The European Union as an economic union of European countries came into existence on 1st January, 1956 by the member nations signing the ‘Treaty of Rome’. Initially it was called European Economic Community (EEC) with 6 member countries (France, Italy, Germany, Belgium, Netherlands, Luxembourg). In due course, new members were admitted in EU. At present, its membership is 27 nations including Denmark, Ireland, UK, Greece, Spain, Portugal, etc. Bulgaria & Romania joined on 1/1/2007.
The ‘Treaty of Rome’ required every member country to:
1. Eliminate tariffs, quotas & other barriers on intra-community trade,
2. Devise a common internal tariff on imports from the rest of the world,
3. Allow the free movement of factors of production within the community,
4. Harmonise their taxation & monetary policies & social security policies, and
5. Adopt a common policy on agriculture, transport & competition in industry.
EU is a powerful trade bloc of highly industrialised & rich nations of Western Europe. It is the world’s largest exporter. EU is the most powerful politico-economic as well as progressive & successful trade bloc in the world. The bloc has now created ‘Europe without frontiers’. From January 99 a common currency ‘EURO’ is introduced by the countries of EU.
EU is working smoothly & acts as a strong trade bloc in the world. EU has converted Europe as one united market for member countries. There is expansion of trade among European countries but EU has put certain restrictions on non-members. As a result, it restricts free trade among countries of the world. It acts as an obstacle to the growth of free & fair global trade.
EU occupies a commanding position in global trade. It puts pressure on WTO negotiations & makes efforts to make WTO agreements favourable to European countries at the cost of developing countries. EU is not favourable to giving special concessions to developing countries under WTO, it only expects new concessions from the developing countries.
India & EU:
India has special interest in EU because nearly 20 percent of our exports move to this trading bloc & 17 percent of our imports are from EU. However, India ranks 14th as EU’s overseas trading partner for their exports & 13th for their imports. Countries of EU are significant overseas investors in India, especially in the core/infrastructure sectors & technology dominated fields. EU is India’s largest source of FDI. However, India attracts only 1.3 percent of the EU’s world-wide investments. India desires to establish mutually gainful trade relations with the EU. Since 2007, India & EU have been negotiating a Free Trade Agreement covering trade in goods & services, investments, Intellectual Property Rights & government procurements.
INTERNATIONAL ENVIRONMENT W.R.T. OPEC:
OPEC means Organisation of Petroleum Exporting Countries. OPEC was founded in Baghdad in 1960. At present, the membership is of 12 countries including Iran, Iraq, Kuwait, Venezuela, Saudi Arabia & UAE. Gabon left in 1994 & Indonesia in 2008 since they had fewer oil fields left. Now they are net importers of oil.
The objectives of OPEC are:
a) To unify the petroleum policies of member countries & determine the best means for safeguarding their interest, individually & collectively.
b) To device ways & means of ensuring the stabilization of prices in international oil markets with a view to eliminating harmful & unnecessary fluctuations.
c) To secure a steady income for the producing countries, an efficient, economic & regular supply of petroleum to consuming nations & a fair return on their capital to those investing in the petroleum industry.
It is estimated that OPEC members possess 75 percent of the world’s known reserves of crude petroleum.
These countries collectively decide the petroleum prices & the quantity to be released from time to time. The general policy of OPEC is to charge higher prices for petroleum exports & earn huge foreign exchange. These countries use their monopolistic position to their benefit.
Due to continuous rising prices of petroleum products, all countries, particularly developing countries like India suffer. They have to pay huge money for importing petroleum products. In addition, this leads to inflation within the country & other undesirable effects. As a result international environment is very much affected. Industrial production, cost of production, etc. are adversely affected due to rising prices of Petroleum products. Rise in petroleum prices affects all countries (particularly developing countries) in a serious manner. This may even lead to global recession.
India & OPEC:
India is not self-sufficient as regards its POL (Petroleum, Oil & Lubricants) needs. We have to import these products at higher prices, leading to rise in the import expenditure on POL.
SHARE OF OPEC IN INDIA’S IMPORTS & EXPORTS
SHARE IN IMPORTS
SHARE IN EXPORTS
POL imports accounted for only 6.1 percent of import expenditure in 1960-61 & increased dramatically to 41.9 percent in 1980-81. This was due to hikes in oil prices. OPEC countries constitute one major trading partner of India. The share of OPEC countries in our imports increased considerably from 4.6 percent in 1960-61 to 27.8 percent in 1980-81 & then to 22.5 percent in 1999-2000. This was due to heavy dependence on this group of countries & rising prices of POL. The situation has changed in 2001-02 as India started purchasing petroleum products from ‘other countries’ (the residual category). The OPEC group accounted for 4.1 percent of our exports in 1960-61 & it rose to 12.0 percent in 2001-02. During 2005-06, our imports from OPEC group amounted to Rs. 49,458 crores (7.5% of total imports) & exports to OPEC group amounted to Rs. 67,483 crores (14.8% of total exports). The balance of trade was favourable to India by Rs. 18,024 crores. However during 2006-07, our imports from OPEC countries reached to Rs. 2,53,780 crores (29.4%) & exports to OPEC group comes to Rs.93,521 crores (16.4% of total exports). This has resulted into huge trade deficit of Rs. 1,60,259 crores. Rising prices of petroleum products is harming Indian economy to a considerable extent. The same is the position of many developing countries.
INTERNATIONAL ENVIRONMENT W.R.T. ASEAN:
· Association of South East Asian Nations
· 1967, Bangkok through Bangkok Declaration
· Malaysia, Philippines, Indonesia, Thailand & Singapore. Later on another 5 members joined Brunei, Vietnam, Laos, Myanmar & Cambodia)
· Headquarters at Jakarta, Indonesia
· Initially group was formed to fight Chinese aggression - Political focus.
Economic focus in 1976 by 1st ASEAN Summit in Bali. Member nations signed ASEAN accord for economic cooperation.
1. Economic growth, social progress & cultural development of member nations.
2. Collaboration & mutual assistance in matters of common interest.
3. Cooperation with existing international & regional organisations with similar aims.
4. Stability of South – East Asian region.
· India & ASEAN:
- In 2008:
Share to total ASEAN trade Share in Percentage
- In 2009, India signed Free Trade Agreement with ASEAN nations to promote free trade between India & ASEAN nations in respect of a number of items such as tea, coffee, rubber, spices, etc. This came into effect on 1/1/2010
- ASEAN has decided to invite India & China as “guest country”
- India is a full dialogue partner of ASEAN. Participated for the first time at the post Ministerial Conference in Jakarta, July 1996
- ASEAN – India working group on Trade & Investment
- Looking towards a single currency for Asian markets = Asian Currency unit
- Asian Development Bank
- India & ASEAN signed Free Trade agreement in services sector. Now more professionals can get job opportunities in ASEAN nations.
INTERNATIONAL ENVIRONMENT W.R.T. W.T.O.:
- WORLD TRADE ORGANISATION (W.T.O.)
- 1st January 1995
- GATT (General Agreement on Tariffs & Trade) came into existence in 1947 with 23 countries including India. The main purpose of GATT was to increase trade & development of member nations by reducing trade barriers. W.T.O. is the result of the Uruguay round of negotiations of GATT.
- In 2002, W.T.O. had 144 countries as member nations.
- W.T.O. is based in Geneva, Switzerland
- Member nations have signed a number of agreements. Among the more important ones are TRIPs, TRIMs, GATS & AoA.
( TRIPs: Trade Related Intellectual Property Rights – protection of IPRs including patents, copyright, etc.
TRIMs: Trade Related Investment Measures – foreign investments at par with domestic investments
GATS: General Agreement on Trade in Services – liberalisation & privatization of service sectors
AoA: Agreement on Agriculture - lower tariff barriers on agricultural inputs, reduce export subsidies, increase market access, lower domestic support to farmers)
- In 1997, India also joined the global Information technology agreement under W.T.O.
- India being a founder member gets benefit of non-discrimination & treatment of MFN (Most Favoured Nation) in exports to other W.T.O. members
1. Free trade
2. Growth of LDCs
3. Protection of the environment
4. Optimum utilisation of the world resources
5. Increase standard of living of member nations
6. Settlement of trade disputes
7. Development of integrated & durable multilateral trading system
1. Trade without discrimination
2. Administer & implement trade agreements that have been signed
3. Act as forum for multilateral trade negotiations
4. Resolve trade disputes through dispute settlement mechanism
5. Implement tariff cuts & lower Non Tariff Barriers by member nations
6. Cooperate with other international institutions involved in global economic policy making
7. Monitor developments in the world economy
8. Consultant to member nations
9. Examine foreign trade policies of member nations
10. Collect trade statistics of member nations
- Critical assessment;
1. Only negotiations but no concrete results
2. No fair treatment to all member nations – more favour shown to developed countries
3. Developed countries hardly abide by the terms of the agreement
- 4th Ministerial Conference at Doha in Nov 2001. Here India opposed contentious issues like child labour issues & insisted on implementation of resolution relating to market access in AoA, clarity in TRIPs for public health policies, etc.