Professional Documents
Culture Documents
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 Bank19
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 doesnt 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
NAFTA
ASEAN
SAARC
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 Fundalso 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
economiesby 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
exchangeproved 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.
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 countriesthe
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 IMFdetermined
broadly by its economic sizethe 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.
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
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 5-10 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 :
http://www.imf.org/external/mmedia/index.asp
Video Presentation on The Sum of Its PartsHow the IMF Lends;
http://www.imf.org/external/mmedia/index.asp
Video Presentation on Conquering A Crisisthe IMF's role in helping
Korea overcome the Asian Crisis;
http://www.imf.org/external/mmedia/index.asp
USA
EU
Canada
China
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 countriesthe
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. Bankss 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 Banks other lending armthe 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 worlds 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%
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.
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. IBRDs income also pays for World Bank operating
expenses and has contributed to IDA and debt relief.
o
o
o
o
Poverty Assessments
Public Expenditure Reviews
Country Economic Reports
Sector Reports
Topics in Development
References :
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)
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)
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
The Bank prioritizes national and multinational projects and programs that
promote regional economic cooperation and integration.
3.2.1 Administrative Setup
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:
Thailand
India
Switzerland
China
195
193
190
182
ASYCUDA
ACIS
Empretec
TRAINS
193
119
110
124
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 WTOs 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 WTOs
predecessor, the General Agreement on Tariffs and Trade (GATT). The WTOs
agreements have been ratified in all members parliaments.
The WTOs 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 Secretariats 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 WTOs 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 WTOs 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 WTOs 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 WTOs 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 WTOs 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 Mechanisms 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.
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
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.
ITCs 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
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 environmental
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.
CBI, www.cbi.nl
Germany
Italy
Netherlands.
France
1972
1971
1973
1975
Africa
Europe
USA
China
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.
the European Parliament (EP), which represents the EUs 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
Unions 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 EUs 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 EUs principal decision-taking body. It shares with Parliament
the responsibility for passing EU laws. It is also in charge of the EUs 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.
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 EUs 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.
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
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.
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
FTAA.
NATA
1989 United States-Canada FTA.
US-Canada Trade Pact.
A)
B)
C)
D)
E)
Canada
the United States
Mexico
Honduras
All are members of NAFTA.
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:
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:
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:
11.3 Principles
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
Bangladesh
Bhutan
India
Afghanistan
B) Mandatory
C) Fixed
D) Flexible
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:
20 years
28 years
34 years
35 years
2028
2034
2030
2020
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
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:
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.
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 Assembly
Peace and Security Council (PSC)
Dispute Settlement Body
The Court of Justice
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
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:
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.
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:
15.4 Objectives
The objectives of SADC are to:
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.
15.5 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
o
o
o
o
o
o
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
A)
B)
C)
D)
August 1992
May 1991
April 1990
June 1992
Angola
Nigeria
Namibia
Democratic Republic of Congo (DRC)
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 Cte
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 Lom 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 Lom, 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 dIvoire, 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 :
References
A)
B)
C)
D)
Council of Ministers
Community Tribunal
ECOWAS Parliament
All of the 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 Tom 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:
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:
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
Yaound (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 Tom et Principe.
At a summit conference of the United Nations' Standing Advisory Committee on
Security Questions in Central Africa which took place in Yaound 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
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
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