AMITY UNIVERSITY
International Institutions and Trade Implications MBA (INTERNATIONAL BUSINESS) SEMESTER II
In this globalised world it is becoming ever more difficult for nations to adapt to the international consequences of market failures, government failures and global externalities without co-operation and co-ordination with other countries. Infact, global economy has been less governed in the last two decades than the previous times.
Table of contents 1. International Monetary Fund……………………………………………….. 6 2. World Bank……………………………………………………………………19 3. The African Development Bank………………………………………….. 29 4. UNCTAD……………………………………………………………………… 34 5. World Trade Organization………………………………………………… 40 6. International Trade Centre……………………………………………….. 47 7. Centre for the Promotion of Imports from developing countries……………………………………………………………….. 52 8. European Union…………………………………………………………….. 57 9. North American Free Trade Agreement (NAFTA)…………………….. 66 10. The Association of Southeast Asian Nations…………………………. 71 11. The South Asian Association for Regional Cooperation……………. 77 12. African Economic Community (AEC)…………………………………… 82 13. African Union………………………………………………………………… 87 14. Common Market for Eastern and Southern Africa (COMESA)……… 94 15. South African Development Community……………………………… 99 16. Economic Community Of West African States (ECOWAS)………... 107 17. Economic Community of Central African States……………………. 113
PREFACE
For all those studying International Business, the dynamics of global economy is very intriguing. The challenge is to understand the impact of such a fluid environment on decision making for ones‘ own business or enterprise. The past two decades have witnessed unprecedented economic growth in several parts of the world. Formerly poor countries are now emerging as major players in the world economy. One can see the transformation of a developing economy to a developed economy in times to come. Growing economies like China, India and Brazil are being seen as not only as developed economies but as major economic superpowers in times to come. However in this globalised world it is becoming ever more difficult for nations to adapt to the international consequences of market failures, government failures and global externalities without co-operation and co-ordination with other countries. Infact, global economy has been less governed in the last two decades than the previous times. The case in the point for highlighting such a precariousness of global economy can be illustrated by underlined by the teetering crisis in Europe and the United States emerging as a result of the subprime mortgage market collapse and its immediate effects on the financial sector. A slow-down in these major economies have its impact on India, China and many other countries posing both economic and political problems within them as well as its surrounding region. The Information Technology Sector in India witnessed a downfall in its exports and overseas operations, while automobile sector had its own share of woes due to less export orders and delay in payment realizations. As governments and bankers look for solutions to the growing financial crisis, the inadequacies of global economic institutions and their ability to regulate international finance effectively have come to the fore once again. Inequality in the global economy has been growing both within and across countries in spite of commitments to ensure that globalization would bring benefits to all. Growing inequality across the world economy is a sign of a serious failure of global governance. The governance of the global economy has lagged behind globalization which has proceeded apace while the international institutions created to better manage international economic relations have become more ineffectual and marginalized. This book aims to create an understanding of the various institutional mechanism in the globalised economy. Chapters on institutions like WTO. UNCTAD, IMF etc
and trade blocks like SAFTA, NAFTA etc aims to highlight their history, role and activities in governing and regulating the global economy. Mettle This compilation on the institutions doesn‘t actually provide a critical analysis on their roles and how they are handling the current global economic scenario. Knowing these organization would certainly help understand the international trade mechanism in much better way.
Syllabus
Course Contents: Module I: Multinational Organizations
Role of IMF in International Trade Role of World Bank in International Trade African Development Bank UNCTAD WTO International Trade Centre ( ITC ), Geneva Centre for Promotion of Imports from Developing Countries Module II: Regional Trade Blocks European Union
NAFTA ASEAN SAARC
Module III: Trade Blocks in Africa
African Economic Community African Union COMESA South African Development Community Economic Community of West African States Economic Community of Central African States
Chapter 1 International Monetary Fund 1.1 Objective The International Monetary Fund was created in 1945 to help promote the health of the world economy through international monetary cooperation. Headquartered in Washington D.C., International Monetary Fund—also known as the ―IMF‖ or the ―Fund‖— is the world's central organization for international monetary cooperation. The IMF's primary purpose is to ensure the stability of the international monetary system for sustainable economic growth and rising living standards. To maintain stability and prevent crises in the international monetary system , the IMF provides advice to its 185 member countries, encouraging them to adopt policies that foster economic stability, reduce their vulnerability to economic and financial crises, and raise living standards. IMF also reviews national, regional, and global economic and financial developments and it also serves as a forum where member countries can discuss the national, regional, and global consequences of their policies. The IMF also makes financing temporarily available to member countries to help them address balance of payments problems. And it provides technical assistance and training to help countries build the expertise and institutions they need for economic stability and growth.
1.2 History The IMF was conceived in July 1944, when representatives of 45 governments meeting in the town of Bretton Woods, New Hampshire, in the northeastern United States, agreed on a framework for international economic cooperation to avoid a repetition of the disastrous economic policies that had contributed to the Great Depression of the 1930s. During that decade, attempts by countries to shore up their failing economies—by limiting imports (figure Figure 1 :World Trade during 1929-1933
1), devaluing their currencies to compete against each other for export markets, and curtailing their citizens' freedom to buy goods abroad and to hold foreign exchange—proved to be self-defeating. World trade declined sharply, and employment and living standards plummeted in many countries. Seeking to restore order to international monetary relations, the IMF's founders charged the new institution with overseeing the international monetary system to ensure exchange rate stability and encouraging member countries to eliminate exchange restrictions that hindered trade. The IMF came into existence in December 1945, when its first 29 member countries signed its Articles of Agreement. Since then, the IMF has adapted itself as often as needed to keep up with the expansion of its membership (Figure 2 ) and changes in the world economy.
Figure 2 : Facts on the IMF Current membership: 185 countries Staff: approximately 2,490 from 143 countries Total Quotas: $352 billion (as of 5/31/08) Loans outstanding (as of 5/31/08): $19.4 billion to 65 countries, of which $6.4 billion to 57 countries on concessional terms Field delivery of technical assistance: 186.2 person years during FY2008 Surveillance consultations concluded: 123 countries during FY2008, of which 115 voluntarily published information on their consultation. 1.3 Administrative Setup The IMF is governed by, and is accountable to, its member countries through its Board of Governors. There is one Governor from each member country, typically the finance minister or central bank governor. The Governors usually meet once a year, in September or October, at the Annual Meetings of the IMF and the World Bank. Key policy issues related to the international monetary system are considered twice a year by a committee of Governors called the International Monetary and Financial Committee, or the IMFC. A joint committee of the Boards of Governors of the IMF and the World Bank—the Development Committee— advises and reports to the Governors on development policy and other matters of concern to developing countries. The day-to-day work of the IMF is carried out by the Executive Board, which receives its powers from the Board of Governors, and the IMF's internationally recruited staff. The Executive Board selects the IMF's Managing Director, who is appointed for a renewable five-year term. The Managing Director reports to the
Board and serves as its chair and the chief of the IMF's staff and is assisted by a First Deputy Managing Director and two other Deputy Managing Directors. The Executive Board usually meets three times a week, in full-day sessions, and more often if needed, at the IMF's headquarters in Washington, D.C. Of the 24 Executive Directors on the Board, 8 are appointed by single countries—the IMF's 5 largest quota-holders (the United States, Japan, Germany, France, and the United Kingdom) and China, Russia, and Saudi Arabia. The other 16 Executive Directors are elected for two-year terms by groups of countries known as "constituencies." Unlike some international organizations (such as the United Nations General Assembly) that operate under a one-country-one-vote principle, the IMF has a weighted voting system. The larger a country's quota in the IMF—determined broadly by its economic size—the more votes the country has, in addition to its "basic votes," of which each member has an equal number. But the Board rarely makes decisions based on formal voting; most decisions are based on consensus. In the early 2000s, in response to changes in the weight and role of countries in the world economy, the IMF began to reexamine the distribution of quotas and voting power to ensure that all members are fairly represented. IMF employees, who come from over 140 countries, are international civil servants. Their responsibility is to the IMF, not to the national authorities of the countries of which they are citizens. About one-half of the IMF's approximately 2,700 staff members are economists. Most staff work at the IMF's Washington, D.C., headquarters, but the IMF also has over 85 resident representatives posted in member countries around the world. In addition, it maintains offices in Brussels, Paris, and Tokyo, which are responsible for liaison with other international and regional institutions and civil society organizations, as well as in New York and Geneva, which focus on liaison with institutions in the UN system. The Geneva office is also responsible for liaison with the World Trade Organization. 1.4 Sources of IMF Funding The IMF's resources come mainly from the quotas that countries deposit when they join the IMF. Quotas broadly reflect the size of each member's economy: the larger a country's economy in terms of output, and the larger and more variable its trade, the larger its quota tends to be. For example, the United States, the world's largest economy, has the largest quota in the IMF. Quotas are reviewed periodically and can be increased when deemed necessary by the Board of Governors.
Countries deposit 25 percent of their quota subscriptions in Special Drawing Rights or major currencies, such as U.S. dollars or Japanese yen and the balance in the member's own currency. Quotas, together with the equal number of basic votes each member has, determine countries' voting power. Quotas also help to determine the amount of financing countries can borrow from the IMF, and their share in SDR allocations. (figure 3) Most IMF loans are financed out of members' quotas. The exceptions are loans under the Poverty Reduction and Growth Facility, which are paid out of trust funds administered by the IMF and financed by contributions from the IMF itself and a broad spectrum of its member countries. If necessary, the IMF may borrow from a number of its financially strongest member countries to supplement the resources available from its quotas. Like other financial institutions, the IMF also earns income from the interest charges and fees levied on its loans. It uses this income to meet funding costs, pay for administrative expenses, and maintain precautionary balances. In the early 2000s, there was a decline in the demand for the IMF's nonconcessional loans, reflecting benign global economic and financial conditions as well as policies in many emerging market countries that had reduced their vulnerability to crises. To diversify its income sources, the IMF established an investment account in 2005. The funds in the account are invested in eligible marketable obligations denominated in SDRs or in the securities of members whose currencies are included in the SDR basket. The Fund also began to explore other options for reducing its dependence on lending for its income.
Figure 3 : Quotas and Voting Power of top 15 member countries Member
United States Japan Germany France United Kingdom China Italy Saudi Arabia Canada
Quota Million of SDR 37,149.30 13,312.80 13,008.20 10,738.50 10,738.50
Percent total 17.09 6.13 5.99 4.94 4.94
8,090.10 7,055.50 6,985.50 6,369.20
3.72 3.25 3.21 2.93
Votes of Number 371,743 133,378 130,332 107,635 107,635
Percent total 16.77 6.02 5.88 4.86 4.86
81,151 70,805 70,105 63,942
3.66 3.19 3.16 2.89
of
Russian Federation Netherlands Belgium India Switzerland Australia Total Source : IMF
5,945.40
2.74
59,704
2.69
5,162.40 4,605.20 4,158.20 3,458.50 3,236.40 217,372.70
2.38 2.12 1.91 1.59 1.49 100
51,874 46,302 41,832 34,835 32,614 2,216,193
2.34 2.09 1.89 1.57 1.47 100
1.5 Role of IMF The IMF's fundamental mission is to help ensure stability in the international system by : 1. keeping track of the global economy and the economies of member countries; 2. lending to countries with balance of payments difficulties; and 3. giving practical help to members 1.5.1 Surveillance : Keeping Track Of The Global Economy The IMF works to promote global growth and economic stability by encouraging countries to adopt sound economic policies. This process is known as surveillance. Surveillance comprises multilateral surveillance, under which the IMF assesses global and regional developments and publishes the World Economic Outlook and Global Financial Stability Report; and bilateral surveillance which is the regular dialogue and policy advice that the IMF offers to its members. When a country joins the IMF, it agrees to subject its economic and financial policies to the scrutiny of the international community. And it makes a commitment to pursue policies that are conducive to orderly economic growth and reasonable price stability, to avoid manipulating exchange rates for unfair competitive advantage, and to provide the IMF with data about its economy. The IMF's regular monitoring of economies and associated provision of policy advice—known as surveillance—is intended to identify weaknesses that are causing or could lead to trouble. 1.5.1.1 Country surveillance takes the form of regular (usually annual) comprehensive consultations with individual member countries, with interim discussions as needed. The consultations are referred to as "Article IV consultations" because they are required by Article IV of the IMF's Articles of Agreement. During an Article IV consultation, an IMF team of economists visits a country to collect economic and financial data and to discuss the country's economic policies with government and central bank officials. IMF staff missions also often reach out beyond their official interlocutors for discussions with
parliamentarians and representatives of business, labor unions, and civil society. The team reports its findings to IMF management and then presents them to the IMF's Executive Board, which represents all of the IMF's member countries, for discussion. A summary of the Board's views is transmitted to the country's government. In this way, the views of the global community and the lessons of international experience are brought to bear on national policies. Summaries of most discussions are released in Public Information Notices and are posted on the IMF's Web site, as are most of the country reports prepared by the staff. 1.5.1.2 Global surveillance entails reviews by the IMF's Executive Board of global economic trends and developments. The main reviews are based on World Economic Outlook reports and the Global Financial Stability Report, which covers developments, prospects, and policy issues in international financial markets; both reports are normally published twice a year. In addition, the Executive Board holds more frequent informal discussions on world economic and market developments. In 2006, the IMF introduced a new tool, multilateral consultations, designed to bring small groups of countries together to discuss a specific international economic or financial problem that directly involves them and to settle on a course of action to address it. 1.5.1.3 Regional surveillance involves examination by the IMF of policies pursued under regional arrangements such as currency unions—for example, the euro area, the West African Economic and Monetary Union, the Central African Economic and Monetary Community, and the Eastern Caribbean Currency Union. The growing interdependence of national economies, and the potential impact of national economic policies on the world economy and vice versa, have prompted the IMF increasingly to integrate the three levels of surveillance. Through its Article IV consultations, the IMF pays close attention to the impact of the larger economies' policies on smaller economies. It also studies the impact of global economic and financial conditions on the economic performance of individual countries and the repercussions of national policies at the regional level. 1.5.2 Lending Any member country, whether rich, middle-income, or poor, can turn to the IMF for financing if it has a balance of payments need—that is, if it cannot find sufficient financing on affordable terms in the capital markets to make its international payments and maintain a safe level of reserves.
IMF loans are meant to help member countries tackle balance of payments problems, stabilize their economies, and restore sustainable economic growth. The IMF is not a development bank and, unlike the World Bank and other development agencies, it does not finance projects. 1.5.2.1 Three main purposes of lending Article I of the IMF's Articles of Agreement states that the purpose of lending by the IMF is "...to give confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity." In practice, the purpose of the IMF's lending has changed dramatically since the organization was created. Over time, the IMF's financial assistance has evolved from helping countries deal with short-term trade fluctuations to supporting adjustment and addressing a wide range of balance of payments problems resulting from terms of trade shocks, natural disasters, post-conflict situations, broad economic transition, poverty reduction and economic development, sovereign debt restructuring, and confidence-driven banking and currency crises. IMF lending serves three main purposes. First, it can smooth adjustment to various shocks, helping a member country avoid disruptive economic adjustment or sovereign default, something that would be extremely costly, both for the country itself and possibly for other countries through economic and financial ripple effects (known as contagion). Second, IMF programs can help unlock other financing, acting as a catalyst for other lenders. This is because the program can serve as a signal that the country has adopted sound policies, reinforcing policy credibility and increasing investors' confidence. Third, IMF lending can help prevent crisis. The experience is clear: capital account crises typically inflict substantial costs on countries themselves and on other countries through contagion. The best way to deal with capital account problems is to nip them in the bud before they develop into a full-blown crisis. 1.5.2.2 Conditions for lending When a member country approaches the IMF for financing, it may be in or near a state of economic crisis, with its currency under attack in foreign exchange markets and its international reserves depleted, economic activity stagnant or falling, and a large number of firms and households going bankrupt.
The IMF discusses with the country the economic policies that may be expected to address the problems most effectively. The IMF and the government agree on a program of policies aimed at achieving specific, quantified goals in support of the overall objectives of the authorities' economic program. For example, the country may commit to fiscal or foreign exchange reserve targets. Loans are typically disbursed in a number of installments over the life of the program, with each installment conditional on targets being met. Programs typically last up to 3 years, depending on the nature of the country's problems, but can be followed by another program if needed. The government outlines the details of its economic program in a "letter of intent" to the Managing Director of the IMF. Such letters may be revised if circumstances change. For countries in crisis, IMF loans usually provide only a small portion of the resources needed to finance their balance of payments. But IMF loans also signal that a country's economic policies are on the right track, which reassures investors and the official community, helping countries find additional financing from other sources. 1.5.2.3 Main lending facilities The Stand-By Arrangement is a key lending facility established in 1952. Although its use has been declining in recent years, it has remained the most popular facility for middle-income countries that seek financial assistance. Under its structure, financing is provided in support of adjustment to a balance of payments need and disbursed in tranches based on conditions spelled out in the program. The IMF's largest loans have traditionally been provided under SBAs. The Short-Term Liquidity Facility was created in October 2008 to channel funds quickly to emerging markets that have a strong track record, but that need rapid help during the current financial crisis to get them through temporary liquidity problems. Financing is made available without the standard phasing and loan conditions of more traditional IMF arrangements, but borrowers are expected to maintain their strong macroeconomic policies. In 1997, the IMF introduced the Supplemental Reserve Facility, under which it can quickly provide large loans with very short maturities to countries going through a capital account crisis. The Extended Fund Facility is used to help countries address balance of payments difficulties related partly to structural problems that may take longer to correct than macroeconomic imbalances. A program supported by an extended arrangement usually includes measures to improve the way markets and institutions function, such as tax and financial sector reforms, privatization of public enterprises, and steps to make labor markets more flexible.
The IMF also provides Emergency Assistance to countries coping with balance of payments problems caused by natural disasters or military conflicts. The interest rates are subsidized for low-income countries. The Trade Integration Mechanism allows the IMF to provide loans under one of its facilities to a developing country whose balance of payments is suffering because of multilateral trade liberalization, either because its export earnings decline when it loses preferential access to certain markets or because prices for food imports go up when agricultural subsidies are eliminated. 1.5.2.4 Lending to low-income countries Low-income countries can borrow from the IMF at a very low, or concessional, interest rate. They can use the Poverty Reduction and Growth Facility, which is the main vehicle by which the IMF provides financial support to countries' poverty-reduction strategies. The facility's core objectives are to promote sustainable balance of payments positions and to foster sustainable growth, leading to higher living standards and a reduction in poverty. In recent years, the largest number of IMF loans has been made through the PRGF. Member countries can also access the Exogenous Shocks Facility, which helps deal with economic shocks, such as food and fuel price hikes or a natural disaster, that are beyond the control of a government but have a significant negative impacts on the economies. The interest rate levied on PRGF and ESF loans is only 0.5 percent, and loans are to be repaid over a period of 5½-10 years. 1.5.3 Debt relief In addition to concessional loans, some low-income countries are also eligible for debts to be written off under two key initiatives. The Heavily Indebted Poor Countries (HIPC) Initiative, introduced in 1996 and enhanced in 1999, whereby creditors provide debt relief, in a coordinated manner, with a view to restoring debt sustainability; and The Multilateral Debt Relief Initiative (MDRI), under which the IMF, the International Development Association (IDA) of the World Bank, and the African Development Fund (AfDF) canceled 100 percent of their debt claims on certain countries to help them advance toward the Millennium Development Goals 1.5.4 Technical Assistance The IMF shares its expertise with member countries by providing technical assistance and training in a wide range of areas, such as central banking,
monetary and exchange rate policy, tax policy and administration, and official statistics. The objective is to help improve the design and implementation of members' economic policies, including by strengthening skills in institutions such as finance ministries, central banks, and statistical agencies. The IMF has also given advice to countries that have had to reestablish government institutions following severe civil unrest or war. In 2008, the IMF embarked on an ambitious reform effort to enhance the impact of its technical assistance. The reforms emphasize better prioritization, enhanced performance measurement, more transparent costing and stronger partnerships with donors. 1.5.4.1 Beneficiaries of technical assistance Technical assistance is one of the IMF's core activities. It is concentrated in critical areas of macroeconomic policy where the Fund has the greatest comparative advantage. Thanks to its near-universal membership, the IMF's technical assistance program is informed by experience and knowledge gained across diverse regions and countries at different levels of development. About 80 percent of the IMF's technical assistance goes to low- and lowermiddle-income countries, in particular in sub-Saharan Africa and Asia. Postconflict countries are major beneficiaries. The IMF is also providing technical assistance aimed at strengthening the architecture of the international financial system, building capacity to design and implement poverty-reducing and growth programs, and helping heavily indebted poor countries (HIPC) in debt reduction and management. 1.5.4.2 Types of technical assistance The IMF's technical assistance takes different forms, according to needs, ranging from long-term hands-on capacity building to short-notice policy support in a financial crisis. Technical assistance is delivered in a variety of ways. IMF staff may visit member countries to advise government and central bank officials on specific issues, or the IMF may provide resident specialists on a short- or a longterm basis. Technical assistance is integrated with country reform agendas as well as the IMF's surveillance and lending operations. The IMF is providing an increasing part of its technical assistance through regional centers located in Gabon, Mali, and Tanzania for Africa; in Barbados for the Caribbean; in Lebanon for the Middle East; and in Fiji for the Pacific Islands. As part of its reform program, the IMF is planning to open four more regional technical assistance centers in Africa, Latin America, and central Asia. The IMF also offers training courses for government and central bank officials of member countries at its headquarters in Washington, D.C., and at regional training
centers in Austria, Brazil, China, India, Singapore, Tunisia, and the United Arab Emirates. References : International Monetary Fund, www.imf.org Video Presentation on ―Out of the Ashes—the origins of the IMF‖, http://www.imf.org/external/mmedia/index.asp Video Presentation on Keeping Track—the IMF's oversight of the global economy; http://www.imf.org/external/mmedia/index.asp Video Presentation on The Sum of Its Parts—How the IMF Lends; http://www.imf.org/external/mmedia/index.asp Video Presentation on Conquering A Crisis—the IMF's role in helping Korea overcome the Asian Crisis; http://www.imf.org/external/mmedia/index.asp
End Chapter Quizzes 1. What is the role of the IMF? a) It controls the budgets of national governments b) It acts as a forum for international economics c) It observes world exchange rates, balance of payments and multilateral payments d) It seeks to promote free international trade 2. Who is currently the governor of IMF for India? a) b) c) d)
Mr. Pranab Mukherjee Dr. Manmohan Singh Dr. Montek Singh Ahluwalia Dr. D. SubbaraoAnswer
3. Which country has the largest quota with IMF? a) b) c) d)
USA EU Canada China
4. Who is currently the Managing Director of IMF? a) Mr. Pascal Lamy b) Mr. Dominique Strauss-Kahn c) Mr. Robert B. Zoellick d) H.E. Dr. Ali Abdussalam Treki 5. Which of the following is not a role of IMF? a) Country Survellience b) Providing Financial Assistance c) Conduction technical sessions d) Take initiatives for reform for climate change 6. The International Monetary Fund Articles of Agreement were adopted at the Bretton Woods Conference in 1944. In general terms, the International Monetary Fund's objectives today are, to foster: A) fixed exchange rates. B) balance of payments disequilibria. C) convertible currencies D) predictable supplies of capital to developing nations.
7. Which of the following is not correct about quotas? the amount of financing countries can borrow from the IMF A) Quotas help to determine country‘s share in SDR allocations. B) quotas are deposited when countries join the IMF C) Quotas broadly reflect the size of each member's economy D) IMF loans are not financed out of members' quotas. 8. The IMF Governors usually meet A) once a year, B) every month C) bi-annually D) whenever required
9. Under Multilateral Debt Relief Initiative which organization(s) cancelled 100 percent of their debt claims on certain countries to help them advance toward the Millennium Development Goals A) B) C) D)
IMF World Bank, and the African Development Fund (AfDF) All of them
10. The IMF provides technical assistance through regional centers located in different parts of the world. Its regional centre for Africa is located in A) Mauritius B) Tanzania C) Spain D) Brazil 1 c, 2 a, 3 a, 4 b, 5 d, 6 c, 7 d, 8 a, 9 d, 10 b
Chapter 2 World Bank 2.1 About World Bank The World Bank is a vital source of financial and technical assistance to developing countries around the world. World Bank is not a bank but is made up of two unique development institutions owned by 185 member countries—the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Since inception in 1944, the World Bank has expanded from a single institution to a closely associated group of five development institutions. Banks‘s mission evolved from the International Bank for Reconstruction and Development (IBRD) as facilitator of post-war reconstruction and development to the present day mandate of worldwide poverty alleviation in close coordination with the affiliate, the International Development Association, and other members of the World Bank Group, the International Finance Corporation (IFC), the Multilateral Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID Each institution plays a different but collaborative role to advance the vision of an inclusive and sustainable globalization. The IBRD focuses on middle income and creditworthy poor countries, while IDA focuses on the poorest countries in the world. Both these institutions provide low-interest loans, interest-free credits and grants to developing countries for a wide array of purposes that include investments in education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. IDA long term loans (credits) are interest free but do carry a small service charge of 0.75 percent on funds paid out. IDA commitment fees range from zero to 0.5 percent on undisbursed credit balances. 2.2 The World Bank Group 2.2.1 The International Bank for Reconstruction and Development (IBRD) aims to reduce poverty in middle-income and creditworthy poorer countries by promoting sustainable development through loans, guarantees, risk management products, and analytical and advisory services. Established in 1944 as the original institution of the World Bank Group, IBRD is structured like a cooperative that is owned and operated for the benefit of its 185 member countries.
IBRD raises most of its funds on the world's financial markets and has become one of the most established borrowers since issuing its first bond in 1947. The income that IBRD has generated over the years has allowed it to fund development activities and to ensure its financial strength, which enables it to borrow at low cost and offer clients good borrowing terms. 2.2.2 IDA complements the World Bank‘s other lending arm–the International Bank for Reconstruction and Development (IBRD)–which serves middle-income countries with capital investment and advisory services. IBRD and IDA share the same staff and headquarters and evaluate projects with the same rigorous standards. IDA is one of the largest sources of assistance for the world‘s 78 poorest countries, 39 of which are in Africa. It is the single largest source of donor funds for basic social services in the poorest countries. IDA lends money (known as credits) on concessional terms. This means that IDA credits have no interest charge and repayments are stretched over 35 to 40 years, including a 10-year grace period. IDA also provides grants to countries at risk of debt distress. FY08 Top Ten IDA Borrowers ($million) Vietnam 1,193 India 837 Bangladesh753 Ethiopia 711 Nigeria 572 Cote 555 d'Ivoire Tanzania 499 Liberia 478 Ghana 387 Nepal 380 (*) Including regional projects FY08 IDA Lending by Region: Sub-Saharan Africa...........50% South Asia...........................25% East Asia/Pacific..................16% Europe/Central Asia...............4% Latin America/Caribbean.......3% Middle East/North Africa.........2%
FY08 IDA Lending by Sector: Infrastructure ......................39% Public Admin and Law..........26% Social sector.......................19% Agriculture ..............................9% Industry...................................8% 2.2.2.1 IDA Funding While the IBRD raises most of its funds on the world's financial markets, IDA is funded largely by contributions from the governments of its richer member countries. Additional funds come from IBRD's income and from borrowers' repayments of earlier IDA credits. Donors get together every three years to replenish IDA funds. Donor contributions account for 60% of the SDR 27.3 billion (US$41.6 billion) in the IDA15 replenishment, which finances projects over the three-year period ending June 30, 2011. 45 countries contributed to the 15th replenishment of IDA. The largest pledges to IDA15 were made by the United Kingdom, the United States, Japan, Germany, France, Canada, Italy and Spain. The IDA15 replenishment raised funds for poor countries for the three-year period between July 2008 and June 2011. These are critical years for countries trying to achieve the UN Millennium Development Goals since it takes time for projects to be completed and yield measurable results. 2.2.3 Affiliates of World Bank 2.2.3.1 IFC IFC fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing capital in the international financial markets, and providing advisory services to businesses and governments. IFC helps companies and financial institutions in emerging markets create jobs, generate tax revenues, improve corporate governance and environmental performance, and contribute to their local communities. The goal is to improve lives, especially for the people who most need the benefits of growth.
IFC invests in enterprises majority-owned by the private sector throughout most developing countries in the world. IFC offers an array of financial products and services to its clients and continues to develop new financial tools that enable
companies to manage risk and broaden their access to foreign and domestic capital markets. 2.2.3.2 MIGA As a member of the World Bank Group, MIGA's mission is to promote foreign direct investment (FDI) into developing countries to help support economic growth, reduce poverty, and improve people's lives. Concerns about investment environments and perceptions of political risk often inhibit foreign direct investment, with the majority of flows going to just a handful of countries and leaving the world's poorest economies largely ignored. MIGA addresses these concerns by providing three key services: political risk insurance for foreign investments in developing countries, technical assistance to improve investment climates and promote investment opportunities in developing countries, and dispute mediation services, to remove possible obstacles to future investment. 2.2.3.3 ICSID is an autonomous international institution established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID or the Washington Convention) with over one hundred and forty member States. The Convention sets forth ICSID's mandate, organization and core functions. The primary purpose of ICSID is to provide facilities for conciliation and arbitration of international investment disputes. The ICSID Convention is a multilateral treaty formulated by the Executive Directors of the International Bank for Reconstruction and Development (the World Bank). It was opened for signature on March 18, 1965 and entered into force on October 14, 1966. The Convention sought to remove major impediments to the free international flows of private investment posed by non-commercial risks and the absence of specialized international methods for investment dispute settlement. ICSID was created by the Convention as an impartial international forum providing facilities for the resolution of legal disputes between eligible parties, through conciliation or arbitration procedures. Recourse to the ICSID facilities is always subject to the parties' consent. As evidenced by its large membership, considerable caseload, and by the numerous references to its arbitration facilities in investment treaties and laws, ICSID plays an important role in the field of international investment and economic development.
Today, ICSID is considered to be the leading international arbitration institution devoted to investor-State dispute settlement. 2.3 Administrative Setup The World Bank is like a cooperative, where its 185 member countries are shareholders. The shareholders are represented by a Board of Governors, who are the ultimate policy makers at the World Bank. Generally, the governors are member countries' ministers of finance or ministers of development. They meet once a year at the Annual Meetings of the Boards of Governors of the World Bank Group and the International Monetary Fund. Because the governors only meet annually, they delegate specific duties to 24 Executive Directors, who work on-site at the Bank. The five largest shareholders, France, Germany, Japan, the United Kingdom and the United States appoint an executive director, while other member countries are represented by 19 executive directors. The President of the World Bank, chairs meetings of the Boards of Directors and is responsible for overall management of the Bank. By tradition, the Bank president is a U.S. national and is nominated by the United States, the Bank's largest shareholder. The President is elected by the Board of Governors for a five-year, renewable term. The Executive Directors make up the Boards of Directors of the World Bank. They normally meet at least twice a week to oversee the Bank's business, including approval of loans and guarantees, new policies, the administrative budget, country assistance strategies and borrowing and financial decisions. The World Bank operates day-to-day under the leadership and direction of the president, management and senior staff, and the vice presidents in charge of regions, sectors, networks and functions. 2.4 Role of World Bank 2.4.1 Fund Generation IBRD lending to developing countries is primarily financed by selling AAArated bonds in the world's financial markets. While IBRD earns a small margin on this lending, the greater proportion of its income comes from lending out its own capital. This capital consists of reserves built up over the years and money paid in from the Bank's 185 member country shareholders. IBRD‘s income also pays for World Bank operating expenses and has contributed to IDA and debt relief.
IDA is the world's largest source of interest-free loans and grant assistance to the poorest countries. IDA's funds are replenished every three years by 40 donor countries. Additional funds are regenerated through repayments of loan principal on 35-to-40-year, no-interest loans, which are then available for re-lending. IDA accounts for more than 40% of the lending. 2.4.2 Loans Through the IBRD and IDA, World Bank offer two basic types of loans and credits: investment operations : for goods, works and services in support of economic and social development projects in a broad range of economic and social sectors. development policy operations : provide quick-disbursing financing to support a country‘s policy and institutional reforms. 2.4.3 Trust Funds and Grants Donor governments and a broad array of private and public institutions make deposits in Trust funds that are housed at the World Bank. These donor resources are leveraged for a broad range of development initiatives. The initiatives vary significantly in size and complexity, ranging from multibillion dollar arrangements—such as Carbon Finance; the Global Environment Facility; the Heavily Indebted Poor Countries Initiative; and the Global Fund to Fight AIDS, Tuberculosis, and Malaria— to much smaller and simpler freestanding ones. The Bank also mobilizes external resources for IDA concessionary financing and grants, as well as funds for non-lending technical assistance and advisory activities to meet the special needs of developing countries, and for co-financing of projects and programs. Direct World Bank grants to civil society organizations emphasize broadbased stakeholder participation in development, and aim to strengthen the voice and influence of poor and marginalized groups in the development process. IDA grants—which are either funded directly or managed through partnerships—have been used to: o o
Relieve the debt burden of heavily indebted poor countries Improve sanitation and water supplies
o o o o
Support vaccination and immunization programs to reduce the incidence of communicable diseases like malaria Combat the HIV/AIDS pandemic Support civil society organizations Create initiatives to cut the emission of greenhouse gases
2.4.4 Analytic and Advisory Services World Bank also provides analysis, advice and information to the member countries for ensuring economic and social improvements their people need. Analytic and Advisory service is provided through economic research and data collection on broad issues such as the environment, poverty, trade and globalization Another is through country-specific, nonlending activities such as economic and sector work, where the Bank evaluates a country's economic prospects by examining its banking systems and financial markets, as well as trade, infrastructure, poverty and social safety net issues, for example. Some of the ways by which Bank‘s analysis, advice and knowledge are made available to the client countries, their government and development professionals, and the public are: o o o o o
Poverty Assessments Public Expenditure Reviews Country Economic Reports Sector Reports Topics in Development
2.4.5 Capacity Building Another core Bank function is to increase the capabilities of the partners, the people in developing countries, and the Bank‘s own staff —to help them acquire the knowledge and skills they need to provide technical assistance, improve government performance and delivery of services, promote economic growth and sustain poverty reduction programs. The International Development Association (IDA) is the part of the World Bank that helps the world‘s poorest countries. Established in 1960, IDA aims to reduce poverty by providing interest-free credits and grants for programs that boost economic growth, reduce inequalities and improve people‘s living conditions.
References : World Bank , www.worldbank.org Video Presentation on ―African Development Indicators‖, http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:215 51437~menuPK:51416306~pagePK:64257043~piPK:437376~theSitePK:4 607,00.html
End Chapter Quizzes 1. The World Bank consists of the Bank itself and: A) the International Bank for Reconstruction and Development. B) the International Finance Corporation. C) Multilateral Development Banks. D) the International Monetary Fund. 2 What are the forms of assistance that the World Bank provides to its members? A) B) C) D)
Technical and financial Political and financial Political and economic Technical and military
3. The World Bank Group is made up of how many organisations? A) B) C) D)
3 5 8 10
4. Which organisation of the World Bank Group deals with matters related to the development of the poorest countries in the world? A) B) C) D)
The International Bank for Reconstruction and Development The International Development Association The International Finance Corporation The Multilateral Investment Agency
5. Which of the following organization is not an affiliate of World Bank? A) ICSID B) IFC C) UNCTAD D) MIGA
6. IBRD lending to developing countries is primarily financed by A) B) C) D)
selling AAA-rated bonds in the world's financial markets developed countries IMF None of the above
7. Objective of MIGA is to A) promote foreign direct investment (FDI) into developing countries B) help support economic growth C) reduce poverty, and improve people's lives D) provide fund for infrastructure development 8. President of World Bank belongs to which country A) United States of America B) Germany C) Australia D) Japan 9. IDA's funds are replenished after every ____ years by 40 donor countries. A) Three B) One C) Two D) Four
10. The primary purpose of ICSID is to provide facilities for conciliation and arbitration in case of A) B) C) D)
international investment disputes. Environmental issues Subsidies International trade
1 a, 2 a, 3 b, 4 b, 5 c, 6 d, 7 d, 8 a, 9 a, 10 a
Chapter 3 The African Development Bank 3.1 About African Development Bank Group The African Development Bank Group Comprises of The African Development Bank, The African Development Fund and The Nigeria Trust Fund. The overarching objective of the African Development Bank Group is to spur sustainable economic development and social progress in its regional member countries (RMCs), thus contributing to poverty reduction. The Bank Group achieves this objective by mobilizing and allocating resources for investment in RMCs; and providing policy advice and technical assistance to support development efforts. 3.2 African Development Bank The ADB is a multilateral development bank whose shareholders comprise 53 African countries (regional member countries – RMCs) and 24 non-African countries (nonregional member countries – non-RMCs). It was established in 1964 and officially began operations in 1967. It is headquartered in Abidjan, Côte d‘Ivoire; however, because of political instability in Côte d‘Ivoire, the ADB Governors‘ Consultative Committee (GCC), at a meeting in February 2003 in Accra, Ghana, decided to move the Bank to its current temporary location in Tunis, Tunisia. The Bank Group‘s primary objective is to promote sustainable economic growth to reduce poverty in Africa. It achieves this objective by financing a broad range of development projects and programs through public sector loans (including policy-based loans), private sector loans, and equity investments; technical assistance for institutional support projects and programs; public and private capital investment; assistance in coordinating RMC development policies and plans; and grants of up to US$ 500,000 in emergency support. The Bank prioritizes national and multinational projects and programs that promote regional economic cooperation and integration.
3.2.1 Administrative Setup
The Agreement Establishing the African Development Bank designates the Board of Governors as the institution‘s highest policy-making organ, with one representative from each member country. The Board of Governors issues general directives on the Bank‘s operations and approves amendments to the Agreement, the admission of new members, and strategies to increase the Bank‘s capital. The ADB Board of Governors elects an 18-member Board of Directors to which it delegates its powers, with the exception of those reserved to it in the Agreement. Twelve Directors are elected from RMCs and 6 from nonRMCs for a 3-year term, renewable for one term. The Board of Directors oversees all Bank operations. The Boards of Governors elect the president of the Bank Group for a 5-year term, renewable for one term. The president, who must be from an RMC, chairs the Board of Directors, appoints vice-presidents – in consultation with the Boards – and manages the Bank‘s daily operations. 3.2.2 Financial Assistance The ADB provides loans to its clients on non-concessional terms. In 1997, it introduced 3 new loan products to meet the needs of its clients: a single-currency variable-rate loan, a single-currency floating-rate loan, and a single-currency fixed rate loan. The interest rate for the single-currency variable-rate loan is based on the quarter‘s average cost of all outstanding Bank borrowings specifically allocated to fund these loans. The interest rate for the floating-rate loan is based on the 6 month LIBOR in the basket of currencies offered by the Bank. The rate for fixedrate loans is based on the Bank‘s cost of borrowing to fund them. The repayment terms for Bank loans are as follows: Repayment period of up to 20 years, including a grace period not exceeding 5 years for public sector loans; Repayment period of up to 14 years, including a grace period not exceeding 4 years for publicly guaranteed lines of credit; and Repayment period of 5 to 20 years, including a grace period of 1 to 3 years for private sector loans. 3.3 The African Development Fund The ADF, which comprises the ADB and State Participants, was created in 1973 and became operational in 1974. Its main objective is to reduce poverty in RMCs by providing low-income RMCs with concessional loans and grants for projects and programs, and with technical assistance for studies and capacity-building activities.
The Agreement Establishing the African Development Fund (ADF) designates the Board of Governors as the Fund‘s highest policy-making organ. The Board of Governors meets at least once a year. The ADF Board of Directors includes 6 Executive Directors from non-RMCs – nominated by their constituencies – and 6 Executive Directors representing the ADB; it oversees the general operations of the Fund. The Fund‘s resources come from contributions and periodic replenishments by participants, usually on a 3-year basis. No interest is charged on ADF loans; however, the loans carry a service charge of 0.75 percent per annum on outstanding balances, and a commitment fee of 0.50 percent per annum on undisbursed commitments. Project loans have a 50-year repayment period, including a 10-year grace period. Lines of credit have a 20-year repayment period with a 5-year grace period. The Fund also provides grants to RMCs; these do not carry any interest charges. 3.4 The Nigeria Trust Fund The NTF is a special ADB fund created in 1976 by agreement between the Bank Group and the Government of the Federal Republic of Nigeria. Its objective is to assist the development efforts of low-income RMCs whose economic and social conditions and prospects require concessional financing. The NTF became operational in April 1976 following approval of the Agreement Establishing the Nigeria Trust Fund by the Board of Governors. Its initial capital of US$ 80.0 million was replenished in 1981 with US$ 71.0 million. Under the terms of the Agreement Establishing the NTF, the operations of the Fund were envisaged to come to an end 30 years after the Agreement came into force. Although the Bank and the Nigerian authorities agreed to 2 oneyear extensions of the Agreement from its original expiry date of April 25, 2006, no new loans or grants have been approved from the NTF window since that date. In November 2006 an evaluation of activities of the Fund was commissioned and the exercise was completed in July 2007. On the basis of the evaluation exercise, findings and recommendations, and subsequent to the meetings held between the Bank and the Nigerian authorities in November 2007, the Agreement has been extended for a period of 10 years starting from April 26, 2008. References : African Development Bank, www.adb.org Video Presentation on ―A Global Partnership for Development‖, http://www.adb.org/Publications/videoclips.asp Video Presentation on ―Reducing Poverty in Asia and the Pacific‖, http://www.adb.org/Publications/videoclips.asp
End Chapter Quizzes 1. The ADF was created in A) 1944 B) 1973 C) 1964 D) 1999 2. The main objectives of ADF are to A) Promote international trade B) reduce poverty in RMCs by providing concessional loans and grants C) Dispute settlement D) None of the above 3. The Nigeria Trust Fund became operational in A) 1976 B) 1944 C) 1973 D) 1965 4. The African Development Bank Group Comprises of A) The African Development Bank B) The African Development Fund C) The Nigeria Trust Fund D) All the three above 5. The ADB‘s shareholders comprises of how many African countries? A) 50 B) 53 C) 59 D) 62 6. African Development Bank was established in A) 1964 B) 1973 C) 1944 D) 1963 7. The ADB‘s shareholders comprises of how many non- African countries? A) 20 B) 23 C) 29 D) 24
8. Headquarters of ADB are in which country? A) Côte d‘Ivoire; B) Nigeria C) South Africa D) Egypt 9. Who is the highest policy making organ in African Development Bank? A) Board of Governors B) President C) Directors D) Trustees 10. Who is the president of ADB? A) Mr. Dominique Strauss-Kahn B) Mr. Robert B. Zoellick C) Mr. Donald Kaberuka D) H.E. Dr. Ali Abdussalam Treki
1 a, 2 b, 3 a, 4 d, 5 b, 7 d, 8 a, 9 a, 10 c
Chapter 4 UNCTAD 4.1 About UNCTAD Established in 1964, UNCTAD (United Nations Conference on Trade and Development) promotes the development-friendly integration of developing countries into the world economy. UNCTAD has progressively evolved into an authoritative knowledge-based institution whose work aims to help shape current policy debates and thinking on development, with a particular focus on ensuring that domestic policies and international action are mutually supportive in bringing about sustainable development. The organization works to fulfil this mandate by carrying out three key functions: It functions as a forum for intergovernmental deliberations, supported by discussions with experts and exchanges of experience, aimed at consensus building. It undertakes research, policy analysis and data collection for the debates of government representatives and experts. It provides technical assistance tailored to the specific requirements of developing countries, with special attention to the needs of the least developed countries and of economies in transition. When appropriate, UNCTAD cooperates with other organizations and donor countries in the delivery of technical assistance. 4.2 The UNCTAD secretariat The UNCTAD secretariat provides substantive and technical services to the intergovernmental bodies of UNCTAD in their discussions and deliberations. Since its inception in 1964, the secretariat has thus serviced twelve sessions of the United Nations Conference on Trade and Development, meeting every four years, with the twelfth session having taken place in Accra, Ghana in April 2008. It has also fully serviced three United Nations Conferences on the Least Developed Countries, meeting every 10 years with the third Conference having taken place in Brussels, Belgium, in May 2001. The secretariat undertakes research, policy analysis and data collection to provide substantive inputs for the discussions of the experts and government representatives in these intergovernmental bodies.
It also provides a series of technical assistance programmes and projects in support of developing countries, paying particular attention to the special handicaps of the least developed countries. The Secretary-General of UNCTAD is Dr. Supachai Panitchpakdi (Thailand), who took office on 1 September 2005. In performing its functions, the secretariat works together with member Governments and interacts with organizations of the United Nations system and regional commissions, as well as with governmental institutions, nongovernmental organizations, the private sector, including trade and industry associations, research institutes and universities worldwide. 4.3 Overview of the main activities 4.3.1 Trade and commodities 4.3.1.1 Commodity diversification and development Promotes the diversification of production and trade structures. Helps Governments to formulate and implement diversification policies and encourages enterprises to adapt their business strategies and become more competitive in the world market. 4.3.1.2 Competition and consumer policies Provides analysis and capacity building in competition and consumer protection laws and policies in developing countries. Publishes regular updates of a Model Law on Competition. 4.3.1.3 Trade Negotiations and Commercial Diplomacy Assists developing countries in all aspects of their trade negotiations. 4.3.1.4 Trade Analysis and Information System (TRAINS) Comprehensive computer-based information system on trade control measures that uses UNCTAD‘s database. The CD-ROM version includes 119 countries. 4.3.1.5 Trade and environment Assesses the trade and development impact of environmental requirements and relevant multilateral agreements and provides capacitybuilding activities to help developing countries participate in and derive benefits from international negotiations on these matters.
4.3.2 Investment and enterprise development 4.3.2.1 International investment and technology arrangements: Helps developing countries to participate more actively in international investment rule making at the bilateral, regional and multilateral levels. These arrangements include the organization of capacity-building seminars and regional symposia and the preparation of a series of issues papers. 4.3.2.2 Investment Policy Reviews: Intended to familiarize Governments and the private sector with the investment environment and policies of a given country. Reviews have been carried out in a number of countries, including Ecuador, Egypt, Ethiopia, Mauritius, Peru, Uganda and Uzbekistan. 4.3.2.3 Investment guides and capacity building for the LDCs: Some of the countries involved are Bangladesh, Ethiopia, Mali, Mozambique and Uganda. 4.3.2.4 Empretec: Promotes entrepreneurship and the development of small and medium-sized enterprises. Empretec programmes have been initiated in 27 countries, assisting more than 70,000 entrepreneurs through local marketdriven business support centres. 4.3.3 Macroeconomic policies, debt and development financing 4.3.3.1 Policy analysis and research on issues concerning global economic interdependence, the international monetary and financial system, and macroeconomic and development policy challenges. 4.3.3.2 Technical and advisory support to the G24 group of developing countries (the Intergovernmental Group of 24) in the World Bank and the International Monetary Fund; advisory services to developing countries for debt rescheduling negotiations under the Paris Club. 4.3.3.3 DMFAS programme: Computer-based debt management and financial analysis system specially designed to help countries manage their external debt. Started in 1982, and now installed in 62 countries. 4.3.4 Technology and Logistics 4.3.4.1 ASYCUDA programme: Integrated customs system that speeds up customs clearance procedures and helps Governments to reform and modernize their customs procedures and management. Installed in over 80 countries, ASYCUDA has become the internationally accepted standard for customs automation.
4.3.4.2 ACIS programme: Computerized cargo tracking system installed in 20 developing countries of Africa and Asia. 4.3.4.3 E-Tourism Initiative: Linking sustainable tourism and Information and communication technologies (ICTs) for development, UNCTAD has developed this Initiative to help developing countries' destinations to become more autonomous by taking charge of their own tourism promotion by using ICT tools. 4.3.4.4 Technology: Services the UN Commission on Science and Technology for Development and administers the Science and Technology for Development Network; carries out case studies on best practices in transfer of technology; undertakes Science, Technology and Innovation Policy Reviews for interested countries, as well as capacity-building activities. 4.3.4.5 Train ForTrade programme: Builds training networks and organizes training in all areas of international trade to enable developing countries to increase their competitiveness. Currently developing distance learning programmes focusing on the LDCs. References : UNCTAD, www.unctad.org
End Chapter Quizzes 1. Secretary General of UNCTAD is from which country A) B) C) D)
Thailand India Switzerland China
2. Objective of Train for Trade program is to A) B) C) D)
organizes training in all areas of international trade promote transfer of technology facilitate cargo tracking system simplify customs clearance procedure
3. ASYCUDA programme of UNCTAD aims at A) Promoting tourism and Information and communication technologies (ICTs) for development B) speeding up customs clearance procedures C) Computerizing cargo tracking system D) Providing trade information 4. UNCTAD stands for A) B) C) D)
United Nations Committee on Trade and Development United Nations Conference on Technology Development United Nations Conference on Trade and Development United Nations Committee on Technology Development
5. How many countries are member of UNCTAD? A) B) C) D)
195 193 190 182
6. Which of the following is not an objective of UNCTAD: A) It functions as a forum for intergovernmental deliberations B) It undertakes research, policy analysis and data collection C) It provides technical assistance tailored to the specific requirements of developing countries D) It provides financial assistance to its members
7. Which initiative of UNCTAD deals with entrepreneurship and the development of small and medium-sized enterprises A) B) C) D)
ASYCUDA ACIS Empretec TRAINS
8. Trade Analysis and Information System (TRAINS) is A) Comprehensive computer-based information system on trade control measures B) Model for making transportation system more efficient C) Training by UNCTAD for upgrading infrastructural facilities D) None of the above 9. Trade Analysis and Information System (TRAINS) contains information for how many countries? A) B) C) D)
193 119 110 124
10. DMFAS programme is A) To promote tourism and Information and communication technologies (ICTs) for development B) Computer-based debt management and financial analysis system C) Computer based cargo tracking system D) CD ROM containing information on trade statistics
1 a, 2 a, 3 b, 4 c, 5 b, 6 d, 7 c, 8 a, 9 b, 10 b
Chapter 5 World Trade Organization 5.1 The Organization The World Trade Organization (WTO) is the only international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. 5.2 Functions The WTO‘s overriding objective is to help trade flow smoothly, freely, fairly and predictably. It does this by: Administering trade agreements Acting as a forum for trade negotiations Settling trade disputes Reviewing national trade policies 5.3 Structure The WTO has 153 members, accounting for over 97% of world trade. Around 30 others are negotiating membership. Decisions are made by the entire membership. This is typically by consensus. A majority vote is also possible but it has never been used in the WTO, and was extremely rare under the WTO‘s predecessor, the General Agreement on Tariffs and Trade (GATT). The WTO‘s agreements have been ratified in all members‘ parliaments. The WTO‘s top level decision-making body is the Ministerial Conference which meets at least once every two years. Below this is the General Council (normally ambassadors and heads of delegation in Geneva, but sometimes officials sent from members‘ capitals) which meets several times a year in the Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body. At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS) Council report to the General Council. Numerous specialized committees, working groups and working parties deal with the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements.
5.4 Secretariat The WTO Secretariat, based in Geneva, has around 625 staff and is headed by a Director General. It does not have branch offices outside Geneva. Since decisions are taken by the Members themselves, the Secretariat does not have the decision-making role that other international bureaucracies are given. The Secretariat‘s main duties are to supply technical support for the various councils and committees and the ministerial conferences, to provide technical assistance for developing countries, to analyze world trade, and to explain WTO affairs to the public and media. The Secretariat also provides some forms of legal assistance in the dispute settlement process and advises governments wishing to become members of the WTO. The annualbudget is roughly 189 million Swiss francs. 5.5 WTO Agreements The WTO‘s rules – the agreements – are the result of negotiations between the members. The current set were the outcome of the 1986-94 Uruguay Round negotiations which included a major revision of the original General Agreement on Tariffs and Trade (GATT). GATT is now the WTO‘s principal rule-book for trade in goods. The Uruguay Round also created new rules for dealing with trade in services, relevant aspects of intellectual property, dispute settlement, and trade policy reviews. The complete set runs to some30,000 pages consisting of about 30 agreements and separate commitments (called schedules) made by individual members in specific areas such as lower customs duty rates and services market-opening. Through these agreements, WTO members operate a non-discriminatory trading system that spells out their rights and their obligations. Each country receives guarantees that its exports will be treated fairly and consistently in other countries‘ markets. Each promises to do the same for imports into its own market. The system also gives developing countries some flexibility in implementing their commitments. 5.5.1 Goods It all began with trade in goods. From 1947 to 1994, GATT was the forum for negotiating lower customs duty rates and other trade barriers; the text of the General Agreement spelt out important rules, particularly non-discrimination. Since 1995, the updated GATT has become the WTO‘s umbrella agreement for trade in goods. It has annexes dealing with specific sectors such as agriculture and textiles, and with specific issues such as state trading, product standards, subsidies and actions taken against dumping.
5.5.2 Services Banks, insurance firms, telecommunications companies, tour operators, hotel chains and transport companies looking to do business abroad can now enjoy the same principles of freer and fairer trade that originally only applied to trade in goods. These principles appear in the new General Agreement on Trade in Services (GATS). WTO members have also made individual commitments under GATS stating which of their services sectors they are willing to open to foreign competition, and how open those markets are. 5.5.3 Intellectual Property The WTO‘s Intellectual Property Agreement amounts to rules for trade and investment in ideas and creativity. The rules state how copyrights, patents, trademarks, geographical names used to identify products, industrial designs, integrated circuit layout-designs and undisclosed information such as trade secrets – ―intellectual property‖ – should be protected when trade is involved. 5.5.4 Dispute Settlement The WTO‘s procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Countries bring disputes to the WTO if they think their rights under the agreements are being infringed. Judgements by specially-appointed independent experts are based on interpretations of the agreements and individual countries‘ commitments. The system encourages countries to settle their differences through consultation. Failing that, they can follow a carefully mapped out, stage-by-stage procedure that includes the possibility of a ruling by a panel of experts, and the chance to appeal the ruling on legal grounds. Confidence in the system is borne out by the number of cases brought to the WTO – more than 300 cases in ten years compared to the 300 disputes dealt with during the entire life of GATT (1947-94). 5.5.5 Trade Policy Review The Trade Policy Review Mechanism‘s purpose is to improve transparency, to create a greater understanding of the policies that countries are adopting, and to assess their impact. Many members also see the reviews as constructive feedback on their policies. All WTO members must undergo periodic scrutiny, each review containing reports by the country concerned and the WTO Secretariat.
5.6 Developing Countries and WTO 5.6.1 Development and Trade Over three-quarters of WTO members are developing or least developed countries. All WTO agreements contain special provision for them, including longer time periods to implement agreements and commitments, measures to increase their trading opportunities, provisions requiring all WTO members to safeguard their trade interests, and support to help them build the infrastructure for WTO work, handle disputes, and implement technical standards. The 2001 Ministerial Conference in Doha set out tasks, including negotiations, for a wide range of issues concerning developing countries. Some people call the new negotiations the Doha Development Round. Before that, in 1997, a high-level meeting on trade initiatives and technical assistance for least-developed countries resulted in an ―integrated framework‖ involving six intergovernmental agencies, to help least-developed countries increase their ability to trade, and some additional preferential market access agreements. A WTO Committee on Trade and Development, assisted by a Sub-Committee on Least-Developed Countries, looks at developing countries‘ special needs. Its responsibility includes implementation of the agreements, technical cooperation, and the increased participation of developing countries in the global trading system. 5.6.2 Technical Assistance and Training The WTO organizes hundreds of technical cooperation missions to developing countries annually. It holds on average three trade policy courses each year in Geneva for government officials. Regional seminars are held regularly in all regions of the world with a special emphasis on African countries. Training courses are also organized in Geneva for officials from countries in transition from central planning to market economies. The WTO has set up reference centres in over 100 trade ministries and regional organizations in capitals of developing and least-developed countries. These centres provide computers and internet access to enable ministry officials to keep abreast of events in the WTO through online access to the WTO‘s immense database of official documents and other material. Efforts are also being made to help countries that do not have permanent representatives in Geneva.
References : World Trade Organization, www.wto.org Annual Report, WTO, www.wto.org Video Presentation on A virtual tour of the WTO, http://www.wto.org/english/res_e/webcas_e/webcas_e.htm#top Video Presentation on From GATT to WTO, http://www.wto.org/english/res_e/webcas_e/webcas_e.htm#top Video Presentation on Case studies of WTO dispute settlement, http://www.wto.org/english/res_e/webcas_e/webcas_e.htm#top
End Chapter Quizzes 1. The World Trade Organization, headquartered in Geneva, Switzerland currently has _____member countries. A) 130 B) 143 C) 153 D) 160 2. Which of the following is not an underlying principle of GATT? A) Trade concessions by member countries will be reciprocated B) Countries should grant preferential treatment to other member countries C) Trade dispute between member countries to be settled by dispute settlement mechanism of GATT D) Policies governing external trade should be transparent 3. In the context of WTO Agreements, ―non discrimination‖ means A) Products imported from all trading partners should be given the same treatment as national products; B) once in the domestic market, imported goods and services from all trading partners cannot be treated differently from domestic products; C) all trading partners should be extended "most favoured" nation; D) a WTO Member can impose customs duties, but once the imported product has cleared customs, it cannot be treated less favourably than the like national product. 4. The Anti-dumping Agreement : A) Allows States to react against dumping, that causes injury to the competing domestic industry; B) can be invoked when a company exports a product at a price lower than the price it normally charges on its own home market; C) requires States to act against dumping; or, D) can be invoked when the unfair competition practised by a company causes injury to the domestic market. 5. Ministerial Conference are : A) Periodic rounds of negotiations; B) meetings of ministers with the sole objective of launching new multilateral trade negotiations; C) enlarged meetings of the General Council, which take place every two years; D) periodic meetings of ministers in charge of WTO matters.
6. The Millennium Round is the Round : A) launched at the Seattle Ministerial Conference; B) not launched at the Seattle Ministerial Conference; C) where Ministers agreed to launch the Doha Development Agenda; or, D) which concluded the negotiations on the Singapore issues. 7. The Doha Development Agenda : A) Sets development of developing countries as the basic goal of the work programme contained in the Doha Ministerial Declaration; B) is a broad work programme addressed to developing countries; C) launched a new round of negotiations on market access, trade and environment, TRIPS, and the Singapore issues; or, D) set a three years deadline for the opening of agriculture and industrial goods market, to the benefit of developing countries. 8. The WTO began its life on A) 1 January 1995 B) 1 January 1994 C) 1 January 1990 D) 1 January 1996 9. The Origin of the multilateral trading system date back to : A) The establishment of the WTO in January 1995; B) the 1944 Bretton-Woods conference which created the World Bank and the International Monetary Fund; C) the discriminatory arrangements following the protectionist trade policies adopted in the 1930's; or, D) the revised GATT of 1994. 10. The GATS differs from GATT among other things because : E) It does not adopt the principle of non discrimination rule with respect to trade in services; F) it provides the same rules as GATT, but it applies them to domestic regulation, rather than to tariffs; G) national treatment is not an obligation under the GATS; H) the GATS has Sectoral Annexes that modify the application of the Agreement.
1 c, 2 b, 3 d, 4 a, 5 d, 6 b, 7 a, 8 a, 9 c, 10 d
Chapter 6 International Trade Centre 6.1 About ITC The International Trade Centre was established in 1964 to enable small business export success in developing countries by providing trade development programmes to the private sector, trade support institutions and policymakers. ITC works in partnership with the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD), supporting their regulatory, research and policy strategies and helping to turn them into practical projects. ITC‘s goal is to help developing countries to achieve sustainable development through exports; activating, supporting and delivering projects with an emphasis on competitiveness and to achieve the mandate, it work with national, regional and international bodies. 6.2 Goals and Objectives The goal of ITC is to help developing and transition countries to achieve sustainable human development through exports and it has taken the following initiative to fulfill its goal 6.2.1 AID for Trade Aid for Trade is the new frontier of development assistance. It is primarily a vehicle for enabling developing countries, particularly least developed countries, to integrate better into the multilateral rules-based trading system. ITC can legitimately claim to be the ‗100% aid for trade‘ organization. The three strategic objectives of ITC correspond closely to at least three of the five parts of the Aid for Trade agenda. ITC contributes the business perspective, offering solutions to supply-side constraints that keep developing countries from participating more fully in world trade. 6.2.2 Trade for the millennium development goals The world development agenda is focused on the Millennium Development Goals (MDGs). They emerged from the Millennium Declaration signed by world leaders
at the largest summit meeting ever assembled at the UN General Assembly in September 2000. ITC has achieved notable success in addressing the MDGs as integral components of its programmes. The MDGs have served as critical benchmarks for ITC in its efforts to reduce poverty and enhance the competitiveness of enterprises in poor communities by promoting their integration into the global value chain. Exports can have an immediate and tangible impact on people‘s lives, both in the well-established trading countries and in those emerging from disruption and conflict. Exports generate employment and better incomes, contribute to women‘s empowerment and bring environmental benefits. 6.3 Strategic Partnership ITC has partnered with trade support institutions to deliver integrated solutions for export impact for good ITC plays a critical role in the development of trade support institutions (TSIs). ITC channels the majority of its technical support services through trade support institutions to ensure the widest dissemination and the sustainable transfer of knowledge and expertise. It will further develop, and better implement, benchmarking methodologies and tools to enable them to deliver outcomes and measure their performance at the international level. 6.4 Capacity Building We advise business on making the most of an open trading system and attend to the specific trade development needs of least developed countries. We help countries apply the benefits of new technologies, provide support to women entrepreneurs and promote environmentally friendly export initiatives. Then we provide the resources for success: facilitating profitable business generation helping to develop the right products and services identifying where the market is and connecting business helping develop skills and technical capacity for ongoing success. 6.5 Overview of its services
ITC delivers five complementary business services 6.5.1 Business and trade policy ITC ensures that business priorities are integrated into national trade policies and that small business needs are taken into consideration in the negotiation of international trade agreements. It also help small businesses to conduct business strategically in today‘s increasingly competitive global trading system. It‘s main objective is to actively link businesses with policymakers through local trade support institutions. 6.5.2 Export strategy ITC helps policymakers and governments, as well as enterprises, to develop successful export development strategies, compatible with national planning frameworks and action plans proposed in diagnostic studies. 6.5.3 Strengthening trade support institutions ITC plays a critical role in the development of TSI networks. It develop and implement benchmarking methodologies and tools to enable TSIs to network more effectively and measure their performance at the international level. 6.5.4 Trade intelligence ITC provide trade data, information, analysis and related capacity building to enterprises, TSIs and policymakers to facilitate decision-making on exportrelated matters. 6.5.5 Exporter competitiveness ITC develop and deliver tools and services responding to the specific needs of exporting enterprises, with the aim of making them more competitive. These services are delivered in cooperation with, and through, TSIs by certifying trainers and programmes. Areas covered include enterprise management, procurement and supply chain management, quality and standards, export packaging, logistics and distribution. We also develop marketing and business environment solutions. References International Trade Centre (ITC), www.intracen.org
End Chapter Quizzes 1. The International Trade Centre was established in A) 1947 B) 1964 C) 1944 D) 1970 2. ITC‘s goal is to A) help developing countries to achieve sustainable development through exports; B) activate, supporting and deliver projects with an emphasis on competitiveness C) work with national, regional and international bodies D) all of the above 3. Which of the following services is not provided by ITC? A) Trade Intelligence B) Support in developing TSI network C) Financial assistance to subsidies export D) successful export development strategies 4. ITC has addressed the MDGs by A) enhancing the competitiveness of enterprises by promoting their integration into the global value chain B) providing financial assistance for developing the sea ports C) providing financial assistance to address balance of payment problems D) none of the above 5. ITC works in partnership with WTO and UNCTAD and supports them by A) helping them in opening regional offices B) providing inputs for their regulatory, research and policy strategies and helping to turn them into practical projects C) dispute settlement between member countries D) none of the above
6. Aid for Trade program of ITC is aimed at A) integrating developing and LCDs into the multilateral rules-based trading system B) providing assistance to meet fiscal deficit C) developing TSI network D) none of the above 7. Headquarters of ITC are situated at A) New York B) London C) Paris D) Geneva 8. ITC helps in capacity building by A) facilitating profitable business generation B) helping to develop the right products and services C) identifying where the market is and connecting business D) All of the above 9. The objective of the Trade Support Institutions (TSI) is to provide A) Integrated solutions for export B) Resolve dispute between exporters and importers C) Both a and b D) None of the above 10. ITC stands for A) International Trade Corporation B) Interregional Trade Centre C) International Trade Promotion Centre D) None of the above
1 b, 2 d, 3 c, 4 a, 5 b, 6 a, 7 d, 8 d, 9 a, 10 d
Chapter 7 Centre for the Promotion of Imports from developing countries 7.1 Organisation The Centre for the Promotion of Imports from developing countries (CBI) was established in 1971. CBI is an Agency of the Ministry of Foreign Affairs and part of the development cooperation effort of the Netherlands. The organisation has four departments dealing with: market information and training; export coaching; institutional development of business support organisations; general affairs and accounting. 7.2 Mission CBI contributes to the equitable economic development of selected developing countries by providing export marketing and management support to their SME exporters and Business Support Organisations with the purpose of increasing exports to Europe. CBI stimulates and supports economic activities that are sustainable, socially responsible and environmentally sound. This implies compliance with international social standards, more specifically ILO Conventions, and European consumer health, safety and environm ental requirements. Requirements are both legislative and market driven. CBI works with clients who subscribe and strive to comply with these standards and requirements.
7.3 Competencies In order to accomplish its mission CBI concentrates on five core competencies. These are: 7.3.1 Market knowledge CBI has an intimate knowledge of the structures, characteristics, developments and requirements of markets in the European Union.
7.3.2 Product and production improvement CBI is able to provide technical assistance in improving products and production processes that contribute to the competitiveness on the EU markets. 7.3.3 Quality control Quality is of main concern to the consumers and end users in the European Union. There are multiple rules, regulations and stan dards on quality (originating from) stipulated by the European Union, national governments, trade & industry, non -governmental organisations, etc. CBI is able to coach exporters and business support organisations in meeting the requirements in this regard. 7.3.4 Export marketing and management CBI is able to provide technical assistance and training on improving export marketing and management knowledge and skills within companies and business support organisations. 7.3.5 Market entry Through its knowledge of the markets and its long year experience CBI is able to provide guidance and market entry services to companies in gaining access to, maintaining and expanding market share on the EU markets. For disciplines beyond our core competencies, CBI cooperates with various other specialized organisations. 7.4 Overview of the services The CBI offers the following services: 7.4.1 Market information The market information services of CBI include a variety of tools to keep exporters and Business Support Organisations (BSOs) in developing countries in step with the very latest developments on the EU market. 7.4.2 Company database
The on-line company database presents a wide range of CBI-trained exporters from developing countries. All of these exporters have been audited by the CBI´s European experts and have received extensive coaching for doing business in Europe through our export coaching programmes (ECPs). 7.4.3 Export Coaching The export coaching activities are designed to assist entrepreneurs in developing countries in entering and succeeding on the EU market and/or consolidating or expanding their existing market sh are. 7.4.4 Training The CBI provides tailorised training for exporters and BSOs in many fields, including the following: - General export marketing and management; - Trade promotion; - Managing international trade fair participations; and - Developing client-oriented market information systems. 7.4.5 BSO development The institutional capacity development support for selected BSOs focuses on: - Export marketing and management; - Market information services and systems; - Institutional development and organisational strengthening; and - Export diversification. The CBI is active in a number of specific market sectors and has built its client base around those sectors. References CBI, www.cbi.nl
End Chapter Quizzes 1. CBI is an Agency of under which department? A) Ministry of Foreign Affairs B) Ministry of External Affairs C) Ministry of International Trade and Investment D) Ministry of International Trade 2. CBI is a development cooperation effort of A) B) C) D)
Germany Italy Netherlands. France
3. The Centre for the Promotion of Imports fr om developing countries (CBI) was established in A) B) C) D)
1972 1971 1973 1975
4. CBI has four departments which deals with: A) market information and training; export coaching; institutional development of business support organisations; & general affairs and accounting B) market information and training; export coaching; institutional development of business support organisations; & dispute settlement C) market information and training; import from LDCs, institutional development of business support organisations; & general affairs and accounting D) market information and training; export coaching; developing strategic partnership with WTO & general affairs and accounting
5. CBI works with the aim of promoting export from selected developing countries to A) B) C) D)
Africa Europe USA China
6. The institutional capacity development suppo rt for selected BSOs focuses on A) Export marketing and management; B) Market information services and systems; C) Institutional development and organisational strengthening; and D) All of the above 7. Which of the following is not a core competency of CBI? A) Market knowledge B) Product and production improvement C) Dispute Settlement D) Export marketing and management E) Market entry 8. The CBI provides tailorised training to A) exporters and BSOs in the field of International Trad e B) employees of the central bank of the country C) policy makers in developing countries D) none of the above
9. The export coaching activities are designed to assist entrepreneurs in developing countries to A) B) C) D)
enter and succeeding in the EU market consolidating or expanding their existing market share none of the above both a and b
10. Which of the following service is not provided by CBI? A) Market information B) Company database C) Dispute Settlement D) Training
1 a, 2 c, 3 b, 4 a, 5 b, 6 d, 7 c, 8 a, 9 d, 10 c
Chapter 8 European Union 8.1 Overview The European Union is a unique economic and political partnership between 27 democratic European countries with the objective to ensure peace, prosperity and freedom for its 498 million citizens — in a fairer, safer world. The countries that make up the EU (its ‗member states‘) remain independent sovereign nations but they pool their sovereignty in order to gain a strength and world influence none of them could have on their own. 8.2 How is EU formed The European Union is based on the rule of law. This means that everything that it does is derived from treaties, which are agreed on voluntarily and democratically by all Member States. Previously signed treaties have been changed and updated to keep up with developments in society. The main treaties are the following: 8.2.1 Treaty of Lisbon The Treaty of Lisbon was signed on 13 December 2007. It will have to be ratified by all 27 Member States before it can enter into force, which is hoped to be before the next European Parliament elections in June 2009. Its main objectives are to make the EU more democratic, meeting the European citizens‘ expectations for high standards of accountability, openness, transparency and participation; and to make the EU more efficient and able to tackle today's global challenges such as climate change, security and sustainable development. The agreement on the Treaty of Lisbon followed the discussion about a constitution. A "Treaty establishing a constitution for Europe" was adopted by the Heads of State and Government at the Brussels European Council on 17 and 18 June 2004 and signed in Rome on 29 October 2004, but it was never ratified. 8.2.2 Treaty of Nice The Treaty of Nice, signed on 26 February 2001, entered into force on 1 February 2003. It dealt mostly with reforming the institutions so that the Union could function efficiently after its enlargement to 25 Member States. The Treaty of Nice, the former Treaty of the EU and the Treaty of the EC have been merged into one consolidated version.
8.2.3 Treaty of Amsterdam The Treaty of Amsterdam, signed on 2 October 1997, entered into force on 1 May 1999. It amended and renumbered the EU and EC Treaties. Consolidated versions of the EU and EC Treaties are attached to it. The Treaty of Amsterdam changed the articles of the Treaty on European Union, identified by letters A to S, into numerical form. 8.2.4 Treaty on European Union The Treaty on European Union, which was signed in Maastricht on 7 February 1992, entered into force on 1 November 1993. 'The Maastricht Treaty changed the name of the European Economic Community to simply "the European Community". It also introduced new forms of co-operation between the Member State governments - for example on defence, and in the area of "justice and home affairs". By adding this inter-governmental co-operation to the existing "Community" system, the Maastricht Treaty created a new structure with three "pillars" which is political as well economic. This is the European Union (EU). 8.2.5 Single European Act (SEA) The Single European Act (SEA), signed in Luxembourg and the Hague, and entered into force on 1 July 1987, provided for the adaptations required for the achievement of the Internal Market. 8.2.6 Merger Treaty The Merger Treaty, signed in Brussels on 8 April 1965 and in force since 1 July 1967, which provided for a Single Commission and a Single Council of the then three European Communities. 8.2.7 Treaty of Rome The Treaty of Rome, establishing the European Economic Community (EEC), signed in Rome on 25 March 1957, and entered into force on 1 January 1958. The Treaty establishing the European Atomic Energy Community (Euratom) was signed at the same time and the two are therefore jointly known as the Treaties of Rome. 8.2.8 Treaty establishing the European Coal and Steel Community The Treaty establishing the European Coal and Steel Community (ECSC), which was signed on 18 April 1951 in Paris, entered into force on 23 July 1952 and expired on 23 July 2002.
Moreover, the founding treaties have been amended on several occasions, in particular when new Member States acceded in 1973 (Denmark, Ireland, United Kingdom), 1981 (Greece), 1986 (Spain, Portugal), 1995 (Austria, Finland, Sweden) and 2004 (the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia). Based on the Treaties, EU institutions can adopt legislation, which is then implemented by the Member States. To see the full texts of EU legislation, please consult Eur-Lex, the portal to European Union Law. The texts published in the Official Journal (EUR-Lex) are the only authentic versions.
8.3 Embracing a continent In all 27 countries are part of EU, Details of when these countries joined EU are : 1952 Belgium, France, Germany, Italy, Luxembourg, Netherlands 1973 Denmark, Ireland, United Kingdom 1981 Greece 1986 Portugal, Spain 1995 Austria, Finland, Sweden 2004 Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia 2007 Bulgaria, Romania 8.4 EU institutions and other bodies 8.4.1 Main EU Institutions The EU's decision-making process in general and the co-decision procedure in particular involve three main institutions:
the European Parliament (EP), which represents the EU‘s citizens and is directly elected by them;
the Council of the European Union, which represents the individual member states;
the European Commission, which seeks to uphold the interests of the Union as a whole.
This ‗institutional triangle‘ produces the policies and laws that apply throughout the EU. In principle, it is the Commission that proposes new laws, but it is the Parliament and Council that adopt them. The Commission and the member states then implement them, and the Commission ensures that the laws are properly taken on board. Two other institutions have a vital part to play: the Court of Justice upholds the rule of European law, and the Court of Auditors checks the financing of the Union‘s activities. The powers and responsibilities of these institutions are laid down in the Treaties, which are the foundation of everything the EU does. They also lay down the rules and procedures that the EU institutions must follow. The Treaties are agreed by the presidents and/or prime ministers of all the EU countries, and ratified by their parliaments. 8.4.1.1 The European Parliament: Voice of the people The European Parliament is elected every five years by the people of Europe to represent their interests.
The main job of Parliament is to pass European laws on the basis of proposals presented by the European Commission. Parliament shares this responsibility with the Council of the European Union. Parliament and Council also share joint authority for approving the EU‘s €130 billion annual budget. Parliament has the power to dismiss the European Commission. The main meetings of the Parliament are held in Strasbourg (France), others in Brussels (Belgium). Like all other EU institutions, the Parliament works in all the 23 official EU languages. The Parliament elects the European Ombudsman, who investigates citizens‘ complaints about maladministration by the EU institutions (ombudsman.europa.eu).
8.4.1.2 The Council of the European Union: Voice of the Member States The Council of the European Union — formerly known as the Council of Ministers — is the EU‘s principal decision-taking body. It shares with Parliament the responsibility for passing EU laws. It is also in charge of the EU‘s foreign, security and defence policies, and is responsible for key decisions on justice and freedom issues. The Council consists of ministers from the national governments of all the EU countries. Meetings are attended by whichever ministers are responsible for the items to be discussed: foreign ministers, ministers of the economy and finance, ministers for agriculture and so on, as appropriate. Every six months, a different member state assumes the so-called Presidency of the EU, meaning that it chairs these meetings and sets the overall political agenda. Each country has a number of votes in the Council broadly reflecting the size of its population, but weighted in favour of smaller countries. Most decisions are taken by majority vote, although sensitive issues in areas like taxation, asylum and immigration, or foreign policy, require unanimity. Several times a year the presidents and/or prime ministers of the member states meet as the European Council. These ‗summit‘ meetings set overall EU policy.
8.4.1.3 The European Commission: Promoting the common interest The European Commission is the EU‘s executive organ. It represents and upholds the interests of Europe as a whole.
It drafts proposals for new European laws, which it presents to the European Parliament and the Council. It manages the day-to-day business of implementing EU policies and spending EU funds. The Commission also makes sure that everyone abides by the European treaties and laws. It can act against rulebreakers, taking them to the European Court of Justice if necessary. The Commission consists of 27 men and women — one from each EU country. They are assisted by about 24 000 civil servants, most of whom work in Brussels. The president of the Commission is chosen by EU governments and endorsed by the European Parliament. The other commissioners are nominated by their national governments in consultation with the incoming president, and must be approved by the European Parliament. They do not represent the governments of their home countries. Instead, each of them has responsibility for a particular EU policy area. The president and members of the Commission are appointed for a period of five years, coinciding with the period for which the European Parliament is elected. 8.4.1.4 The Court of Justice: The rule of law The job of the Court of Justice is to make sure that EU law is interpreted and applied in the same way in all EU countries, thereby ensuring that the law is equal for everyone. It ensures, for example, that national courts do not give different rulings on the same issue. The Court also makes sure that EU member states and institutions do what the law requires them to do. The Court is located in Luxembourg and has one judge from each member country 8.4.1.5 The Court of Auditors: Getting value for your money The Court of Auditors checks that the EU‘s funds, which come from the taxpayers, are spent legally, economically and for the intended purpose. The Court is based in Luxembourg and has the right to audit any organisation, body or company which handles EU funds. 8.4.2. EU Other Institutions and bodies 8.4.2.1 The European Economic and Social Committee: Voice of civil society The 344 members of the European Economic and Social Committee represent a wide range of interests: from employers to trade unionists, from consumers to ecologists. The Committee is an advisory body which must be consulted on proposed EU decisions about employment, social spending, vocational training, etc.
8.4.2.2 The Committee of the Regions: The local perspective The Committee of the Regions is consulted on upcoming EU decisions with a direct impact at the local or regional level in fields such as transport, health, employment or education. Its 344 members are often leaders of regional governments or mayors of cities. 8.4.2.3 The European Central Bank: A stable currency Based in Frankfurt, the (Germany), the European Central Bank is responsible for managing the euro, principally by setting interest rates. Its prime concern is ensuring price stability so that the European economy is not harmed by inflation. The Bank takes it decisions independently of governments and other bodies. 8.4.2.4 The European Investment Bank: Lending a helping hand The Bank lends money for projects of European interest, particularly in the less well-off regions. It finances infrastructure projects, such as rail and road links or environmental schemes. It also provides credit for investments by small businesses and lends to candidate states and developing countries. Because it is owned by EU governments, the bank can raise capital and provide loans and credit at favourable rates. The European Union (EU) is not a federation like the United States. Nor is it simply an organisation for co-operation between governments, like the United Nations. It is, in fact, unique. Pooling sovereignty means, in practice, that the member states delegate some of their decision-making powers to shared institutions they have created, so that decisions on specific matters of joint interest can be made democratically at European level.
References : Video on ―50 Years of EU in the World‖, www.youtube.com/watch?v=95CuBIBL4E Video on ―The EU explained The EU explained‖ http://europa.eu/take-part/eutube/index_en.htm Video on ― Your Europe‖ http://www.youtube.com/profile?user=eutube#g/u
End Chapter Quizzes 1. The European Union is a supranational entity. This means that: A) it relies on the goodwill of its member nations for cooperation. B) its member countries remain completely sovereign nations. C) it relies on voluntary contributions of its member nations. D) it has the power to implement legislation directly in each of the member nations. 2. Currently 12 member countries are participating in the European Monetary Union (EMU). Which of the following countries is not participating in EMU? A) Italy B) Denmark C) Luxembourg D) Belgium 3. The European Union has _____ official languages. A) 9 B) 10 C) 11 D) 15 4. The original six members of the European Union included: A) the Netherlands. B) the United Kingdom. C) Spain. D) Denmark. 5. EU is an example of which type of regional economic integration? A) Economic Integration B) Customs Union C) Free Trade Agreement D) Preferential Trade Agreement 6. Romania and Bulgaria joined the EU in: A) B) C) D)
2004 2008 2000 2007
7. Which of the following country do not share the common currency Euro? A) Great Britain.
B) Cyprus C) Finland D) Belgium.
8. The basis of the EU was the: A) B) C) D)
EC. ECE. EURO EUCE.
9. This is the motto of the EU. A) Promoting regional trade B) Ensure peace in the region C) United in diversity D) Eco friendly region 10. Europe Day is celebrated on A) 9 May B) 1 January C) 26 November D) 5 June
1 d, 2 b, 3 c, 4 a, 5 a, 6 d, 7 a, 8 a, 9 c, 10 a
Chapter 9 North American Free Trade Agreement (NAFTA) 9.1 Objectives and Achievements NAFTA is a comprehensive rules-based trade agreement between the United States (U.S.), Canada, and Mexico. It was signed by the three governments on 17 December 1992 and came into force on 1 January 1994. It broadens and supersedes the 1989 Free Trade Agreement (FTA) between the United States and Canada. Its primary objective is to promote free trade in the area and to reduce all tariffs to zero within a 15-year period. Since its enforcement, trade between the U.S., Canada and Mexico has increased by 43%, with a total trade (imports and exports between the U.S. and Mexico and the U.S. and Canada) of US$421 billion in 1996. Two-way trade between the United States and Mexico rose by 93% between 1993 and 1997, reaching nearly US$160 billion in 1997. NAFTA has also contributed to increase the flow of investment from the U.S. and Canada into Mexico, with an average of US$4 billion annually over the same period. 9.2. Institutional Structure The central institution created by NAFTA, and hence the body ultimately in charge of fulfilling NAFTA's objectives, is the ministerial-level NAFTA Free Trade Commission (FTC) composed of cabinet-level representatives and required to meet at least once a year, in locations rotating among the three countries. The FTC is designed to supervise the implementation of the Agreement and resolve any disputes that may arise regarding its interpretation or application. The second main institutional body of NAFTA is the Secretariat. It has three primary functions: to support the FTC and any working groups or committees established by it; to act as the administrative assistant for NAFTA's dispute settlement panels and related committees; and to act in a limited capacity as a depository for any investment-related disputes. It is currently composed of three national sections, a mechanism which originated in the Canada-United States Free Trade Agreement of 1989 (FTA) to administer binational procedures for dispute settlement panel reviews. 9.3 Dispute Settlement Two mechanisms exist within NAFTA for the resolution of disputes: the FTC and the dispute resolution panels. NAFTA specifies that the Parties should use the
FTC as a stage to explore creative solutions to a conflict. If no such solution is found, the case is then sent to a formal dispute settlement panel. As of yet this aspiration has remained unfulfilled. The major disputes that have arisen, as on Canadian-US supply management, US-Mexican tomatoes, and the US-Mexican trucking issues, have been so politically charged that the envisaged creative ministerial solutions have not yet been possible. Of the thirty some cases of commercial dispute raised so far, only two have been resolved by the FTC, while the remainder went to arbitral panels. 9.4 NAFTA and the Environment Although NAFTA was conceived and created as a trade agreement, it contains commitment to further environmental protection and sustainable development. Indeed, its preamble contains specific pledges to promote sustainable development, strengthen the development and enforcement of environmental laws and regulations, and undertake its economic activities in a manner consistent with environmental protection and conservation. Article 104 of NAFTA accords primacy to environment over trade considerations in some circumstances by declaring that the major multilateral conventions on endangered species, ozone depletion, and hazardous waste disposal take precedence over the new trade rights it created. Chapter 7, dealing with sanitary and phytosanitary standards, allows each NAFTA country to set the level of environmental protection it considers appropriate. Chapter 9 protects the right of a NAFTA country to determine the level of national environmental protection it desires when taking standard-related measures. Chapter 11, in Article 1114, prohibits countries from lowering environmental standards or their enforcement in order to increase or maintain investment in its territory. Chapter 20 provides new mechanisms for the submission of environmental concerns to dispute settlement panels. 9.4.1. The Committee on Standards-Related Measures (CSRM) To fulfil its goal of protecting the environment and promoting sustainable development, the FTC has established a number of bodies, most notably the Committee on Standards-Related Measures (CSRM). Of all the FTC bodies, the CSRM has the clearest responsibilities and most central role in reaching NAFTA's environmental objectives. It is mandated to monitor the implementation and administration of NAFTA's Chapter 9 on Technical Barriers to Trade, consider non-governmental developments in standards-related measures, and report annually to the FTC. The NAFTA text directs CSRM to establish four subcommittees, i.e. Land Transportation Standards Subcommittee (LTSS) Automotive Standards Council (ASC) Telecommunications Standards Subcommittee
Subcommittee on Labelling of Textile and Apparel Goods. 9.4.2. The Committee on Sanitary and Phytosanitary Measures (SPS) NAFTA also establishes trilateral institutions with direct environmental relevance in the area of agriculture. The SPS Committee is designed to facilitate technical cooperation for the enhancement of food safety, and to hold consultations on sanitary and phytosanitary measures. 9.4.3. The Commission for Environmental Cooperation (CEC) To better reach its environmental objectives, NAFTA is complemented by a major side agreement, the North American Agreement on Environmental Cooperation (NAAEC), which in effect is a complete agreement in its own right. Its central feature is the establishment of the Commission for Environmental Cooperation (CEC) to address regional environmental concerns, help prevent potential trade and environmental conflicts, and promote the effective enforcement of environmental laws. References North America Free Trade Agreement, www.nafta-sec-alena.org
End Chapter Quizzes 1. The impetus for the creation of the North American Free Trade Agreement (NAFTA) was: A) the desire of Mexico to attract multinational corporations because of its cheap labor supply. B) the desire of the United States to remain as competitive as possible in the world market place. C) the desire of Canada to leverage its proximity to the United States in world trade. D) all of the above. 2. NAFTA's purpose is to: A) create an economic union of the member countries. B) create a political union of the member countries. C) eliminate trade barriers among the member countries. D) allow for the free movement of people, goods and services among the member countries. 3. Which of the following is not an objective of NAFTA: A) Access to financial services B) To investigate environment and labour abuses C) No change in tariff D) Protection for investment
4. The basis for NAFTA was the: A) B) C) D) 5.
FTAA. NATA 1989 United States-Canada FTA. US-Canada Trade Pact.
NAFTA came into force on A) 1 January 1994 B) 17 December 1992 C) 31 Decmeber 1992 D) 1st January 1995
6. Which of the following is not a member of NAFTA?
A) B) C) D) E)
Canada the United States Mexico Honduras All are members of NAFTA.
7. . Main objective of NAFTA are to A) promote sustainable development B) strengthen the development and enforcement of environmental laws and regulations C) undertake its economic activities in a manner consistent with environmental protection and conservation. D) All of the above 8. Which of the following is not a subcommittee under Committee on StandardsRelated A) Dispute Settlement Standards Subcommittee (LTSS) B) International Trade Standards Council C) Information Technology Standards Subcommittee D) Subcommittee on Labelling of Textile and Apparel Goods 9. The second main institutional body of NAFTA is the Secretariat. It has three primary functions: A) to support the FTC and any working groups or committees B) to act as the administrative assistant for NAFTA's dispute settlement panels and related committees C) to act in a limited capacity as a depository for any investment-related disputes D) All of the above E) None of the above 10. The SPS Committee is designed to facilitate A) Technical cooperation for the enhancement of food safety B) To hold consultations on sanitary and phytosanitary measures C) Both a and b D) None of the above
1 b, 2 c, 3 c, 4 c, 5 a, 6 d, 7 d, 8 d, 9 d, 10 c
Chapter 10 The Association of Southeast Asian Nations 10.1 Overview The Association of Southeast Asian Nations, or ASEAN, was established on 8 August 1967 in Bangkok, Thailand, with the signing of the ASEAN Declaration (Bangkok Declaration) by the Founding Fathers of ASEAN, namely Indonesia, Malaysia, Philippines, Singapore and Thailand. Brunei Darussalam then joined on 8 January 1984, Viet Nam on 28 July 1995, Lao PDR and Myanmar on 23 July 1997, and Cambodia on 30 April 1999, making up what is today the ten Member States of ASEAN. 10.2 Aims And Purposes As set out in the ASEAN Declaration, the aims and purposes of ASEAN are: To accelerate the economic growth, social progress and cultural development in the region through joint endeavours in the spirit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of Southeast Asian Nations; To promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries of the region and adherence to the principles of the United Nations Charter; To promote active collaboration and mutual assistance on matters of common interest in the economic, social, cultural, technical, scientific and administrative fields; To provide assistance to each other in the form of training and research facilities in the educational, professional, technical and administrative spheres; To collaborate more effectively for the greater utilisation of their agriculture and industries, the expansion of their trade, including the study of the problems of international commodity trade, the improvement of their
transportation and communications facilities and the raising of the living standards of their peoples; To promote Southeast Asian studies; and To maintain close and beneficial cooperation with existing international and regional organisations with similar aims and purposes, and explore all avenues for even closer cooperation among themselves. 10.3 Fundamental Principles In their relations with one another, the ASEAN Member States have adopted the following fundamental principles, as contained in the Treaty of Amity and Cooperation in Southeast Asia (TAC) of 1976: Mutual respect for the independence, sovereignty, equality, territorial integrity, and national identity of all nations; The right of every State to lead its national existence free from external interference, subversion or coercion; Non-interference in the internal affairs of one another; Settlement of differences or disputes by peaceful manner; Renunciation of the threat or use of force; and Effective cooperation among themselves. 10.4 ASEAN Community The ASEAN Vision 2020, adopted by the ASEAN Leaders on the 30th Anniversary of ASEAN, agreed on a shared vision of ASEAN as a concert of Southeast Asian nations, outward looking, living in peace, stability and prosperity, bonded together in partnership in dynamic development and in a community of caring societies. At the 9th ASEAN Summit in 2003, the ASEAN Leaders resolved that an ASEAN Community shall be established.
At the 12th ASEAN Summit in January 2007, the Leaders affirmed their strong commitment to accelerate the establishment of an ASEAN Community by 2015 and signed the Cebu Declaration on the Acceleration of the Establishment of an ASEAN Community by 2015. The ASEAN Community is comprised of three pillars, namely the ASEAN Political-Security Community, ASEAN Economic Community and ASEAN SocioCultural Community. Each pillar has its own Blueprint, and, together with the Initiative for ASEAN Integration (IAI) Strategic Framework and IAI Work Plan Phase II (2009-2015), they form the Roadmap for and ASEAN Community 20092015. 10.5 ASEAN Charter The ASEAN Charter serves as a firm foundation in achieving the ASEAN Community by providing legal status and institutional framework for ASEAN. It also codifies ASEAN norms, rules and values; sets clear targets for ASEAN; and presents accountability and compliance. The ASEAN Charter entered into force on 15 December 2008. A gathering of the ASEAN Foreign Ministers was held at the ASEAN Secretariat in Jakarta to mark this very historic occasion for ASEAN. With the entry into force of the ASEAN Charter, ASEAN will henceforth operate under a new legal framework and establish a number of new organs to boost its community-building process. In effect, the ASEAN Charter has become a legally binding agreement among the 10 ASEAN Member States. It will also be registered with the Secretariat of the United Nations, pursuant to Article 102, Paragraph 1 of the Charter of the United Nations. The importance of the ASEAN Charter can be seen in the following contexts: New political commitment at the top level New and enhanced commitments New legal framework, legal personality New ASEAN bodies Two new openly-recruited DSGs More ASEAN meetings More roles of ASEAN Foreign Ministers
New and enhanced role of the Secretary-General of ASEAN Other new initiatives and changes 10.6 The ASEAN Secretariat The ASEAN Secretariat was set up in February 1976 by the Foreign Ministers of ASEAN. However, it was only in 1981 was the existing ASEAN Secretariat established. It was officiated in 1981 by the then President of Indonesia, H.E. Soeharto. The ASEAN Secretariat‘s basic function is to provide for greater efficiency in the coordination of ASEAN organs and for more effective implementation of ASEAN projects and activities The ASEAN Secretariat‘s vision is that by 2015, it will be the nerve centre of a strong and confident ASEAN Community that is globally respected for acting in full compliance with its Charter and in the best interest of its people. The ASEAN Secretariat‘s mission is to initiate, facilitate and coordinate ASEAN stakeholder collaboration in realising the purposes and principles of ASEAN as reflected in the ASEAN Charter. References Association of South East Asian Nations, www.aseansec.org
End Chapter Quizzes 1. The Association of Southeast Asia Nations or ASEAN is one of the fastest developing economic regions in the world. ASEAN's purpose is to: A) eliminate barriers to trade. B) promote the free movement of people in the region. C) create a free trade area among the member countries. D) promote economic growth and peace in the region. 2. Which of the following is an example of regional trade agreement among Asian Countries? A) SAPTA B) CARICOM C) EEC D) CACM 3. Which of the following countries is not a member of ASEAN? A) Thailand B) China C) Vietnam D) Singapore 4. The Association of Southeast Asian Nations, or ASEAN, was established on A) 8 August 1967 B) 4 August 1971 C) 3 July 1978 D) 6 September 1976 5. Which of the following is not a Founding Fathers of ASEAN A) Indonesia B) Malaysia C) China D) Philippines 6. Myanmar became a member of ASEAN on A) 3 July 1978 B) 23 July 1997 C) 30 April 1999
D) 8 August 1967 7. The ASEAN Charter entered into force on A) 23 July 1997 B) 30 April 1999 C) 8 August 1967 D) 15 December 2008 8. The ASEAN Secretariat was officiated in 1981 by A) President of Indonesia B) Foreign Minister of Thailand C) President of Singapore D) President of Indonesia 9. Leaders of the ASEAN nations affirmed their strong commitment to accelerate the establishment of an ASEAN Community by 2015 at the ASEAN Summit in A) December 2005 B) January 2008 C) January 2007 D) July 2004 10. The pillar(s) of the ASEAN Community are A) ASEAN Political-Security Community B) ASEAN Economic Community C) ASEAN Socio-Cultural Community D) All of the above
1 d, 2 a, 3 c, 4 a, 5 c, 6 b, 7 d, 8 a, 9 c, 10
Chapter 11 The South Asian Association for Regional Cooperation 11.1 Overview The South Asian Association for Regional Cooperation (SAARC) was established when its Charter was formally adopted on 8 December 1985 by the Heads of State or Government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and SriLanka. The Association provides a platform for the peoples of South Asia to work together in a spirit of friendship, trust and understanding. It aims to promote the welfare of the peoples of South Asia and to improve their quality of life through accelerated economic growth, social progress and cultural development in the region. Cooperation in the SAARC is based on respect for the principles of sovereign equality, territorial integrity, political independence, noninterference in internal affairs of the Member States and mutual benefit. Regional cooperation is seen as a complement to the bilateral and multilateral relations of SAARC Member States. Decisions are taken on the basis of unanimity. Bilateral and contentious issues are excluded from the deliberations of SAARC. 11.2 Objectives The objectives of the ASSOCIATION shall be: to promote the welfare of the peoples of SOUTH ASIA and to improve their quality of life; to accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realise their full potentials; to promote and strengthen collective self-reliance among the countries of SOUTH ASIA; to contribute to mutual trust, understanding and appreciation of one another's problems; to promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields;
to strengthen cooperation with other developing countries; to strengthen cooperation among themselves in international forums on matters of common interests; and to cooperate with international and regional organisations with similar aims and purposes.
11.3 Principles Cooperation within the framework of the ASSOCIATION shall be based on respect for the principles of sovereign equality, territorial integrity, political independence, non-interference in the internal affairs of other States and mutual benefit. Such cooperation shall not be a substitute for bilateral and multilateral cooperation but shall complement them. Such cooperation shall not be inconsistent with bilateral and multilateral obligations. 11.4 Areas of Cooperation At the inception of the Association, the Integrated Programme of Action (IPA) consisting of a number of Technical Committees (TCs) was identified as the core areas of cooperation. Over the period of years, the number of TCs were changed as per the requirement. The current areas of cooperation under the reconstituted Regional Integrated Programme of Action which is pursued through the Technical Committees cover: 1. 2. 3. 4. 5. 6. 7.
Agriculture and Rural Development; Health and Population Activities; Women, Youth and Children; Environment and Forestry; Science and Technology and Meteorology; Human Resources Development; and Transport.
Recently, high level Working Groups have also been established to strengthen cooperation in the areas of Information and Communications Technology, Biotechnology, Intellectual Property Rights, Tourism, and Energy. Given the emphasis laid down at successive Summits on the need to expand the areas of cooperation and strengthen the regional cooperation, a number of other areas have been included in the SAARC agenda. Several Ministerial level meetings have taken place to give due emphasis in various fields.
11.5 Secretariat The SAARC Secretariat was established in Kathmandu on 16 January 1987. Its role is to coordinate and monitor the implementation of SAARC activities, service the meetings of the Association and serve as the channel of communication between SAARC and other international organisations. The Secretariat has also been increasingly utilised as the venue for SAARC meetings. The Secretariat comprises the Secretary General, seven Directors and the General Services Staff. The Secretary-General is appointed by the Council of Ministers upon nomination by a member state, on the principle of rotation in alphabetical order, for a period of two years. 11.6 Financial Arrangements The contribution of each Member State towards financing of the activities of the ASSOCIATION is voluntary. Moreover, each Technical Committee makes recommendations for the apportionment of costs of implementing the programmes proposed by it. In case sufficient financial resources cannot be mobilised within the region for funding activities of the ASSOCIATION, external financing from appropriate sources may be mobilised with the approval of or by the Standing Committee. References: SAARC Information Centre, http://www.saarc-sic.org/ SAARC Documentation Centre, http://www.sdc.gov.in/index.htm
End Chapter Quizzes 1. Which of the following is not founder member country of ASEAN? A) Cambodia B) Singapore C) India D) Vietnam 2. SAARC Secretariat is in A) New Delhi B) Kathmandu C) Colomba D) Islamabad 3. Which of the following country is not a member of SAARC? A) B) C) D)
Bangladesh Bhutan India Afghanistan
4. Secretary-General is appointed for a period of A) 1 year B) 2 years C) 3 years D) 4 years 5. The Secretariat comprises the Secretary General, ______ Directors and the General Services Staff. A) 3 B) 4 C) 5 D) 7 6. The Association provides a platform for the peoples of South Asia to A) work together in a spirit of friendship, trust and understanding B) promote the welfare of South Asia C) to improve their quality of life through accelerated economic growth, social progress and cultural development in the region D) all of the above 7. The contribution of each Member State towards financing of the activities of the ASSOCIATION is A) Voluntary
B) Mandatory C) Fixed D) Flexible
8. Regional Integrated Programme of Action which is pursued through the Technical Committees does not cover: A) B) C) D)
Agriculture and Rural Development; Women, Youth and Children; Foreign Investment Health and Population Activities;
9. The Secretary-General is appointed by A) B) C) D)
the Council of Ministers upon nomination by a member state President of United State President of India President of Pakistan
10. SAARC is based on the following principles A) B) C) D)
sovereign equality, territorial integrity political dependence non-interference in the internal affairs of other States and mutual benefit.
1 c, 2 b, 3 d, 4 b, 5 d, 6 d, 7 a, 8 c, 9 a, 10 c
Chapter 12 African Economic Community (AEC) 12.1 History And Present Status Long before the establishment of the Organization of African Unity (OAU), African leaders had recognised that cooperation and integration among African countries in the economic, social and cultural fields were indispensable to the accelerated transformation and sustained development of the African continent. Since the early 1960s, member states were encouraged to combine their economies into sub-regional markets that would ultimately form one Africa-wide economic union. In 1980, the OAU Extraordinary Summit adopted the Lagos Plan of Action as a major step towards the goal of integration. The commitments in this Plan and the Final Act of Lagos were translated into concrete form in Abuja, Nigeria in June 1991 when the OAU Heads of State and Government signed the Treaty establishing the African Economic Community (AEC) during the 27th Ordinary Session of the Assembly. Since May 1994, the OAU has been operating on the basis of the OAU Charter as well as the AEC Treaty, and the organisation is now officially referred to as the OAU/AEC. 12.2 Objective The aim of the AEC is to promote economic, social and cultural development as well as African economic integration in order to increase self-sufficiency and endogenous development and to create a framework for development, mobilisation of human resources and material. The AEC further aims to promote co-operation and development in all aspects of human activity with a view to raising the standard of life of Africa's people, maintaining economic stability and establishing a close and peaceful relationship between member states. 12.3 AEC Treaty The AEC Treaty (more popularly known as the Abuja Treaty) came into force after the requisite numbers of ratification in May 1994. It provided for the African Economic Community to be set up through a gradual process, which would be achieved by coordination, harmonisation and progressive integration of the activities of existing and future regional economic communities (RECs) in Africa. The RECs are regarded as the building blocks of the AEC. The existing RECs are: • AMU (The Arab Maghreb Union); • ECCAS (Economic Community of Central African States); • COMESA (Common Market of Eastern and Southern Africa); • SADC (Southern African Development Community); and • ECOWAS (Economic Community of West African States).
The implementation of the Abuja Treaty is a process that will be done in 6 stages over 34 years, i.e. by 2028, as follows: • STAGE 1: Strengthening existing RECs and creating new ones where needed (5 years); • STAGE 2: Stabilisation of tariff and other barriers to regional trade and the strengthening of sectoral integration, particularly in the field of trade, agriculture, finance, transport and communication, industry and energy, as well as coordination and harmonisation of the activities of the RECs (8 years); • STAGE 3: Establishment of a free trade area and a Customs Union at the level of each REC (10 years); • STAGE 4: Coordination and harmonisation of tariff and non-tariff systems among RECs, with a view to establishing a Continental Customs Union (2 years); • STAGE 5: Establishment of an African Common Market and the adoption of common policies (4 years); and • STAGE 6: Integration of all sectors, establishment of an African Central Bank and a single African currency, setting up of an African Economic and Monetary Union and creating and electing the first Pan-African Parliament (5 years). 12.4 Economic and Social Council The principal technical policy making organ of the AEC is the Economic and Social Council, also known as ECOSOC. The functions of ECOSOC are central to the implementation of the objectives of the AEC. As such ECOSOC is the most important specialised organ in respect of all activities relating to, directly or indirectly, the intended establishment of the African Economic Community. In this regard it is responsible for the preparation of policies, programmes and strategies for cooperation in the socio-economic field, as well as the coordination, evaluation and harmonisation of activities and issues in this field. In addition, ECOSOC is responsible to examine the reports of all the Specialised Technical Committees. It is supposed to monitor the progress made in the establishment of the AEC, i.e. by way of the six phases identified in the Treaty and, consequently, under the Sirte Declaration process. Lastly, the body is responsible for supervising the preparations for international negotiations in these fields, for assessing their results and reporting annually to the OAU/AEC Summit, through the Council of Ministers. The Specialised Technical Committees of the AEC are:
• Committee on Rural Economy and Agricultural Matters; • Committee on Monetary and Financial Affairs; • Committee on Trade, Customs and Immigration Matters; • Committee on Industry, Science and Technology, Energy, Natural Resources and Environment; • Committee on Transport, Communications and Tourism; • Committee on Health, Labour and Social Affairs; and • Committee on Education, Culture and Human Resources. 12.5 Future Outlook It is evident from the Abuja Treaty that the concept of the Community, its eventual take-off and its progressive establishment are closely related to the process of cooperation at the regional level, as the RECs are perceived as the building blocks of the Community. A Protocol on Relations between the AEC and the RECs was concluded and signed in February 1998. This Protocol serves as an efficient instrument and framework for close cooperation, programme harmonisation and coordination, as well as integration among the RECs on the one hand (horizontal) and between the AEC and the RECs on the other (vertical). The Protocol has the advantage of enhancing the status and role of the OAU Secretariat, which is also the Secretariat of the AEC, in all matters pertaining to the implementation of the Abuja Treaty. The adoption of the Constitutive Act of the African Union during the 2000 OAU/AEC Summit in Lomé, Togo, necessitates a structural, process and content review of the Abuja Treaty. This is important from a legal point of view, as this will ensure a sound legal basis for the African Union, will ensure that respect for the Rule of Law is maintained, and provide for the progression from organisational activities dominated by security and stability crisis situations to a developmental focus and emphasis. References African Economic Community, www.aec.org
End Chapter Quizzes 1. Which Treaty is more popularly known as the Abuja Treaty? A) AMU (The Arab Maghreb Union) B) ECCAS (Economic Community of Central African States) C) AEC (African Economic Community) D) COMESA (Common Market of Eastern and Southern Africa) 2. Treaty to establishing the African Economic Community (AEC) was signed in A) May 1994 B) June 1991 C) July 1991 D) May 1998 3. The OAU Heads of State and Government signed the AEC Treaty in A) Nigeria B) Senegal C) South Africa D) Sudan 4. The AEC Treaty aims at A) coordination, harmonisation and progressive integration of the activities of existing and future regional economic communities (RECs) in Africa B) promoting trade of African countries with European Countries C) ensuring cordial relations between African countries and USA D) none of the above 5. The implementation of the Abuja Treaty will be done in 6 stages over A) B) C) D)
20 years 28 years 34 years 35 years
6. The implementation of the Abuja Treaty will be completed by the year A) B) C) D)
2028 2034 2030 2020
7. The principal technical policy making organ of the AEC is the A) Committee on Transport, Communications and Tourism B) Committee on Health, Labour and Social Affairs C) Committee on Education, Culture and Human Resources D) Economic and Social Council
8. Which of the following is not a Specialised Technical Committees of the AEC A) B) C) D)
Committee on Rural Economy and Agricultural Matters Committee on Monetary and Financial Affairs; Committee on Climate Change Committee on Trade, Customs and Immigration Matters
9. In the AEC treaty the establishment of a free trade area and a Customs Union at the level of each REC is part of A) B) C) D)
Stage 1 Stage 2 Stage 3 Stage 4
10. Establishment of an African Common Market and the adoption of common policies will be ensured in which stage of AEC Treaty A) B) C) D)
Stage 1 Stage 3 Stage 4 Stage 5
1 a, 2 b, 3 a, 4 a, 5 c, 6 a, 7 d, 8 c, 9 c, 10 d
Chapter 13 African Union 13.1 Introduction The advent of the African Union (AU) can be described as an event of great magnitude in the institutional evolution of the continent. On 9.9.1999, the Heads of State and Government of the Organisation of African Unity issued a Declaration (the Sirte Declaration) calling for the establishment of an African Union, with a view, inter alia, to accelerating the process of integration in the continent to enable it play its rightful role in the global economy while addressing multifaceted social, economic and political problems compounded as they are by certain negative aspects of globalisation. The main objectives of the OAU were, inter alia, to rid the continent of the remaining vestiges of colonization and apartheid; to promote unity and solidarity among African States; to coordinate and intensify cooperation for development; to safeguard the sovereignty and territorial integrity of Member States and to promote international cooperation within the framework of the United Nations. Indeed, as a continental organization the OAU provided an effective forum that enabled all Member States to adopt coordinated positions on matters of common concern to the continent in international fora and defend the interests of Africa effectively. Through the OAU Coordinating Committee for the Liberation of Africa, the Continent worked and spoke as one with undivided determination in forging an international consensus in support of the liberation struggle and the fight against apartheid. 13.2 Advent of the AU The OAU initiatives paved the way for the birth of AU. In July 1999, the Assembly decided to convene an extraordinary session to expedite the process of economic and political integration in the continent. Since then, four Summits have been held leading to the official launching of the African Union: The Sirte Extraordinary Session (1999) decided to establish an African Union The Lome Summit (2000) adopted the Constitutive Act of the Union. The Lusaka Summit (2001) drew the road map for the implementation of the AU The Durban Summit (2002) launched the AU and convened the 1st Assembly of the Heads of States of the African Union.
13.3 The Vision of the AU The AU is Africa's premier institution and principal organization for the promotion of accelerated socio-economic integration of the continent, which will lead to greater unity and solidarity between African countries and peoples. The AU is based on the common vision of a united and strong Africa and on the need to build a partnership between governments and all segments of civil society, in particular women, youth and the private sector, in order to strengthen solidarity and cohesion amongst the peoples of Africa. As a continental organization it focuses on the promotion of peace, security and stability on the continent as a prerequisite for the implementation of the development and integration agenda of the Union. 13.4 The Objectives of the AU To achieve greater unity and solidarity between the African countries and the peoples of Africa; To defend the sovereignty, territorial integrity and independence of its Member States; To accelerate the political and socio-economic integration of the continent; To promote and defend African common positions on issues of interest to the continent and its peoples; To encourage international cooperation, taking due account of the Charter of the United Nations and the Universal Declaration of Human Rights; To promote peace, security, and stability on the continent; To promote democratic principles and institutions, popular participation and good governance; To promote and protect human and peoples' rights in accordance with the African Charter on Human and Peoples' Rights and other relevant human rights instruments; To establish the necessary conditions which enable the continent to play its rightful role in the global economy and in international negotiations; To promote sustainable development at the economic, social and cultural levels as well as the integration of African economies; To promote co-operation in all fields of human activity to raise the living standards of African peoples; To coordinate and harmonize the policies between the existing and future Regional Economic Communities for the gradual attainment of the objectives of the Union; To advance the development of the continent by promoting research in all fields, in particular in science and technology; To work with relevant international partners in the eradication of preventable diseases and the promotion of good health on the continent. 13.5 The Organs of the AU
13.5.1 The Assembly Composed of Heads of State and Government or their duly accredited representatives. The Assembly of Heads of State and Government is the supreme organ of the Union.
13.5.2 The Executive Council Composed of Ministers or Authorities designated by the Governments of Members States. The Executive Council is responsible to the Assembly. 13.5.3 The Commission Composed of the Chairperson, the Deputy Chairperson, eight Commissioners and Staff members; Each Commissioner shall be responsible for a portfolio. 13.5.4 The Permanent Representatives' Committee Composed of Permanent Representatives of Member States accredited to the Union. The Permanent Representatives Committee is charged with the responsibility of preparing the work of the Executive Council. 13.5.5 Peace and Security Council (PSC) By decision AHG/Dec 160 (xxxvii) of the Summit of Lusaka, July 2001, a decision was made for the creation within the African Union of the Peace and Security Council. The Protocol establishing the PSC is in the process of ratification. 13.5.6 Pan-African Parliament A Pan-African Parliament, an organ to ensure the full participation of African peoples in governance, development and economic integration of the Continent. The protocol relating to the composition, powers, functions and organization of the Pan-African Parliament has been signed by Member States and is in the process of ratification. 13.5.7 ECOSOCC The Economic, Social and Cultural Council, an advisory organ composed of different social and professional groups of the Member States of the Union. The statutes determining the functions, powers, composition and organization of the Economic, Social and Cultural Council have been prepared and will be submitted to Maputo Summit. 13.5.8 The Court of Justice
A Court of Justice of the Union shall be established. The statutes defining the composition and functions of the Court of Justice have been prepared and will be submitted to the Assembly in Maputo. 13.5.9 The Specialized Technical Committees The following Specialized Technical Committees are meant to address sectoral issues and are at Ministerial Level: The Committee on Rural Economy and Agricultural Matters; The Committee on Monetary and Financial Affairs; The Committee on Trade, Customs and Immigration Matters; The Committee on Industry, Science and Technology, Energy, Natural Resources and Environment; The Committee on Transport, Communications and Tourism; The Committee on Health, Labour and Social Affairs; and The Committee on Education, Culture and Human Resources. 13.6 The AU Commission The Commission is the key organ playing a central role in the day-to-day management of the African Union. Among others, it represents the Union and defends its interests; elaborates draft common positions of the Union; prepares strategic plans and studies for the consideration of the Executive Council; elaborates, promotes, coordinates and harmonizes the programmes and policies of the Union with those of the RECs; ensures the mainstreaming of gender in all programmes and activities of the Union. References African Union, www.oau.org
End Chapter Quizzes 1. The main objectives of the OAU are to A) rid the continent of the remaining vestiges of colonization and apartheid B) promote unity and solidarity among African States C) safeguard the sovereignty and territorial integrity of Member States D) all of the above 2. The AU was launched during which summit A) B) C) D)
The Durban Summit (2002) The Sirte Extraordinary Session (1999) The Lome Summit (2000) The Lusaka Summit (2001)
3. The decision to establish an African Union was taken in A) The Durban Summit (2002) B) The Sirte Extraordinary Session (1999) C) The Lome Summit (2000) D) The Lusaka Summit (2001) 4. Which of the following is not an organ of AU A) The Assembly B) Peace and Security Council (PSC) C) Dispute Settlement Body D) The Court of Justice 5. The supreme organ of the Union is A) B) C) D)
The Assembly Peace and Security Council (PSC) Dispute Settlement Body The Court of Justice
6. Which of the following is not a Sspecialized Technical Committee of AU A) The Committee on Industry, Science and Technology, Energy, Natural Resources and Environment B) The Committee on Transport, Communications and Tourism C) The Committee on Strategic Partnership
D) The Committee on Education, Culture and Human Resources 7. The objective of the Pan-African Parliament is to ensure the full participation of African peoples in A) Governance B) development C) economic integration D) all of the above 8. The Commission of the AU is composed of A) Secretary General, the Deputy Chairperson, eight Commissioners B) Chairperson, the Deputy Chairperson, eight Commissioners C) Chairperson, the Deputy Chairperson, six Commissioners D) Chairperson, the Deputy Chairperson, eight Deputy Commissioners
9. The Commission is the key organ and is responsible for A) preparing strategic plans and studies for the consideration of the Executive Council B) promoting, coordinating and harmonizing the programmes and policies of the Union with those of the RECs C) ensuring the mainstreaming of gender in all programmes and activities of the Union. D) All of the above 10. Constitutive Act of the Union was adopted in A) B) C) D)
The Durban Summit (2002) The Sirte Extraordinary Session (1999) The Lome Summit (2000) The Lusaka Summit (2001)
1 d, 2 a, 3 b, 4 c, 5 a, 6 c, 7 d, 8 b, 9 d, 10 c
Chapter 14 Common Market for Eastern and Southern Africa (COMESA) 14.1 Overview The history of COMESA began in December 1994 when it was formed to replace the former Preferential Trade Area (PTA) which had existed from the earlier days of 1981. COMESA (as defined by its Treaty) was established 'as an organisation of free independent sovereign states which have agreed to co-operate in developing their natural and human resources for the good of all their people' and as such it has a wide-ranging series of objectives which necessarily include in its priorities the promotion of peace and security in the region. However, due to COMESA's economic history and background its main focus is on the formation of a large economic and trading unit that is capable of overcoming some of the barriers that are faced by individual states.. COMESA's current strategy can thus be summed up in the phrase 'economic prosperity through regional integration'. With its 21 member states , population of over 385 million and annual import bill of around US$32 billion COMESA forms a major market place for both internal and external trading. Its area is impressive on the map of the African Continent and its achievements to date have been significant. COMESA currently has 21 member states (Angola, Burundi, Comores, Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Tanzania, Uganda, Zambia, and Zimbabwe). South Africa is not a member of COMESA and it is unlikely that the country will ever join. Botswana has also been invited to join. Lesotho and Mozambique were members of COMESA, but have subsequently left the organisation to focus their attention on the development of SADC. 14.2 What COMESA Offers COMESA offers its members and partners a wide range of benefits which include: A wider, harmonised and more competitive market
Greater industrial productivity and competitiveness Increased agricultural production and food security A more rational exploitation of natural resources More harmonised monetary, banking and financial policies More reliable transport and communications infrastructure 14.3 Aims and Objectives The aims and objectives of COMESA can be summarized as: Attaining sustainable growth and development of the member states by promoting a more balanced and harmonious development of its production and marketing structures Promoting joint development in all fields of economic activity Co-operation in the creation of an enabling environment for foreign, crossborder and domestic investment Co-operation in the promotion of peace, security and stability among member states Co-operation in strengthening the relationship between the Common Market and the rest of the world Contributing towards the establishment, progress and the realisation of the objectives of the African Economic Community 14.4 The COMESA Authority The COMESA Authority comprises of the Heads of State and Government of the different COMESA Countries; the Authority is COMESA‘s supreme policymaking organ. It is responsible for the general policy direction and control of the performance of the executive functions of COMESA. It is headed by a Chairman elected for an agreed period. The Authority meets once a year, but may hold an Extraordinary Summit at the request of any member of the Authority, provided that one-third of the members of the Authority support such a request. The last extraordinary Summit was held in 2000 at the official launching of the COMESA FTA. Summits are held in various member States, with the host Government and the COMESA Secretariat bearing joint responsibility for their organization. Usually, the country hosting the Summit assumes the chairmanship of the Authority for the year. Under normal circumstances, the Authority takes decisions by consensus. Although its meetings are in closed session, at the end of each meeting, the leaders issue a communiqué recording their decisions. The Authority sometimes
issues declarations or statements on matters of particular concern. The directives and decisions taken by the Authority are binding on all member States and the other organs to which they are addressed. 14.5 About the Secretariat The COMESA Centre is the headquarters of the Common Market for Eastern and Southern Africa. It houses the Common Market for Eastern and Southern Africa Secretariat and has been the venue for a number of independent negotiations with cooperating partners and many COMESA conferences, including intergovernmental and Technical committees meetings. The COMESA Centre is located in the Central Business Area of Lusaka city. The COMESA Centre is home to the Secretary General's Office and most of the one hundred fifty plus staff members and the organisation divisions. Many of the organisation‘s functions are carried out from COMESA Centre. The majority of the Secretariat‘s staff is based at its Lusaka, Zambia headquarters. There is a smaller sub-section of the Secretariat staff in Cairo, Egypt under the Regional Investment Agency, Brussels, Belgium and Addis Abba, Ethiopia. Besides carrying out the Secretariat's key functions, the headquarters continues to serve as a base for many intergovernmental meetings and negotiations. References COMESA, http://www.comesa.int Mbendi Information service, http://www.mbendi.com/land/af/p0010.htm#25
End Chapter Quizzes
1. How many countries are member of COMESA A) 23 B) 21 C) 20 D) 19 2. The supreme policy-making organ of COMESA is A) COMESA Authority B) COMESA Secretariat C) COMESA Court of Justice D) COMESA Parliament 3. The COMESA Authority comprises of the A) General Secretary and Chairman B) Chairman and Deputy Chairman C) Heads of State and Government of the different COMESA Countries D) Foreign Ministers of member countries 4. COMESA Authority is responsible for A) general policy direction B) performance of the executive functions of COMESA C) Both a and b above D) None of the above 5. Extraordinary Summit of COMESA was held in 2000 to A) Officially launch COMESA FTA B) Include Zimbabwe as member country C) Sign the agreement to form Custom Union D) Sign the agreement to form Economic Union 6. COMESA Secretarait is based at A) Zambia B) Ethiopia C) Egypt D) Zimbabwe
7. Which country is not member of COMESA? A) Malawi B) Mauritius C) South Africa D) Namibia 8. Which of the following countries left COMESA to focus their attention on the development of SADC? A) Lesotho and Mozambique B) Lesotho and Egypt C) South Africa and Mozambique D) South Africa & Egypt
9. Extraordinary Summit of COMESA can be held A) at the request of any member of the Authority, B) provided that one-third of the members of the Authority support such a request C) Both a and b above D) None of the above 10. The COMESA Authority meets A) Once in a year B) Twice in a year C) Once is two year D) After four years
1 b, 2 a, 3 c, 4 c, 5 a, 6 a, 7 c, 8 a, 9 c, 10 a
Chapter 15 South African Development Community 15.1 The Origins The Southern African Development Co-ordination Conference, SADCC, the forerunner of the SADC, the Community, was established in April 1980 by Governments of the nine Southern African countries of Angola, Botswana, Lesotho, Malawi, Mozambique, Swaziland, Tanzania, Zambia and Zimbabwe. The formation of SADC was the culmination of a long process of consultations by the leaders of Southern Africa. Towards the end of the 1970's, it became clear to the leaders of the region that just having a national flag and a national anthem would not meet the needs of the people for improved living standards. Secondly, the positive experiences gained in working together in the group of Frontline States, to advance the political struggle, had to be translated into broader co-operation in pursuit of economic and social development. From 1977, active consultations were undertaken by representatives of the Frontline States, culminating in a meeting of Foreign Ministries of the Frontline States in Gaborone, in May 1979, which called for a meeting of ministers responsible for economic development. That meeting was subsequently convened in Arusha, Tanzania, in July 1979. The Arusha meeting led to the birth to the Southern African Development Coordination Conference a year later. The SADCC or the conference, was formed with four principal objectives, namely: to reduce Member States dependence, particularly, but not only, on apartheid South Africa to implement programmes and projects with national and regional impact; to mobilise Member States' resources, in the quest for collective selfreliance; and to secure international understanding and support. These objectives were pursued with determination and vigour. Through SADCC, the founding fathers sought first to demonstrate the tangible benefits of working together, and to cultivate a climate of confidence and trust among member States.
SADC has developed since then, to become a organisation that has a Programme of Action, covering several broad economic and social sectors, namely, Energy, Tourism, Environment and Land Management, Water, Mining, Employment and Labour, Culture, Information and Sport and Transport and Communications. Other sectors are Finance and Investment, Human Resource Development, Food, Agriculture and Natural Resources, Legal Affairs and Health. Sectors are each co-ordinated by a Member State with some member states co-ordinating more than one sector. Over the past two years SADC has undertaken an exercise to restructure its institutions and a report on this was adopted by an Extra-Ordinary Summit on March 9, 2001 in Windhoek, Namibia. This restructuring was necessitated by the number of difficulties and constraints encountered in the process of moving the organisation from a coordinating conference into a Community. These include: Inadequate institutional reforms to enable the effective transformation from SADCC (Coordinating Conference) to SADC (the Community). Furthermore, the resource provision and the management system were not adequately addressed. The need to put in place appropriate mechanisms capable of translating the high degree of political commitment to shape the scope and scale of community building through regional integration. This implies delegating authority and strengthening the capacity for decision-making to the relevant agencies responsible for implementing the SADC agenda. Lack of synergy between the objectives and strategies of the Treaty on one hand and the existing SADC Programme of Action (SPA) and the institutional framework on the other. Limited capacity to mobilize significant levels of the region's own resources for the implementation of its Programme. The external financial overdependence of the SADC Programme of Action (SPA) to the tune of more than 80 percent, which compromises the Programme's sustainability. 15.2 Transformation from Conference to Community This transformation occurred in August 1992, when the Heads of State and Government of the Southern African Development Co-ordination Conference met in Windhoek, Namibia, to sign a Declaration and Treaty establishing the new SADC - the Southern African Development Community. The SADCC leaders had come to realise that although the co-ordination conference had served them well and had demonstrated the crucial need to cooperate in their development efforts, time had come to give the Organisation a legal and more formal status.
There was also a need to shift the focus of the organisation from co-ordination of development projects to a more complex task of integrating the economies of member States. Hence the Treaty, which is the blueprint for building a Community of Southern African states. SADC has 14 member states namely Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. 15.3 Principles SADC and its member States are expected to act according to the following principles: Sovereign equality of all member States; Solidarity, peace and security; Human rights, democracy, and the rule of law; Equity, balance and mutual benefit; Peaceful settlement of disputes 15.4 Objectives The objectives of SADC are to: Achieve development and economic growth, alleviate poverty, enhance the standard and quality of life of the people of Southern Africa and support the socially disadvantaged through regional integration; Evolve common political values, systems and institutions; Promote and defend peace and security; Promote self-sustaining development on the basis of collective selfreliance, and the interdependence of Member States; Achieve complementarity between national and regional strategies and programmes; Promote and maximise productive employment and utilisation of resources of the Region; Achieve sustainable utilisation of natural resources and effective protection of the environment; Strengthen and consolidate the long standing historical, social and cultural affinities and links among the people of the Region. The ultimate objective of SADC, the Community is, therefore, to build a Region in which there will be a high degree of harmonisation and rationalisation to enable the pooling of resources to achieve collective self-reliance in order to improve the living standards of the people of the region.
15.4 Institutional Framework In deciding on the Conference's institutions, the Founding Fathers were particularly sensitive to the lessons and experiences of past attempts at regional co-operation in Africa, some of which had ended in dismal failure and bitter disappointment. Such failures were largely because sensitive issues of how best to equitably share the costs and benefits of regional co-operation had not been sufficiently addressed and agreed upon at both national and regional levels. To avoid similar pitfalls, SADC from the very beginning placed particular emphasis on a decentralised institutional arrangement that would ensure that member States are the principal actors in the formulation and implementation of policy decisions. However, under the new restructuring exercise, it has become clear that there are a number of problems that inhibit the efficient and effective performance of the current structure and these include: Inadequate provision of resources and staffing by member States which has led to inequitable distribution of responsibilities and obligations. Different management and administrative procedures and rules, varying standards, qualifications and performance criteria for staff involved in the management of the Regional Programme. Rapid increase of Sectors and therefore a plethora of priorities and activities dependent on limited resources which has led to a proliferation of meetings and an increase in associated costs. Under the current structure and circumstances, the Secretariat has been unable to execute its mandate as provided for in the Treaty, especially that of undertaking strategic planning and management. Lack of an institutional framework in which Ministers responsible for Foreign Affairs in the SADC region could discuss and adopt common positions on matters pertaining to the organization in various international fora. 15.5 Secretariat It is the principal executive institution of SADC responsible for strategic planning, co-ordination and management of SADC programmes. It is headed by an Executive Secretary and has its headquarters in Gaborone, Botswana. The Extra-Ordinary Summit agreed that the Secretariat should be strengthened in terms of both its mandate and the provision of adequate resources for it to be able to perform its functions effectively as provided for under Article 14 of the Treaty and consistent with the Abuja Treaty, as follows:
o o o o o o
o o
o o o o o o o o
Strategic planning and management of the programme of SADC; Implementation of the decisions of the Summit and Council; Organization and management of the SADC meetings; Financial and general administration; Representation and promotion of SADC; and Promotion and harmonization of policies and strategies of Member States. In addition, the Secretariat should perform the following functions: Gender mainstreaming in all SADC programmes and activities; Organization and servicing of the meetings of the Troika and any other committees established by the Summit, Council and the Troika on an ad-hoc basis; Submission of harmonized policies and programmes to the Council for consideration and approval; Monitoring and evaluating the implementation of regional policies and programmes; Collation and dissemination of information on the community and maintenance of a reliable database; Development of capacity, infrastructure and maintenance of intraregional Information Communication Technology (ICT); Mobilization of resources, co-ordination and harmonization of the programmes and projects with co-operating partners; Devising appropriate strategies for self-financing and income generating activities and investment; Management of special programmes and projects; Undertaking of research on Community Building and the integration process. The Structure of Secretariat shall comprise the following:
o o o o o o
Office of the Executive Secretary: Deputy Executive Secretary; Department of Strategic Planning, Gender and Development and Policy Harmonization Legal Affairs; Internal Audit; Information, Communication and Technology including statistics and library services; Administration; and Finance.
15.6 Way Forward The stage is now set for the implementation of the Report on the Restructuring of SADC Institutions and the first directorate, the Trade, Finance, Industry and Investment directorate is expected to start operations at the Secretariat by
August 2001. The second one, the Food, Agriculture and Natural Resources is expected to be established by December 2001. The others will be established during 2001. The implementation of the Trade Protocol is on track and the region hopes to attain a free trade area by 2008. The ultimate objective is to enable SADC to effectively address the developmental needs of the region and to position the region to meet the challenges of the dynamic, ever changing and complex globalisation process as well as to take advantage of the opportunities offered by globalisation. References : http://www.sadc.int
End Chapter Quizzes 1. SADC Secretariat is based in A) Botswana B) Angola C) Sudan D) Zambia 2. How many countries are member of SADC? A) 14 B) 21 C) 23 D) 34 3. SADC Secretariat is headed by A) Chairman B) Secretary General C) Executive Secretary D) President of South Africa
4. Which of the following was not the objective of SADCC A) to reduce Member States dependence, particularly, but not only, on developed countries B) to implement programmes and projects with national and regional impact; C) to mobilise Member States' resources, in the quest for collective selfreliance; and D) to secure international understanding and support. 5. SADC is originally known as the A) Southern African Development Co-ordination Committee B) Southern African Development Co-ordination Conference C) Southern African Development Co-ordination Convention D) Southern African Development Co-operation Conference 6. Which of the following country is not a member of SADC? A) Angola B) Nigeria C) Botswana D) Democratic Republic of Congo (DRC)
7. Transformation of SADCC into SADC occurred in
A) B) C) D)
August 1992 May 1991 April 1990 June 1992
8. The Heads of State and Government of the Southern African Development Co-ordination Conference met in__________to sign a Declaration and Treaty establish the SADC. A) B) C) D)
Angola Nigeria Namibia Democratic Republic of Congo (DRC)
9. The SADC Secretariat comprises of A) President B) Chairman C) Department of Strategic Planning, Gender and Development and Policy Harmonization D) Department of External Trade 10. The Southern African Development Co-ordination Conference, SADCC, was established in April 1980 by Governments of how many Southern African countries? A) 8 B) 9 C) 7 D) 6
1 a, 2 a, 3 c, 4 a, 5 b, 6 c, 7 a, 8 c, 9 c, 10 b
Chapter 16 Economic Community Of West African States (ECOWAS) 16.1 History And Background: The idea for a West African community goes back to President William Tubman of Liberia, who made the call in 1964. An agreement was signed between Côte d'Ivoire, Guinea, Liberia and Sierra Leone in February 1965, but this came to nothing. In April 1972, General Gowon of Nigeria and General Eyadema of Togo re-launched the idea, drew up proposals and toured 12 countries, soliciting their plan from July to August 1973. A meeting was then called at Lomé from 10-15 December 1973, which studied a draft treaty. This was further examined at a meeting of experts and jurists in Accra in January 1974 and by a ministerial meeting in Monrovia in January 1975. Finally, 15 West African countries signed the treaty for an Economic Community of West African States (Treaty of Lagos) on 28 May 1975. The protocols launching ECOWAS were signed in Lomé, Togo on 5 November 1976. In July 1993, a revised ECOWAS Treaty designed to accelerate economic integration and to increase political co-operation, was signed. ECOWAS has been designated as one of the five regional pillars of the African Economic Community (AEC). Together with COMESA, ECCAS, IGAD and SADC, ECOWAS signed the Protocol on Relations between the AEC and RECs in February 1998. There are 16 members of ECOWAS, namely Benin, Burkina Faso, Cape Verde, Cote d‘Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone and Togo. 16.2 Objectives ECOWAS aims to promote co-operation and integration in economic, social and cultural activity, ultimately leading to the establishment of an economic and monetary union through the total integration of the national economies of member states. It also aims to raise the living standards of its peoples, maintain and enhance economic stability, foster relations among member states and contribute to the progress and development of the African Continent. ECOWAS integration policies and programmes are influenced by the prevailing economic conditions in its member countries, the need to take the principal provisions of the AEC Treaty into account, and relevant developments on the international scene. The revised treaty of 1993, which was to extend economic and political cooperation among member states, designates the achievement of a common market and a single currency as economic objectives, while in the political sphere
it provides for a West African parliament, an economic and social council and an ECOWAS court of justice to replace the existing Tribunal and enforce Community decisions. The treaty also formally assigned the Community with the responsibility of preventing and settling regional conflicts. 16.3 Structure The Community consists of the Authority of Heads of State and Government, the Council of Ministers, the Community Tribunal, the ECOWAS Parliament, the Executive Secretariat and six Specialised Commissions. 16.3.1 Conference of Heads of State and Government The Authority of Heads of State and Government of Member States is the supreme institution of the Community and is composed of Heads of State and/or Government of Member States. The Authority is responsible for the general direction and control of the Community and take all measures to ensure its progressive development and the realization of its objectives. 16.3.2 Council of Ministers The Council comprises the Minister in charge of ECOWAS Affairs and any other Minister of each Member State. Council is responsible for the functioning and development of the Community. 16.3.3 Tribunal The treaty provides for a Community Tribunal, whose composition and competence are determined by the Conference of Heads of State and Government. The Tribunal interprets the provisions of the treaty and settles disputes between member states that are referred to it. 16.3.4 Executive Secretariat The Executive Secretary is elected for a four-year term, which may be renewed once only. ECOWAS is undergoing a process of reform, which has seen the post of financial controller being scrapped, while two positions of deputy executive secretaries have been created for economic co-operation and policy harmonisation respectively. The restructuring of the Executive Secretariat was approved at the summit in December 1999. 16.3.5 Mechanism for Conflict Prevention, Management and Resolution, Peace and Security The ECOWAS Summit of December 1999 agreed on a Protocol for the Establishment of a Mechanism for Conflict Prevention, Management and Resolution, Peace and Security. The Mechanism has a Council of Elders, as well as a Security and Mediation Council. 16.3.6 Specialised Commissions The following Technical Commissions are established within the Economic Community of West African States :
* Food and Agriculture; * Industry, Science and Technology and Energy; * Environment and Natural Resources; * Transport, Communications and Tourism; * Trade, Customs, Taxation, Statistics, Money and Payments * Political, Judicial and Legal Affairs, Regional Security and Immigration; * Human Resources, Information, Social and Cultural Affairs; and * Administration and Finance Commission. 16.3.7 Community Court of Justice In October 1999, ECOWAS decided to establish a Court of Justice following a two-day meeting of Justice Ministers in Abuja. The court will address complaints from member states and institutions of ECOWAS, as well as issues relating to defaulting nations. The court has a president, chief registrar and seven judges and is a permanent institution. 16.3.8 ECOWAS Parliament The ECOWAS Parliament convened in May 2002, with 115 MPs representing all the member states except Cote d‘Ivoire. Togo, Liberia, Cape Verde, Guinea Conakry, Guinea Bissau, Republic of Benin, the Gambia and Sierra Leone have 5 Parliamentarians each; Burkina Faso, Mali, Niger and Senegal have 6 Parliamentarians each; Cote d‘Ivoire is entitled to 7 representatives; Ghana has 8 and Nigeria has 35. Membership is constituted from the membership of the national parliaments of each member state. Should the member lose his or her seat in the national parliament, they would lose their seats in the regional parliament. The ECOWAS Parliament is situated in Abuja, Nigeria and at present only acts in a consultative and advisory capacity. 16.4 Peace and Security-Related Activities Because of distressing events in several of its Member States, ECOWAS soon realized that the case of economic development and progress can only be pursued in an environment of peace and stability. It found that it had to involve itself in conflicts in Member States to ensure that an environment conducive to the implementation of its economic programmes was maintained. A Protocol Relating to Mutual Assistance on Defence (PMAD) was signed in Freetown, Sierra Leone on 29 May 1981 and became effective five years later. PMAD committed the ECOWAS member states to a collective defence treaty by accepting that armed threat or aggression against one constituted a threat or aggression against the Community and resolved to give mutual aid and assistance for defence. The Protocol provides for a collective response where a member state is a victim of internal armed conflict that is engineered and supported actively from outside, and which is likely to endanger the peace and security of other member states. Both these Protocols have been subsumed as part of the new ECOWAS Mechanism.
References
End Chapter Quizzes 1. ________West African countries signed the treaty for an Economic Community of West African States A) 15 B) 5 C) 25 D) 18 2. The treaty for an Economic Community of West African States was signed on A) 30 June 1974 B) 28 May 1975. C) 15 May 1975 D) 5 June 1975 3. The ECOWAS Parliament is situated in A) Nigeria B) Angola C) Sudan D) Egypt 4. The objective of the Community Tribunal is to A) interprets the provisions of the treaty B) settles disputes between member states that are referred to it C) a and b above D) provide financial assistance to member countries 5. The ECOWAS Parliament convened in A) August 2001 B) May 2002 C) June 1999 D) April 1998 6. Protocol for Mutual Assistance on Defence (PMAD) was signed in A) Sierra Leone B) Nigeria C) Angola D) Libya 7. Objective of the Protocol Relating to Mutual Assistance on Defence is to A) commit the ECOWAS member states to a collective defence treaty B) develop an army against developed countries C) none of the above D) both a and b above 8. ECCAS consists of
A) B) C) D)
Council of Ministers Community Tribunal ECOWAS Parliament All of the above
9. The supreme institution of the Community is the A) Authority of Heads of State and Government of Member States B) Council of Ministers C) Community Tribunal D) ECOWAS Parliament 10. In July 1993, a revised ECOWAS Treaty designed to A) accelerate economic integration B) increase political co-operation C) promote export to USA D) a and b above
1 c, 2 b, 3 a, 4 c, 5 b, 6 a, 7 a, 8 d, 9 a,10 d
Chapter 17 Economic Community of Central African States 17.1 History and Background At a summit meeting in December 1981, the leaders of the Central African Customs and Economic Union (UDEAC) agreed in principle to form a wider economic community of Central African states. ECCAS was established on 18 October 1983 by the UDEAC members and the members of the Economic Community of the Great Lakes States (CEPGL) (Burundi, Rwanda and the then Zaire) as well as Sao Tomé and Principe. Angola remained an observer until 1999, when it became a full member. ECCAS began functioning in 1985, but was inactive for several years because of financial difficulties (non-payment of membership fees) and the conflict in the Great Lakes area. The war in the DRC was particularly divisive, as Rwanda and Angola fought on opposing sides. ECCAS has been designated a pillar of the African Economic Community (AEC), but formal contact between the AEC and ECCAS was only established in October 1999 due to the inactivity of ECCAS since 1992 (ECCAS signed the Protocol on Relations between the AEC and the Regional Economic Communities in October 1999). The AEC again confirmed the importance of ECCAS as the major economic community in Central Africa at the third preparatory meeting of its Economic and Social Council (ECOSOC) in June 1999. Presided over by President Pierre Buyoya of Burundi, the 2nd Extra-Ordinary Summit of ECCAS was held in Libreville on 6 February 1998. The Heads of State/Government present at the summit committed themselves to the resurrection of the organisation. The Prime Minister of Angola also indicated that his country would become a fully-fledged member. The summit approved a budget of 10 million French Francs for 1998 and requested the Secretariat to: Obtain assistance from UNECA to evaluate the operational activities of the secretariat; to evaluate the contributions due by member states; and the salaries and salary structures of employees of the secretariat; Convene an extra-ordinary meeting of the Council of Ministers as soon as possible to evaluate the recommendations of UNECA; the Council should then draw up proposals for a new administrative structure for the secretariat and revised contributions due by each member state.
The summit also requested countries in the region to find lasting and peaceful solutions to their political problems. The chairman also appealed to member countries to support the complete lifting of the embargo placed on his country. During the inauguration of President Bongo of Gabon on 21 January 1999, a mini-summit of ECCAS leaders was held. The leaders discussed problems concerning the functioning of ECCAS and the creation of a third Deputy Secretary-General post, designated for Angola. Angola formally joined the Community during this summit. The 10th Ordinary Session of Heads of State and Government took place in Malabo in June 2002. This Summit decided to adopt a protocol on the establishment of a Network of Parliamentarians of Central Africa (REPAC) and to adopt the standing orders of the Council for Peace and Security in Central Africa (COPAX), including the Defence and Security Commission (CDC), Multinational Force of Central Africa (FOMAC) and the Early Warning Mechanism of Central Africa (MARAC). Rwanda was also officially welcomed upon its return as a full member of ECCAS. The 11th Ordinary Session of Heads of State and Government in Brazzaville during January 2004 welcomed the fact that the Protocol Relating to the Establishment of a Mutual Security Pact in Central Africa (COPAX) had received the required number of ratifications to enter into force. The Summit also adopted a declaration on the implementation of NEPAD in Central Africa as well as a declaration on gender equality. 17.2 Objectives ECCAS aims to achieve collective autonomy, raise the standard of living of its populations and maintain economic stability through harmonious cooperation. Its ultimate goal is to establish a Central African Common Market. At the Malabo Heads of State and Government Conference in 1999, four priority fields for the organization were identified: to develop capacities to maintain peace, security and stability, which are essential prerequisites for economic and social development; to develop physical, economic and monetary integration; to develop a culture of human integration; and to establish an autonomous financing mechanism for ECCAS. 17.3 Structure Conference of Heads of State and Government;
Council of Ministers; Secretariat General (one secretary-general elected for four years and three assistant secretaries-general); Court of Justice; Consultative Commission. 17.4 Peace and Security-Related Activities Central African states adopted a pact of non-aggression at the end of the fifth meeting of the UN Consultative Committee on Security in Central Africa held in Yaoundé (Cameroon). The pact, adopted on 9 September 1994, was arrived at after five days of meeting and discussions between military experts and ministers of Cameroon, Central African Republic, Congo, Equatorial Guinea, Gabon and Sao Tomé et Principe. At a summit conference of the United Nations' Standing Advisory Committee on Security Questions in Central Africa which took place in Yaoundé on 25-26 February 1999, member states decided to create an organisation for the promotion, maintenance and consolidation of peace and security in Central Africa, which would be called the Council for Peace and Security in Central Africa (COPAX). The COPAX Protocol has now entered into force. 17.5 Organs of the Union The technical organs of the council are: The Central African early-warning system (MARAC), which collects and analyses data for the early detection and prevention of crises. The Defence and Security Commission (CDS), which is the meeting of chiefs of staff of national armies and commanders-in-chief of police and gendarmerie forces from the different Member States. Its role is to plan, organize and provide advice to the decision-making bodies of the community in order to initiate military operations if needed. The Central African multinational force (FOMAC), which is a non-permanent force consisting of military contingents from Member States, whose purpose is to accomplish missions of peace, security and humanitarian relief. References : http://www.ceeac-eccas.org
End Chapter Quizzes 1. ECCAS was established on A) 18 October 1983 B) 23 November 1999 C) 15 December 1985 D) 30 January 1982 2. Which of the following country remained an observer initially and became a full member in 1999 A) Burundi, B) Rwanda C) Zaire D) Angola 3. Which of the following is not an objective of ECCAS A) to develop capacities to maintain peace, security and stability, which are essential prerequisites for economic and social development; B) to develop physical, economic and monetary integration; C) to promote foreign direct investment in the region; and D) to establish an autonomous financing 4. Which of the following is not an organ of the Council A) Central African early-warning system B) Defence and Security Commission C) Central African multinational force D) Council for Peace and Security in Central Africa 5. The aim of Defence and Security Commission is to A) initiate military operations if needed B) accomplish missions of peace, security and humanitarian relief C) collects and analyses data for the early detection and prevention of crises D) provide financial assistance
6. Council for Peace and Security in Central Africa was conceived for A) the promotion, maintenance and consolidation of peace and security in Central Africa B) initiate military operations if needed C) collects and analyses data for the early detection and prevention of crises D) provide financial assistance 7. The secretary General of ECCAS is elected for a period of A) 1 year B) 2 years C) 4 years D) 3 years 8. ECCAS began functioning in 1985, but was inactive for several years because of A) financial difficulties B) conflict in the Great Lakes area C) pressure from the developed countries D) both a and b above 9. ECCAS is designated as a pillar of AEC. Contact between the AEC and ECCAS was only established in A) October 1999 B) October 1992 C) November 1992 D) December 1992 10. ECCAS secretariat consists of A) one secretary-general and one assistant secretaries-general B) one secretary-general and three assistant secretaries-general C) one secretary-general and two assistant secretaries-general D) one secretary-general and four assistant secretaries-general
1 a, 2 d, 3 c, 4 d, 5 d, 6 a, 7 c, 8 d, 9 a, 10 b
Text & References: Text: Khurana P.K 2003-Export Management : 4th Revised Edition-Galgotia Publishing Company References: Black J Stewart & Sundaram Anant K 1997 -International Business Environment- Prentice Hall of India –
Daniels John & Radebaugh Lee International Business Environment & Operations8th edition, Pearson Education Exporter’s Manuel 2004 Nabhi Publications Mathur Vibha- Foreign Trade of India – Policy and Development- New Century Publication Bennett Roger -International Business – Pearson Education Dr. M.L Varma -Foreign Trade Management in India –Vikas Publishing House Bhalla V.K –& Shivaramu S.- 8th Edition, 2004-International Business Environment and Management, Anmol Publications Pvt. Ltd., Calof J.L & Beamish P.W -Adapting to Foreign Markets: Explaining Internationalization –, 1995 - International Business Review 4 (2) Easier Cross Border Payment 1992– Commission of the European Communities (CEC) , Brussel , Kenneth D. 3rd Edition, 2002 Weiss Building an Import/Export Business, Carl A. Nelson 3rd Edition, 2000 -Import/Export: How to Get Started in International Trade, Robert C. Feenstra-Advanced International Trade: Theory and Evidence, 2003 Khurana, P K Exort management 5th Galgotia Publication New Delhi Book Age McGillivrary, Fiona International trade political institutions Edward Elgar U.K. 2001 Book Age Bardhan, Pranab International trade growth and development Black Well Publishing U.K. 2003 Book Age Lloyed, Peter, ed. Intra-industry trade An Elgar Reference Collection U.K. 2003 Book Age
