 The Status Quo: The Doha Round (2001 – Present) and the 2013 Bali Ministerial Declaration ...... 9 Executive Summaries of WTO Actions ...... 12 Proposed Reform Ideas: World Trade Organization and Beyond ...... 14 Conclusion ...... 16 Topic B: Reforming the International Monetary System: Promoting Growth and Stability in Least Developed Countries (LDCs) ...... 20 Introduction ...... 20 Defining and Explaining the Key Terms ...... 20 The History of the International Monetary System ...... 21 The Status Quo: Free Floating Exchange Rates (1971 – Present) ...... 23 Executive Summaries of UN Action ...... 25 Proposed Reform Ideas: United Nations and Beyond ...... 27 Conclusion ...... 29 Bibliography ...... 30

Welcome Letter

Dear Delegates,

As director of the World Trade Organization (WTO) I warmly welcome you to LIMUN 2015! My name is Ann-Kristin Matthé and I will chair the WTO together with James Theuerkauf as assistant director.

I am currently studying a double master in Public Policy and Human Development at the United Nations University and the Maastricht School of Governance. Since my first MUN about six years ago, I have contributed to several conferences across Europe, for example in Rome, The Hague or Berlin and most recently in Oxford.

At this conference you will be diplomats in the most important body dealing with international trade. Since 20 years, the WTO it is not only committed to enhancing free trade but also serves as forum for international dispute settlement in the field.

I am looking forward to seeing you in February for a WTO of LIMUN 2015 that results in effective policy solutions, an awesome MUN experience and some lasting friendships!

Please feel free to ask any remaining questions via email!

Ann-Kristin Matthé

Introduction to the WTO

The goal of the WTO is to “improve the welfare of the peoples of the member countries” by ensuring “that trade flows as smoothly, predictably and freely as possible.” 1 Within this organization Member States can negotiate trade agreements and settle their trade disputes. All actions are based on the cooperation of Member States and their consent. This implies that votes are taken by consensus, giving every country an equal say in negotiations. The WTO is the most important organ on the international level in regard to trade and it serves the following purposes:2

- Monitoring national trade policies - Administration of WTO trade agreements

- Technical assistance for developing - Forum for trade negotiations countries - Cooperation with other international - Dispute settlement organizations

Its predecessor is the General Agreement on Trade and Tariffs (GATT), a multilateral trading system that hold several rounds of trade negotiations and was concluded by the Uruguay Round negotiations in 1986-94. Following this round, the WTO was established on January 1. 1995. Until today, membership has grown to 160 countries and in 2001, the new negotiation round, the Doha Round, was opened. At the end of 2013, Member States adopted the Bali Ministerial Declaration, a milestone and intermediary result of the present negotiation round, which served to further advance the WTO system.

“At the heart of the system — known as the multilateral trading system — are the WTO’s agreements, negotiated and signed by a large majority of the world’s trading nations, and ratified in their parliaments. These agreements are the legal ground-rules for international commerce. Essentially, they are contracts, guaranteeing member countries important trade rights. They also bind governments to keep their trade policies within agreed limits to everybody’s benefit.”3

1 WTO, “The WTO… in Brief,“ http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr00_e.htm. 2 List of purposes, see: WTO, “Understanding the WTO – Who we are?“ http://www.wto.org/english/thewto_e/whatis_e/who_we_are_e.htm. 3 WTO, “The WTO... in Brief.“ © London International Model United Nations 2015 4 LIMUN | Charity No. 1096197 www.limun.org.uk

The two basic principles of the WTO are the most-favourite-nation principle and the national treatment principle. The most-favourite-nation principle demands not to discriminate or differentiate between different trading partners. This means that the most favourable standards of trade granted to one trading partner has to be expanded to all trading partners. Secondly, the national treatment principle refers to the idea of ensuring the same treatment for foreign goods and services as for national ones.4

The WTO cooperates closely with the International Momentary Fund (IMF) and the World Bank (WB) with the aim to advance coherence in global economic policy-making.5 The concept of coherence lies also at the core of its relations with other international organizations like the United Nations (UN). Within the UN system, the WTO cooperates closely with sub-organs like the United Nations Conference on Trade and Development (UNCTAD), the Food and Agricultural Organization (FAO), the World Health Organization (WHO) and the United Nations Environment Program (UNEP).6 Moreover, it participates regularly in the activities of the UN Economic and Social Council (ECOSCO) and is part of the UN’s Chief Executive Board. 7

At LIMUN 2015, you have the honour to celebrate the 20th anniversary of the WTO by developing solutions to two very important and pressing issues of world trade. Topic A focuses on the future of free trade in the context of agricultural subsidies and related subsidies in the global economy. The challenging dilemma between more free trade and constant attention to other concerns like welfare or environmental policies will lie at the heart of discussions on this agenda item. Secondly, topic B will discuss reforms of the international monetary system with the aim of promoting growth and stability in least developed counties (LDCs). How can LDCs’ interests be taken into account in reforming the current system of free-floating exchange rates and which alternatives could be implemented? These and further challenges are to be tackled under agenda item B.

4 WTO, “Principles of Trading Systems,“ http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm. 5 See amongst others: General Council Decision, “Agreements Between the WTO, IMF and World Bank,” November 1996. 6 For further information, see: WTO, “The WTO and Other International Organizations,“ http://www.wto.org/english/thewto_e/coher_e/coher_e.htm. 7 More information on the WTO-UN cooperation: WTO, “The WTO and the United Nations,” http://www.wto.org/english/thewto_e/coher_e/wto_un_e.htm. © London International Model United Nations 2015 5 LIMUN | Charity No. 1096197 www.limun.org.uk

Topic A: The future of Free trade: Application of agricultural and related subsidies in the global economy

Introduction The core idea of the World Trade Organization (WTO) is to enhance world trade by reducing not only tariffs but also non-tariff barriers and other distortions to free trade. Governments often desire to influence the amount of agricultural production, the way it is produced or the kind of output. These goals can be reached amongst others by using subsidies. In this regard, the work of the WTO is important because “[o]ne distortion invites another, which creates the need for a third.”1 This statement refers to the European common agricultural policy (CAP), a well-known and often criticized scheme of agricultural subsidies to European Union (EU) Member States. The EU supports farmers with subsidies, so that even less-competitive farms can be maintained. This additional source of revenue to agricultural producers leads to overproduction within the EU. Since the resulting prices would be too high to be competitive on the world market, the EU supplies export subsides that lower the price for consumers outside the EU. This increase in supply at low prices contributes to lower world market prices for agricultural products. In order to shield the EU farmers against these low prices, the EU imposes import tariffs. Given the complexity of this mechanism it is not surprising that agricultural subsidies still make up the largest share of the EU’s budget. Thus, the EU’s agricultural subsidy scheme is a case in point to call for more free trade in the global economy. This study guide will provide you with definitions and explanations of the key terms, paying particular attention to the different types of subsidies. Subsequently, an overview of the historical development of the topic will be given. Thereafter, the status quo and the current country groups in the WTO will be described. This will be followed by a summary of previous actions by the WTO. Finally, some reform proposals and future challenges will be discussed in order to provide you with an overview of the state of the art in this field, followed by a brief conclusion.

Defining and Explaining the Key Terms The WTO defined the term “subsidy” for the first time in the Agreement on Subsidies and Countervailing Measures (SCM Agreement). The definition includes three elements and only if all three are fulfilled and subsidies are “specific” they are subject to WTO procedures. The first

element is financial contributions, which establishes that governments have to spend financial resources for the definition to hold. The financial contribution can take forms like “grants, loans, equity infusions, loan guarantees, fiscal incentives, the provision of goods or services [as well as] the purchase of goods.”2 The second element is that the financial contribution has to be made by or at the direction of a government or any public body within the territory of a WTO Member State. Thereby, the definition covers direct support by governments, as well as, actions conducted by bodies like regional state organs or state-owned businesses.3 The third element of the definition is that the financial contribution must confer a benefit. The exact application of this requirement is still open, however, in the case Canada-Aircraft, the Appellate Body has ruled that benefits are to be assessed in comparison to what the beneficiary could have obtained on the market.4 The rules on subsidies are more refined in the field of agriculture. While general subsidies are classified as prohibited or actionable, meaning challengeable under WTO procedures, agricultural subsides form a third separate category. General subsidies are classified in three groups, so-called boxes.5 A green box signifies a permitted subsidy, an amber one a subsidy that should be reduced and a red one a forbidden subsidy. In the case of agriculture, the red box does not exist and instead a blue one is added to the classification. Each of these categories is explained in the Agreement on Agriculture (AoA).6 The green box contains subsidies that do not distort trade or result only in minimal distortions (AoA, Annex 2).7 Thus, these subsidies are permitted within restrictions and do not have to be reduced.8 They have to be government funded, in order to not increase consumer prices and may not be provided through price support. Thus, usually this type of subsidies consists of support to the overall income of farmers, which does not focus on one product, so it is “decoupled” from production levels and prices. An important second class of subsidies are government service programs like public stockholding programs, infrastructural services and research in relevant areas, as well as, environmental and regional development subsidies.9 Amber box agricultural subsidies are defined as distortion to production and trade, for example in the form of price support or subsidies targeting production quantities (AoA, article 6).10 Contrary to green box subsidies, amber box support shall be reduced by governments over time in order to enhance free trade. Blue box subsidies fall in a middle category and refer to the same class of subsidies as the amber

category; however, these subsidies are contained by a requirement to reduce production if a subsidy is received (AoA, article 6.5).11 Governments are currently not limited on their spending in this category and the future of this type of subsidies is still open. Additionally, a distinction between domestic and export subsidies is made. Export subsidies refer to “a benefit conferred on a firm by the government that is contingent on exports” (see also AoA article 9), while and a “domestic subsidy is a benefit not directly linked to exports” and can be found in the context of this guide under the term “domestic support.”12 Free trade is defined as “[i]nternational trade unhampered by government-imposed constraints, such as tariffs, quotas, restrictions on foreign ownership, and other barriers.”13 The reference to other barriers, includes subsides as potential form of other barriers to trade. The global economy refers to the globalized structure of trading partners and trading routes around the world. Connected to this is the process of economic globalization, which describes two aspects: “the mobility of goods, services, capital, technology, and people in the world economy as a whole; and a given country’s integration into the world economy.”14

The History of Agricultural and Related Subsidies The initial General Agreement on Trade and Tariffs (GATT) was established in 1947 to rebuild international trade after World War II and included only limited provisions on subsidies, while focusing instead primarily on reducing tariff barriers. However, after having reduced tariff barriers without cutting subsidies, the latter were increasingly seen as obstacles to trade. In case two countries have negotiated mutual market access, while one of them maintains a subsidizing scheme to national import-competing companies, this is an example for a trade distortion. The underlying reasoning is that the subsidized production yields higher revenue or leads to lower prices for the products of the subsidies’ beneficiaries. Moreover, domestic subsidies to exporting producers can divert bilateral trade towards third counties that apply the export subsidies, since trading with them can be more favourable for the original bilateral trading partners.15 Agricultural subsidies are a very sensitive topic of great importance to many countries. Therefore, separate regulations were found for agricultural products in most initial rounds of negotiations. First incremental steps to liberalize the agricultural sector were taken in the Kennedy Round in the 1960s. During the subsequent negotiations in the Tokyo Round in the 1970s, a multilateral “Subsidies Code” was established and only in the Uruguay Round in 1986, the abovementioned AoA

was agreed upon after lengthy negotiations.16 The AoA is the central document resulting from the Uruguay Round Protocol, also called GATT 1994, which will be described in more detail in the section summarizing WTO actions. However, the Uruguay protocol entails further relevant provisions on agricultural topics. Firstly, Appendix I covers tariff concessions on a most-favoured nation basis and tariff quotas for agricultural products.17 Secondly, Appendix V specifies commitments limiting subsidization of agricultural products. Thirdly, the final provision includes a schedule for the implementation of the newly agreed steps towards the reduction of trade barriers. As reflected in the outcome, the Uruguay Round was the first one where developing countries became more involved in international trade negotiations.

The Status Quo: The Doha Round (2001 – Present) and the 2013 Bali Ministerial Declaration The Doha Round was initiated in 2001 and pays particular attention to developing countries. Agriculture is one of its key issues and covers the three themes: “domestic support (subsidies), market access (import regime, including tariffs), and export competition (export refunds, export credits, food aid and state-trading enterprises).”18 After slow and temporarily stalled negotiations, from 2012 onwards a limited agenda was pursued and at the end of 2013, Member States finally agreed to the Bali Ministerial Declaration, which signalled their overall willingness to proceed with the WTO’s agenda.19 It was the first agreement adopted under the WTO and provided new impetus also with regard to agricultural matters. Nevertheless, the agreements in the field of agriculture were limited to the selected agenda of four issues plus the discussion of cotton subsidies. These four issues were: reducing export subsidies and “export competition” policies, tackling persistently under-filled “tariff quotas” for imports, allowing for developing countries’ food stockholding for food security and finally, adding general services of particular interest to developing countries to the “Green Box.”20 Prior to the Bali Ministerial Decision, India had raised concerns about stricter regulations in the field of agriculture out of concerns they would hamper its food aid programs that include storing large amounts of food. Many developing countries wish to shield their public stockholding programs for food security against the possibility of law suits in case they find themselves unable to comply with the newly established WTO rules. So far, only an interim solution has been found, thus, a permanent solution still has to be negotiated until the end of this year.21 Under the interim provision, India was given four years in which it does not have to comply with the new rules and during the next round of negotiations the issue will be reviewed.

With regard to the global difference of interest between developing and developed countries, a prominent example is the dispute between Brazil and the United States of America (USA) over American cotton subsidies. This case was filed in 2002 and decided in 2004, although, it could not be resolved until 2014. The WTO dispute settlement supported Brazil’s claim that the “US support for cotton farmers – Including direct payments, crop insurance and export credit programmes – was illegal under WTO agreement.” 22 This is an exemplary expression of the discontent of developing countries with the agricultural subsidies provided by developed countries and a success for developing countries to have their point of view recognized by the WTO. Nevertheless, it also demonstrates the potential problems that evolve in such a setting. The USA used appeals and further methods to prevent cutting its subsidies, so that “Brazil was granted the right to retaliate against US [United States] export for up to $829m annually.”23 In order to prevent retaliatory measures being taken by Brazil, the USA proposed a temporary deal to pay monthly allowances of $12.2m to Brazilian farmers until the US law on subsidies could be changed. However, the judicial change was stalled in Congress for several years and automatic federal budget cuts terminated the payment of allowances in 2013. Brazil was reluctant to initiate a trade war with the USA and finally last year, both were able to negotiate a lump sump payment of $300m from the USA to Brazil. With this compromise, no new distortions are introduced, as would have been the case if Brazilian had retaliated against the USA. Thereby, this case has come to and end, while, the underlying issue remains to be solved in future negotiations. This year in December, the WTO will hold its 10th Ministerial Conference in Nairobi, which means that a Ministerial Meeting will take place for the first time in Africa. In this meeting the focus lies on the implementation of the Bali Ministerial Declaration, with special regard to finding a sustainable solution on public stockholding.24

Country groups in the field of agriculture As previously mentioned cases have demonstrated, the influence of countries within the WTO has changed over time and changed the decisions taken by this organization. For a long time, the USA and the EU have been the two most important actors with regard to free trade. However, over the past decade the developing countries have gained importance. One group of growing economies with expanding influence are the BRICS countries, which have begun to promote their own

interests also against established actors’ positions.25 In many instances, countries like India or Brazil have demanded from the US and EU to contribute more to advance international free trade, while promoting less ambitious goals for developing countries.26 Nevertheless, as shown in the graphic above, the composition of the “block” of developing countries is by no means unitary and clearly defined. Instead, in many instances varying coalitions form per topic area.

Figure 2 – Visual representation of how the agriculture groups intersect 27 One of the groups in the graphic is the Cairns Group, named after the Australian city of its first meeting in 1986 at the beginning of the Uruguay Round, which requires additional explanation. It consists of a coalition of 19 developing as well as developed countries and has proven to be an influential power in the negotiations regarding the liberalization of agricultural trade. Most members are food-exporting countries and highly in favour of trade liberalization in the agricultural sector, which leads this group to continuously criticizes the high level of protectionism in the USA, the EU and Japan.28 With regard to another group, please note that the EU Commission negotiates on behalf of the EU, while the EU as well as its single Member States are members of the WTO.29

Executive Summaries of WTO Actions

The Agreement on Agriculture (January 1. 1995) This international treaty was negotiated during the Uruguay Round and forms part of the WTO treaty system.30 The same round led to the conclusion of three other related agreements, one in the area of market access, a second regarding sanitary and pythosanitary measures and a final one with regard to least-developed and net food-importing countries. In the interest of advancing “predictability and stability for importing and exporting countries,” the AoA is seen as the first step in a process of negotiations on agricultural trade.31 In order to facilitate compliance in the early stages of agricultural liberalization, exceptions have been introduced. These include for example some leeway in the implementation of the new rules or the permission to apply less distorting domestic support measures in order to maintain rural economies.32 The three main points of the AoA are market access, domestic support and export competition, as mentioned earlier in the context of the Doha round. Market access deals with “trade restrictions confronting imports” and refers to the decision to transform non-tariff border measures into tariffs with the aim of subsequently gradually lowering the level of protectionism.33 Since the focus of our session will lie on subsidies, tariffs are not the main point to be discussed. Domestic support refers to subsidies and other support measures contributing to the income of farmers or guaranteeing certain price levels.34 This kind of subsides is classified in the boxes that were introduced in the section on definitions and will be analysed here in more detail. Governments may continue to pay agricultural subsidies in the green box category, since their trade distorting effect is seen as negligible. Nevertheless, this group of support measures has been subject to criticism. The controversy around the green box evolves from the argument that many subsidies mentioned in Annex 2 of the AoA might result in more than minimal distortions of trade. If this were the case, the subsidies would no longer qualify for the green box. Cases in point here are for example “direct payments to producers (paragraph 5), including decoupled income support (paragraph 6), and government financial support for income insurance and income safety-net programmes (paragraph 7).“35 The opposite claim is that present regulations are still too strict in order to properly account for non-trade objectives such as environmental protection. So far, the Doha round has not found a solution to this problem.

The amber box can be seen the opposite of the green box because measures that fall into the amber box are considered distortive to trade and have to be reduced. In more detail this means that states have to reduce the excess subsidies above a 5% or respectively 10% threshold, by 20% (developed countries), 13.3% (developing countries) or 0% (LDCs) respectively during the implementation period. 36 All calculations for reduction requirements are based on the above- Figure 1 – Domestic Support in the Agreement on Agriculture37 mentioned Total Aggregate Measurement of Support (Total AMS; AoA, article 1 and Annex 3 and 4).38 The Total AMS includes all product-specific and non-product-specific subsidies of a country taken together and thus, provides “an index that measures the monetary value of the extent of government support to a sector.”39 Current negotiations concern the idea to disaggregate this measure to demand more specified reductions, for example separately targeting product and non-product-specific subsidies. Despite green box subsidies, further options exclude governmental support from the reduction requirements of the amber box. Firstly, blue box subsidies are of the same kind as the amber category but come with requirements to reduce production if a subsidy is received (AoA, article 6.5).40 With regard to the future of this type of subsides two points of view exist. On the one hand, they can be seen as subsidies really similar to the first amber category, which should consequently be further reduced, while on the other hand, they can be seen as beneficial alternative to subsidies in the amber category that should be maintained to reduce the volume of subsides in the amber box. Secondly, “developmental measures” are permitted and allow for assistance to developing

countries’ agricultural sectors in a direct or indirect way with the aim to foster rural development in these countries (AoA, article 6.2).41 And finally, “de minimis” allowances permit trade-distorting subsidies that would otherwise be subject to reductions to remain in place as long as they do not exceed 5% of agricultural production in the case of developed countries and 10% in case of developing countries (AoA, article 6.4, calculation with Total AMS).42 The third topic is export subsidies, which are used to artificially ensure competitiveness of exports.43 In this regard: “Members are required to reduce the value of mainly direct export subsidies to a level 36 per cent below the 1986-90 base period level over the six-year implementation period, and the quantity of subsidised exports by 21 per cent over the same period. In the case of developing countries, the reductions are two-thirds those of developed countries over a ten-year period (with no reductions applying to the least-developed countries) and subject to certain conditions, there are no commitments on subsidies to reduce the costs of marketing exports of agricultural products or internal transport and freight charges on export shipments.”44 Moreover, the AoA provides regulations for the donation of food aid (AoA, article 10.4) and for the application of export credits (AoA, article 10.2). 45 To further accommodate the interests of developing countries and LDCs, so-called “peace” provisions are included in the AoA. Among them the earlier mentioned exemption in calculating the reduction requirements based on the Total AMS and a restriction termed “due restraint” in the use of WTO procedures against less well performing countries (AoA, article 13 and 18.4). WTO procedures include the for example option to impose countervailing duties as reaction to violations of the subsidy reduction requirement. The duration of these peace provisions is limited to nine years.46 A committee supervises the implementation of these decisions, which are seen as initial steps to the liberalization of agricultural trade.

Proposed Reform Ideas: World Trade Organization and Beyond Reforms towards the long-term objectives of the Uruguay Round The AoA strives to work towards the long-term objectives of the Uruguay Round as stated in its preamble. In this regard, the problems and unsolved conflicts of interest as mentioned in the prior section provide an important starting point for future reforms. Thus, regarding domestic support

and green box subsidies, the question arises up to which level the exemptions in Annex 2 can be regarded as minimally distorting to trade. The current definition of the minimally distorting element in the AoA has been criticized as being too open to interpretation. However, negotiations determining this level should go beyond the consideration of its effects on free trade and also look at non-trade concerns. With regard to amber box subsidies, the calculation of reduction requirements using the Total AMS has been questioned for relying on a total sum, instead of yielding a targeted reduction demand. And with regard to blue box subsidies, the existence of the entire category was called into question based on the idea that it provides excuses not to reduce obsolete subsidies. The opposing point of view justifies blue box subsidies as viable alternative for subsides that would otherwise be even more distortive support belonging in the amber box.

Public Stockholding for Food Security Purposes Regarding the Decisions taken by the Special General Council on Public Stockholding for Food Security Purposes, in 2015 a detailed version for permanent solution should be established.47 The main challenge will be to reconcile the interest in fair trade of developing countries with the concerns of developed countries that feel a necessity to protect domestic producers. In this regard the WTO rules on special and differentiated treatment offer a starting point to discussing the developing countries’ position in the WTO system. 48 A similar situation evolves in the case of the post-Bali agenda and cotton subsidies.

Post-Bali: decisions on agriculture with a focus on cotton One of the results of the conference on Bali was the commitment to implement the Bali Ministerial Decision. In the agricultural sector this means implementing the Bali decision on agriculture, which pays particular attention to cotton. Additionally, a work program for the remaining issues of the Doha Development Agenda (DDA) should be established. In the context of developing a new agenda tackling the remaining points of the DDA Roberto Azevêdo, Director-General of the WTO, said in January this year: “So I think this is an important moment — and a real opportunity. The big, tough issues of agriculture, services and industrial goods will all be back on the table. So I urge you all to be prepared and to engage proactively in this work.”49 The topic of cotton has evolved as a case in point where developed countries have long maintained high subsidies even if some are

contrary to WTO rules. Additionally, recently cotton prices on the world market have fallen, which provides further incentives to subsidize local producers to be able to compete on the world market.50 And while the case between Brazil and the US has been resolved, the general issue of subsidies by developed countries remains an important topic for the future negotiations in the Doha round.

Conclusion This study guide offers you an overview of the field of agricultural subsidies. To shape the future of free trade it is up to you to resolve the presented challenges. After an introduction to the WTO and the topic, definitions and explanations of key terms have been provided. Thereafter, an outline of the historical development of the topic was given, flowed by an explanation of the present situation. In addition to this, the current grouping of countries in the WTO was outlined. Subsequently, previous actions by the WTO, particularly the Agreement on Agriculture, were described. In conclusion, some proposed reform ideas and future challenges were presented. As Director-General Roberto Azevêdo requests: “We have to make sure that Bali is just the beginning — and use that momentum to deliver even more. […] As instructed by Ministers in Bali, delegations in Geneva have started work to prepare, by the end of this year, a clearly defined work programme to conclude the Doha Round. And there are some really important issues on the table. In my view, any engagement here will have to tackle the really tough areas upfront: industrial goods, services, and agriculture.“51 Finding solutions to the future of agricultural subsidies will be your task in the WTO of LIMUN 2015.

Endnotes/Bibliography (particularly useful sources are highlighted)

1. The Economist, “The Sword and the Shield,” September 12, 2003, http://www.economist.com/node/2064132?zid=293&ah=e50f636873b42369614615ba3c16df4a.

2. An introduction to multilateral disciplines regulating the provision of subsidies and the use of countervailing measures to offset injury caused by subsidized imports: “Agreement on Subsidies and Countervailing Measures (“SCM Agreement”),” http://www.wto.org/english/tratop_e/scm_e/subs_e.htm For original text, see: http://www.wto.org/english/docs_e/legal_e/24-scm.pdf. 3. Ibid. 4. Ibid.

5. This paragraph is based on: WTO, “Domestic Support in Agriculture – The Boxes,” http://www.wto.org/english/tratop_e/agric_e/agboxes_e.htm.

6. WTO, Agreement on Agriculture, http://www.wto.org/english/docs_e/legal_e/14- ag.pdf.

7. This paragraph is based on: WTO, “Domestic Support in Agriculture – The Boxes.”

8. For more information on the restrictions, see: Annex 2 of the Agriculture on Agreement.

9. WTO, “Agriculture: Explanation – Domestic Support,“ http://www.wto.org/english/tratop_e/agric_e/ag_intro03_domestic_e.htm.

10. This paragraph is based on: WTO, “Domestic Support in Agriculture – The Boxes.”

11. For details see: Paragraph 5 of Article 6 of the Agriculture on Agreement.

12. WTO, “Glossary,“ http://www.wto.org/english/thewto_e/glossary_e/glossary_e.htm.

13. Financial Times, “Lexicon: Free Trade,“ http://lexicon.ft.com/Term?term=free-trade.

14. Financial Times, “Lexicon: Economic Globalization,“ http://lexicon.ft.com/Term?term=free-trade.

15. WTO, “B Defining Subsidies,“ http://www.wto.org/english/res_e/booksp_e/anrep_e/wtr06-2b_e.pdf. 16. Ibid.

17. For the statements regarding the Uruguay Protocol’s Annexes see: WTO, “Legal Texts the WTO Agreements,” http://www.wto.org/english/docs_e/legal_e/ursum_e.htm.

18. The European Commission, “Agriculture and Rural Development – Agriculture in the Doha Round,” http://ec.europa.eu/agriculture/wto/doha-round/index_en.htm. 19. WTO, “Bali Ministerial Declaration,“ http://www.wto.org/english/thewto_e/minist_e/mc9_e/balideclaration_e.htm.

20. WTO, “Briefing Note: Agriculture Negotiations — the Bid to ‘Harvest’ some ‘Low Hanging Fruit’,” http://www.wto.org/english/thewto_e/minist_e/mc9_e/brief_agneg_e.htm#trq.

21. WTO, “The Bali Decision on Stockholding for Food Security in Developing Countries,” http://www.wto.org/english/tratop_e/agric_e/factsheet_agng_e.htm.

22. Aaron Stanley, “US and Brazil Reach Accord on Cotton Subsidies,” http://www.ft.com/intl/cms/s/0/b7f7e78c-4984-11e4-80fb-00144feab7de.html#axzz3POkw7r5W. 23. Ibid.

24. WTO, “Azevêdo: India’s Support “vital” in WTO Negotiations this Year,” http://www.wto.org/english/news_e/spra_e/spra46_e.htm. And: WTO, “Post-Bali,” http://www.wto.org/english/thewto_e/minist_e/mc9_e/nov14postbali_e.htm.

25. The BRICS countries are Brazil, Russia, India, China and South Africa.

26. The Economist, “The Sword and the Shield.“

27. Negotiations Coalitions in Agriculture, http://www.wto.org/english/tratop_e/dda_e/groups_e.pdf. For a comprehensive table of group membership, see: WTO; “Agriculture: Negotiations - Groups in the Agriculture Negotiations” http://www.wto.org/english/tratop_e/agric_e/negoti_groups_e.htm.

28. The Carnis Group, “Background on the Cairns Group and the WTO Doha Round,” http://cairnsgroup.org/Pages/wto_negotiations.aspx

29. European Commission, “How the EU Works with the WTO,” http://trade.ec.europa.eu/doclib/docs/2013/april/tradoc_150988.pdf.

30. WTO, Agreement on Agriculture.

31. WTO, “Agriculture Negotiations: Backgrounder- Developing Countries,” http://www.wto.org/english/tratop_e/agric_e/negs_bkgrnd14_devopcount_e.htm. 32. Ibid.

33. WTO, “Agriculture: Fairer Markets for Farmers,“ http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm3_e.htm. 34. Ibid.

35. WTO, “Domestic Support in Agriculture – The Boxes.”

36. As mentioned earlier, 5% for developed countries and 10% in case of developing countries. The reduction of 20% applies to developed countries, the reduction of 13.3 % to developing countries and the requirement for no reduction to least-developed countries (LDCs).

37. WTO, “Agriculture: Explanations – Summary,” http://www.wto.org/english/tratop_e/agric_e/ag_intro07_summary_e.htm.

38. See for definition AoA, article 1(a) and for more details and example calculation: WTO, “Agriculture Explanation – Domestic Support.”

39. Foreign Trade Information System, “Dictionary of Trade Terms,” http://www.sice.oas.org/dictionary/AG_e.asp.

40. WTO, Agreement on Agriculture.

41. WTO, “Agriculture Explanation – Domestic Support.” 42. Ibid.

43. WTO, “Agriculture: Fairer Markets for Farmers.“

44. “Where subsidised exports have increased since the 1986-90 base period, 1991-92 may be used, in certain circumstances, as the beginning point of reductions although the end-point remains that based on the 1986-90 base period level. The Agreement on Agriculture provides for some limited flexibility between years in terms of export subsidy reduction commitments and contains provisions aimed at preventing the circumvention of the export subsidy commitments.” See: WTO, “Agriculture Negotiations: Backgrounder- Developing Countries.” 45. Ibid. 46. Ibid.

47. WTO, “The Bali Decision on Stockholding for Food Security in Developing Countries.“

48. WTO, “Agriculture Negotiations: Backgrounder- Developing Countries.”

49. WTO, “Azevêdo: India’s Support “Vital” in WTO Negotiations this Year.“

50. WTO, “Summary of the General Council Meeting of 10 December 2014,” http://www.wto.org/english/news_e/news14_e/sum_gc_dec14_e.htm.

51. WTO, “Azevêdo cites China’s “crucial role” in trade liberalization,” http://www.wto.org/english/news_e/spra_e/spra22_e.htm.

Topic B: Reforming the International Monetary System: Promoting Growth and Stability in Least Developed Countries (LDCs)

Introduction

“The World has changed – the International Monetary System needs some serious rethinking”52 Alessandro Magnoli wrote in anticipation of the World Economic Forum’s 2012 Meeting in Davos, Switzerland. The reform of the international currency system is an issue of paramount importance that has received special attention since the Global Financial Crisis, from academics, technocrats, and politicians alike. Despite this continued dialogue, a definite proposal is yet outstanding. And, among the current proposals, one fundamental factor seems to be missing: a focus on the Least Developed Countries (LDCs). Therefore, and following from WTO Director-General Pascal Lamy’s speech in 2012, in which he outlined that “we need an international monetary system which facilitates international trade (…) [,] the international community needs to make headway on the issue of reform of the international monetary system. Unilateral attempts to change or retain the status quo will not work”53, the WTO is asked to propose a resolution on the reform of the international currency system, while taking into account the goals of promoting growth, as well as stability, in the Least Developed Countries. In the following study guide we will firstly provide a definition and explanation of the topic’s key terms, in order to set the scope for debate. Thereafter, we will elaborate on the history of the international monetary system, and its importance on the present, as well as on any future design of an international monetary system. Following this, we will then examine the present international currency system, placing special emphasis on the problems that it is currently encountering. Subsequently, we will be providing an executive summary of the most important resolutions and publications from the United Nations bodies on the issue. Finally, we will briefly touch upon some of the proposed reforms for the international monetary system that have emerged, highlighting their main points, in order to then end with a brief conclusion.

Defining and Explaining the Key Terms

Farhi, Gourinchas, and Rey (2011) define the International Monetary System as “the set of rules, conventions, and institutions that govern the conduct of monetary policies, their coordination (or © London International Model United Nations 2015 20 LIMUN | Charity No. 1096197 www.limun.org.uk

non-coordination), exchange rates, and the provision of international liquidity”. It is essentially the means by which buyers and seller in different countries with different national currencies accept to pay one another, facilitating international trade and cross border investments. Least Developed Countries (LDCs) are the 48 countries54 as classified by the UN as being least developed in terms of their (i) level of Gross National Income (GNI), (ii) level of human assets, and (iii) degree of economic vulnerability. Economic stability is defined as the absence of any excessive fluctuations in a fairly constant output growth and low and stable inflation in the macroeconomy, whereas economic growth mirrors the increase in the market value of the goods and service produced in an economy over time.

The History of the International Monetary System While one could trace back the history of the international monetary system as far back as centuries BC, the interesting periods for the reader and for a resolution on this topic, will be starting in the late 19th century, with the informal introduction of the so-called “Gold Standard”.

The Gold Standard: 1870 – 1914 and 1918 – 1933 The world experienced two periods where the international monetary system was subjected to the discipline of the Gold Standard: the Gold Standard of the years 1870 – 1914, as well as the Gold Exchange Standard of the inter-war years55. The 19th century Gold standard was supported by the fact that the British Sterling was quintessentially the international currency, which supported international commerce. What the Gold Standard means, is that the monetary system is based upon a fixed quantity of gold. According to Bordo and Rockoff (1996) the Gold standard proved to be the foundation of the first age of globalization, as adherence to it was interpreted as a “seal of approval” to international markets of the creditworthiness of emerging markets. The financing of WWI, however, led to the suspension of the Gold Standard as the international monetary system. After the War, there was widespread desire to reinstall the Gold Standard; however, the monetary expansion had led to inflationary pressures, which led some countries to enter at pre-war prices, while others adopted new valuations. Germany, which had no more Gold reserves following its defeat in the War, issued “virtually limitless amounts of marks without any backing to buy foreign currency” (Astrow, 2012), leading to hyperinflation. The inter-war Gold standard hence did not last for long: the new financial conditions required price deflation in order to achieve economic growth, © London International Model United Nations 2015 21 LIMUN | Charity No. 1096197 www.limun.org.uk

accompanied by politically unpalatable increased unemployment56. Research has demonstrated the impact of the Gold Standard on the Great Depression57, as it limited the ability of central banks to fall back on monetary policy as a tool to fight falling prices. The United States, committed to the Gold Standard, actually increased interest rates in 1931, at a time when the economy was in free fall – only in 1933 did the United States, after suffering from the devastating effects of deflation, abandon the Gold Standard58.

Bretton Woods: 1945 – 1971 The 1944 Bretton Woods conference, which was formally known as the United Nations Monetary and Financial Conference, saw the 44 attending countries endorsing a plan that set out rules, institutions and procedures to govern the international monetary system after WWII, based on plans drawn up from mostly British and American policy-makers, notably including John Maynard Keynes and Harry Dexter White. The arrangement was backed by the creation of two new international institutions, namely the International Monetary Fund (IMF) and the World Bank (WB), which were created in order to replace private finance for a more reliable development financing mechanism. The Bretton Woods agreement involved nations agreeing on a system of fixed (yet adjustable) exchange rates, where the currencies would be pegged against the US Dollar, which in itself would be convertible into Gold at a set price of $35/oz., de facto pegging the national currencies to the US Dollar, and in turn essentially establishing the US Dollar as the primary international reserve currency. Moreover, Bretton Woods introduced a system of capital controls, in order to protect countries from capital flights and allow independent macroeconomic policies. Furthermore, the Bretton Woods framework introduced some flexibility, as countries facing economic hardship were allowed to devalue their currencies vis-à-vis the Dollar in a limited way. Despite the Bretton Woods era underpinning a post-war economic boom in the 1950s and 1960s, the Yale Economist Robert Triffin identified the pitfalls of the Bretton Woods framework59, as the use of one national currency would lead to a conflict between the short-run domestic and the longer-term international objectives, as the incessant demand for the reserve currency leads to that country persistently running account deficits, which in turn leads to a declining value of the reserve currency and a loss of credibility in the emitting country, undermining confidence in the Dollar60. Simultaneously, a parallel market for gold had emerged, which soared above the US

mandated price, thus leading to a steady decrease in US Gold reserves. All of this eventually led US President Richard Nixon to end all convertibility into gold on the 15th of August of 1971, thus marking an effective end to the Bretton Woods system61.

The Status Quo: Free Floating Exchange Rates (1971 – Present) Since the breakdown of the Bretton Woods, the international monetary system has been one of free floating exchange rates, as well as a series of unilateral pegged exchange rates, which means that a particular government (e.g. that of Panama) essentially gives up monetary policy by pegging its exchange rate to a certain currency, in most cases the US Dollar (as is the case with Panama). The problem of free floating exchange rates with one national currency (the USD) serving as reserve currency has received great critical attention, especially since the Great Financial Crisis that hit the World Economy in 2007, as the current system (or non-system62) had led to large financial imbalance, which may have triggered the crisis. Moreover, the current system leads to a large amount of exchange rate volatility, which is particularly harmful to LDCs and to exporters in non- OECD countries63. The chart below shows the extent of this volatility, using swings in the US Dollar rate64.

Figure 1 – Swings in the US Dollar65

Moreover, the current system has encourage the abrupt reversal of capital flows, as well as persistent and “upstream” external imbalances, as net capital flows have been moving from emerging to richer economies (Astrow, 2012). The increased occurrence of crisis is a notable feature of the post-Bretton Woods International Monetary System, and may be seen as causal evidence for the malfunction of the current system. As can be seen in the following table, the period of 1973 – 1989 was even more prone to banking crises that the inter-war period, whereas the subsequent period from 1990 – 2010 still shows a high incidence by historical standards.

Figure 2 – Incidence of Crisis per International Monetary System Period While this is clearly not conclusive evidence for the failure of the International Monetary System, it does provide a clear symptom of the malfunction that our current system is suffering. The central IMF report on the international monetary system in 2013 concludes that “arguably, the post- Bretton Woods system of flexible/floating exchange rates, freer capital flows and the practice of independent monetary policy has not brought financial stability to the global economy.”66 Furthermore, the trend towards a multipolar world that the world economy is currently going through undermines the role of the United States as the world’s principal issuer of the reserve currency. This is complemented by the fact that an enormous amount of US dollars are held by central banks around the world, with the People’s Republic of China alone holding about $3.8trillion67, as well as doubts about the worth of the currency. There is, however, no real national currency alternative, as neither the Euro nor the Yen have a sufficient deep and liquid financial market, and there is no rival to the US Treasury and bond market. The emergence of the Euro, especially, has led to a diversification of global reserves, but the Eurozone crisis has strongly weakened international confidence in the currency68. The rise of China has led commentators to

look at the Renminbi as a medium- to long-run alternative as an international reserve currency; yet, it still has very little international exposure, is not fully convertible, and lacks a sounds institutional framework. As pointed out by World Bank President Robert Zoellick69, China will need to rebalance its economy towards boosting demand, reducing savings, and increasing consumptions, which will require it to lift restrictions on the Renminbi. In 2009, Xiaochuan Zhou, the Governor of China’s Central Bank, called for the creation of “an international reserve currency that is disconnected from the individual nations (…) [which] should be a gradual process that yields win-win results for all,”70 clearly distancing himself from the idea of the Renminbi replacing the dollar as the international reserve currency. Therefore, and as concluded by Astrow (2012): Thus the dollar may be suffering from long-term weakness, but its role as an international currency is certainly far from over, while the prospects for another global currency to replace it in the near future are not bright Meanwhile, there have been a series of calls for a rethinking of the international monetary system, coming from the IMF, the Eurozone, the ECB, independent think tanks, politicians, and academics alike. And what about the LDCs? There is some fear that, with the international monetary system being a struggle between the superpowers (be it the United States, China, the G-20, or the Eurozone) that the interests of the LDCs are forgotten. The last comprehensive study of the impact of the international monetary system on LDCs was done by Graham Bird in 1982 with his book The International Monetary System and the Less Developed Countries, in which he alerts how vulnerable the LDCs are to the flaws of the international monetary system, and points out the strong relationship between LDCs and the system. As explained above, the current volatility is particularly harmful to LDCs, and any design of a reformed system needs to take into account the impact it will have on the stability and the growth of the LDCs.

Executive Summaries of UN Action On the 18th of October of 2008 the President of the 63rd Session of the General Assembly, Mr. Miguel D’Escoto Brockmann, announced his intention of establishing a taskforce71, which then turned into a commission, in order to review the global financial system, in the light of the collapse of Lehman Brothers on September 15th, 200872 and the subsequent offset of the Global Financial

Crisis. The commission, which would be chaired by the Nobel Laureate in Economic Sciences of the year 2001, former chief economist of the World Bank, and Professor at Columbia University, Joseph Stiglitz, would produce the “Report of the Commission of Experts of the President of the United Nations General Assembly on Reform of the International Monetary and Financial System”, published in its entirety on the 21st of September of 200973. The Report, which goes beyond treating with the international monetary system, and also examines a reform of the global financial system, focuses on the role of regulation, institutions – including the World Bank and the IMF –, as well as international financial innovations, both in a positive and normative manner. It observes that the crisis has been exacerbated by flawed institutions and institutional arrangements. It recalls the fact that a large reason for the crisis and the current problems in the international monetary system are global imbalances, which have been tackled by asymmetric rules, which, instead of solving the problem, actually make it worse. Next to elaborating on some ideas for a reform of the international monetary system, which we will be developing on in the next section, the report also analyses the historic evolution of the international monetary system, as well as the problem it currently faces74. We would like to highlight one of the central points (31, Chapter 5) of the report, which summarizes its key concern with regards to the international monetary system: 31. The current crisis provides, in turn, an ideal opportunity to overcome the political resistance to a new global monetary system. It has brought home problems posed by global imbalances, international instability, and the current insufficiency of global aggregate demand. A global reserve system is a critical step in addressing these problems and in ensuring that, as the global economy recovers, it moves onto a path of strong growth without setting the stage for another crisis in the future. It is also a propitious moment because the United States may find its reserve currency status increasingly costly and untenable. The dollar can be a reserve currency only if others are willing to hold it as such, and as the return falls and the risk increases, greater reservations about the dollar as a reserve currency are being expressed. The dollar reserve system is likely to fray, if it is not already doing so. Moreover, the U.S. has embarked on a response to the crisis that will involve large domestic imbalances and also potentially large external imbalances, with unpredictable implications for the international reserve system. Thus, both the United States and foreign exchange reserve holding countries may actually find it acceptable to introduce a new system. The former

would be able to take policy decisions with less concern about their global impact; the latter would be less concerned about the impact of U.S. policies on their reserve holdings.75 And while the report has offered a series of analyses and policy proposals, little action on the side of the UN or national governments has been taken, increasing the importance of a potential resolution from the WTO.

Proposed Reform Ideas: United Nations and Beyond In the following section, we will be elaborating both on proposals set forward by the “Report of the Commission of Experts of the President of the United Nations General Assembly on Reform of the International Monetary and Financial System” (2009), as well as offering the reader further ideas about potential reforms of the international monetary system.

Multiple currency reserve system The default option, i.e. the one that is most likely to occur given no real reform of the international monetary system, will be the move towards a system of flexible exchange rates, with a multiple currency reserve system replacing the US Dollar as the global reserve currency. Dailami (2011) predicts that by 2025 the Euro, the US Dollar, and the Renminbi will all be reserve currencies. The proponents of this idea, including the Eurozone and the United States76, and lately China too, see this option as viable due to a greater stability and a more even distribution of the lender-of-last- resort responsibilities, while permitting LDCs to reduce the risk of depreciation on their reserve stocks. Moreover, one could argue that the geopolitical advantage of a multiple currency reserve system under flexible exchange rates allows an increased possibility to aid LDCs, if countries who are the main issuers combine the provision of global liquidity with growth and investment, while also stabilizing bilateral exchange rates, which, under the current system, has not occurred. There has however also been criticism of this idea, most notable from the UN Report that we have featured in this study guide. It reads It should be emphasized that a system based on multiple, competing reserve currencies would not resolve the difficulties associated with the current system, since it would not solve the problems associated with national currencies—and, particularly, currencies from major industrial countries—being used as reserve assets. 77

The problem with a multiple currency reserve system is, of course, that exchange rate volatility among issuing countries could provide another source of instability, which is exactly what a reform is looking to tackle.

Special Drawing Rights (SDRs) SDRs, essentially a “super-sovereign” currency, issued by the IMF, are proposed by many, including Zhou Xiaochuan, the governor of China’s central bank, to be the cornerstone for the reform of the international monetary system, or, as Mr Zhou put it, the “light in the tunnel for the reform of the international monetary system.”78 For a basic yet solid overview of SDRs, we encourage the reader to watch the video in Figure 3, produced by the IMF itself.

Figure 3 “Making Sense of SDRs”, International Monetary Fund79 (click image to open the video in an internet browser) The basic advantage of a global reserve currency, which is not issued by any national government, such as the SDRs, is that it provides a hedge against the currency risk inherent in any national currency, while also solving Triffin’s Dilemma, as explained above. The biggest problem facing SDRs currently is that their circulation is very small (as of 2009, SDRs constituted only 4% of global reserves)80, and its use is only between sovereign governments and the IMF itself, despite being in existence for over 40 years. For it to be used, “expanding the volume of official SDRs is a prerequisite for them to play a more meaning role” (International Monetary Fund, 2011). Moreover, as pointed out by David Bosco (2011): “Moving the SDR back to the prominent place it was designed to occupy would be a formidable political and logistical task.”

The UN (2011) report sees the SDRs as the main way forward in the reform of the international monetary system: This is a feasible proposal and it is imperative that the international community begins working on the creation of such a new global reserve system. A failure to do so will jeopardize prospects for a stable international monetary and financial system, which is necessary to support a return to robust and stable growth. The report further outlines a series of approaches of how to design the institutional framework for a new global reserve system81, such as the possibility of having the IMF continuing to issue SDRs or a Global Reserve Bank, the allocation based on a formula weighted by the relative national size in the world economy by GDP, the counter-cyclical issuance of SDRs to finance world liquidity and using SDR allocations to advance global development objectives in LDCs by multilateral development banks.

Returning to the Gold Standard? There have also been calls for a return to the Gold Standard82. In order for Gold to play a formal role in the international monetary system, it could not hamper the system’s performance or create unacceptable constraints on national economic policies – the latter being unlikely due to the inflexibility of a fixed price of gold. The think tank Chatham House has considered the idea of introducing Gold into the IMF’s SDR basket (“Gold-laced SDRs”), yet found no evidence of this actually bringing substantial benefits, while actually potentially proving an obstacle83. And while Gold is probably going to continue playing a significant role in the system as a hedging instrument, there are few concrete proposals about re-introducing it formally into the monetary system.

Conclusion In this study guide we have tried to give the reader an understanding of the international monetary system, by introducing its history in the forms of the Gold Standard and Bretton Woods, as well as explaining the status quo, and its pitfalls; wherever possible, we have introduced the impact of the international monetary system on the LDCs. Furthermore, we have reviewed the United Nations’ “Report of the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System” (2011), as well as providing the reader with proposed ideas to reform the system, mainly in terms of a multi-currency reserve

system or the widening of SDRs in order to replace the hegemonic status the US Dollar enjoys as the global reserve currency. What, then, are the next steps? There is no clear answer, and the importance of the matter requires a united approach, especially for the Least Developed Countries, who have a very large stake in the system, and yet have only played a very small part in forming it: “poor countries have almost no say in the rules of the game” (United Nations, 2009). Meanwhile, Sheng (2012) predicts that “realistically, only a more severe crisis will force common agreement on change”. However, it cannot be in the interest of the global community to await an even more severe crisis than the Global Financial Crisis, the harshest since the Great Depression. Hence, the WTO is asked to come up with a resolution on the reformation of the international monetary system, with a particular focus on the promotion of stability and growth in LDCs.

Bibliography

Astrow, André. Gold and the International Monetary System. Chatham House, 2012.

Bird, Graham. The international monetary system and the less developed countries. London: Macmillan, 1978.

Bordo, Michael D. and Hugh Rockoff. “The Gold Standard as a “good housekeeping seal of approval”.” The Journal of Economic History 56, no. 02 (1996): 389-428

Bosco, David. “Dreaming of SDRs.” Foreign Policy, September 7, 2011.

Copeland, Laurence S. Exchange Rates and international finance. Pearson Education, 2008.

Dailami, Mansoor. “The New Triumvariate”. Foreign Policy, September 7, 2011.

Dorucci, Ettore and Julie McKay. “The International Monetary System After the Financial Crisis.” European Central Bank, Occasional Paper Series No. 123, 2011.

Eichengreen, Barry J. Golden Fetters: The Gold Standard and the Great Depression, 1919-1939. Oxford University Press, 1996.

Farhi, Emmanuel, Pierre-Olivier Gourinchas, and Hélène Rey. Reforming the international monetary system. CEPR, 2011.

International Monetary Fund. “Enhancing International Monetary Stability – A Role for the SDR?” IMF, 2011.

Khosa, Matimba Johannes. “The Impact of exchange rate volatility on emerging market exports: a comparative study”. University of Johannesburg, 2012.

Mohan, Rakesh, Michael Debabrata Patra and Muneesh Kapur. “The International Monetary System: Where Are We and Where Do We Need to Go?”. IMF Working Paper, 2013.

Schenk, Catherine. “Gold as a Money Anchor: We have been here before”. The Gail Foster Group LLC, 2011.

Sheng, Andrew. “Systematic Thoughts on the International Monetary System,” TEN (2012): 5.

Triffin, Robert. Gold and the dollar crisis: the future of convertibility. Vol. 960. Yale University Press, 1960.

United Nations. “Report of the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System”. United Nations, 2009.

Zhou, Xiaochuan. “Reflections on Reforming the International Monetary System.” People’s Bank of China, 2009.

Endnotes

52. The full opinion piece is available at http://www.economonitor.com/blog/2013/03/the- world-has-changed-the-international-monetary-system-needs-some-serious-re-thinking/

53. A full transcript of Mr. Lamy’s speech can be found at http://www.wto.org/english/news_e/sppl_e/sppl222_e.htm

54. http://www.un.org/en/development/desa/policy/cdp/ldc/ldc_list.pdf

55. See Astrow (2012).

56. Ibid.

57. See, for example, Eichengreen (1992)

58. A comprehensive analysis can be found at http://www.sjsu.edu/faculty/watkins/econhist.htm

59. This is also known as the Triffin Dilemma or the Triffin Paradox. See Triffin (1960)

60. For a more detailed explanation of the Triffin Dilemma, see http://lexicon.ft.com/term?term=triffin-dilemma

61. See Copeland (2008) for a more detailed analysis of the causes of the decline and end of Bretton Woods

62. See Farhi et al (2011)

63. For a in-depth econometric study of the impact of exchange rate volatility on emerging economies, see Khosa (2012)

64. Note that the vertical scale shows the real effective exchange rates over the last six months, rolling window.

65. Source: Dorucci and McKay (2011)

66. The full report is available at http://www.imf.org/external/pubs/ft/wp/2013/wp13224.pdf, and should be consulted for important reference on the IMF’s analysis of the status quo and policy proposals

67. See, for example, the following press release http://www.ibtimes.co.uk/chinas-dollar- trap-foreign-exchange-reserves-hit-3-8tn-1432428

68 See Farhi et al (2011)

69. See Roberto Zoellick’s, ‘The big questions China still has to answer,” Financial Times, 2 September 2011.

70. See Zhou (2009).

71. For a in-depth background of the taskforce (later, commission), please see http://www.un.org/ga/president/63/commission/background.shtml

72. An exemplary press release can be found at http://www.marketwatch.com/story/lehman- folds-with-record-613-billion-debt?siteid=rss

73. The report is available online at http://www.un.org/ga/econcrisissummit/docs/FinalReport_CoE.pdf

74. We would like to encourage the reader to read the report, especially Chapter 5 “International Financial Innovations”, for an alternative assessment of the history and status quo to the one we offer.

75. Report of the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System (2009), p. 115

76. See, for example, US Treasury Secretary Timothy Geithner commenting on the stance of the US Dollar remaining to be the world’s reserve currency http://www.channelnewsasia.com/stories/afp_world_business/view/417740/1/.html

77. Report of the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System (2009), p. 114

78. See Zhou (2009)

79. Alternatively, you may access http://bcove.me/7qou4729 80. See Bosco (2011)

81. We strongly encourage the reader to read the details of these proposed policies, which would be central to a resolution focusing on SDRs. In particular, we would like to stress points 32 – 47 of Chapter 4 of the UN (2011) report, or pp. 115 – 118.

82. See, for example, http://www.cnbc.com/id/44356270

83. See Astrow (2012).