What were the reasons behind establishment of international trade institutions and trade agreements.

The First World War of 1914 and the IInd World War of 1939-45 had resulted in massive destruction of the life and property of the world over. Hence, the countries were unable to take up any reconstruction work on their own. At this point representatives of forty four nations under the leadership of J. M. Keynes decided to set up three international institutions namely, the International Monetary Fund, International Bank for Reconstruction and Development and the International Trade Organisation. World Bank or IBRD was assigned with the task of reconstructing the war-torn economies, IMF was given the responsibility, of ensuring stabilization of exchange rates to the way for expansion of world trade. The main objectives of the ITO was to promote and facilitate international trade among the member countries by overcoming various restrictions and discriminations that were being practiced at that time.

The first two institutions namely IBRD and IMF came into existence immediately. The idea of setting up of ITO, however, could not materialise due to stiff opposition from the United States. Instead of this, an agreement was emerged to liberalise international trade from high customs tariffs and various other types of restrictions. This arrangement was known as General Agreement for Tariffs and Trade (GATT). India was one of the founding members of these three international bodies.