Target Economic Regions

BBA 3753
Semester 5

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Content outline of the course/module and the SLT per topic:
Sl. Subject Description Lecture Practical Tutorial Others ILT Total
No
.
Historical overview of Russia and
1 chosen Asian nations (China, 2 0 1.5 0 3.5 7
South Korea and Japan)
political overview of Russia and
2 chosen Asian nations (China, 2 0 1.5 0 3.5 7
South Korea and Japan)
economic overview of Russia and
3 chosen Asian nations (China, 2 0 1.5 0 3.5 7
South Korea and Japan)
European vs. Russian vs. Asian
business cultural values and
4 2 0 1.5 0 3.5 7
attitudes

Trade relations between the EU,

5 2 0 1.5 0 3.5 7
Russia and Asian nations
Challenges doing business in the
6 2 0 1.5 0 3.5 7
EU, Russia markets
Challenges doing business in the
7 2 0 1.5 0 3.5 7
Asian markets
Solutions doing business in the
8 2 0 1.5 0 3.5 7
EU, Russia and
Solutions doing business in
9 2 0 1.5 0 3.5 7
Asian markets
Institutions and treaties of the
10 2 0 1.5 0 3.5 7
European Union
Entrepreneurship in the
11 2 0 1.5 0 3.5 7
European Union
12 EU trade policy, 2 0 1.5 0 3.5 7
13 Market access and 2 0 1.5 0 3.5 7
14 Lobbying the Institutions 2 0 1.5 0 3.5 7
15 Examination 0 0 0 6 16 22
Total 28 0 21 6 65 120

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UNIT 1 Historical overview of Russia and chosen Asian
nations

Learning Outcomes:

Upon successful completion of the course, the student

• Is able to analyze and benchmark business opportunities between the EU area, Russia and Asian
markets.

• Is aware of still existing challenges in doing business in the European Union, Russia and Asian
target countries.

• Understands current issues: political, economic, socio-cultural, legal, environmental and

technological development both in the EU, Russia and Asian markets.

• Understands the key drivers motivating internationalization of businesses in the European

Union, Russia and Asia.

• Is familiar with the main characteristics of European, Russian and Asian business

cultures.

HISTORICAL OVERVIEW OF RUSSIA AND CHOSEN ASIAN NATIONS

(CHINA, SOUTH KOREA AND JAPAN)
Russia, country that stretches over a vast expanse of Eastern Europe and northern Asia. Once
the preeminent republic of the Union of Soviet Socialist Republics (U.S.S.R.; commonly known
as the Soviet Union), Russia became an independent country after the dissolution of the Soviet
Union in December 1991.
Russia is a land of superlatives. By far the world’s largest country, it covers nearly twice the
territory of Canada, the second largest. It extends across the whole of northern Asia and the
eastern third of Europe, spanning 11 time zones and incorporating a great range
of environments and landforms, from deserts to semiarid steppes to deep forests

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and Arctic tundra. Russia contains Europe’s longest river, the Volga, and its largest lake, Ladoga.
Russia also is home to the world’s deepest lake, Baikal, and the country recorded the world’s
lowest temperature outside the North and South poles.
The inhabitants of Russia are quite diverse. Most are ethnic Russians, but there also are more
than 120 other ethnic groups present, speaking many languages and
following disparate religious and cultural traditions. Most of the Russian population is
concentrated in the European portion of the country, especially in the fertile region
surrounding Moscow, the capital. Moscow and St. Petersburg (formerly Leningrad) are the two
most important cultural and financial centers in Russia and are among the most picturesque
cities in the world. Russians are also populous in Asia, however; beginning in the 17th century,
and particularly pronounced throughout much of the 20th century, a steady flow of ethnic
Russians and Russian-speaking people moved eastward into Siberia, where cities such
as Vladivostok and Irkutsk now flourish.
Russia’s climate is extreme, with forbidding winters that have several times famously saved the country
from foreign invaders. Although the climate adds a layer of difficulty to daily life, the land is a generous
source of crops and materials, including vast reserves of oil, gas, and precious metals. That richness of
resources has not translated into an easy life for most of the country’s people, however; indeed, much
of Russia’s history has been a grim tale of the very wealthy and powerful few ruling over a great mass of
their poor and powerless compatriots. Serfdom endured well into the modern era; the years of Soviet
communist rule (1917–91), especially the long dictatorship of Joseph Stalin, saw subjugation of a
different and more exacting sort.
The Russian republic was established immediately after the Russian Revolution of 1917 and became a
union republic in 1922. During the post-World War II era, Russia was a central player in international
affairs, locked in a Cold War struggle with the United States. In 1991, following the dissolution of the
Soviet Union, Russia joined with several other former Soviet republics to form a loose coalition,
the Commonwealth of Independent States (CIS). Although the demise of Soviet-style communism and
the subsequent collapse of the Soviet Union brought profound political and economic changes, including
the beginnings of the formation of a large middle class, for much of the post-communist era Russians
had to endure a generally weak economy, high inflation, and a complex of social ills that served to
lower life expectancy significantly. Despite such profound problems, Russia showed promise of achieving
its potential as a world power once again, as if to exemplify a favorite proverb, stated in the 19th

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century by Austrian statesman Klemens, Fürst (prince) von Metternich: “Russia is never as strong as she
appears, and never as weak as she appears.”
The historic tales of China’s ancient Three Kingdoms can be used to explain the complicated
rivalry between China, Japan and South Korea, which have often had troubled relations despite
their geographical proximity, similar cultures and close economic ties.

The three East Asian powers have taken turns at being the envy of the world with their
miraculous growth after World War II, first seen by Japan, then South Korea and China. Today,
China is Asia’s largest economy, Japan second and South Korea fourth. Combined, they account
for a quarter of global economic output.

That is why the leaders of these nations, who met in a trilateral summit in China’s south-western
Sichuan province on December 24, shared their desire for peace and prosperity despite the
increased tensions on all sides of the regional triangle over the past decade.

Since the first summit in 2008, bilateral relations between Beijing and Tokyo, Beijing and Seoul,
and Tokyo and Seoul have been locked in bitter disputes over war history, territory, regional
security and other issues.

The modern history of East Asia saw Japan colonizing China and Korea, followed by the 1950-
53 Korean war that divided Korea into two opposite alliances, in which communist China fought
on the side of North Korea and Japan on the side of South Korea, led by the United States.

Relations have become more complicated following dramatic geopolitical changes in the last few
decades, which saw China become the world’s fastest-rising major power; Japan the world’s
fastest-declining one; and South Korea an emerging regional economic and diplomatic power.

The Sichuan summit celebrated more than 20 years of cooperation, originally dating back to the
aftermath of the 1997 Asian financial crisis. However, trilateral initiatives seeking to build
confidence and trust have been slow to get going, not just because of the historical feuds but also
because of divergent or conflicting geopolitical interests.

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The summit came amid a bitter quarrel between Tokyo and Seoul, the uncertainty caused by the
escalating trade war between the US and China, as well as the threat of North Korea resuming
nuclear tests.
Sino-Japanese relations recovered only after Shinzo Abe’s ice-breaking trip to Beijing in October
2018. This was the first visit by a Japanese prime minister since 2011, when relations took a
nosedive following a 2012 territorial dispute over a string of islands in the East China Sea, called
the Senkakus by Japan and the Diaoyu by China. Anti-Japanese sentiments still run high in
China as a result of the government’s high-profile World War II memorial activities in recent
years.

Sino-Korean relations also experienced a major setback following Seoul’s agreement to deploy
the US-built Terminal High Altitude Area Defence (THAAD) missile system in 2016 which
Beijing viewed as a threat to its security. This led to an unofficial boycott of South Korean goods
and movies, as well as a steep decline in the number of tourists.

Ties between Tokyo and Seoul have hit rock bottom in recent months over trade and a bitter feud
related to Japan’s 1910-1945 occupation of the Korean peninsula. In late November, Seoul
narrowly opted to continue an intelligence-sharing pact with Tokyo, reversing its prior decision
to withdraw from the accord after intervention from Washington.

Economic cooperation remains the most significant bond between the three trade powers.
Leaders shared their desire for a free-trade agreement in a market of over 1.5 billion people with
trilateral trade of US$720 billion last year, which accounted for just shy of 24 per cent of the
global total.

China is Japan’s largest trading partner and Japan is China’s third-largest export market. South
Korea is also an important trade partner for both China and Japan.

Beijing sees the trade pact as an important part of its efforts to increase regional economic
integration and diversify its markets in the face of escalating trade tensions with the United
States. The three-way trade accord would lead to a tariff reduction on around 92 per cent of
tradeable goods, making it one of the biggest multilateral free-trade deals China has negotiated.

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The accord could also pave the way for Beijing and Seoul to join Tokyo in the Comprehensive
and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a free-trade agreement which
involves 11 Asia-Pacific countries, excluding the US. China was excluded from the pact when it
was first drafted in 2015 under then US President Barack Obama’s “pivot to Asia” policy to
counter Chinese influence. However, US President Donald Trump withdrew the US from the
pact when he came to office.
China, South Korea and Japan pledge cooperation on regional security Leaders also agreed to
jointly push for the Regional Comprehensive Economic Partnership (RCEP), an expansive
multilateral trade deal spanning the Asia-Pacific, although its future is uncertain
following India’s recent abrupt withdrawal.
Shared concerns over the threat from North Korea’s nuclear ambitions have long glued the three
countries together diplomatically. The failures of three meetings between Trump and North
Korean leader 
Kim Jong-un prompted Tokyo and Seoul to seek Beijing’s help to break the impasse, as China is
seen as North Korea’s sole ally and supporter.

Pragmatism might prevail as leaders hope booming business relations would help heal the
festering wounds.

Beijing is also trying to exploit its two Asian neighbours’ increasing frictions with the US. The
Trump administration threatened to punish Tokyo and Seoul over its complaints about the cost of
maintaining US troops there. They are also at odds over trade issues.

However, Beijing’s shift from its “low-key” diplomacy to a high-profile and increasingly
assertive posture in recent years has triggered distrust and animosity in the hearts of its Asian
neighbours. The Pew Research Centre’s Global Attitudes survey in September suggested a
record 85 per cent of Japanese and 63 per cent of South Koreans view China unfavourably,
despite the improving ties.

Viewing China’s fast-rising military clout as a major threat to their security, Tokyo and Seoul
have moved to forge closer defence ties with Washington, joining in a tripartite security system
that would play a critical role in deterring China, along with North Korea and Russia.

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South Korea’s President Moon Jae-in, China’s Premier Li Keqiang and Japan’s Prime Minister
Shinzo Abe pose in front of flags ahead of the 8th trilateral leaders’ meeting. Photo: Reuters
Indeed, pragmatism might prevail as leaders hope booming business relations will help heal the
festering wounds as a result of disputes over wars, history and territory, and strategic distrust.
Ties will be repaired in anticipation of Chinese President Xi Jinping’s first state visit to Japan
and expected trip to South Korea early this year.

But Tokyo and Seoul, as like-minded US allies, will side with Washington in the event of any
military confrontation between the world’s two biggest rivals and political adversaries.

There is no historical period that offers richer theoretical arguments and insight into diplomacy
and geopolitical strategy than the legendary Three Kingdoms era between AD220 and 280. One
lesson from that time is that weaker states often ally themselves in an effort to resist the
strongest, as seen by the alliance between Shu, based in Sichuan where the trilateral summit was
held, and Wu in East China, against the Northern power of Wei.

The era was also full of tricks and conspiracies in battles, either at the negotiating table or on the
field, as rivals lacked confidence and trust in each others.

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UNIT 2 political overview of Russia and chosen Asian
nations

The  politics of Russia take place in the framework of the federal semi-

presidential republic of Russia. According to the Constitution of Russia, the President of
Russia is head of state, and of a multi-party system with executive power exercised by the
government, headed by the Prime Minister, who is appointed by the President with the
parliament's approval. Legislative power is vested in the two houses of the Federal Assembly of
the Russian Federation, while the President and the government issue numerous legally binding
by-laws.
Since the collapse of the Soviet Union at the end of 1991, Russia has seen serious challenges in
its efforts to forge a political system to follow nearly seventy-five years of Soviet governance.
For instance, leading figures in the legislative and executive branches have put forth opposing
views of Russia's political direction and the governmental instruments that should be used to
follow it. That conflict reached a climax in September and October 1993, when President Boris
Yeltsin used military force to dissolve the parliament and called for new legislative elections
(see Russian constitutional crisis of 1993). This event marked the end of Russia's first
constitutional period, which was defined by the much-amended constitution adopted by
the Supreme Soviet of the Russian Soviet Federative Socialist Republic in 1978. A new
constitution, creating a strong presidency, was approved by referendum in December 1993.
With a new constitution and a new parliament representing diverse parties and factions, Russia's
political structure subsequently showed signs of stabilization. As the transition period extended
into the mid-1990s, the power of the national government continued to wane as Russia's regions
gained political and economic concessions from Moscow.

Historical background

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The Soviet inheritance
The first constitution of the Soviet Union, as promulgated in 1924, incorporated a treaty of union
between various Soviet republics. Under the treaty, the Russian Socialist Federative Soviet
Republic became known as the Russian Soviet Federated Socialist Republic (RSFSR).
Nominally, the borders of each subunit incorporated the territory of a specific nationality. The
constitution endowed the new republics with sovereignty, although they were said to have
voluntarily delegated most of their sovereign powers to the Soviet center. Formal sovereignty
was evidenced by the existence of flags, constitutions, and other state symbols, and by the
republics' constitutionally guaranteed "right" to secede from the union. Russia was the largest of
the Union republics in terms of territory and population. During the Cold War era (ca 1947-
1991), Because of the Russians' dominance in the affairs of the union, the RSFSR failed to
develop some of the institutions of governance and administration that were typical of public life
in the other republics: a republic-level communist party, a Russian academy of sciences, and
Russian branches of trade unions, for example. As the titular nationalities of the other fourteen
union republics began to call for greater republic rights in the late 1980s, however, ethnic
Russians also began to demand the creation or strengthening of various specifically Russian
institutions in the RSFSR. Certain policies of Soviet leader Mikhail Gorbachev (in office as
General Secretary of the Communist Party of the Soviet Union from 1985 to 1991) also
encouraged nationalities in the union republics, including the Russian Republic, to assert their
rights. These policies included glasnost (literally, public "voicing"), which made possible open
discussion of democratic reforms and long-ignored public problems such as pollution. Glasnost
also brought constitutional reforms that led to the election of new republic legislatures with
substantial blocs of pro-reform representatives.

In the RSFSR a new legislature, called the Congress of People's Deputies, was elected in March
1990 in a largely free and competitive vote. Upon convening in May, the congress elected Boris
Yeltsin, a onetime Gorbachev protégé who had resigned/been exiled from the top party echelons
because of his radical reform proposals and erratic personality, as president of the congress's
permanent working body, the Supreme Soviet. The next month, the Congress declared Russia's
sovereignty over its natural resources and the primacy of Russia's laws over those of the central

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Soviet government. During 1990-1991, the RSFSR enhanced its sovereignty by establishing
republic branches of organizations such as the Communist Party, the Academy of Sciences of the
Soviet Union, radio and television broadcasting facilities, and the Committee for State Security
(Komitet gosudarstvennoy bezopasnosti—KGB). In 1991 Russia created a new executive office,
the presidency, following the example of Gorbachev, who had created such an office for himself
in 1990. The Russian presidential election of June 1991 conferred legitimacy on the office,
whereas Gorbachev had eschewed such an election and had had himself appointed by the Soviet
parliament. Despite Gorbachev's attempts to discourage Russia's electorate from voting for him,
Yeltsin won the popular election to become the president, handily defeating five other candidates
with more than 57 percent of the vote.

Yeltsin used his role as president of Russia to trumpet Russian sovereignty and patriotism, and
his legitimacy as president was a major cause of the collapse of the coup by hard-line
government and party officials against Gorbachev in August 1991 Soviet Coup of 1991. (see
August coup of 1991) The coup leaders had attempted to overthrow Gorbachev in order to halt
his plan to sign a New Union Treaty that they believed would wreck the Soviet Union. Yeltsin
defiantly opposed the coup plotters and called for Gorbachev's restoration, rallying the Russian
public. Most importantly, Yeltsin's faction led elements in the "power ministries" that controlled
the military, the police, and the KGB to refuse to obey the orders of the coup plotters. The
opposition led by Yeltsin, combined with the irresolution of the plotters, caused the coup to
collapse after three days.

Coat of Arms of the Russian Federation

Polity type Federal semi-presidential constitutional

republic

Constitution Constitution of Russia

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Legislative branch

Name Federal Assembly

Type Bicameral

Meeting place Moscow Kremlin

Upper house

Name Federation Council

Presiding Valentina Matviyenko, Chairwoman of the

officer Federation Council

Appointer Indirect elections

Lower house

Name State Duma

Presiding Vyacheslav Volodin, Chairman of the State

officer Duma

Executive branch

Head of State

Title President

Currently Vladimir Putin

Appointer Direct popular vote

Head of Government

Title Prime Minister

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 Currently Mikhail Mishustin

Appointer President

Cabinet

Name Government of Russia

Current cabinet Mikhail Mishustin's Cabinet

Leader Prime Minister

Appointer President

Headquarters White House

Ministries 32

Judicial branch

Name Judiciary of Russia

Constitutional Court

Constitution and government structure

Presidential copy of the Russian Constitution

During 1992-93 Yeltsin had argued that the existing, heavily amended 1978 constitution of
Russia was obsolete and self-contradictory and that Russia required a new constitution granting
the president greater power. This assertion led to the submission and advocacy of rival
constitutional drafts drawn up by the legislative and executive branches. The parliament's failure
to endorse a compromise was an important factor in Yeltsin's dissolution of that body in
September 1993. Yeltsin then used his presidential powers to form a sympathetic constitutional
assembly, which quickly produced a draft constitution providing for a strong executive, and to

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shape the outcome of the December 1993 referendum on Russia's new basic law. The turnout
requirement for the referendum was changed from 50 percent of the electorate to simply 50
percent of participating voters. The referendum vote resulted in approval by 58.4 percent of
Russia's registered voters.

The 1993 constitution declares Russia a democratic, federative, law-based state with a republican
form of government. State power is divided among the legislative, executive, and judicial
branches. Diversity of ideologies and religions is sanctioned, and a state or compulsory ideology
may not be adopted. Progressively, however, human rights violations in connection with
religious groups labeled "extremist" by the government have been increasingly frequent. The
right to a multiparty political system is upheld. The content of laws must be approved by the
public before they take effect, and they must be formulated in accordance with international law
and principles. Russian is proclaimed the state language, although the republics of the federation
are allowed to establish their own state.
Presidential powers
Russia's president determines the basic direction of Russia's domestic and foreign policy and
represents the Russian state within the country and in foreign affairs. The president appoints and
recalls Russia's ambassadors upon consultation with the legislature, accepts the credentials and
letters of recall of foreign representatives, conducts international talks, and signs international
treaties. A special provision allowed Yeltsin to complete the term prescribed to end in June 1996
and to exercise the powers of the new constitution, although he had been elected under a
different constitutional order.

In the 1996 presidential election campaign, some candidates called for eliminating the
presidency, criticizing its powers as dictatorial. Yeltsin defended his presidential powers,
claiming that Russians desire "a vertical power structure and a strong hand" and that a
parliamentary government would result in indecisive talk rather than action.
Informal powers and power centers
Many of the president's powers are related to the incumbent's undisputed leeway in forming an
administration and hiring staff. The presidential administration is composed of several
competing, overlapping, and vaguely delineated hierarchies that historically have resisted efforts

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at consolidation. In early 1996, Russian sources reported the size of the presidential apparatus in
Moscow and the localities at more than 75,000 people, most of them employees of state-owned
enterprises directly under presidential control. This structure is similar to, but several times
larger than, the top-level apparatus of the Soviet-era Communist Party of the Soviet Union
(CPSU).

Former first deputy prime minister Anatoly Chubais was appointed chief of the presidential
administration (chief of staff) in July 1996. Chubais replaced Nikolay Yegorov, a hard-line
associate of deposed Presidential Security Service chief Alexander Korzhakov. Yegorov had
been appointed in early 1996, when Yeltsin reacted to the strong showing of antireform factions
in the legislative election by purging reformers from his administration. Yeltsin now ordered
Chubais, who had been included in that purge, to reduce the size of the administration and the
number of departments overseeing the functions of the ministerial apparatus. The six
administrative departments in existence at that time dealt with citizens' rights, domestic and
foreign policy, state and legal matters, personnel, analysis, and oversight, and Chubais inherited
a staff estimated at 2,000 employees. Chubais also received control over a presidential advisory
group with input on the economy, national security, and other matters. Reportedly that group had
competed with Korzhakov's security service for influence in the Yeltsin administration.
Presidential elections
The constitution sets few requirements for presidential elections, deferring in many matters to
other provisions established by law. The presidential term is set at six years, and the president
may only serve two consecutive terms. A candidate for president must be a citizen of Russia, at
least 35 years of age, and a resident of the country for at least ten years. If a president becomes
unable to continue in office because of health problems, resignation, impeachment, or death, a
presidential election is to be held not more than three months later. In such a situation, the
Federation Council is empowered to set the election date.

The Law on Presidential Elections, ratified in May 1995, establishes the legal basis for
presidential elections. Based on a draft submitted by Yeltsin's office, the new law included many
provisions already contained in the Russian Republic's 1990 election law; alterations included
the reduction in the number of signatures required to register a candidate from 2 million to 1

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million. The law, which set rigorous standards for fair campaign and election procedures, was
hailed by international analysts as a major step toward democratization. Under the law, parties,
blocs, and voters' groups register with the Central Electoral Commission of Russia (CEC) and
designate their candidates. These organizations then are permitted to begin seeking the 1 million
signatures needed to register their candidates; no more than 7 percent of the signatures may come
from a single federal jurisdiction. The purpose of the 7 percent requirement is to promote
candidacies with broad territorial bases and eliminate those supported by only one city or ethnic
enclave.
Government (cabinet)
Main article: Government of the Russian Federation
The constitution prescribes that the Government of Russia, which corresponds to the Western
cabinet structure, consist of a prime minister (chairman of the Government), deputy prime
ministers, and federal ministers and their ministries and departments. Within one week of
appointment by the president and approval by the State Duma, the prime minister must submit to
the president nominations for all subordinate Government positions, including deputy prime
ministers and federal ministers. The prime minister carries out administration in line with the
constitution and laws and presidential decrees. The ministries of the Government, which
numbered 24 in mid-1996, execute credit and monetary policies and defense, foreign policy, and
state security functions; ensure the rule of law and respect for human and civil rights; protect
property; and take measures against crime. If the Government issues implementing decrees and
directives that are at odds with legislation or presidential decrees, the president may rescind
them.

The Government formulates the federal budget, submits it to the State Duma, and issues a report
on its implementation. In late 1994, the parliament successfully demanded that the Government
begin submitting quarterly reports on budget expenditures and adhere to other guidelines on
budgetary matters, although the parliament's budgetary powers are limited. If the State Duma
rejects a draft budget from the Government, the budget is submitted to a conciliation commission
including members from both branches.

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Besides the ministries, in 1996 the executive branch included eleven state committees and 46
state services and agencies, ranging from the State Space Agency (Glavkosmos) to the State
Committee for Statistics (Goskomstat). There were also myriad agencies, boards, centers,
councils, commissions, and committees. Prime Minister Viktor Chernomyrdin's personal staff
was reported to number about 2,000 in 1995.
Legislative branch
Parliament
The 616-member parliament, termed the Federal Assembly, consists of two houses, the 450-
member State Duma (the lower house) and the 166-member Federation Council (the upper
house). Russia's legislative body was established by the constitution approved in the December
1993 referendum. The first elections to the Federal Assembly were held at the same time—a
procedure criticized by some Russians as indicative of Yeltsin's lack of respect for constitutional
niceties. Under the constitution, the deputies elected in December 1993 were termed
"transitional" because they were to serve only a two-year term. In April 1994, legislators,
Government officials, and many prominent businesspeople and religious leaders signed a "Civic
Accord" proposed by Yeltsin, pledging during the two-year "transition period" to refrain from
violence, calls for early presidential or legislative elections, and attempts to amend the
constitution. This accord, and memories of the violent confrontation of the previous parliament
with Government forces, had some effect in softening political rhetoric during the next two
years.

South Korean President Moon Jae-in speaking in the Russian State Duma, 21 June 2018
The first legislative elections under the new constitution included a few irregularities. The
republics of Tatarstan and Chechnya and Chelyabinsk Oblast boycotted the voting; this action,

17
along with other discrepancies, resulted in the election of only 170 members to the Federation
Council. However, by mid-1994 all seats were filled except those of Chechnya, which continued
to proclaim its independence. All federal jurisdictions participated in the December 1995
legislative elections, although the fairness of voting in Chechnya was compromised by the
ongoing conflict there.
The legislative process
The legislative process[4] in Russia includes three hearings in the State Duma, then approvals by
the Federation Council, the upper house and sign into law by the President.

Draft laws may originate in either legislative chamber, or they may be submitted by the
president, the Government, local legislatures and the Supreme Court, the Constitutional Court, or
the Superior Court of Arbitration within their respective competences. Draft laws are first
considered in the State Duma. Upon adoption by a majority of the full State Duma membership,
a draft law is considered by the Federation Council, which has fourteen days to place the bill on
its calendar. Conciliation commissions are the prescribed procedure to work out differences in
bills considered by both chambers.
Local and regional government
In the Soviet period, some of Russia's approximately 100 nationalities were granted their own
ethnic enclaves, to which varying formal federal rights were attached. Other smaller or more
dispersed nationalities did not receive such recognition. In most of these enclaves, ethnic
Russians constituted a majority of the population, although the titular nationalities usually
enjoyed disproportionate representation in local government bodies. Relations between the
central government and the subordinate jurisdictions, and among those jurisdictions, became a
political issue in the 1990s.

The Russian Federation has made few changes in the Soviet pattern of regional jurisdictions. The
1993 constitution establishes a federal government and enumerates eighty-nine subnational
jurisdictions, including twenty-one ethnic enclaves with the status of republics. There are ten
autonomous regions, or okruga (sing., okrug ), and the Jewish Autonomous Oblast (Yevreyskaya
avtonomnaya oblast', also known as Birobidzhan). Besides the ethnically identified jurisdictions,
there are six territories (kraya ; sing., kray ) and forty-nine oblasts (provinces). The cities of

18
Moscow and St. Petersburg are independent of surrounding jurisdictions; termed "cities of
federal significance," they have the same status as the oblasts. The ten autonomous regions and
Birobidzhan are part of larger jurisdictions, either an oblast or a territory. As the power and
influence of the central government have become diluted, governors and mayors have become
the only relevant government authorities in many jurisdictions.

Basic facts about Russia: Political system

Russia is a federal presidential republic

The executive power is split between the President and the Prime Minister, but the President is the
dominant figure. The legislature is represented by the Federal Assembly of Russia. It has two chambers:
the State Duma – the lower house, and the Federation Council – the upper house. The judicial power is
vested in courts and administered by the Ministry of Justice.

The President

The President is the head of state and is elected by popular vote every six years for a maximum
of two consecutive terms. The original constitution had four-year presidential terms, but this was
amended to six years by parliament late in 2008. The new rules will not apply to the current
administration and will come into effect only after the next election, due in 2012. The President’s
working residence is in the Moscow Kremlin. The President determines the basic domestic and
foreign policy, is the commander-in-chief of the armed forces, can veto legislative bills, resolves
issues of citizenship of the Russian Federation, awards state decorations and grants pardons.

The Government

Government duties are split between a number of ministries, some of which, in turn, have
federal services and federal agencies answerable to them. The head of government, the prime
minister, is appointed by the president and confirmed by the State Duma. The government is
housed in the so-called White House in Moscow. The government ensures the implementation
of domestic and foreign policy, works out the federal budget, oversees the implementation of financial
and monetary policy, ensures the rule of law, human rights and freedoms.

19
The Parliament

The bicameral Federal Assembly makes federal law, approves treaties, declares war and has the power
of the purse. Both its chambers are located in Moscow.

The Federation Council

The Federation Council of Russia is the upper house of the Russian Parliament. Created by the 1993
constitution, it was to act as a voice of Russia’s federated entities. The Council has explicitly stated that
no political factions are to exist in the upper house.

Unlike the State Duma, the Council isn’t directly elected. It consists of representatives of Russia’s federal
entities – each has two. One is elected by the entity’s legislature; the other is nominated by the entity’s
head. The terms of the members aren’t nationally fixed, but depend on the terms of the regional bodies
that chose them.

The Council works with the lower chamber to complete and vote on draft laws. But the Federation
Council also has special powers of its own, including the declaration of a presidential election,
impeachment of the President and decisions on the use of the armed forces outside Russia’s territory.
The State Duma

The State Duma is the lower house of the Russian Parliament. The 450 deputies are elected for terms of
five years following constitutional amendments agreed by parliament late in 2008. However, the original
term of four years will apply to the current Duma, as the new rules do not come into effect until after
the next election. Any Russian citizen over the age of 21 is eligible to run. Half the seats used to be filled
through proportional representation and the other half through single seat constituencies. Now the
system has changed.

The 2007 parliamentary election used a new format whereby all deputies were elected from party-lists
through proportional representation.

20
The term Duma comes from the Russian “dumat” (“to think”). Compared to some European
democracies, the Russian Duma is quite a youngster. Founded in 1906, it didn’t survive the 1917
revolution. But it bounced back in 1993, when Russia’s first President, Boris Yeltsin, introduced a new
constitution.

All bills, even those proposed by the Federation Council, must first be considered by the State Duma.
Once a bill is passed by a majority in the Duma, a draft law is sent back to the Federation Council. If the
Council rejects it, the two chambers may form a commission to work out a compromise.
The Judiciary

Three types of court make up the Russian judiciary:

 The courts of general jurisdiction (including military courts), subordinated to the Supreme Court;
 He arbitration court system under the High Court of Arbitration;
 The Constitutional Court (as well as constitutional courts in a number of federal entities)
The municipal court is the lowest adjudicating body in the general court system. It serves each city or
rural district and hears more than 90 per cent of all civil and criminal cases. The next level of courts of
general jurisdiction is the regional courts. At the highest level is the Supreme Court. Decisions of the
lower trial courts can generally be appealed only to the immediately superior court.

Arbitration courts are in practice specialised courts which resolve property and commercial disputes
between economic agents. The highest level of court resolving economic disputes is the High Court of
Arbitration.

The Constitutional Court is empowered to rule on whether or not laws or presidential decrees are
constitutional. If it finds that a law is unconstitutional, the law becomes unenforceable and
governmental agencies are barred from implementing it. The judges of the Constitutional Court, the
Supreme Court and the Higher Arbitration Court are appointed by the parliament’s upper house, the
Federation Council.

21
East Asia
East Asia is the eastern region of Asia, which is defined in both geographical and ethno-cultural terms.
The region consists of China (People's Republic of China), Hong Kong (SAR of PRC), Macau (SAR of
PRC), Japan, Mongolia, North Korea (Democratic People's Republic of Korea), South Korea (Republic of
Korea), and Taiwan (Republic of China). The East Asian states China, North Korea, South Korea, and
Taiwan are all unrecognized by at least one other East Asian state. Hong Kong and Macau are officially
highly autonomous but are under effective Chinese sovereignty. North Asia borders East Asia's
north, Southeast Asia the south, South Asia the southwest, and Central Asia the west. To the east is
the Pacific Ocean, and to the southeast is Micronesia (a Pacific Ocean island group, classified as part
of Oceania). Vietnam is also considered a part of the East Asian cultural sphere due to its cultural,
religious, and ethnic similarities.
China, Japan, and Korea represent the three core countries and civilizations of traditional East Asia - as
they once shared a common written language, culture, as well as sharing Confucian philosophical tenets
and the Confucian societal value system once instituted by Imperial China.[85][86][87][88][89] Other
usages define Mainland China, Hong Kong, Macau, Japan, North Korea, South Korea and Taiwan as
countries that constitute East Asia based on their geographic proximity as well as historical and modern
cultural and economic ties, particularly with Japan and Korea having strong cultural influences that
originated from China.[90][89][91][92][93][94] Some scholars include Vietnam as part of East Asia as it
has been considered part of the greater Chinese sphere of influence. Though Confucianism continues to
play an important role in Vietnamese culture, Chinese characters are no longer used in its written
language and many scholarly organizations classify Vietnam as a Southeast Asian country.[95][96][97]
Mongolia is geographically north of Mainland China yet Confucianism and the Chinese writing system
and culture had limited impact on Mongolian society. Thus, Mongolia is sometimes grouped with
Central Asian countries such as Turkmenistan, Kyrgyzstan, and Kazakhstan.[98][96] Xinjiang (East
Turkestan) and Tibet are sometimes seen as part of Central Asia.[99][100][101]

Politics of Asia
The politics of Asia are extremely varied as would be expected of such a large landmass and a
diverse population. Constitutional monarchies, absolute monarchies, one-party states, federal

22
states, dependent territories, liberal democracies and military dictatorships are all factors in the
region, as well as various forms of independence movements.

Civilization has a long history throughout Asia and it probably involved politics right from the
start although some of the earliest discernible political structures arose in Mesopotamia with the
advent of writing offering details of these politics. A large and well organized civil service the
like of which arose in China is also a necessary adjunct to politics. Much of the political climate
in Asia today is affected by colonialism and imperialism of the past with some states retaining
close links with their former colonial governors while others involved in bitter independence
struggles the consequences of which continue to be felt.

The situation today is still mixed, with hostilities in parts of Asia such as the continuing tensions
over South China sea, Kashmir, Taiwan, Tibet, North Korea as well as economic
competitiveness between the People's Republic of China and India. China and India do not have
a peace treaty, nor does Russia and Japan or North Korea and South Korea. However, there are
also moves towards greater co-operation and communication within the region with Association
of Southeast Asian Nations (ASEAN) a notable example.

Politics of China
The politics of the People's Republic of China takes place in a framework of a socialist republic
run by a single party, the Communist Party of China, headed by the General Secretary .[2]
[unreliable source?] State power within the People's Republic of China (PRC) is exercised
through the Communist Party, the Central People's Government (State Council) and their
provincial and local representation. The state uses Internal Reference [zh], secret documents
produced by Xinhua News Agency, similar to US's President's Daily Brief, though delivered to
most of its officials according to the level of secrecy of the information, a major source of
information of the society.[citation needed]

23
The PRC consists of 22 provinces (excluding the claimed Taiwan Province), four municipalities,
five autonomous regions and two special administrative regions of Hong Kong and Macau with
the latter operating in a separate political systems different from the PRC.
Overview
Each local Bureau or office is under the coequal authority of the local leader and the leader of
the corresponding office, bureau or ministry at the next higher level. People's Congress
members at the county level are elected by voters. These county-level People's Congresses
have the responsibility of oversight of local government and elect members to the Provincial (or
Municipal in the case of independent municipalities) People's Congress. The Provincial People's
Congress, in turn, elects members to the National People's Congress that meets each year in
March in Beijing.[3][non-primary source needed] The ruling Communist Party committee at
each level plays a large role in the selection of appropriate candidates for election to the local
congress and to the higher levels.

The President of China is the head of state, serving as the ceremonial figurehead under National
People's Congress.[note 1] The Premier of China is the head of government, presiding over the
State Council composed of four vice premiers and the heads of ministries and commissions. As
a one-party state, the General Secretary of the Communist Party of China holds ultimate power
and authority over state and government.[note 2] The offices of President, General Secretary,
and Chairman of the Central Military Commission have been held simultaneously by one
individual since 1993, granting the individual de jure and de facto power over the country .[note
3]

China's population, geographical vastness, and social diversity frustrate attempts to rule from
Beijing. Economic reform during the 1980s and the devolution of much central government
decision making, combined with the strong interest of local Communist Party officials in
enriching themselves, has made it increasingly difficult for the central government to assert its
authority.[19][ISBN missing] Political power has become much less personal and more

24
institutionally based than it was during the first forty years of the PRC. For example, Deng
Xiaoping was never the General Secretary of the Communist Party of China, President, or
Premier of China, but was the leader of China for a decade. Today[when?] the authority of
China's leaders is much more tied to their institutional base.[dubious – discuss] The incident of
Hong Kong’s Missing Booksellers had alarmed the public that political confrontation of different
political cadre in the senior level of the Chinese Communist Party still dominates China's
politics.[20]

Typology
Socialist consultative democracy

The Communist Party of China calls China's system a "socialist consultative democracy".
According to an article in the Communist Party theoretical journal Qiushi[better source
needed], "Consultative democracy was created by the CPC and the Chinese people as a form of
socialist democracy. ... Not only representing a commitment to socialism, it carries forward
China’s political and cultural traditions. Not only representing a commitment to the
organizational principles and leadership mode of democratic centralism, it also affirms the role
of the general public in a democracy. Not only representing a commitment to the leadership of
the CPC, it also gives play to the role of all political parties and organizations as well as people
of all ethnic groups and all sectors of society".[25][better source needed]

According to a China Today[better source needed] editorial, "Consultative democracy

guarantees widespread and effective participation in politics through consultations carried out
by political parties, peoples congresses, government departments, CPPCC committees, peoples
organizations, communities, and social organizations".[26]

In 2012, Li Changjian, a member of the National Committee of the Chinese People's Political
Consultative Conference (CPPCC), China's top political advisory body, said that consultative
democracy should be made a greater priority in China's political reform.[27][better source

25
needed] A significant feature of socialist consultative democracy is consulting with different
sectors in order to achieve maximum consensus.[27][better source needed]

However, elections are also an element in socialist consultative democracy,[27] even though
the People's Republic of China is often erroneously[a fact or an opinion? (See discussion.)]
criticised in the West for not having elections.[28] This error likely stems from a
misunderstanding of the PRC's election system.[29][unreliable source?] However, no
substantial legal political opposition groups are allowed to participate in the election.[citation
needed]
Communist Party
Main articles: Communist Party of China and Ideology of the Communist Party of China

The 90 million-member[30][non-primary source needed] Communist Party of China (CPC)

continues to dominate government. In periods of relative liberalization, the influence of people
and groups outside the formal party structure has tended to increase, particularly in the
economic realm. Under the command economy, every state-owned enterprise was required to
have a party committee. The introduction of the market economy means that economic
institutions now exist in which the party has limited or lots of power.

Nevertheless, in all governmental institutions in the PRC, the party committees at all levels
maintain a powerful and pivotal role in the administration. Central party control is tightest in
central government offices and in urban economic, industrial, and cultural settings; it is
considerably looser over the government and party establishments in rural areas, where the
majority of Mainland Chinese people live. The CPC's most important responsibility comes in the
selection and promotion of personnel. They also see that party and state policy guidance is
followed and that non-party members do not create autonomous organizations that could
challenge party rule. Particularly important are the leading small groups which coordinate
activities of different agencies. There is no convention that government committees contain at

26
least one non-party member, party membership is a definite aid in the promotion and in being
included in crucial policy-setting meetings.

Constitutionally, the party's highest body is the Party Congress, which is supposed to meet at
least once every 5 years. Meetings were irregular before the Cultural Revolution but have been
periodic since then. The party elects the Central Committee and the primary organs of power
are formally parts of the central committee.

The primary organs of power in the Communist Party include:

 The General Secretary, which is the highest-ranking official within the Party and usually
the Chinese Paramount leader.
 The Politburo, consisting of 22 full members (including the members of the Politburo
Standing Committee);
 The Politburo Standing Committee, the most powerful decision-making body in China,
which as of June 2020 consists of seven members;[31]
 The Secretariat, the principal administrative mechanism of the CPC, headed by the
General Secretary;
 The Central Military Commission;
 The Central Discipline Inspection Commission, which is charged with rooting out
corruption and malfeasance among party cadres.

Government
The primary organs of state power are the National People's Congress (NPC), the President, and
the State Council. Members of the State Council include the Premier, a variable number of vice premiers
(now four), five state councillors (protocol equal of vice premiers but with narrower portfolios), and 29
ministers and heads of State Council commissions. During the 1980s there was an attempt made to
separate party and state functions, with the party deciding general policy and the state carrying it out.
The attempt was abandoned in the 1990s with the result that the political leadership within the state
are also the leaders of the party, thereby creating a single centralized locus of power.

27
At the same time, there has been a convention that party and state offices be separated at levels other
than the central government, and it is unheard of for a sub-national executive to also be party secretary.
The conflict has been often known to develop between the chief executive and the party secretary, and
this conflict is widely seen as intentional to prevent either from becoming too dominant. Some special
cases are the Special Administrative Regions of Hong Kong and Macau where the Communist Party does
not function at all as part of the governmental system, and the autonomous regions where, following
Soviet practice, the chief executive is typically a member of the local ethnic group while the party
general secretary is non-local and usually Han Chinese.
Under the Constitution of China, the NPC is the highest organ of state power in China. It meets annually
for about 2 weeks to review and approve major new policy directions, laws, the budget, and major
personnel changes. Most national legislation in China is adopted by the Standing Committee of the
National People's Congress (NPCSC). Most initiatives are presented to the NPCSC for consideration by
the State Council after previous endorsement by the Communist Party's Politburo Standing Committee.
Although the NPC generally approves State Council policy and personnel recommendations, the NPC and
its standing committee has increasingly asserted its role as the national legislature and has been able to
force revisions in some laws. [32] For example, the State Council and the Party have been unable to secure
passage of a fuel tax to finance the construction of freeways.

Local government[edit]

Currently,[when?] local government in China is structured in a hierarchy on four different levels.

With the village being the grassroots (usually a hundred or so families), and not considered part
of the hierarchy, local government advances through
the township, county, prefecture or municipality, and the province as the geographical area of
jurisdiction increases. Each level in the hierarchy is responsible for overseeing the work carried
out by lower levels on the administrative strata. At each level are two important officials. A
figure that represents the Communist Party of China, colloquially termed the Party chief or
the Party Secretary, acts as the policy maker. This figure is appointed by their superiors. The
head of the local People's Government, is, in theory, elected by the people. Usually called
a governor, mayor, or magistrate, depending on the level, this figure acts to carry out the policies
and most ceremonial duties. The distinction has evolved into a system where the Party Secretary
is always in precedence above the leader of the People's Government.

28
After Deng Xiaoping took power in 1978 greater autonomy has been given to provinces in terms
of economic policy implementation as well as other areas of policy such as education and
transportation. As a result, some provincial authorities have evolved tendencies of operating on
a de facto federal system with Beijing. Prominent examples of greater autonomy are seen in the
provinces of Guangdong and Zhejiang, where local leaders do little to adhere to the strict
standards issued by the Central Government, especially economic policy. In addition, conflicts
have arisen in the relations of the central Party leaders with the few provincial-level
Municipalities, most notably the municipal government of Shanghai and the rivalry between
former Beijing mayor Chen Xitong and Jiang Zemin. The removal of Shanghai Municipality
Party Secretary Chen Liangyu in September 2006 is the latest[when?] example.

China's system of autonomous regions and autonomous prefectures within provinces are

formally intended to provide for greater autonomy by the ethnic group majority that inhabits the
region. In practice, however, power rests with the Party secretary. Beijing will often appoint
loyal party cadres to oversee the local work as Party secretary, while the local Chairman of the
region's government is regarded as its nominal head. Power rests with the Party secretary. To
avoid the solidification of local loyalties during a cadre's term in office, the central government
freely and frequently transfers party cadres around different regions of the country, so a high
ranking cadre's career might include service as governor or party secretary of several different
provinces.

Elections[edit]
Main article: Elections in the People's Republic of China

No substantial legal political opposition groups exist, and the country is mainly run by the  Communist
Party of China (CPC), but there are other political parties in the PRC, called "democratic parties", which
participate in the People's Political Consultative Conference but mostly serve to endorse CPC policies.
Even as there have been some moves in the direction of democratisation as far as the electoral system at
least, in that openly contested People's Congress elections are now held at the village and town levels,
[34]
 and that legislatures have shown some assertiveness from time to time, the party retains effective
control over governmental appointments. This is because the CPC wins by default in most electorates.
[35]
 The CPC has been enforcing its rule by clamping down on political dissidents as well as simultaneously
attempting to reduce dissent by improving the economy and allowing public expression of people's
personal grievances, provided that it is not within the agenda of any NGO or other groups openly or
covertly opposing CPC ideals. Current [when?] political concerns in Mainland China include countering the

29
growing gap between the wealthy and the poorer, and fighting corruption within the government
leadership and its institutions.[36] The support that the Communist Party of China has among the Chinese
population in general is unclear because national elections are mostly CPC dominated, [34][unreliable source?]
 as
there are no opposition political parties and independent candidates elected into office aren't organised
well enough to realistically challenge CPC rule. Also, private conversations and anecdotal information
often reveal conflicting views. However, according to a survey conducted in Hong Kong, where a
relatively high level of freedom is enjoyed, the current [when?] CPC leaders have received substantial votes of
support when its residents were asked to rank their favourite Chinese leaders from Mainland and Taiwan.
[37]

Main article: Law of the People's Republic of China

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The Chinese legal code is a complex amalgam of custom and statute, largely focused on criminal
law, though a rudimentary civil code has been in effect since January 1, 1987, and new legal
codes have been in effect since January 1, 1980. Continuing efforts are being made to improve
civil, administrative, criminal, and commercial law.

Although the current[when?] law of China cannot be categorised by arbitrary rule, it is over-

simplifying to describe it as a system of rule of law. While personal freedom and right to private
property is nominally guaranteed by law, officials maintain the right to trespass citizens before
proving or suspecting them breaking the law through the use of Droit administration. In other
words, the concept of Habeas corpus does not apply in China. Also, Party members are subjected
to different sets of law, namely the Constitution of the Communist Party of China, which
authorises itself to use state apparatus to regulate behaviours of party members, sometimes
overriding Law of the land. One of the most distinctive characteristics of Chinese law is the lack
of a mechanism to verify the constitutionality of statute laws. This in effect allows the enactment
of any administrative laws as long as circumstances justify.

The government's efforts to promote rule by law (not the same as rule of law) are significant and
ongoing. After the Cultural Revolution, the PRC's leaders aimed to develop a legal system to
restrain abuses of official authority and revolutionary excesses. In 1982, the National People's

30
Congress adopted a new state constitution that emphasized the concept of rule by law by which
party and state organizations are all subject to the law. (The importance of the rule by law was
further elevated by a 1999 Constitutional amendment.) Many commentators[who?] have pointed out
that the emphasis on rule by law increases rather than decreases the power of the Communist
Party of China because the party, in its position of power, is in a better position to change the law
to suit its own needs.

The political framework of South Korea

Political Outline

Current Political LeadersPresident: Moon Jae-in (since 10 May 2017)

Prime Minister: Chung Sye-kyun (since 14 January 2020)

Next Election DatesLegislative: April 2024

Presidential: 2022

Current Political Context: The Korean-peninsula remains one of the most protracted and
volatile conflict zones in the word. President Moon Jae-in has pushed the denuclearization and
the 'peace economy' concept as the cornerstones of its North Korea policy. In its five-year plan,
the government is working to lay the foundations for economic unification by restarting inter-
Korean cooperation and seeking a single market for Seoul and Pyongyang. The purpose is to
achieve peace and unification by 2045. However, the long protests in 2019 combined with slow
economic growth have driven President Moon Jae-in approval ratings to their lowest since he
took power in 2017. The dwindling support is making it harder for him to deliver on his election
promises, such as reforming the judicial system and reviving peace talks with North Korea.
Moon Jae-in government is forging ahead with the biggest expansionary budget since the global
financial crisis, as export-driven economy battles headwinds from the global economic
slowdown, uncertainty over the USA-China trade war and a significant deterioration in the
relations with Japan to the lowest point since 1965. In August 2019, Japan moved to restrict
high-tech material exports to South Korea. In response, South Korea broke off its intelligence
sharing arrangement with Japan (GSOMIA), leading to criticism from the United States and
complicating ongoing operations between the three countries, including on addressing human
rights issues in North Korea.Main Political PartiesThe re-branding of party names and party

31
mergers have been a popular means of securing additional votes in recent years. The most
influential parties are:

Main Political Parties :The re-branding of party names and party mergers have been a
popular means of securing additional votes in recent years. The most influential parties
are:
- The Minjoo Party: centre, socially liberal, result of a 2014 merger between the
Democratic Party and the New Political Vision Party; first party in the Parliament since
August 2017
- Liberty Korea Party (LKP): right-wing; second party in the Parliament since August
2017
Smaller parties include:
- Bareunmirae Party (BP): centre-right
- New Conservative Party: right-wing; founded in December 2019
- Justice Party: centre-left; organised around progressivism

Executive Power :The President is the chief of the state, head of the Government and
commander-in-chief of the armed forces. He or she is elected by a popular vote for a
single five-year term. The President enjoys executive powers and appoints both the Prime
Minister and the State Council (cabinet) with consent of the parliament. The Prime
Minister is not required to be a member of parliament and his or her main role is to assist
the President
.Legislative Power ;The legislature in South Korea is unicameral. The Parliament,
called the National Assembly, has 273 seats distributed among parties in proportion to
their share of the vote. Each member is elected to serve four-year terms. The executive
branch of the government is directly or indirectly dependent on the support of the
National Assembly, often expressed through a vote of confidence.
The political framework of Japan
The politics of Japan are conducted in a framework of a multi-party bicameral
parliamentary representative democratic constitutional monarchy in which the Emperor is
the ceremonial head of state and the Prime Minister is the head of government and the
head of the Cabinet, which directs the executive branch.

32
Legislative power is vested in the National Diet, which consists of the House of
Representatives and the House of Councillors. Judicial power is vested in the Supreme
Court and lower courts, and sovereignty is vested in the Japanese people by the
Constitution. Japan is considered a constitutional monarchy with a system of civil law.
Political Outline
Current Political Leaders Emperor: Naruhito (since 1 May 2019); succeeded his father
who abdicated on 30 April 2019
Prime Minister: Shinzō Abe (since 26 December 2012) - Liberal Democratic Party
Next Election DatesHouse of Representatives: October 2021
House of Councillors: 2022

Current Political Context : 2019, Shinzo Abe became Japan’s longest-serving prime
minister, although his term is supposed to end in September 2021. At the same time, in
May 2019, Prince Naruhito became the 126th emperor of Japan. On October 7, 2019,
following six months of negotiations, the United States and Japan signed two agreements
aiming to liberalize bilateral trade. Japan’s relationship with China remains fragile, even
if it has improved in the latest years. The situation between Japan and South Korea, on
the other hand, has worsened recently, due to a 2018 South Korean ruling which compels
Japanese companies to pay compensation for the forced Korean labor during World War
II. In response, Japan imposed sanctions on the exports of semiconductor materials
directed at South Korea and removed the country from so-called 'white list' of favoured
trade partners. South Korea, for its part, threatened to leave the General Security of
Military Information Agreement (GSOMIA), the strategic military information exchange
agreement it shares with Japan. Only in December 2019, the leaders of the countries met
in order to find a way to overcome the dispute
.Main Political Parties: The Liberal Democratic Party (PLD): centre-right, conservative,
nationalist, liberal, populist

33
 - The Democratic Party of Japan (DPJ): centre to centre-right, liberal
- Party for Hope: right-wing to far-right, conservative, populist; opposition party
- Constitutional Democratic Party: centre-left to left-wing, liberal, pacifist; opposition
party
- Japan Restoration Party (JRP): right-wing to far-right, nationalist, populist; third largest
force, but is slowly losing representation
- Komeito (NK): centre-right, conservative, pacifist, in coalition with the LDP
- Japanese Communist Party (JCP): left-wing to far-left, socialist; more than doubled its
representation in the last election
-Nippon Ishin No Kai: centre-right to right-wing, localism, economic liberalism
-Liberal Party: centre, centre-left
-Social Democratic Party: centre-left to left-wing, social-democratic
Executive Power :The head of State is the Emperor and the role is largely ceremonial.
The leader of the majority party or leader of the majority coalition in the parliament
(House of Representatives) is designated as the Prime Minister for a four-year term. The
Prime Minister is the Head of the Government and enjoys executive powers, which
include implementation of the law and running of day-to-day affairs. The Cabinet is
appointed by the Prime Minister
.Legislative Power :The legislature in Japan is bicameral. The parliament, called
National Diet, consists of the House of Councillors (the upper house) and the House of
Representatives (the lower house). The House of Councillors contains 242 members,
elected through a popular vote for six-year terms, with half of the membership being
renewed every three years. The House of Representatives contains 465 members, elected
through a popular vote for four-year terms. The Constitution of Japan states that the
nation's 'highest organ of state power' is the National Diet. The executive branch of
government is directly or indirectly dependent on the support of the National Diet, which
is often expressed through a vote of confidence.

Government[edit]
Main article: Government of Japan

34
The Imperial Palace in Tokyo has been the primary residence of the Emperor since 1869.

The Constitution of Japan defines the Emperor[4] to be "the symbol of the State and of the unity of the
people". He performs ceremonial duties and holds no real power. Political power is held mainly by the
Prime Minister and other elected members of the Diet. The Imperial Throne is succeeded by a member of
the Imperial House as designated by the Imperial Household Law.

The chief of the executive branch, the Prime Minister, is appointed by the Emperor as directed by the
Diet. He is a member of either house of the Diet and must be a civilian. The  Cabinet members are
nominated by the Prime Minister, and are also required to be civilian. With the Liberal Democratic
Party (LDP) in power, it has been convention that the President of the party serves as the Prime Minister.

Parliamentary system
From Wikipedia, the free encyclopedia

A parliamentary system or parliamentary democracy 

It is a system of democratic governance of a state (or subordinate entity) where the executive derives its

democratic legitimacy from its ability to command the confidence of the legislature, typically
a parliament, and is also held accountable to that parliament. In a parliamentary system, the head of
state is usually a person distinct from the head of government. This is in contrast to a presidential
system, where the head of state often is also the head of government and, most importantly, the
executive does not derive its democratic legitimacy from the legislature.
Countries with parliamentary democracies may be constitutional monarchies, where a monarch is the
head of state while the head of government is almost always a member of parliament (such as Thailand,
the United Kingdom, Denmark, Sweden, and Japan), or parliamentary republics, where a mostly
ceremonial president is the head of state while the head of government is regularly from the legislature
(such as Ireland, Germany, India, and Italy). In a few parliamentary republics, such as Botswana, Kiribati
and South Africa, among some others, the head of government is also head of state, but is elected by

35
and is answerable to parliament. In bicameral parliaments, the head of government is generally, though
not always, a member of the lower house.

A parliamentary system may be either bicameral, with two chambers of parliament (or houses) or
unicameral, with just one parliamentary chamber. A bicameral parliament usually consists of a directly
elected lower house with the power to determine the executive government, and an upper house which
may be appointed or elected through a different mechanism from the lower house.

Scholars of democracy such as Arend Lijphart distinguish two types of parliamentary democracies: the
Westminster and Consensus systems.The Palace of Westminster in London, United Kingdom. The
Westminster system originates from the British Houses of ParliamentThe Reichstag Building in Berlin,
Germany. The Consensus system is used in most Western European countries.

 The Westminster system is usually found in the Commonwealth of Nations and countries which
were influenced by the British political tradition.[11][12][13] These parliaments tend to have a
more adversarial style of debate and the plenary session of parliament is more important than
committees. Some parliaments in this model are elected using a plurality voting system (first past
the post), such as the United Kingdom, Canada, and India, while others use some form of
proportional representation, such as Ireland and New Zealand. The Australian House of
Representatives is elected using instant-runoff voting, while the Senate is elected using
proportional representation through single transferable vote. Regardless of which system is used,
the voting systems tend to allow the voter to vote for a named candidate rather than a closed list.

 The Western European parliamentary model (e.g. Spain, Germany) tends to have a more
consensual debating system and usually has semi-circular debating chambers. Consensus
systems have more of a tendency to use proportional representation with open party lists than the
Westminster Model legislatures. The committees of these Parliaments tend to be more important
than the plenary chamber. Some Western European countries' parliaments (e.g. in the
Netherlands, Luxembourg and Sweden) implement the principle of dualism as a form of
separation of powers. In countries using this system, Members of Parliament have to resign their
place in Parliament upon being appointed (or elected) minister. Ministers in those countries
usually actively participate in parliamentary debates, but are not entitled to vote.

Implementations of the parliamentary system can also differ as to how the prime minister and government
are appointed and whether the government needs the explicit approval of the parliament, rather than just
the absence of its disapproval.

Political developments since 2010

36
On 2 June 2010, Hatoyama resigned due to lack of fulfillments of his policies, both domestically and
internationally[8] and soon after, on 8 June, Akihito, Emperor of Japan ceremonially swore in the newly
elected DPJ's president, Naoto Kan as prime minister.[9] Kan suffered an early setback in the 2010
Japanese House of Councillors election. In a routine political change in Japan, DPJ’s new president and
former finance minister of Naoto Kan’s cabinet, Yoshihiko Noda was cleared and elected by the Diet as
95th prime minister on 30 August 2011. He was officially appointed as prime minister in the attestation
ceremony at imperial palace on 2 September 2011.[10]

In an undesired move, Noda dissolved the lower house on 16 November 2012 (as he fails to get support
outside the Diet on various domestic issues i.e. tax, nuclear energy) and elections were held on 16
December. The results were in the favor of LDP, which won absolute majority in the leadership of former
Prime Minister Shinzō Abe.[11] He was appointed as the 96th Prime Minister of Japan on 26 December
2012.[12] With the changing political situation, earlier in November 2014, Prime Minister Abe called for
fresh mandate for the Lower House. In an opinion poll the government failed to win the public trust due to
bad economic achievements in the two consecutive quarters and on the tax reforms.[13

UNIT 3 Russia Economic Outlook

The economy seems to have slipped into a severe contraction in the second quarter.
Economic activity shrank in double-digits in April-May as strict lockdown measures forced closures of
non-essential businesses, in turn prompting a broad-based downturn in the industrial sector. Similarly,

37
nosediving retail sales in Q2 suggest private consumption plunged as the unemployment rate jumped in
April-May while strict social distancing measures prompted households to postpone spending, thus
gutting the services sector. Moreover, exports nosedived in April on depressed oil prices and eviscerated
foreign demand. On a more positive note, however, the PMIs recovered in June, hinting at rebounding
private-sector activity at the tail end of Q2. In politics, Russian voters have supported constitutional
changes which, in addition to guaranteeing social payments and nationalist agenda amendments, reset
presidential term limits giving President Vladimir Putin the chance to stay in office until 2036.

Russia Economic Growth

The economic outlook deteriorated this month, as the economy remains in the grip of the Covid-
19 health crisis. Domestic demand is poised for a sharp contraction amid crumbling investment
activity and sliding household spending, while eviscerated foreign demand is set to hammer
exports. Political uncertainty amid ongoing constitutional reform further clouds the outlook.
FocusEconomics panelists see GDP shrinking 4.9% this year, which is down 0.2 percentage
points from last month’s forecast. In 2021, the economy is seen growing 3.2%
EconomicOverviewofRussia

Following the collapse of the Soviet Union, the first decade of transition from a centrally-planned
economy to market economy was disastrous for Russia: nominal gross domestic product (GDP) fell from
USD 516 billion in 1990 to USD 196 billion in 1999, which represented a plunge of over 60%. In an
attempt to address the economic turmoil and follow the recommendations from the IMF, the Soviet
government began to privatize many Russian industries during the 1990s. Important exceptions were,
however the energy and defense sectors.

Russia’sBalance of Payments

Russia’s current account records regular trade surpluses largely due to exports of commodities such as
crude oil and natural gas. From 2010 to 2014, Russia’s average current account surplus was USD 66.8
billion, reaching a peak in 2011 at USD 98.8 billion.

Russia’s balance of payments suffered a significant terms-of-trade shock in the fourth quarter of
2014 as a result of falling oil prices, which were, in part, offset by a drop in imports. Simultaneously,
geopolitical uncertainties and related sanctions in 2014 resulted in large capital outflows, further

38
deteriorating Russia’s BoP. Private sector capital outflows increased from USD 60.7 billion in 2013
to USD 130.5 billion in 2014. During the same period, capital and financial accounts of the Russian
Federation fell from

Russia’s trade structure

Crude oil, petroleum products and natural gas comprise roughly 58% of total exports, iron and steel
represent 4% and other mining sector related exports including gems and precious metals account
for about 2.5%. Sales to Europe represent over 60% of total exports while Asia has an export share
of roughly 30%. Russian exports to the United States, Africa and Latin America combined represent
less than 5% of total shipments.

Russia’s main imports are food and ground transports, which represent 13% and 12% of total
imports, respectively. Other significant imports include pharmaceuticals, textile and footwear,
plastics and optical instruments. Exports peaked in 2012 reaching USD 527 billion; imports peaked
in 2013 reaching USD 341 billion.

Russia’s Monetary Policy

The Central Bank of Russia (Bank Rossii), founded in 1990, has several responsibilities in
compliance with the Russian Constitution and Russian Federal Law: maintaining the value and
stability of the ruble, overseeing Russian financial institutions (including acting as a lender of last
resort), managing Russia’s foreign reserves and foreign exchange, and setting short-term interest
rates, which is one of the main instruments of the bank’s monetary policy implementation.
Russia’s Exchange Rate Policy

On 10 November 2014, Bank Rossii un-pegged the ruble from a dual-currency (U.S. dollar and euro)
basket band, ending two decades of exchange rate controls and moving Russia to a free-float exchange
rate system. The Central Bank also ended the regular interventions with the ruble, but signaled that it
remained committed to intervening in support of the Russian currency in case there were risks to
financial stability. As the ruble continued to slide against the greenback because of falling oil prices and
higher uncertainty among investors, the Central Bank decided to continue intervening in the foreign
exchange market, costing the Central Bank hundreds of millions per day.

Russia’s Fiscal Policy

39
Since the country’s 1998 debt crisis, a nearly decade-long environment of favorable commodities prices
(particular in the energy sector), a relatively weak ruble and tight fiscal policy allowed Russia to run
budget surpluses from 2001 to 2008 until the global financial crisis hit.

Russia depends heavily on its energy exports. In fiscal year 2008, oil and gas revenues reached a peak,
accounting for half of the Russian federal budget. However, since the global financial crisis hit the
country in 2009, the Russian economy began to run fiscal deficits. In 2012, 2013 and 2014 Russia ran
budget deficits representing -0.02%, -0.7% and -0.6% of GDP, respectively. The exception was the year
2011, when the Russian budget incurred a 0.8% of GDP surplus.
Russia
Economy
Description
DescriptionThe economy of Russia is an upper-middle income mixed and transition economy. It is the
fifth-largest national economy in Europe, the eleventh-largest nominal GDP in the world, and the fifth-
largest by purchasing power parity. Wikipedia
Gross domestic product: 1.658 trillion USD (2018) Trending, World Bank
Currency: Russian Rouble
GDP per capita: 11,288.87 USD (2018) World Bank
GDP growth rate: 2.3% annual change (2018) World Bank

Economy of Asia

The economy of Asia comprises more than 4.5 billion people (60% of the world population)
living in 49 different nations.[7] Asia is the fastest growing economic region, as well as the
largest continental economy by both GDP Nominal and PPP in the world.[8] Moreover, Asia is
the site of some of the world's longest modern economic booms, starting from the Japanese

40
economic miracle (1950–1990), Miracle on the Han River (1961–1996) in South Korea,
economic boom (1978–2013) in China and economic boom in India (1991–present).

As in all world regions, the wealth of Asia differs widely between, and within, states. This is due
to its vast size, meaning a huge range of different cultures, environments, historical ties and
government systems. The largest economies in Asia in terms of PPP gross domestic product
(GDP) are China, India, Japan, Indonesia, Turkey, South Korea, Saudi Arabia, Iran, Thailand
and Taiwan and in terms of nominal gross domestic product (GDP) are China, Japan, India,
South Korea, Indonesia, Saudi Arabia, Turkey, Taiwan, Thailand and Iran.

Total wealth is mainly concentrated in East Asia, India and Southeast Asia, while if measured by
GDP per capita; is mostly concentrated in the East Asia in Japan, South Korea, Taiwan, Hong
Kong, Macau, Singapore, and Brunei, as well as in oil rich countries in West Asia such as Saudi
Arabia, Qatar, United Arab Emirates, Bahrain, Kuwait, and Oman.[9][10][11] Israel and Turkey
are also two major economies in West Asia. Israel (entrepreneurship on diversified industries) is
a developed country,

Economic development[edit]

Ancient and medieval times[edit]

Silk route via land and sea

China and India alternated in being the largest economies in the world from 1 to 1800 AD. China
was a major economic power and attracted many to the east, [17][18][19][20] and for many the legendary
wealth and prosperity of the ancient culture of India personified Asia, [21] attracting European
commerce, exploration and colonialism. The accidental discovery of America by Columbus in search
for India demonstrates this deep fascination. The Silk Road became the main East-West trading
route in the Asian hitherland while the Straits of Malacca stood as a major sea route.

41
Pre–1945[edit]
Prior to World War II, most of Asia was under colonial rule. Only relatively few states managed to
remain independent in the face of constant pressure exerted by European power. Such examples
are China, Siam and Japan.[22]

Japan in particular managed to develop its economy due to a reformation in the 19th century. The
reformation was comprehensive and is today known as the Meiji Restoration.[23] The Japanese
economy continued to grow well into the 20th century and its economic growth created various
shortages of resources essential to economic growth. As a result, the Japanese expansion began
with a great part of Korea and China annexed, thus allowing the Japanese to secure strategic
resources.[24]

History

Ancient East Asia was economically dominated by three states known today as China, Japan, and
Korea. These three ancient states traded an abundance of raw materials and high-quality
manufactured goods, exchanged cultural ideas and practices, and had military conflicts with each
other throughout the centuries.[19]

China[edit]
Main article: Economic history of China before 1912

For much of East Asia's history, China was the largest and most advanced economy in the region and
globally as a whole.[20][21][22][23][24][25][26] Historically from the 1st until the 19th century, China
was one of the leading global economic powers for most of the two millennia.[27][28][29] The history of
trade in East Asia was largely shaped by the history of trade within Ancient China. During the Han
dynasty, China gradually became the largest economy of the ancient world.[30] Han China hosted the
largest unified population in East Asia, the most literate and urbanized as well as being the most
economically developed, as well as the most technologically and culturally advanced civilization in the
region at the time.[31][32] Han China had economic contacts with Persia and the Roman empire, trading
silk, minerals, and spices through the famous Silk Road.[33] During the Tang dynasty, China had a
multitude of religions that invigorated the many dynamic aspects of Tang cultural and intellectual life, a
productive economy that generated substantial tax revenues to fund a competent, credible, and
efficient political bureaucracy that administered a vast empire as well as possessing the world's most
advanced science and technology at the time.[34] By 1100, the Song dynasty hosted a population of
almost 100 million people while large cities had over 1 million inhabitants, a sophisticated medieval

42
economic system boasting the use of paper money (written business contracts, mercantile credits,
checks, promissory notes, bills of exchange), and was a maritime naval power with extensive and
flourishing trade contacts with Southeast Asia.[35][36][37] For much of East Asia's economic history,
China was one of the most developed economies. After the Fall of the Western Roman Empire, for a
thousand years from 500 AD to 1500 AD, China was the wealthiest country in East Asia in the aggregate
total in addition to per capita income.[38] According to The Economist, China was not only the largest
economy for much of recorded history for 1800 years of the past two millennia, but it was the world's
largest until the end of the 15th century boasting the worlds highest per capita income and most
advanced technology at the time.[39][40][22][41] Throughout this period, China outperformed its fellow
East Asian and distant European counterparts in terms of technological development, economic growth,
culminating in its ability to maintain a massive territorial empire throughout succeeding medieval
Chinese dynasties.[42] Despite economic stagnation after 1450 and the rise of early modern Europe,
China's economy still remained the world's largest from the 1500s until 1820 as the world's most
populous country and remained the world's largest economy up until 1885, a figure higher than the US
economy at the height of its economic dominance after World War II.[43] China was the wealthiest part
of the world from 1200 to the 1300s — aside from Italy until the European Renaissance took off during
the late Middle Ages and the modern Western World and Japan overtook China it during the mid and
late-19th century.[44][21][45][46] China accounted for around one-quarter of the global GDP until the
late 1700s and approximately one-third of the global GDP in 1820 as the Industrial Revolution was
beginning in Great Britain.[47][48][49][50] China's GDP in 1820 was six times as large as Britain’s, the
largest economy in Europe — and almost 20 times the GDP of the nascent United States.[51]

Japan[edit]
Main article: Economic history of Japan

Ancient Chinese coinage and money was introduced to Japan about 1500 years ago during the
during early Han dynasty. The Japanese did not mint coins from copper and silver until 708 AD and
paper money was introduced in 1661. Japan during the Yayoi period engaged in intensive rice
agriculture in paddy fields introduced from southern China via the Ryukyu Islands which developed a
manorial feudal economy similar to that of medieval Europe. [52]

As the Yayoi economy used no form of currency, bartering was used to trade goods and services,
predominantly farm implements. Yayoi farmers fished, hunted, gathered and farmed. The
introduction of a highly advanced form of rice cultivation using irrigation propelled the Yayoi
economy.[53] Terraced paddy fields made the Yayoi more successful in the growing of rice that

43
surpluses were often produced. The agricultural surpluses produced by the manorial Yayoi economy
stimulated Japan's early handicraft industries and the establishment of urban villages and permanent
settlements started to appear in the Yayoi agricultural community as cities didn't exist at that time.
[54]
 As the Yayoi economy became more sophisticated, Japanese craftsmen began to venture in
metallurgy and began to develop their own tools such as swords, arrowheads, axes, chisels, knives,
sickles, and fishhooks. Decorative items such as ceremonial bells and mirrors were used as religious
rituals and status symbols.[55] As the Yayoi population increased, the society became more stratified
and complex. They wove textiles, lived in permanent farming villages, and constructed buildings with
wood and stone. Yayoi merchants and farmers also accumulated wealth through land ownership and
the storage of grain. Such factors promoted the development of distinct social classes.
Contemporary Chinese sources described the people as having tattoos and other bodily markings
which indicated differences in socioeconomic status. [56]

Asian countries by GDP[edit]

Main article: List of Asian countries by GDP

Recent reforms in China[edit]

Hong Kong Exchange Trade Lobby 2005

Following a Third Plenum of the Central Committee of the Communist Party of China in 2013 China
revealed plans for several sweeping social and economic reforms. The government would relax
its one-child policy to allow single-child parents to have two kids. This reform was implemented as a
response to the aging population of China and provide more labor. The government also reformed
the hukou system, allowing the labor force to become more mobile. [57]

The reforms will make financial loan systems more flexible encouraging increased economic
involvement of private firms. Additionally, state-owned enterprises will be required to pay higher
dividends to the government. The benefits of this will go to Social Security. Reform also allows

44
farmers to own land for the first time ideally encouraging farmers to sell their land and move to cities
which will boost consumerism and increase urban work force. [57]

On April 10, 2014, China Securities Regulatory Commission (CSRC) and Securities and Futures
Commission (CSRC) made a Joint Announcement about the approval for the establishment of
mutual stock market access between Mainland China and Hong Kong. [58] Under the ‘Connect
Program’, the Stock Exchange of Hong Kong Limited and Shanghai Stock Exchange will establish
mutual order-routing connectivity and related technical infrastructure to enable investors to invest in
Chinese equities market directly. On November 17, 2014, the program officially launched with the
approvals from Beijing.[59]

The 'Connect Program' is an initiative with significance to both Hong Kong and Mainland. It brings
another opportunity for the growth of the Hong Kong securities market. More importantly, it provides,
for the first time, a feasible, controllable and expandable channel to investors to invest in both Hong
Kong and Mainland, in addition to current schemes including QDII, QFII, AND RDFII programs. [60]
[61]

Local government's spending plays a critical role in China's fiscal system. Following the 1991
intergovernmental fiscal reform, the central government's share of total fiscal revenue increase from
less than 30 percent to around 50 percent in 2012. [62] Local governments are now responsible for
infrastructure investment, service delivery and social spending, which together account for about 85
percent of the total expenditure. Without a rule to guide the distribution of intergovernmental
expenditure responsibilities, significant levels of risk would be associated with the spending.

China's central administration will impose hard caps on local government borrowing in order to
control financial risks from an explosive level. Statistics showed that total debt had reached $3 trillion
by the middle of 2013, raising total government debt to 58 percent of GDP. Similar jump occurred in
corporate debt as well, which pushed China's overall debt-GDP ratio up to 261% from 148% in 2008.
IMF warned that rapid debt run-ups could lead to financial crisis. [63]

The new rules are expected to be combined with broader fiscal reforms aimed at bringing local
government tax revenue in line with expenditure. The central government will provide more guidance
to local governments in terms of how to manage and invest wisely.

As of 2017, China has the world's second largest economy by nominal GDP at $11.8 trillion. It is the
largest manufacturing economy in the world, and is the largest exporter of goods. China is also the
world's largest producer and consumer of agricultural products. China is a leading producer of rice,
and is a key producer of wheat, corn, tobacco, soybeans, and potatoes, among others. Though thee
real estate industry in China has taken, China has had the largest real estate market in the world.

45
China's service sector has doubled in size, accounting for 46% of China's total GDP. In 2011, the
Chinese government instituted a five-year plan to prioritize the development of the service economy.
The telecommunications sub-sector in China is one of the largest in the world, with over a billion
mobile customers. Tencent, the developer of WeChat, is one of the dominating players in the
telecommunication sector.[64]

Abenomics in Japan[edit]

Shinzo Abe, the current Prime Minister of Japan, who initiated economic reforms popularly called Abenomics.

Abenomics is a policy named after, and implemented by the Japanese Prime Minister Shinzō Abe.
Following the global economic recession, the Prime Minister hoped to boost Japanese economy with
"three arrows": massive fiscal stimulus, more aggressive monetary easing and structural reforms to
make Japan more competitive.[84] The stimulus package was 20.2 trillion yen ($210 billion) and the
government also aimed to create 600,000 jobs in two years. In addition, this stimulus package aimed
to ensure public safety with reconstruction efforts, creating a base for future business growth, and
revitalizing regions by promoting tourism, revitalizing public transport, and improving infrastructure. [85]

The Bank of Japan also aimed to raise inflation to 2% in part by buying up short-term government
debts. Critics point out that hyperinflation and an unbalanced GDP/debt ration could be negative
results of Abenomics. Furthermore, currency changes could aggravate international relations,
especially those between China and Japan.[86]

Economic sectors[edit]

Primary sector[edit]
Asia is by a considerable margin the largest continent in the world, and is rich in natural resources.
The vast expanse of the former Soviet Union, particularly that of Russia, contains a huge variety of
metals, such as gold, iron, lead, titanium, uranium, and zinc.[116] These metals are mined, but
inefficiently due to the control of a few state-sponsored giants that make participation difficult for
many international mining companies.[117] Nevertheless, profits are high due to a commodity price
boom in 2003/2004 caused largely by increased demand in China. [118] Oil is Southwest Asia's most
important natural resource. Saudi Arabia, Iraq, and Kuwait are rich in oil reserves and have
benefited from recent oil price escalations. [119]

46
Terraced Paddy field in Yunnan, China

Asia is home to some four billion people, and thus has a well established tradition in agriculture.
High productivity in agriculture, especially of rice, allows high population density of many countries
such as Bangladesh, Pakistan, southern China, Cambodia, India, and Vietnam. Agriculture
constitutes a high portion of land usage in warm and humid areas of Asia.

Secondary sector[edit]
The manufacturing sector in Asia has traditionally been strongest in the East Asia region—particularly in
China, Japan, South Korea, Singapore, and Taiwan.[124] The industry varies from manufacturing cheap
low value goods such as toys to high-tech value added goods such as computers, CD players, games
consoles, mobile phones and cars. Major Asian manufacturing companies are mostly based in either
Japan or South Korea. They include Sony, Toyota, Toshiba, and Honda from Japan,
and Samsung, Hyundai, LG, and Kia from South Korea.[125]
Many developed-nation firms from Europe, North America, Japan and South Korea have significant
operations in developing Asia to take advantage of the abundant supply of cheap labor.[126] One of the
major employers in manufacturing in Asia is the textile industry. Much of the world's supply of
clothing and footwear now originates in Southeast Asia and South Asia, particularly in Vietnam,
China, India, Thailand, Bangladesh, Pakistan, and Indonesia. [124]

Tertiary sector[edit]
Asia's top ten important financial centers are located in Hong
Kong, Singapore, Tokyo, Shanghai, Beijing, Dubai, Shenzhen, Osaka, Seoul and Mumbai.[127] India has
been one of the greatest beneficiaries of the economic boom. The country has emerged as one of the
world's largest exporters of software and other information technology related services.[128] World
class Indian software giants such as Infosys, HCL, Wipro, Mahindra Satyam and Tata Consultancy
Services have emerged as the world's most sought after service providers.[129][130]

47
UNIT 4
European vs. Russian vs. Asian business cultural
values and attitudes

Understanding Asian and European Business Culture

Our responses to other cultures are influenced by the attitudes, beliefs, values, assumptions and biases
that shape our own life. The purpose of engaging with other cultures is not to study them, but to learn
from people of those cultures and receive the gifts of diverse cultures
1. Understanding the cultural differences between the Asian and European markets.
Learning about other cultures will necessitate learning new concepts of time and space, as well as
new values and attitudes. The different business etiquettes employed by the European and Chinese
can be attributed to the differences in their historical and cultural development. Within Europe, a
common cultural heritage is generally acknowledged to exist, but there are still some differences
between individual nations.

48
 2. What does it takes to make or break that business deal? How do your rate your cultural
intelligence (CQ)?
a) Meeting Etiquettes
Build a successful relationship with your business partners through appropriate greetings and
meetings. Leave a good and right impression with your business associate, especially on your first
meeting. Learn greeting gestures, and understand the culture and etiquettes of delivering meetings
in different countries.
 In most European countries it is very important to be on time, (Germany and Britain), but due to
increased traffic on the roads, it is common for people to be delayed. Arriving late at a meeting
can be regarded as an insult especially to the Chinese and Germans. In France, it is
recommended to confirm appointments to be sure that the French business partners will be
present.

 When European business people meet for the first time, they shake hands firmly. Titles, first
names and last names are mentioned. In most European countries such as Germany, France and
Belgium, using courtesy titles and last names during meetings is a norm; for example, Monsieur
Miguel; Mdm Ute etc. In the UK and in the Netherlands, it is not unusual to act on a first-name
basis after the first introduction

 The Chinese will sometimes nod as an initial greeting. Bowing is seldom used. Handshakes are
also popular; wait, however, for your Chinese counterpart to initiate the gesture.

 Exchanging business cards is one of the most internationally common ways of providing contact
details. In Europe, business cards are not handed over with both hands, but it is regarded as
impolite if one does that in China, and in Asia.

 Business lunches are growing in popularity in most cultures. However, business breakfasts are
not a part of the Chinese business culture, except in Guangdong, Hangzhou and Fujian province
where ‘Morning Tea’ is very popular. ‘Yum Zhou Cha’.

 Seating etiquette in China is based on hierarchy in Chinese business culture. The seat in the
middle of the table, facing the door, is reserved for the host. The most senior guest of honor sits
directly to the left. Everyone else is seated in descending order of status. The most senior
member sits in the center seat. This is the case for both businesses and social reasons, even in
your residence.

49
  b) Social Etiquette
i. Most Europeans enjoy dining sumptuously. Several courses and significant amount of
time may pass before business topics are brought up. For Chinese banquets, it not
uncommon to be served between 20-30 courses.
ii. At European business lunches and dinners, strict table manners are required. For
instance, making noises while eating is considered very impolite.
iii. In China, a clean plate is perceived to mean that you were not given enough food.
Leaving the food offering untouched will also give offense. Be polite; try a small portion
even if the food is unappealing.
iv. The Tea-drinking ritual is used to establish rapport before a meeting or during meals. If
you do not want a ‘refill’ of tea, leave some in your cup. Tap your pointer and centre finger
on the table when you are served tea, to thank the host/or person who served you.
v. Seeds and bones are placed on the table or in a specially reserved dish, never place these
objects in your bowl.
vi. Try to use chopsticks if you can. That will be appreciated. When you finish eating, place
your chopsticks on the table or a chopstick rest. DO NOT drop your chopsticks as this is
considered a sign of bad luck.
VII.When eating rice, follow the Chinese custom by holding the bowl close to your mouth.
viii. When using toothpick, which is usually offered between courses and at the end of a
meal, ensure that you cover your mouth with your palm for concealment.
ix. Before smoking, it’s polite to offer cigarettes to those in your company.
x. Guests should make preparations to leave after the desert (usually fruit) fruit) and hot
towels are presented. In accordance with Chinese business culture, the host will not initiate
the guests’ departure.
xi. If you are hosting a meal, you should arrive at least 30 minutes before your guests.
xii. If you have been invited to a Chinese home, you will probably be asked to remove your
shoes before entering the home. Arrive on time, but not too early. Normally, a small
present is brought along. This is similar for most cultures internationally. It is also polite to
send a letter of thanks the day after the dinner, especially in the European context.
xiii. Members of the same sex may hold hands in public in order to show friendliness.
xiv. Public displays of affection between the sexes are frowned upon.

50
xv. Do not put your hands in your mouth, as it is considered vulgar. Consequently, when in
public, avoid biting your nails, removing food from your teeth.
xvi. Pushing and cutting ahead are common in lineups among Chinese, but they do not
appreciate being cut in front of themselves
. c) Building Rapport
I.Part of building rapport (guan xi) in your business dealings involves participating
in the strong drinking culture that exists in China. It is usually during these social
occasions that most negotiating breakthroughs are made. Prepare some medical
excuses for yourself to avoid drinking heavily. Such excuses are readily accepted.
ii. It is important to recognize that the host of a banquet offers the first toast.
iii. In Chinese business protocol - reciprocate with a banquet of the same value;
never surpass your host by arranging a more lavish gathering.
iv. The typical Chinese business person does not like Western food.
d) Agreements/Contracts
In most western nations, including those in North America, agreements are
determined by literal meanings of words and specific provisions of a contract. In
many cultures, it is the meaning and spirit of an agreement and one’s commitment
to the agreement that is more important. These realities may be operative as you
plan with another culture for this experience. You should always consider the
implications of conceptual differences for others and yourself.

Europeans, culture and cultural values

In 2006, the European Commission (Directorate General Education and
Culture) commissioned a study to learn more about the perceptions that the
citizens of 27 countries (25 member states plus Bulgaria and Rumania) have
on culture and cultural values.

The objectives of the study were particularly to analyse:

 The meaning or meanings, for the Europeans, of the notion of culture

in a wide sense of the term – not limited to highbrow culture and fine
arts-, and the importance of culture in their lives.

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  Their perceptions of European culture and its components that make
it specific and different from other cultures.
 The link between culture and values shared by Europeans.
 Interest in European cultural diversity and other European cultures.
 The perceived and expected role of Europe in the cultural sphere.
The methodology used was basically qualitative and was organised through
discussion groups. Two groups were therefore set up in each country:

 One group of higher-middle social and educational level: socio-

professional categories of business owners, liberal professions and
top managers and middle-level managers; mostly university level of
education.
 One group of lower-middle social and educational level: socio-
professional categories of self-employed craftsmen and small shop
owners, lower-level managers, (non managerial) office employees
and manual workers; mostly secondary level of educations.
Asian values
The term Asian values is a political ideology that arose in the 1990s,
which defined elements of society, culture, and history common to
the nations of Southeast Asia and East Asia. It aimed to use
commonalities – for example, the principles of collectivism or
communitarianism – to unify people for their economic and social
good and to create a pan-Asian identity. This contrasted with
perceived European ideals of the universal rights of man. The concept
was advocated by Mahathir Mohamad (Prime Minister of Malaysia,
1981–2003, 2018–2020), Lee Kuan Yew (Prime Minister of
Singapore, 1959–1990), Park Chung Hee (President of South Korea,
1962–1979) and Shinzo Abe (Prime Minister of Japan, 2012–present)
and as well as other Asian leaders.

52
The popularity of the concept slightly waned after the 1997 Asian
financial crisis when at the time Asia lacked a coherent regional
institutional mechanism to deal with such crises. A few months after
the crisis, The ASEAN Plus Three (APT) was conceived in December
1997 with the convening of a summit among the leaders of ASEAN,
China, Japan and South Korea. The APT Summit was
institutionalised in 1999 when its leaders issued a joint statement at
the 3rd APT Summit. The joint statement determined the main
objectives, principles and further directions of APT countries' and
resolved to strengthen and deepen cooperation at various levels and in
various areas, particularly in economic, social, political and other
fields.

Russian culture
The culture of the ethnic Russian people (along with the cultures of
many other ethnicities with which it has intertwined in the territory of
the Russian Federation) has a long tradition of achievement in many
fields, especially when it comes to literature, folk dancing,
philosophy, classical music, traditional folk music, ballet,
architecture, painting, cinema, animation and politics, which all have
had considerable influence on world culture. Russia also has a rich
material culture and a tradition in technology.

Russian culture grew from that of the East Slavs, with their pagan
beliefs and specific way of life in the wooded, steppe and forest-
steppe areas of Eastern Europe and Eurasia. Early Russian culture and
Slavic people in Russia were much influenced by nomadic Turkic
people (Tatars, Kipchaks) and tribes of Iranian origin through intense
cultural contacts in the Russian steppe and strongly by Finno-Ugric,
Balts and Scandinavians (Germanic people) through the Russian
North, as well as by the people of the Byzantine Empire (especially

53
Greeks) with which Old Russia maintained strong cultural links. In
the late 1st millennium AD the Nordic sea culture of the Varangians
(Scandinavian Vikings) and in the middle of the second millennium
the nomadic people of the Mongol Empire also influenced the
Russian culture. Early Slavic tribes in European Russia were much
shaped by the fusion of Nordic-European and Oriental-Asian cultures
which formed Russian identity in the Volga region and in the states of
Rus' Khaganate and Kievan Rus'. Orthodox Christian missionaries
began arriving from the Eastern Roman Empire in the 9th century,
and Kievan Rus' officially converted to Orthodox Christianity in
1988. This largely defined the Russian culture of the next millennium
as a synthesis of Slavic and Byzantine cultures. Russia or Rus' was
formed, developed its culture and was influenced through its location
by Western European and Asian cultures so that a Russian-Eurasian
culture developed.
Emblem of the Ministry of Culture of Russia.

The image of the crowned double eagle and the central crown which
is connected with the other two crowns is often used as a pictorial
example of Russias cultural nature. One crowned head looks to
Europe and reflects the Western European element in Russian culture,
the other looks to Asia and symbolizes the Asian Oriental element in
Russia. Both are connected to a big third crown. Russian culture is

54
 connected with European and Asian cultures and was influenced by
both.[26]

Language and literature[edit]

Main article: Russian language

The Ostromir Gospels, the second oldest East Slavic book known; 1056 AD; Russian National Library (Saint
Petersburg)

55
Page of a Russian illuminated manuscript; 1485–1490

Russia's 160 ethnic groups speak some 100 languages.[1] According to the 2002 census,
142.6 million people speak Russian, followed by Tatar with 5.3 million and Ukrainian with 1.8 million
speakers.[19] Russian is the only official state language, but the Constitution gives the
individual republics the right to make their native language co-official next to Russian. [20] Despite its
wide dispersal, the Russian language is homogeneous throughout Russia. Russian is the most
geographically widespread language of Eurasia and the most widely spoken Slavic language.[21] Russian
belongs to the Indo-European language family and is one of the living members of the East Slavic
languages; the others being Belarusian and Ukrainian (and possibly Rusyn). Written examples of Old East
Slavic (Old Russian) are attested from the 10th century onwards.[22]
Over a quarter of the world's scientific literature is published in Russian. Russian is also applied as a
means of coding and storage of universal knowledge—60–70% of all world information is published in
the English and Russian languages.[23] The language is one of the six official languages of the United
Nations.

Visual arts
Russian visual artworks are similar in style with the ones from other eastern Slavic countries, like
Ukraine or Belarus.As early as the 12th and 13th centuries Russia had its national masters who
were free of all foreign influence, i. e. that of the Greeks on the one hand, and on the other hand that
of the Lombard master-masons called in Andrei Georgievich to build the Uspensky (Assumption)
Cathedral in the city of Vladimir. Russia's relations with the Greek world were hampered by the
Mongol invasion, and it is to the isolation arising from this that we must attribute the originality of

56
Slavo-Russian ornamentation, which has a character of its own, quite unlike the Byzantine style and
its derivative, the Romanesque.

Characteristics of business culture in Asia and Europe

Characteristics of business culture

in Asia and Europe
East Asia is characterized by a high power distance index. As a result, these nations are much
more respectful towards authorities than European countries. This has a direct impact on employees
who usually have lower standards of labour rights and are less inclined to strike and ght for
their
rights. In the selected countries of East Asia, the average PDI is 76.0 while in European countries
this indicator amounts to 50.1.
Furthermore, generally East Asian countries are also very unwilling to take risks. Confu-
cianism, Taoism and Buddhism, in this region, have created a culture that worships peace and
tranquility [Meyer 2012]. This inuence can be seen in the behaviour of Muslims from East
Asia,
which is much more balanced and peaceful than the behaviour of inhabitants of the Middle East.
The average UAI in selected Asian countries amounted to 52. This result stems from the fact
that the cultures of these countries worship the idea of harmony. Therefore, due to the countries’
traditional values, harmony should create a link between society and the individual. However,
due to vast globalization processes and fast economic growth, which is positively correlated with
growth of international exchange, the uncertainty avoidance level could evolve and decrease. Al-
though European nations are widely considered to be more open to change, in selected European
countries, this indicator amounted to 70.4. Numerous studies which take cultural differences and
their inuence on global business into consideration have been conducted
[…2013,

57
Unit 5
Trade relations between the EU, Russia and Asian nations

Since 1997 the EU's political and economic relations with Russia have been based on a bilateral
Partnership and Cooperation Agreement (PCA). The trade-relevant sections of the Agreement
aim to promote trade and investment and develop mutually beneficially economic relations
between the EU and Russia. Since 2014 the illegal annexation of Crimea and the conflict in
Eastern Ukraine have seriously affected the bilateral political dialogue. As a result, some of the
policy dialogues and mechanisms of cooperation, including in the area of trade, have been
suspended.

Since 2012, when Russia joined the WTO, EU-Russia trade relations have also been framed by
WTO multilateral rules.

Trade picture

58
  Russia is the EU's fifth largest trading partner and the EU is Russia's largest trading
partner, with a two-way trade in goods value of €232 billion in 2019. In 2019 Russia was
the origin of ca. 40% of EU imports of gas and 27% of EU imports of oil. Due to the
large value these imports, EU’s trade deficit with Russia (€ 57 billion in 2019) is only
second to EU’s trade deficit with China.
 EU-Russia bilateral trade in goods peaked in 2012, dropping by 43% between 2012 and
2016 from two-way €322 billion in 2012 to €183 billion in 2016. Since 2016, bilateral
trade has partially recovered. However, Overall EU exports to Russia were in 2019 25%
lower than in 2012, agri-food exports were 38% lower.
 In 2019 Russia was the destination of 4,1% of EU global exports, down from 6,7% in
2012. As for the origins of imports into Russia, the EU accounted in 2019 for 35%, down
from 39% in 2012.
 As for exports of goods from Russia, in 2019 the EU was the destination of 42% of them,
down from 50% in 2012.
Main EU exports to Russia are in the categories of machinery, transport equipment, medicines,
chemicals and other manufactured products.

Main EU imports from Russia are raw materials, especially - oil (crude and refined) and gas, as
well as metals (notably iron/steel, aluminium, nickel).

As for services, EU exports to Russia amounted in 2019 to € 26,2 billion, imports from Russia to
€ 12 billion EUR.
The EU is the largest investor in Russia, with an estimated stock of €276,8 billion in 2018, or
75% of total FDI stock in Russia. The stock of FDI in the EU from Russia amounted in 2018 to

€89,3 billion, or ca. 1% of the total in the EU.

EU and Russia
The European Union and Russia have an important bilateral trade relation. Russia is the EU's
fifth largest trading partner and the EU is Russia's largest trading partner. As reported above, in
recent years bilateral trade flows went through severe fluctuations.

59
A first factor is the evolution of the price of oil, with a sharp decline in 2012-2016 and a
recovery in 2017-2018, as well as the related depreciation of the Ruble in 2014-2015.

A second factor is the policy of import substitution progressively deployed by Russia since 2012,
largely coinciding with Russia’s accession to the WTO. The accession to the WTO had raised the
expectation that trade with Russia would benefit from sustained liberalisation. Instead, Russia
has progressively put in place numerous measures favouring domestic products and services over
foreign ones, and incentivising localisation of production in Russia by foreign companies.
Related measures often contravene the spirit and/or the letter of WTO rules and are the origin of
many trade irritants. Since Russia joined the WTO in 2012, the EU has filed four disputes in the
WTO against Russia:

 2014 on Russia's excessive import duties. The WTO confirmed that Russia's import
duties violated its rules. Since May 2017, Russia has lowered its import duties on the
tariff lines challenged in line with its WTO commitments.
 2014 on Russia's embargo on EU pig meat on the basis of Sanitary and Phytosanitary
(SPS) requirements. As a result of panel and Appellate Body proceedings, the WTO
confirmed that Russia's ban was illegal. Russia was obliged to bring its measures in line
with its World Trade Organization commitments, however it extended the scope of the
2014 political ban to cover also EU pig meat. The case is currently the object of a WTO
compliance panel.
 2014 on Russia's anti-dumping duties on light commercial vehicles: following panel and
Appellate Body proceedings the WTO declared certain aspects of the duties inconsistent
with its rules. Russia implemented the decision.
 2013 on Russia's recycling fee on imported motor vehicles: following consultations in the
World Trade Organization and the EU's request for a dispute settlement panel to be set
up, Russia extended the recycling fee to also cover locally-produced motor vehicles, and
introduced parallel compensatory measures for these. The case is currently on hold.
Russia has also filed four disputes at the WTO against the EU.

 2014 on the EU's third energy package.

60
  2013 and 2015 on gas cost-adjustment in EU anti-dumping investigations.
 2017 on EU anti-dumping measures on imports of certain cold-rolled flat steel products
from Russia.
All four of them are currently on-going. Further information on Russia as a member of the World
Trade Organization is available.

A third factor affecting trade relations with Russia are political measures restricting trade, i.e.
sanctions. In July 2014, in response to Russia’s responsibility in the events in Ukraine, the EU
adopted economic sanctions against Russia targeting four sectors: access to finance, arms, dual-
use goods, and specific technologies for oil production and exploration. More information on
these measures is available here.

Economic and trade relations

Since 1997 the Partnership and Cooperation Agreement (PCA) has been the general framework
of EU-Russia political and economic relations. One of the main objectives of this agreement is
the promotion of trade and investment as well as the development of harmonious economic
relations between the EU and Russia. The Partnership and Cooperation Agreement was supposed
to be upgraded through the negotiation of a New EU-Russia Agreement, providing a
comprehensive framework for bilateral relations. The New Agreement would have been built on
the basis of WTO rules and would have included stable, predictable and balanced rules for
bilateral trade and investment relations. Negotiations started in 2008, but they were stopped in
2010 because no progress was made in the Trade and Investment part.

The negotiations, but also some of the activities in the existing agreement, were suspended after
the illegal annexation of Crimea and the destabilization of Ukraine in 2014. The positive
influence on bilateral economic and trade relations of Russia joining the WTO in 2012 has
unfortunately been diminished by the consequences of localization and import substitution
policies implemented by Russia, but also by a less dynamic Russian economy, a development
partly due to the difficult political environment. As a consequence, bilateral trade decreased in
the past 7 years since 2012 and Russia moved from 3rd to 4th trading partner of the EU.

61
Still, the EU remains a key trading partner for Russia, representing in 2018 €253.6 billion. and
42.8% of Russia's trade.

Russia is now the 4th largest trading partner of the EU for trade in goods, representing 6.4% of
overall EU trade. Russia is also the 4th export destination of EU goods (€85.3 billion in 2018)
and the 3rd largest source of goods imports (€168.3 billion in 2018). Imports from Russia to EU
increased by 16.7% in period from 2017 to 2018 and was driven by the growth of imports of
energy products from Russia that account for c.a. 70% of imports from Russia to EU. In the first
half of 2019 the EU-Russia trade has to large extent remained at the same level, compared to the
first half of 2018. The same can be said on EU exports to Russia.

The EU is by far the largest investor in Russia. According to the Central Bank of Russia, the total
stock of foreign direct investment in Russia originating from the EU approached €235.2 billion
in 2018. Nevertheless, the share of investments originating from the EU in the total FDI stock in
Russia has been decreasing: e.g. from 73% in 2014 to 64.7% in 2018. Overall inflow of direct
investments in Russia from abroad fell to USD 8.8 billion in 2018 – a three-fold decline as
compared with figures from 2017, while outflow of investments from Russia in the same period
constituted 31.9 billion dollars (36.8 billion dollars in 2017).
The importance of the EU-Russia energy cooperation

Russia is the largest oil, gas, uranium and coal exporter to the EU. Likewise, the EU by far the
largest trade partner of the Russian Federation. Based on this mutual interdependence and
common interests in the energy sector, the EU and Russia developed an energy partnership and
launched the EU-Russia Energy Dialogue in 2000.

The EU is ready to cooperate with Russia in further developing a number of market principles in
the energy sector, such as: an energy efficiency and saving policy, investment facilitation and
protection, the right of access to energy transport infrastructure, network operators’
independence from the natural monopoly producers, sector regulation, and reform of
monopolies.

62
Russia and the EU both seek to ensure stable energy markets, and to secure reliable exports and
imports. Both wish to see improved energy efficiency and a reduction in greenhouse gas
emissions from energy production and use in their respective economies. To these ends, regular
dialogues take places, for example the trilateral gas talks between the EU, Russia, and Ukraine
aimed to insure an uninterrupted supply of gas to and through Ukraine, including after 2019).

The Early Warning Mechanism

The Early Warning Mechanism is one element of the EU-Russia Energy Dialogue. This Early
Warning Mechanism constitutes an essential procedure whereby the parties inform each other of
short- or long-term risks to the security of supply or demand. Contact persons on both sides have
been designated and the Mechanism has already proven its effectiveness. The formal nature of
the Mechanism, including its precise format, contents and organization are included in the
Memorandum on the Early Warning Mechanism.

Actions against exports from the EU

As the world's leading exporter, the EU is sometimes the subject of trade defence investigations
initiated in non-EU countries.

 The EU's trade policy aims to help the EU to compete better on international markets.
Unwarranted trade defence measures unfairly block EU exporters' free access to the
world's markets, and their negative impact should be minimised whenever possible.
 Any exporting industry subject to a trade defence action initiated by a non-EU country is
responsible for defending its rights throughout the proceedings and for cooperating with
the investigating authorities to favour a positive outcome.
EU trade defence policy

The European Commission monitors and assists affected EU industries when non-EU
countries take trade defence measures against EU exporters. The Commission also plays
a more direct role in anti-subsidy and safeguard investigations when EU subsidies are
involved and the EU as a whole is targeted.

63
 The Commission:

 closely monitors the development of trade defence investigations initiated by non-EU

countries: the EU publishes statistics concerning ongoing investigations and measures in
force and an annual report on non-EU country trade defence actions
 assists and advises EU national authorities and the EU industry concerned by
investigations initiated by non-EU countries
 promotes discipline and seeks to make non-EU countries comply with their WTO
obligations through bilateral meetings, consultations under the relevant WTO
Agreements or WTO dispute settlement mechanism.

economic ties between Europe and Asia

Asia and Europe are now leading trade partners, with $1.5 trillion of annual merchandise trade,
overtaking each continent’s trade with the United States. A new study gathering an unprecedented
range of bilateral data between country pairs pinpoints the economic, social and political ties between
51 Asian and European countries.

While the eyes of the world are on the US-China trade war, Asia and Europe are working to deepen
their relationship. The two continents have made mutual connectivity between people, businesses and
institutions a top political priority, and are moving quickly to build and strengthen ties, with a firm
commitment to work towards the Sustainable Development Goals (SDGs).

Asia-Europe trade

Trade between ASEM countries accounts for about half of all world merchandise trade.
Although intra-regional trade (i.e. within Europe or within Asia) is four times higher than cross-
regional trade, the Asian and European regions trade more between them than between any other
regions in the world.

64
Two major hubs stand out: Germany and China. These countries together are responsible for one
quarter of the overall trade in the ASEM group, and are the main trade bridges between the two
continents. Nearly one third of European goods shipped to Asia come from Germany ($202
billion), with China as the largest customer

Cross-border investment

Foreign direct investment (FDI) between Asia and Europe reaches close to $90 billion annually (2015-
2017). This is nearly the same size as FDI flows within Europe.

The FDI landscape is dominated by two major foreign investors in each region. Over half of European
investment in Asia comes from the UK and Germany, exceeding $32 billion. In fact, the UK invests twice
as much in Asia than in Europe, with India receiving the greatest share. Likewise, China and Japan are
the main Asian investors in Europe, collectively amounting to $12 billion.

Overall, India and China attract around half the total European foreign investment. However,
some Asian countries are more appealing to foreign investors from Europe than from Asia. This
is the case for Korea, Mongolia, Singapore and Russia..

Movement of people

Asia and Europe are also bringing people and societies closer together, with around 13 million
people having migrated between the two regions. Germany, the UK and Australia host the largest
number of cross-bloc migrants (around 2.5 million each).

Working together in research

65
More than 200,000 collaborations between Asian and European research institutions take place
every year in the form of co-authorship of scientific publications. Cross-bloc collaboration
represents close to one third of research collaborations in ASEM countries.

Researchers from institutions in Australia, New Zealand and India collaborate around twice as
much with European countries than with Asian countries, and Russian researchers collaborate
three times more with European ones. Cross-bloc collaboration is stronger on the Asian side than
on the European side, since European countries also have a strong internal collaboration network
supported by large EU-funded research programmes.

Large movements of migrants from the UK to Australia and from Russia and Kazakhstan to
Germany are associated with historical, cultural and language ties. Russia is the main country of
origin of migrants to Europe, followed by India.

66
Unit 6

Challenges doing business in the EU, Russia markets

After years of subdued expectations there is an air of confidence surrounding the Russian
economy as it pairs its economic potential with economic growth. But regardless of the
positive strides it has made, many challenges to doing business in this diverse and
notoriously tricky economy still remain.

Traditionally regarded as a resource-reliant economy, notable growth in retail,

telecommunications and real estate development in recent years has driven an expansion
in the country’s consumer base. Incomes are increasing and consumer lending is also
becoming more widespread, which has allowed the country to weather the economic
storm far better than other export-reliant nations.

As the market matures and open market policies are favoured over a protectionist stance,
the international business community is starting to warm to Russia as an investment
destination. However, the obstacles are difficult to overcome without local help

67
.

Top 10 challenges of doing business in Russia

Starting a business
According to a report by the World Bank and International Finance Corporation (IFC), it
takes an average of nine procedures and over 23 days to start a business in Russia.
What’s more, it costs on average 2.3% of income per capita, with Surgut found to be the
hardest place to start a business and St Petersburg ranked the easiest.

Construction permits
The number of steps needed to acquire construction permits can vary significantly from
city to city; Novosibirsk requires only 16 compared to 47 in Moscow. As a result, there is
huge variation in the time it takes to acquire permits; a year in Moscow compared to five
months in Surgut.

Registering property
Registering property is relatively cheap in Russia, and registration fees are among the
lowest in the world and well below the OECD average. However, it still requires an
average of four procedures and over 35 days to complete the procedure.

Getting electricity
Getting electricity is an extremely laborious task in Russia and firms can wait between
four months and a year to get switched on, depending on the destination. Design approval
is a particularly complicated step, requiring several trips to public agencies and taking
anything from 30 to 120 days.

Punctuality

68
Businesses often find Russia’s polychronic culture - where attitudes to punctuality are a
little more relaxed - hard to grow accustomed to. Many meetings will not conform to
linear agendas used in other nations, which can disrupt inter-business communications.

Undeveloped infrastructure
Russia’s infrastructure is heavily Moscow-centred, with most transport channels of
economic significance emanating from the country’s capital. Commercial transportation
is heavily reliant on rail, although it is insufficiently integrated into world transport
systems. For such a large nation, air links are still underdeveloped, making inter-country
travel arduous.

Intellectual property rights

Establishing intellectual property rights in Russia is still a tiresome business, although
steps have been taken to simplify the process. As of 1 February 2013, a specialised court
for intellectual property rights has been instituted within the commercial courts of the
Russian Federation.

Government transparency
Government transparency is a notoriously fraught problem in Russia, although the
situation has improved significantly. The Open Budget Survey 2012 conducted by the
International Budget Partnership found Russia has significantly improved its budget
transparency over the years and is now telling its public more about government income
and spending than countries such as Germany or Spain.

Government interference
Ruben Vardanyan, head of Troika Dialogue Group, described Russia’s main challenges
as being corruption, government interference and the high level of monopolisation.
Although steps have been made to amend problems in central government, overseas firms
still find the state of governance in Russia difficult to navigate.

Protectionism

69
An EU report revealed a “staggering increase” in protectionist measures as governments
seek to shield national industries from foreign competition amid a difficult economic
environment. Russia was among the worst offenders; the report concluded that Moscow
was not in compliance with its future obligations to the World Trade Organization.

TMF Group
We have the local knowledge to help you navigate these minefields. Whether you want to
set up in Russia or just want to streamline your Russian operations, talk to us.

Doing Business in Europe? Consider These Top 10 Issues

Europe has long been a prime market and trading partner for many U.S.-based
companies. Several European economies are growing individually and collectively,
creating new opportunities. Companies doing business in Europe need to stay on top of
the constantly changing political, economic and regulatory landscape.
1. Negative Interest Rate Environment
Negative interest rates are prevalent across the Eurozone, Switzerland, Sweden and
Denmark and do not appear to be moving in the short term.[1] As a result, most banks are
now passing fees on to clients that hold balances in these currencies. Clients are being
asked to move non-operational funds out of the bank or are being given a certain
threshold that they must adhere to. In response, clients are finding uses for their excess
cash. In a recent survey of EU-based companies, a large percent of CFOs are using these
funds to expand their product lines, enter new markets, or acquire businesses. In other
words, they are spending the cash.

Other companies have employed more aggressive strategies for managing their excess
cash. Some have looked at intercompany lending and paying down debt as a use for the
cash (such as paying down invoices from other entities). Some companies are building in-
house banks or moving cash to other currencies or even back to the U.S. to mitigate the
risk of having excess funds in weakening banks across certain countries in Europe.

70
Companies are also considering the recent U.S. tax changes when determining how much
cash to keep overseas.

It’s become increasingly important to understand where you have excess cash and
integrating those balances into your information reporting dashboards. You should also
examine your hedging strategies as there’s been a significant amount of fluctuation across
European currencies in the past year.

2. Banking Structure
European banks are far more dependent on short-term borrowing to fund their capital
needs than U.S. banks. In some countries, the competition for deposits is greater than
with comparative banks in the U.S.

Deposits and borrowing are the two main sources of funds for banks; where there is
competition for deposits then banks need to rely on borrowing. As a result, many
European banks have high loan-to-deposit ratios compared to what you might see with
comparable U.S. banks.[2]

Since November 4, 2014, the ECB has been granted a supervisory role to monitor the
financial stability of banks within the Eurozone via the Single Supervisory Mechanism
(SSM), in accordance with the EU’s SSM Regulation No. 1024/2013. The ECB possesses
the authority to conduct supervisory reviews, on-site inspections and investigations;
grant/withdraw banking licenses; assess bank acquisitions; ensure compliance with EU
prudential rules; and, if required, set higher capital requirements to counter financial
risks.

Some of these regulatory actions may result in stifling growth in some European
countries and curtail lending by some banks. This is an issue to monitor in terms of
deciding where to operate and focus your resources in Europe.

3. Methods of Payments

71
The use of cheques in most European countries is almost nonexistent with the exception
of a few countries (France and the U.K.). An instrument called a giro is still used in some
countries, and even the use of cash is becoming less and less popular. Therefore, lockbox
offerings in Europe are not nearly as essential as they are in the U.S.

The use of electronic payment systems in the U.K. and the rest of Europe is more
common and there are generally more controls in place to protect the senders. This is in
contrast to some well-publicized issues that have emerged in the U.S. in recent years.

Payment platforms have evolved across Europe and the U.K., much more quickly than in
the U.S. in recent years.[3] Platforms such as SEPA (Single Euro Payments Area), SEPA
Inst and Faster Payments (U.K.) have facilitated faster and cheaper in-country and cross-
border payments. SEPA payments are a fraction of the cost of wires and allow for one
streamlined format across the EU.

Overall, the impact has been very positive, but an area of concern for U.S. companies
will be the impact of the U.K.’s exit from the European Union (Brexit) and what impact
this might have on their access to SEPA and other systems. Brexit may impact the cost of
payments and potential access to the entire scheme. Negotiations are in process and will
likely be determined later this year.[4]

4. Non-Resident Accounts
It has become increasingly difficult to open non-resident accounts (non-resident meaning
that the company does not have an entity set up within that particular country but still
may need an account at a bank within that country). Amplified “know your customer
requirements” across the world have increased the compliance costs to banks when
onboarding clients. Companies without employees on the ground are often deemed as too
difficult to work with in terms of verifying the identities of corporate representatives and,
therefore, many banks are closing their doors to these businesses.

72
If this situation sounds like your organization, please contact your representative to
understand how PNC can help.

5. Capital Accounts
Some countries in the EU require the establishment of a capital account and a minimum
subscribed capital injection in order to set up a European entity.[5] This process precedes
the opening of a current account or demand deposit account (DDA) in the U.S. Each
country may have different requirements and capital injection thresholds based on the
type of entity a company is setting up. Companies should work with legal counsel to set
up these entities, and PNC can potentially offer assistance through our Gateway Direct
referral program with European partner banks.

6. In-Country Accounts Required for Tax Purposes

Value added tax (VAT) can be refunded for both non-resident and resident companies in
Europe.[6] Depending on the business structure, some countries, such as the U.K. and
Italy, require a local in-country account in order to receive these refunds.

The European Payments Council put out a report in November of 2017 regarding IBAN
discrimination for VAT purposes within the EU.[7] This would apply to companies that
are being required by certain tax bodies to set up in-country accounts in Europe where
they are trying to pay VATs, which is not allowed. The EPC regulation states that a client
may use a SEPA IBAN in any one of the SEPA-compliant countries to make and receive
these payments. An example would be when a company maintains an account in the
Netherlands but is also being asked to open an account in Germany for VAT purposes.

Companies should understand how VATs in various countries can be collected, including
any banking requirements.

7. Liquidity Management
Cash pooling is a practice that allows corporations to manage their global liquidity with
lower costs across various business entities that fall under the corporate umbrella. This is

73
an increasingly common structure for many multinational corporations. They structure
their cash arrangements among subsidiaries to allow the cash deficits of one entity to be
offset by the cash surpluses of another. This can simplify cash and liquidity management
and reduce overall banking fees.[8]

One popular form of cash pooling, called notional pooling, is very popular in many
European countries. Notional pooling allows the offsetting of interest income and
expense that results from the varying cash positions of each subsidiary or entity held in
separate bank accounts within the same bank. Each entity participating in the pool
maintains its own accounts.

The bank creates a “paper” or notional position from all of the participant accounts,
resulting in a consolidated cash position on which interest is paid or charged.

Due to the implementation of Basel III regulations within Europe, many banks have
determined that offering this product and adhering to the Basel capital requirements is too
costly. Companies operating across Europe in single or multiple currencies should speak
to their financial institution about the benefits of physical or notional cash pooling.

8. Overdraft Lines
Overdraft facilities are frequently used in Europe as a way of financing working capital.
While bank loans are still used as well, the use of overdrafts is less common in the United
States.

In 2017, credit lines, including bank overdraft credit lines, were the most common form
of financing used by European SMEs (small and medium enterprises).[9]

Overdraft lines of credit can be expensive for your European subsidiaries or business
partners and may become problematic if profitability in these entities starts to deteriorate.
It is important to understand your subsidiaries’ financing needs and put policies into
place to clarify your borrowing requirements.

74
9. Regulatory Changes
There are several regulatory changes to be aware of when doing business in Europe,
including:

This refers to the structural separation of the retail and commercial deposit-taking side of
the banks from the riskier activities that may be undertaken by that institution.

In order to comply with the ringfencing rules, some banks and other depository
institutions may have to reorganize their structure and perhaps some of their banking
functions. This may impact an arrangement that your firm has in place and may result in
less access to funding and services and/or the need to switch banks.
KEY CHALLENGES OF DOING BUSINESS IN EUROPE
Key Challenges Of Doing Business In Europe
 Language: There are many potential difficulties connected to doing business
outside of your native language. It's important to have resources that can help you
communicate.
 Process: A lot of cases within Europe can be collected quickly and economically.
You don’t have to keep writing off losses when there's help available!
 Interpretation: The legal systems in Europe operate very differently than in the
United States. Most countries in Europe operate on a civil law system. This makes
local legal knowledge essential.
 Know your customer: US companies face a lot of challenges doing business with
international buyers. They may have to deal with a very different culture as well
as different legal and political systems.

75
Unit 7
Challenges doing business in the Asian markets

The Asia-Pacific region has the potential to help increase the fortunes of foreign
companies due to high economic growth rates of over 6% in most of the region’s markets. As a
result, there’s been an influx of activity by foreign companies, coupled with trade and investment
liberalization. Before foreign companies decide to enter the market, however, it’s important to
identify why local Asia-Pacific economies matter to your business via market research and to
determine how much investment in time and resources you’ll need to establish a presence.
Identifying hurdles that exist in each market is also vital before entry. Here’s an overview of the
six challenges foreign companies face in Asia and what your company should do about them.

SIX PRIMARY CHALLENGES FOREIGN COMPANIES FACE IN ASIA

 Light Financial Regulation and Enforcement
Asia-Pacific region economies in some cases have less financial regulation than economies in the
West, and therefore present business practice uncertainty and legal compliance risks for foreign
companies – particularly for American companies that must comply with the Foreign Corrupt
Practices Act (FCPA).

76
Moreover, Asia’s wealth is highly concentrated which fosters a more friendly climate for
domestic businesses, resulting in corruption and opaque decision-making systems in some cases.
Foreign companies, therefore, are rendered less competitive in this climate due to lack of insider
status.

 Currency Rate Fluctuation

There is no single regulator of Asia-Pacific region currency trading. Hence, Asian nations can
maintain low rates of exchange in order to promote exports (which often is a complaint by
Western economies). Foreign companies must work within local currencies and complex
regulatory environments, creating further challenges to growth and profitability.
 Varying Legal Systems
Despite recent liberalization of several Asia-Pacific region economies, many still place
significant restrictions on the operations of foreign companies. Among the challenges include
compromises of intellectual property and proprietary technology rights of foreign companies.
Local shareholding requirements are common. This environment can create instability for
foreign companies who can face thriving counterfeit markets in local Asian economies. Some
questions also remain in some jurisdictions about the impartiality of local judiciaries to set and
maintain legal precedent, which protects intellectual property and proprietary technology.
 Unique Business Culture
The Asia-Pacific region possesses unique business cultures distinct from that in the West. Asian
business cultures, to varying degrees, focus on hierarchical structures and group dynamics over
individual autonomy. Gender applies as well in certain places. Asian companies benefit from a
preference for local talent and protectionism of local industries and business practices.
Governments in Asia underpin these practices with policies favorable to local culture and
business, which is often detrimental to Western companies.
 Increased Local Competition
Amid the dramatic growth in most of the Asia-Pacific region’s economies and a growing middle
class in China and southeast Asia, local businesses now have more capital and more access to
sophisticated advisory services to help them compete against well-healed Western businesses.
Contrary to what many in the West might presume, much innovation is occurring in Asia.

77
  Local Political Tensions
Relationships between neighboring Asian countries can negatively impact foreign companies
doing business in the region. For example, smaller regional economies with a favorable trade and
investment relationship with China must balance this with a desire for closer ties with Western
countries.

Amid Western competition with China and the ascension of ASEAN-region economies in
southeast Asia, Western companies must navigate this environment with careful planning and a
strategic approach to risk and management.
 Looking Forward
The Asia-Pacific region has become the economic growth engine for the world, presenting much
opportunity for foreign businesses. However, any foreign business interested in tapping into this
growth must be aware of the often-complex environments they will encounter in each Asia-
Pacific region economy and plan accordingly.
Top 10 challenges of doing business in China
As the economy continues to grow (expected to expand by 8.2% this year), we assess some of
the main difficulties encountered by overseas firms doing business in China.

 Market access
Local distribution networks, buying habits of local consumers and regulatory requirements can
make China a very difficult market to access. What’s more, the market environment is
completely detached from most other economies in the world, making it difficult to take the first
steps. It is estimated that 37% of products that pass for the US market fail in the China market.

 Consumer preference
There has been a sizeable class shift in China over the past few decades, and the consumer
environment is far more diverse than it once was. It is also completely detached from markets
elsewhere in the world, and many companies have sunk in China because they failed to take into
account consumer preference.

 Bureaucracy

78
Overseas firms often struggle with laws and regulations in China, with 31% of 338 respondents
in a recent business survey listing bureaucracy as their number one concern when expanding into
the country. Most common complaints revolve around obtaining the required licenses and
permits, with many respondents bemoaning the laborious processes.

 Governmental challenges
Transparency of government procedure and corruption are chief concerns of companies moving
into China, although as the new leadership is ushered in, this is likely to change. The citizens of
China need to believe the government’s decisions serve their interests, and there is a growing
risk that the Party leaders increasingly are viewed as clinging to power in order to enrich
themselves.
Standards and conformity assessment

Rules stating how products are designed, manufactured, sold, used and disposed of exist in China
which all products must comply with before entering the market. This can be a very foreign
procedure to many companies, and can impact the appeal of the country.

 Intellectual property
Intellectual property rights is an area that has been notoriously difficult in China, although recent
reports suggest this is an area that is improving the most. Gary Locke, America's ambassador to
China, recently said that “for every foreign company calling for stronger IP protection, there are
more Chinese companies calling for the same,” suggesting that progress is occurring.

 Competition
Many Chinese companies are looking to improve the quality of their products and services so
they can sell them abroad, which has increased competition as a result. Additionally, consumers
can, in some cases, give preference to native companies over those from abroad. The government
can also give preference to domestic firms, which makes disrupting the market rather difficult.

 Labour

79
The US-China Business Council recently published a report that showed 62% of respondents
said that they had increased wages by 5% to 10%. Eight percent of respondents had hiked them
more than 15%. This was the area that concerned respondents the most on the whole survey.

 Human resources
Human resources remains a number one task for Chinese companies, with the demand for
trained, professional labour still outstriping supply. Companies therefore find it hard to keep hold
of their best staff, as some job changes can mean salary increases of up to 30%.

 Administration
Administration, licensing, product approvals and many more laborious operating task can leave
managerial desks flooded in paperwork. For many firms, overcoming the bureaucratic hassle is
the biggest task to successfully breaking the Chinese market.

 TMF Group
We have the local knowledge to help you navigate these minefields. Whether you want to set up
in China or just want to streamline your Chinese operations, talk to us.

80
Unit 8
Solutions doing business in the EU, Russia

Doing Business in Russia - Competition Policy and Growth

Economic development is the result of the interaction of two main factors -- availability of inputs and a
country’s incentive/Institutional regime. Competition is one of the factors affecting the incentive regime
for cost reduction, quality improvement, innovation and thus productivity gains. It can thus lead to more
productive and nimble firms that can in turn contribute to higher growth, entrepreneurship
development and diversification.

Business in Russia

The World Bank is working with the Ministry of Economic Development in assessing key obstacles to
competition in the Russian Federation both at the federal and subnational levels.

The Doing Business Project provides objective measures of business regulations and their enforcement
across 183 economies and selected cities at the subnational and regional level.

First results

81
Doing Business in Russia 2009: New Report Finds Adopting Good Practices Can Enhance
Business Environment across Russia

Potential gains that can be realized through the introduction of a well designed competition
framework also include greater consumer welfare and economic efficiency in form of lower
prices, greater choice and variety of goods and services, innovation, reduced costs and better
allocation of resources.

Empirical evidence shows strong correlation between higher GDP per capita and local markets
where competition is more intense in most industries. Similarly, higher frequency of entry of
new competitors into a local market is also associated with higher GDP per capita and, to some
extent, with higher growth rates. Measures of mark-ups also indicate that low domestic
competition translates into lower international price-competitiveness.

Many countries have successfully improved their competition policies (EU, Australia, Canada,
etc.). From a historical prospective, the EU example illustrates how following the adoption of the
Treaty of Rome in 1957 and an active competition policy (notably through strict regulation of
state aid to minimize distortions to competition), the integration of small national markets into a
large single market promoted trade, and how these “trade clubs” helped Europe converge to U.S.
productivity levels within the span of two decades. Similarly, recognizing the importance of
nationwide competition as a driver of enhanced productivity and living standards, in Australia,
representatives of federal, state and local governments agreed in 1992 to the development of a
National Competition Policy (NCP). The NCP in Australia established a formal institutional
setting for cooperation on the competition reform agenda based on a broad-based consensus and
introduced a system of “competition payments” defined as the state’s share of additional revenue
arising from the NCP -- with payments made from federal to state governments that implemented
specific reforms and pecuniary penalties imposed on slow reformers. The Australian experience is
considered to be one of the most successful examples in recent years. The NCP helped reduce barriers
to entry and exit and improved competition; It is estimated to have increased GDP by 2.5% (excluding
dynamic effects).

Competition can be measured in different ways:

82
The economy-wide OECD Product Market Regulation (PMR) indicators are used to measure the extent
to which policy settings promote or restrict competition in areas of the product market where
competition is viable. The indicators cover formal regulations in the following areas:
 state control of business enterprises;
 legal and administrative barriers to entrepreneurship;
 barriers to international trade and investment.
An anti-competitive PMR lowers productivity by slowing technological diffusion across countries, curbing
ICT investment, reducing FDI and foreign affiliate penetration, restricting firm entry, and restricting
formal-sector employment.
The World Bank Group Doing Business (DB) report assesses the regulatory environment faced by a
domestic small to medium-size firm - from start-up and operations to closing a business - through 11
indicators.
Russia ranks poorly on both measurements. According to the PMR methodology, Russia has one of the
most restrictive markets in OECD (particularly on state regulation). According to the DB methodology,
Russia (assessed through Moscow) ranks particularly poorly on the Starting a business, Dealing with
construction permits, Trading across borders and Closing a business indicators.
At the same time, when looking at the regional level, the picture appears more nuanced as revealed by
the first round of Subnational Doing Business conducted in 2009 in 10 cities, which shows significant
regional variations. For example, while Moscow stands out as the worst performer in the construction
permitting area, Rostov-on-Don is doing significantly better and - when compared with the global
ranking - is at par with Portugal on the ease of building a warehouse.
This shows that there is a broad unfinished business environment reform agenda to ease new firm
creation and exit of inefficient incumbents (as again highlighted by the recent Doing Business report
2011), but also that an important part of the reform agenda is in the hands of the regions.
Thus, as part of its broader collaboration in the area of export diversification, the Bank will be working
with the Ministry of Economy to assess key obstacles to competition in the Russian Federation both at
the federal and regional levels by:
 Conducting a review of the anti-competitive effect of key regulations and policies in the Russian
Federation;
 Carrying out selected sector studies;
 Contributing to further critical data generation on sector mark-ups as well as comparative
regional performance data that can help better capture regional variations - through regional

83
 PMR and the second planned round of Subnational Doing Business in 30 regions that will be
conducted in partnership with the Ministry of Economy.

Doing business in Russia

10 Reasons to do business in Russia...
 Russia is the largest country in the world with over 6,563,736 sq mi.
 Large population of 143 million, and home of the city (Moscow) with the most
billionaires.
 Russia has 7th largest domestic market in the World and 1st in Europe.
 Russia’s economy is the 6th largest in the World in GDP, PPP based, and set to remain in
top 10 by 2020 according to the World Bank.
 Russia joined the World Trade Organization in 2012. They are reducing trade barriers &
simplifying trade.
 Russia has established 28 ‘special economic zones’ to encourage investment from foreign
companies, they provide tax preferences, reduced administrative barriers, infrastructure
for business development, simplified migration regime and access to the qualified
personnel resources.
 Russia provides the most attractive tax regime among the BRIC countries (income taxes
– both corporate and personal – are the lowest).
 Russia, despite being a second largest producer of natural gas, 3rd  largest supplier of
crude oil, 5th of coal, has 14% of global gold reserves.
 85% of FDI in Russia has gone into manufacturing, with over 200 FDI projects –
showing the highest growth rate among the top 10 European countries. (Ernst & Young’s
2015

BENEFITS OF DOING BUSINESS IN RUSSIA

Russia is by far the largest country in the world. The country covers an area all the
way from Europe in the West to North America in the East and bordering with
Asia in the South, and boasts a vast geography that spans eleven time zones.

Emerging as a diverse nation after a long and eventful history, Russia’s growing
and strengthening consumer economy, with a market of over 140 million people, is
84
evolving into a prime location for investment. Business opportunities can be found
in many sectors of Russia’s economy and strong support exists for investors from
both the government and the Foreign Investment Advisory Council (FIAC).

Doing business in Russia offers the following key benefits:

STABLE AND GROWING RUSSIAN ECONOMY

According to Invest in Russia, Russia boasts one of the most dynamically
developing and attractive economies in the world. Since 1999, GDP growth has
averaged 6.8% per year and reached 8.1% in 2007 (compared to 4-5% average
world economic growth). Thanks to the strengthening rouble, in dollar terms the
1999-2007 GDP growth was an astounding 26% per year, far outstripping
international growth rates.
EGALITARIAN ATTITUDE
Russians generally subscribe to attitudes that promote equality, reciprocity and
mutual advantage in business and a “deal” is often regarded as an opportunity for
equally shared benefit. Personal relationships are also of great importance in
Russia. When doing business in Russia it is worth investing time initially in
creating strong bonds, as these are likely to form a solid basis for future business
negotiations.
LARGE, EDUCATED CONSUMER MARKET
There is untapped potential in Russia’s captive market of over 140 million people
whose incomes are steadily improving. Additionally, Russia’s strong educational
system has a good reputation for producing a highly skilled workforce and
discerning consumers. The talent of the Russian people is starkly evident in the
achievements of Russian art, music, literature and architecture.

85
UNIQUE GEOGRAPHICAL LOCATION
Russia’s massive geographical presence spans a distance unmatched by any other
single country. Linking Europe with Asia and bordering the North American
continent, Russia has excellent access to sea, road and rail routes and is home to
several major airports. Russia’s location is further supplemented by its vast natural
resources of mineral reserves, coal mines, natural gas and timber.

UNIFIED EMPLOYEES
Russia is a predominantly collective society, with a communal spirit perhaps
stemming from its history and climate. Russia’s severe winters and geographical
conditions have meant that collaborating, rather than competing has been necessary
for survival. This sense of co-operation and togetherness must be considered when
doing business in Russia, especially when communicating with Russian
counterparts. For example, it is important to remember to address the group rather
than the individual.
International organisations can profit immensely from the above benefits of doing
business in Russia. Utilising these benefits comes with the necessity to create
effective strategies for navigating the geographic, political and cultural diversity of
Russian society. This requires a comprehensive understanding of Russian business
and social culture on all levels.

International organisations employing people in Russia or doing business with

Russia on a regular basis should therefore participate in cross-cultural training
programmes for business and management such as Doing Business in Russia to
ensure they develop the skills to successfully deal with the many cultural
differences in working preferences, values and communication styles.

86
Unit 9

Solutions doing business in Asian markets

We live in unpredictable times. Not only did US President Donald Trump withdraw from the
Trans-Pacific Partnership – the putative trade agreement between the US and 11 other countries
including Japan, Vietnam and Singapore – he has also embarked on a much publicised trade war
with China, threatening to apply tariffs to all $505bn (€431.5bn) of Chinese goods imported into
the US.

However, while the US favours a protectionist stance, other countries – notably those in the EU –
are hoping to increase their trade with Asian partners. In fact, the EU’s total trade with Asia is
worth no less than €1.4trn a year.

87
As European companies seek to build relationships in Asian markets, understanding the various
cultures, etiquettes and nuances of language will be critical to success. Here, we outline five top
tips for conducting business in Asia:

Top 5 tips for doing business in Asia

As European companies seek to capitalise on the US' trade war with China, showing an
awareness of cultural differences will be key to establishing productive business relationships

Make formal introductions

There are some broad rules to consider when addressing someone in Asia, especially for
the first time. First, it’s important to always use the individual’s formal title – e.g.
“Director” or “Mayor” – rather than a general “Mr” or “Mrs” salutation.

This degree of formality should be maintained until you’re invited to address someone
more informally – you should never make this decision yourself. Should you be
introduced to a group (or need to introduce members of your own team), always do so in
a line, starting with the most senior person.

In Japan, instead of adding a title of civility to the beginning of a name, you should
attach “-san” to the end of it. This appendix is gender neutral and works independently
of whether the person in question is single or married. The rules of address are specific
to each country, so take advice from an expert or someone native to the area.

Adhere to local business etiquette

Let’s begin by addressing the traditional confusion about whether to bow or offer a hand
to shake. Shaking hands has become increasingly common practice, so we advise
starting there, though you can also nod at the same time or do a small bow after your
handshake. However, be careful when bowing (particularly in Japan) if you have not
been taught how to do it properly.

According to the context, you may find yourself being welcomed by a group with
applause. It’s polite to smile and applaud in return.

88
When it comes to business cards, never put a pile on the table and invite people to take
one. You should also refrain from sliding them across the table as if they were playing
cards, writing on someone else’s business card in their presence or placing a card you
have just received into your back trouser pocket.

Most commonly, you will take your counterpart’s card with both hands and thank them,
before placing it in a cardholder or next to you on the table. You should hand over your
business card in return, also giving it out with both hands.

Master your body language

In most Asian countries you’ll need to take facial expressions and body language into
account to get the true meaning of what’s being communicated; the nuances of body
language are far more important to grasp in Asia than in most others regions. For
example, talking with your hands in your pockets should never be done. Passing
anything with your left hand is also considered rude in many countries – no matter
whether you are right or left handed.

Further, there are several important rules – or simply ways to be polite – based on
religious customs and beliefs. A Buddhist, for example, may be offended by the way your
feet are positioned, particularly if you show them the soles of your shoes, as they are the
lowest part of the body and considered offensive. Conversely, your head is the highest
part of your body and considered sacred. Touching someone’s head is viewed as being
very invasive and should be avoided.

Broadly put, if you don’t know enough about how body language is used in the culture in
which you’re doing business, try to avoid making too many gestures or too much
physical contact.

Establish connections
This is perhaps one of the most important tips for doing business in Asia. If you want to
succeed, you need to know the place and, more importantly, the people with whom you
wish to make a deal.

89
 You’ll want to spend as much time as possible in the area to familiarise yourself with it
and show your interest. The importance of building relationships and connections
cannot be overstated. This is true of everything from the higher business-to-business
level right down to individual interactions between employees in the workplace.

In countries such as Malaysia, the amount of time employees spend relationship

building and socialising has been estimated at around 50 percent of their workday. This,
more than anything else, should give you an inkling as to the value placed on making
connections.

Keep learning
Most western businesses will tend to approach Asia as if it was one country. But, in
reality, the region is incredibly diverse in people and culture. You need to be aware of
those differences to be successful in each country.

Always maintain a sense of curiosity and be open to learning from different problem-
solving and decision-making processes, instead of simply imposing your own approach.
This will not only benefit your business, but it will also engender trust and respect with
your business partner.

In today’s global market, businesses have to stop thinking about the risks of doing
business in Asia and start thinking about the risks of not doing business in Asia. As
cultural knowledge stems from experience, there’s no substitute for expert local advice.
Surround yourself with insiders who have deep experience in your target markets, who
can help you navigate the landscape and who can stop you from making preventable
mistakes.

Benefits of Doing Business in Asia

When an investors seeks new locations for expanding a business empire, they look for
what that location can offer and how it can be beneficial towards their businesses.
The growing interest in doing business in Asia is due to:
  Strategic location – Different countries in Asia are not too far apart, many of them in close
proximity and travelling between these regions rarely takes more than a day.

90
 The relative ease of doing business – Except for one or two countries, it is relatively easy for
foreign investors to establish a business in Asia without experiencing too much difficulty.
 Affordability – The tax system in Asia is much lower and reasonable when compared to a lot of
Western economies. A skilled and educated workforce is also available for hire at very
reasonable rates.
 Stable legal, political and economic environment – Asia is very welcoming towards
international investments, and the sound political and economic environment with strong legal
systems in place are favourable environments for investors wanting to establish a business.

How to Successfully do Business in Asia

Each business is different and should be run in a different way, but the general
guideline of running a business successfully in Asia will tend to include:  
 Working with a local partner – Having a local partner with a thorough understanding of the
local business in an valuable asset to help navigate local bureaucracy.
 Understanding the local society – Asian cultures have varying beliefs that are different form
country to country, and understanding local customs and etiquette will go a long way in building
a successful local businesses while avoiding taboos.
 Remember that the Asian way of doing business is not the same as the Western way
– Asian business people tend to be a lot more introverted than their western counterparts.
Building trust and open communication is often on of the best approaches.

91
Unit 10

Institutions and treaties of the European Union

We are looking to learn from our users and how we can best support your experiences on
Wikipedia. Please fill out a short screener survey and we may invite you to chat with us about
your experiences. Thank you in advance for your interest and for visiting Wikipedia!

The Treaties of the European Union are a set of international treaties between the European
Union (EU) member states which sets out the EU's constitutional basis. They establish the
various EU institutions together with their remit, procedures and objectives. The EU can only act
within the competences granted to it through these treaties and amendment to the treaties
requires the agreement and ratification (according to their national procedures) of every single
signatory.

Two core functional treaties, the Treaty on European Union (originally signed in Maastricht in
1992, aka The Maastricht Treaty) and the Treaty on the Functioning of the European Union

92
(originally signed in Rome in 1957 as the Treaty establishing the European Economic
Community, aka The Treaty of Rome), lay out how the EU operates, and there are a number of
satellite treaties which are interconnected with them. The treaties have been repeatedly amended
by other treaties over the 65 years since they were first signed. The consolidated version of the
two core treaties is regularly published by the European Commission.

Treaty on European Union

Following the preamble the treaty text is divided into six parts.[1]

Title 1, Common Provisions (Article 1-Article 8)

The first deals with common provisions. Article 1 establishes the European Union on the basis of
the European Community and lays out the legal value of the treaties. The second article states
that the EU is "founded on the values of respect for human dignity, freedom, democracy,
equality, the rule of law and respect for human rights, including the rights of persons belonging
to minorities". The member states share a "society in which pluralism, non-discrimination,
tolerance, justice, solidarity and equality between women and men prevail".

Article 3 then states the aims of the EU in six points. The first is simply to promote peace,
European values and its citizens' well-being. The second relates to free movement with external
border controls are in place. Point 3 deals with the internal market. Point 4 establishes the euro.
Point 5 states the EU shall promote its values, contribute to eradicating poverty, observe human
rights and respect the charter of the United Nations. The final sixth point states that the EU shall
pursue these objectives by "appropriate means" according with its competences given in the
treaties.

Wikisource has original text related to this article:

Charter of Fundamental Rights of the European Union

93
Article 4 relates to member states' sovereignty and obligations. Article 5 sets out the principles of
conferral, subsidiarity and proportionality with respect to the limits of its powers. Article 6 binds
the EU to the Charter of Fundamental Rights of the European Union and the European
Convention on Human Rights. Article 7 deals with the suspension of a member state and article
8 deals with establishing close relations with neighbouring states.

Title 2, Provisions on democratic principles (Article 9-12 )

Article 9 establishes the equality of national citizens and citizenship of the European Union.
Article 10 declares that the EU is founded in representative democracy and that decisions must
be taken as closely as possible to citizens. It makes reference to European political parties and
how citizens are represented: directly in the Parliament and by their governments in the Council
and European Council – accountable to national parliaments. Article 11 establishes government
transparenc
y, declares that broad consultations must be made and introduces provision for a petition where
at least 1 million citizens may petition the Commission to legislate on a matter. Article 12 gives
national parliaments limited involvement in the legislative process.

Title 3, Provisions on the institutions (Article 13 – Article 19)

Article 13 establishes the institutions in the following order and under the following names: the
European Parliament, the European Council, the Council, the European Commission, the Court
of Justice of the European Union, the European Central Bank and the Court of Auditors. It
obliges co-operation between these and limits their competencies to the powers within the
treaties.

Article 14 deals with the workings of Parliament and its election, article 15 with the European
Council and its president, article 16 with the Council and its configurations and article 17 with
the Commission and its appointment. Article 18 establishes the High Representative of the Union
for Foreign Affairs and Security Policy and article 19 establishes the Court of Justice.

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Title 4, Provisions on enhanced cooperations (Article 20 )

Title 4 has only one article which allows a limited number of member states to co-operate within
the EU if others are blocking integration in that field.

Title 5, General provisions on the Union's external action and specific provisions on the
Common Foreign and Security Policy

Chapter 1 of this title includes articles 21 and 22. Article 21 deals with the principles that outline
EU foreign policy; including compliance with the UN charter, promoting global trade,
humanitarian support and global governance. Article 22 gives the European Council, acting
unanimously, control over defining the EU's foreign policy.

Chapter 2 is further divided into sections. The first, common provisions, details the guidelines
and functioning of the EU's foreign policy, including establishment of the European External
Action Service and member state's responsibilities. Section 2, articles 42 to 46, deal with military
cooperation (including Permanent Structured Cooperation and mutual defence).

Title 6, Final provisions (Article 47 –Article 55)

Article 47 establishes a legal personality for the EU. Article 48 deals with the method of treaty
amendment; specifically the ordinary and simplified revision procedures. Article 49 deals with
applications to join the EU and article 50 with withdrawal. Article 51 deals with the protocols
attached to the treaties and article 52 with the geographic application of the treaty. Article 53
states the treaty is in force for an unlimited period, article 54 deals with ratification and 55 with
the different language versions of the treaties.

Treaty on the functioning of the European Union[edit]

Treaty on the Functioning of the European Union

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The Treaty on the functioning of the European Union goes into deeper detail on the role, policies and
operation of the EU. It is split into seven parts.[1][2]

Part 1, Principles(Article 1 –Article 17)

In principles, article 1 establishes the basis of the treaty and its legal value. Articles 2 to 6 outline the
competencies of the EU according to the level of powers accorded in each area. Articles 7 to 14 set out
social principles, articles 15 and 16 set out public access to documents and meetings and article 17
states that the EU shall respect the status of religious, philosophical and non-confessional organisations
under national law.[2]
Part 2, Non-discrimination and citizenship of the Union
The second part begins with article 18 which outlaws, within the limitations of the treaties,
discrimination on the basis of nationality. Article 19 states the EU will "combat discrimination based on
sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation". Articles 20 to 24
establishes EU citizenship and accords rights to it;[3] to free movement, consular protection from other
states, vote and stand in local and European elections, right to petition Parliament and the European
Ombudsman and to contact and receive a reply from EU institutions in their own language. Article 25
requires the Commission to report on the implementation of these rights every three years.[2]
Part 3, Union policies and internal actions
Part 3 on policies and actions is divided by area into the following titles: the internal market; the free
movement of goods, including the customs union; agriculture and fisheries; free movement of people,
services and capital; the area of freedom, justice and security, including police and justice co-operation;
transport policy; competition, taxation and harmonisation of regulations (note Article 101 and Article
102); economic and monetary policy, including articles on the euro; employment policy; the European
Social Fund; education, vocational training, youth and sport policies; cultural policy; public health;
consumer protection; Trans-European Networks; industrial policy; economic, social and territorial
cohesion (reducing disparities in development); research and development and space policy;
environmental policy; energy policy; tourism; civil protection; and administrative co-operation.[2]
Part 4, Association of the overseas countries and territories
Part 4 deals with association of overseas territories. Article 198 sets the objective of association as
promoting the economic and social development of those associated territories as listed in annex 2. The
following articles elaborate on the form of association such as customs duties. [2]
Part 5, External action by the Union

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Part 5 deals with EU foreign policy. Article 205 states that external actions must be in accordance with
the principles laid out in Chapter 1 Title 5 of the Treaty on European Union. Article 206 and 207 establish
the common commercial (external trade) policy of the EU. Articles 208 to 214 deal with cooperation on
development and humanitarian aid for third countries. Article 215 deals with sanctions while articles
216 to 219 deal with procedures for establishing international treaties with third countries. Article 220
instructs the High Representative and Commission to engage in appropriate cooperation with other
international organisations and article 221 establishes the EU delegations. Article 222, the Solidarity
clause states that members shall come to the aid of a fellow member who is subject to a terrorist attack,
natural disaster or man-made disaster. This includes the use of military force.[2]
Part 6, Institutional and financial provisions
Part 6 elaborates on the institutional provisions in the Treaty on European Union. As well as elaborating
on the structures, articles 288 to 299 outline the forms of legislative acts and procedures of the EU.
Articles 300 to 309 establish the European Economic and Social Committee, the Committee of the
Regions and the European Investment Bank. Articles 310 to 325 outline the EU budget. Finally, articles
326 to 334 establishes provision for enhanced co-operation.[2]
Part 7, General and final provisions
Part 7 deals with final legal points, such as territorial and temporal application, the seat of institutions
(to be decided by member states, but this is enacted by a protocol attached to the treaties),
immunities and the effect on treaties signed before 1958 or the date of accession. [2]
European Union Treaties Introduction
The EU is founded on a series of legal treaties between its member states. The first treaty, which
established the European Economic Community (EEC), was signed in Rome in 1957. There have been five
subsequent treaties – the Single European Act (1986), the Treaty of Maastricht (1992), the Treaty of
Amsterdam (1997), the Treaty of Nice (2001) and the Treaty of Lisbon (2007). In 2003, the EU produced
a draft Constitutional Treaty designed to replace all the existing treaties as the sole legal document
governing the operation of the EU. However, following votes against it in referendums in France and the
Netherlands in 2005, the Lisbon Treaty was drafted as a replacement. The new treaty was controversial
because of its similarity to the failed EU constitution, and as such it was rejected at a referendum in
Ireland in 2008. However, it was subsequently ratified following a second, successful referendum in
Ireland, and the Lisbon Treaty came into force in December 2009.

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The Treaty of Rome (1957)
The Treaty of Rome was the founding treaty of the European Economic Community, which later became
the EU. The Treaty established four institutions – a Commission, a Council of Ministers, a European
Parliament and a European Court of Justice. The Treaty focused overwhelmingly on economic co-
operation. It tried to create closer co-operation on a range of economic and trade issues from
agriculture to overseas aid, commerce to taxation, but it also set out a wider political vision for ‘an ever
closer union’ to ‘eliminate the barriers which divide Europe’.
The Single European Act (1986)
The Single European Act (SEA) was the first attempt made by member states to amend the
arrangements made under the Treaty of Rome. The SEA’s main effect was to set a deadline for the
creation of a full single market by 1992. The SEA swept away restrictive practices in a range of areas of
private enterprise, as well as in the public sector. It also pursued deeper integration by making it easier
to pass laws, strengthening the EU Parliament and laying the basis for a European foreign policy.

The Treaty of Maastricht (1992)

The Maastricht Treaty pushed forward two broad processes: the widening of the European
Community’s responsibilities and the deepening of integration. The Treaty amended the provisions of
the Treaty of Rome while hugely advancing the agenda set out under the Single European Act for
deepening ‘European Political Union’ (EPU), most notably in the areas of social policy and Economic and
Monetary Union (EMU). It also introduced a new model for the Community based around three ‘pillars’
which, broadly speaking, covered economic relations, foreign policy, and justice and home affairs. It
gave the EU Parliament greater influence in decision making through the co-decision procedure,
developed the concept of European citizenship, and established the principle of subsidiarity. It also
changed the organisation’s name to the ‘European Union’ (EU).
The Treaty of Amsterdam (1997)
The Treaty of Amsterdam was largely an exercise in tying up the loose ends left over from the
Maastricht Treaty. The most symbolically important gesture of the Treaty of Amsterdam was the
framework laid down for the future accession of ten new member states, mainly from formerly
communist Eastern Europe. It absorbed the Schengen Convention into EU law, creating open borders
between 12 of the member states, and expanded the role of the Common Foreign and Security Policy
(CFSP) by creating a High Representative to take overall responsibility for EU foreign affairs. Most

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significantly, however, it changed decision making in the EU by expanding the number of decisions
covered by Qualified Majority Voting (QMV).
The Treaty of Nice (2001)
The Treaty of Nice represented a further attempt to find a workable means of moving forward the
process of European integration. Much of the text of the Treaty was concerned with reforming the
decision-making of the EU. It extended QMV in the Council of the EU; changed the way in which the
Commission President was to be elected; gave the President the power to sack individual
Commissioners, and set limits on the future numbers of Commissioners and MEPs. Finally, it declared
that another Inter-governmental Conference should be set up to draft an EU constitution.

The Treaty of Lisbon (2007)

The Lisbon Treaty was drafted to replace the rejected EU Constitution. The Treaty clarified the role of
European bodies and institutions, made explicit the aims of the EU and strengthened measures to
achieve these goals. As such, it changed the way EU decisions are made and abolished the pillar
structure set out in the Maastricht Treaty. It expanded the areas in which the Commission can propose
legislation; made QMV the default voting method in the Council, and created two high profile posts: a
High Representative of the Union for Foreign Affairs and Security Policy and a permanent EU President,
whilst giving the EU greater legal independence to make new agreements. It brought the Charter of
Fundamental Rights (CFR) into European law, which fixed human rights standards for all EU nations
(Poland, the UK and the Czech Republic opted-out from the implications of the CFR). Ireland and the UK
also secured the right to opt in or out of any policies in the entire field of justice and home affairs.
Following Ireland’s rejection of the Lisbon Treaty in 2008, protocols were added to provide guarantees
on Ireland’s military neutrality and ethical issues. Lastly, the Treaty outlined a procedure for states to
end their membership of the EU for the first time.).

EUROPEAN INSTITUTIONS

The EU has an institutional framework aimed at promoting and defending its values, objectives and
interests, the interests of its citizens and those of its member countries. This framework also contributes
to ensuring the coherence, effectiveness and continuity of EU policies and actions.

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According to Article 13 of the Treaty on European Union, the institutional framework comprises 7
institutions:

 the European Parliament;

 the European Council;
 the Council of the European Union (simply called ‘the Council’);
 the European Commission;
 the Court of Justice of the European Union;
 the European Central Bank;
 the Court of Auditors.

Each institution acts within the limits of its remit, granted in the Treaties in line with the procedures,
conditions and purposes laid down therein.

EUROPEAN PARLIAMENT

The European Parliament, the Council and the Commission are assisted by the European Economic and
Social Committee and the Committee of the Regions performing advisory functions.

The European Parliament (EP) is the only directly-elected EU body and one of the largest democratic
assemblies in the world. Its 751 Members represent the EU's 500 million citizens. They are elected once
every 5 years by voters from across the 28 EU countries (1). Its representatives are called Members of
the European Parliament - MEPs.

Following the 2014 elections to the European Parliament (EP), with a turnout of only 42.54%, the seats
are distributed between 8 different Parliamentary groups the EPP - Group of the European People's
Party, the S&D - Group of the Progressive Alliance of Socialists and Democrats in the European
Parliament, the ECR - European Conservatives and Reformists, the ALDE - Alliance of Liberals and

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Democrats for Europe, the Greens/EFA - Group of Greens/European Free Alliance, the GUE/NGL -
European United Left/Nordic Green Left, the EFDD - Europe of Freedom and Direct Democracy Group
and the NI - Non-attached Members - Members not belonging to any political group.

The number of MEPs per country is set by a European Council decision adopted unanimously on the EP
proposal. No country has fewer than 6 or more than 96 MEPs: Austria: 18, Belgium: 21, Bulgaria: 17,
Croatia: 11, Cyprus: 6, Czech Republic: 21, Denmark: 13, Estonia: 6, Finland: 13, France: 74, Germany:
96, Greece: 21, Hungary: 21, Ireland: 11, Italy: 73, Latvia: 8, Lithuania: 11, Luxembourg: 6, Malta: 6,
Netherlands: 26, Poland: 51, Portugal: 21, Romania: 32, Slovakia: 13, Slovenia: 8, Spain: 54, Sweden: 20,
United Kingdom (1): 73.

The EP's main functions are as follows:

 legislative power: the EP is now a co-legislator. For most legal acts, the legislative power is
shared with the Council, through the ordinary legislative procedure.
 budgetary power: the EP shares budgetary powers with the Council in voting on the annual
budget, rendering it enforceable through the President of Parliament's signature, and
overseeing its implementation
 power of control over the EU's institutions, in particular the Commission. The EP can give or
withhold approval for the designation of Commissioners and has the power to dismiss the
Commission as a body by passing a motion of censure. It also exercises a power of control over
the EU's activities through written and oral questions, put to the Commission and the Council. It
sets up temporary committees and committees of inquiry, whose remit is not necessarily
confined to the activities of EU institutions but can extend to action taken by EU countries in
implementing EU policies.

EUROPEAN COUNCIL

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Under the Treaty of Lisbon, the European Council became an EU institution. The treaty also
created the new position of the President of the European Council. In late 2014, Donald Tusk
was elected its president for a period of two and a half years.

Comprising the Heads of State or Government of the EU countries, it meets at least 4 times a
year and includes the President of the European Commission as a full member.

The European Council's role is to provide the impetus, general political guidelines and priorities
for the EU's development (Article 15 of the Treaty on European Union - TEU).

It does not exercise any legislative function. However, it may be consulted on criminal matters
(Articles 82-83 of the Treaty on the Functioning of the European Union - TFEU) or on social
security matters (Article 48 of the TFEU) where an EU country opposes a legislative proposal in
these areas.

Its decisions are taken by consensus or, where so provided by the treaties by unanimity,
qualified majority or simple majority. The conclusions of European Council proceedings are
published after each meeting.

COUNCIL OF THE EUROPEAN UNION

The Council of the European Union (‘Council’) is one of the EU's main decision-making bodies. Its
meetings are attended by ministers from the 28 EU countries (1), and it is the institution where
these countries adopt laws and coordinate policies. The Council's headquarters are in Brussels,
but some of its meetings are held in Luxembourg. Sessions of the Council (except for Foreign
Affairs Council) are convened by the rotating presidency, which sets the agenda.

The Council meets in 10 configurations, bringing together the relevant ministers from EU
countries: General Affairs; Foreign Affairs; Economic and Financial Affairs; Justice and Internal
Affairs; Employment, Social Policy, Health and Consumer Affairs; Competitiveness; Transport,
Telecommunications and Energy; Agriculture and Fisheries; Environment; Education, Youth and

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Culture. The ‘General Affairs’ Council coordinates the work of the different Council formations,
with the Commission’s help.

Decisions are prepared by the Committee of Permanent Representatives of the EU countries

(Coreper), assisted by working groups of national government officials.

The Council, with the European Parliament, acts in a legislative and budgetary capacity. It is also
the lead institution for decision-making on the common foreign and security policy (CFSP), and
on the coordination of economic policies (intergovernmental approach), as well as being the
holder of executive power, which it generally delegates to the Commission.

In most cases, the Council's decisions, based on proposals from the Commission, are taken
jointly with the European Parliament under the ordinary legislative procedure. Depending on
the subject, the Council takes decisions by simple majority, qualified majority or unanimity,
although qualified majority is more widely used (agriculture, single market, environment,
transport, employment, health, etc.).

EUROPEAN COMMISSION

Established in 1957, the European Commission now comprises 28 Commissioners including its
President. It acts in the EU's general interest with complete independence from national
governments and is accountable to the European Parliament.

It has the right of initiative to propose laws in a wide range of policy areas. In the fields of justice
and home affairs, it shares a right of initiative with EU countries. Like the European Parliament
and the Council, EU citizens may also call on the Commission to propose laws by means of the
European Citizens' Initiative.

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 The Commission has the right to adopt non-legislative acts, in particular delegated and
implementing acts, and has important powers to ensure fair conditions of competition between
EU businesses.

The Commission oversees the implementation of EU law. It executes the EU's budget and
manages funding programmes. It also exercises coordinating, executive and management
functions, as laid down in the Treaties. It represents the EU around the world in areas not
covered by the common foreign and security policy, for example in trade policy and
humanitarian aid.

The Commission comprises Directorates-General (departments) and Services which are mainly
located in Brussels and Luxembourg.
COURT OF JUSTICE OF THE EUROPEAN UNION

The Court of Justice of the European Union (CJEU) was first created in 1952. The Treaty of Lisbon
added to its jurisdictional scope. The CJEU comprises the following 2 branches.

 The Court of Justice: this court continues to give preliminary rulings, hear some actions against
EU institutions brought by EU countries and take appeals from the General Court. It now also
gives rulings in the area of freedom, security and justice and makes decisions on police and
judicial cooperation in criminal matters and issues arising from the Charter of Fundamental
Rights.
 The General Court: this court has jurisdiction to hear actions against EU institutions brought by
citizens and, in some instances, by EU countries. It also gives rulings in cases on employment
relations between the EU institutions and their civil servants.
EUROPEAN CENTRAL BANK (ECB)

The European Central Bank (ECB) is the central bank of the euro area and an EU institution
located in Frankfurt am Main, Germany. Together with the euro area national central banks, it
forms the Eurosystem, which conducts monetary policy in the euro area. Its primary objective is
to maintain price stability, i.e. to safeguard the value of the euro. In addition, the ECB, in

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cooperation with the national supervisors, carries out banking supervision in the euro area and
in other participating Member States within the Single Supervisory Mechanism (SSM).

COURT OF AUDITORS
The Court of Auditors, based in Luxembourg, was established in 1975. It is the EU's independent
external auditor and financial watchdog. It operates according to rules laid down in the Treaty
on the Functioning of the EU (Articles 285-287).

It comprises 1 member from each EU country. The members are appointed for 6 years
(renewable). They appoint the President, whose mandate is for 3 years (renewable). All
members must perform their duties in the general interest of the EU and in complete
independence.

The Court checks that EU revenue and spending (including that of bodies created by the EU and
external bodies managing EU funds) is legal and regular. It ensures that financial management

Unit 11
Entrepreneurship in the European Union

Europe’s economic growth and jobs depend on its ability to support the growth of
enterprises. Entrepreneurship creates new companies, opens up new markets, and
nurtures new skills. The most important sources of employment in the EU are Small and
Medium-sized Enterprises (SMEs). The Commission’s objective is to encourage people
to become entrepreneurs and also make it easier for them to set up and grow their
businesses.

What is entrepreneurship?
Entrepreneurship is an individual’s ability to turn ideas into action. It includes creativity,
innovation, risk taking, ability to plan and manage projects in order to achieve objectives.
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 Challenges faced by entrepreneurs in Europe
Only 37% of Europeans would like to be self-employed, compared to 51% of people in
the US and China. Some of the challenges to be tackled include:

 education should offer the right foundation for an entrepreneurial career

 difficult access to finance and markets
 difficulty in transferring businesses
 the fear of ‘punitive’ sanctions in case of failure
 burdensome administrative procedures

The entrepreneurial generation

The EU clearly seems to be doing its homework, but has it really ignited an entrepreneurial
culture? Apparently, yes. When taking a look at the capital cities of several big European
nations as well as some smaller nations, an increase in entrepreneurial activity is undoubtedly
noticeable.

Valuer, an AI-powered platform for finding early-stage startups for accelerators and
investors, has just released a ranking of the 50 best cities for startups. Surprisingly, the
ranking is mainly dominated by European cities, as the top 10 features six metropoles from
the European continent.

The Entrepreneurship 2020 Action Plan

In an attempt to tackle the devastating effects of the world economic crisis in 2008 on
entrepreneurship, the EU established the Entrepreneurship 2020 Action Plan in early 2013.
The initiative aims to reignite Europe’s entrepreneurial spirit as well as to clear existing
hurdles for European entrepreneurs.

To achieve these aspiring goals, the European Commission identified three main objectives.

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First, proper education for and from entrepreneurs should be made widely available in
current education systems. This includes not only the sharing of ideas, knowledge and
experience but also exchanging best practices among different nations, companies and
business owners. Besides, the EC also promised to give access to practical experience
through developing models and projects with a focus on EU standards.

Germany’s capital Berlin, which is leading the list, is often described as a city with relatively
low living expenses and an extraordinary ecosystem for startups. As Matt Cohler, a tech
venture capitalist and co-founder of Facebook, once said in a guest post on TechCrunch: “I
believe Berlin has the best shot in the Western world outside of Silicon Valley at becoming a
place with a true tech startup ecosystem.”

Additionally, the World Economic Forum shed light on further fascinating developments in a
report in 2016. According to the white paper, Europe experienced a substantial increase in
Entrepreneurial Employee Activity -- also known as intrapreneurship. The term refers to
employees drafting and realizing new ideas within corporations, instead of opening their own
businesses. As hinted in the study, Europe has the world’s highest number of EEA, adding up
to 40 percent of the whole entrepreneurial activity.

Entrepreneurship from the European Union perspective

The Lisbon strategy and Europe 2020 strategy assume that SMEs considerably contribute to making
the European Union a smart, sustainable and inclusive economy1 . According to the Report of the
Enterprise Directorate General of the European Commission on Benchmarking the Administration of
Business Start-ups from January 2002, entrepreneurs as “agents of change” respond to new
opportunities, face risk-taking activities and, as a result, contribute to the economic development
and create new sources of wealth. Entrepreneurial activity is measured by the rate of new company
formation, the number of people with a propensity towards self-employment or the level of total
entrepreneurial activity provided by The Global Entrepreneurship Monitor. Entrepreneurship in
Europe is discussed in relation to small and medium-sized enterprises (SMEs) which are entities

107
 employing fewer than 250 employees and whose annual turnover may not exceed EUR 50 million
and the annual balance sheet – EUR 43 million. SMEs are classified as micro-enterprises (fewer than
10 employees), small enterprises (10–49 employees) and medium enterprises (50–249 employees).

Therefore, the European Union aims at exploiting entrepreneurial potential by developing an

attractive business and legal environment, promoting entrepreneurial values and mitigating the fear
of risk-taking. The Small Business Act for Europe fosters the principle of promoting SMEs (Think
small first principle) under which the EU suggested the following legislative proposals to create an
attractive business environment for small businesses: –

 General Block Exemption Regulation on State Aids (GBER),

 – regulations concerning the Statute for a European Private Company (SPE)

 – directive on reduced VAT rate,

 – fostering entrepreneurial talents among young people,

 – giving bankrupt entrepreneurs a second chance,

 – promoting e-government and one-stop-shop solutions,

 – using the code of Best Practice, – increasing access to risk capital, microcredit and
mezzanine finance,
 – ensuring timely payments in commercial transactions,

 – facilitating SMEs’ access to patents and trade marks,

 – promoting and upgrading all forms of innovation,

 – encouraging investment in research and SMEs participation in R&D support programmes,

– clustering and active intellectual property management by SMEs,
 – exploiting the opportunities for green markets and increased energy efficiency,

Become an Entrepreneur Europe Contributor

Entrepreneur Europe publishes original articles from entrepreneurs about what it's like
to start and run a company in Europe or their country of origin.

The types of articles we're looking for include:

108
- Personal stories about starting and growing your business in Europe, especially how
that experience might differ from other parts of the world.
- What is the entrepreneurial environment like in your country, and how does that differ
from other parts of Europe or other parts of the world?
- Analysis of upcoming regulatory issues that impact European entrepreneurs and small
business owners.
- Other timely business topics that European entrepreneurs and business owners
should know about.

Pitches that do not fall under one of these categories will not be considered.

Entrepreneurship in the EU: policies and trends

SMEs constitute the backbone of the European economy and the generation of
innovation depends on the prosperity of the SMEs (Szabo and Herman 2012). The
contributions made by SMEs, in terms of employment opportunities and growth, are
crucial for the EU’s ongoing economic welfare, and as consequence there is a need
for a European entrepreneurial community (Elert, Henrekson, and Sanders 2019).
This is so that the countries and members can overcome the barriers created by the
financial crisis. As the competitiveness of the EU across global markets depends
upon the success and expansion of the SME community, the challenges faced by the
EU’s policies must be overcome in order to promote innovation and for the EU to
maintain its global competitiveness (World Economic Forum 2014).
On 28 October 2015, the European Commission presented a new Single Market
Strategy to deliver a deeper and fairer Single Market that will benefit both
consumers and businesses. One of the four pillars of the Single Market Strategy
focuses on promoting better opportunities for businesses and consumers. Against
this backdrop, the Com-mission needs direct feedback from European startups and
SMEs on what could help them over-come barriers that prevent them from
growing, innovating, and internationalizing. To this end, the main objective of this
report is to help prepare ground for informed policy-making on startup and scale up
support measures in the EU. To achieve this objective, this report does four things:

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 1 Provide an overview of definitions related to SMEs, startups, scales, and high-
growth firms
2 Review how entrepreneurship changes in the Digital Economy
3 Review entrepreneurship policies against this background, highlighting emerging
policy needs
4 Provide a specific focus on entrepreneurial ecosystems as an emerging challenge
for entrepreneurship policy

UNIT 12

EU trade policy AND Market access

European Union Trade Policy

This contribution provides an overview of the evolution of EU policy, a summary of the EU’s positions on
key issues in international trade and a summary of the decision making procedures in EU external trade
policy after the adoption of the Lisbon Treaty. The aim is of course to provide an overview and sufficient
references for readers to follow up on the various aspects of the topic.

The evolution of EU trade policy

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 The Treaty of Rome granted the European Economic Community (EEC) exclusive competence for
Common Commercial Policy (CCP).1 The creation of a customs union required the adoption of a
common external tariff and thus a single EEC position on tariffs. The customs union also created a
collective market power that exceeded that of the individual member states. As a result the EEC was
able to achieve some important offensive interests during the Kennedy Round (1963-66) of the General
Agreement on Tariffs and Trade (GATT), notably a reduction in US tariffs (Duer, 1998). A desire to show
solidarity in building Europe and a decision making process that enabled member states to veto trade
concessions also enabled the EEC to hold its defensive positions. These were to retain the preference
margin for EEC producers the customs union would create and to protect the fledgling Common
Agricultural Policy (CAP). In the 1970s the US again led the charge in GATT. Facing a deteriorating
balance of trade and what it saw as ‘unfair’ trade practices of the Japanese and Europeans in supporting
their national industries the US pushed for multilateral controls for subsidies, an opening of government
procurement markets and disciplines covering technical regulations and standards. The US had no active
industrial policy, decentralised public purchasing and standards setting the US viewed the coordination
of such instruments to favour national companies in other countries as unfair. But European Community
(EC) member states pursued explicit (France and Britain) or implicit (Federal Republic of 1 Germany)
national champion strategies. The implications for EC trade policy were however, the same, namely the
defence of the policy space to enable these national policies to be continued.

Why is EU trade policy important in a globalised economy?

Economic globalization is characterized by an increase in international trade and a growing

interdependence of economies at a global level. The EU's trade policy is a central tool to respond
to the challenges posed by globalization and to turn its potential into real benefits.

Having a trade policy at EU level rather than at a national level allows for more weight in
bilateral negotiations and in multinational bodies such as the World Trade Organisation (WTO).
The main goal of the EU's trade policy is to increase trading opportunities for European
companies by removing trade barriers such as tariffs and quotas and by guaranteeing fair
competition.

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How does the trade policy work?

The EU's trade policy covers the trade in goods and services, foreign direct investment,
commercial aspects of intellectual property, such as patents, and public procurement.

It is composed of three main elements:

 Trade agreements with non EU-counties to open new markets and increase trade
opportunities for EU companies
 Trade regulation to protect EU producers from unfair competition
 EU membership of the World Trade Organisation, which sets international trade rules.
EU countries are also members, but the European Commission negotiates on their behalf.

Trade agreements
Trade agreements are negotiated with non-EU countries to ensure better trading
opportunities. There are different types:

 Economic partnership agreements, with developing countries from the Caribbean, Pacific
and Africa
 Free trade agreements with developed countries
 Association agreements that strengthen larger political agreements such as the Union for
the Mediterranean with Tunisia

EU trade regulation

The EU also has rules to protect European companies from unfair trade practices. Such
practices can include dumping or subsidies in order to make prices artificially low
compared to European products. European products could also face customs barriers or
quotas. If trade disagreements cannot be resolved, they can lead to a trade war.

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The EU and the WTO
The World Trade Organisation (WTO) is made up of more than 160 members
representing 98% of world trade. It aims to keep the world’s trading system predictable
and fair by agreeing and monitoring common rules for trade between nations
The EU is a strong supporter of the WTO and has played a central role in developing the
international trading system.
It is closely involved in WTO multilateral trade talks. The European Parliament closely
follows such negotiations and adopts reports assessing their state. The current round of
WTO negotiations - the Doha cycle (2001) - has stalled due to a lack of agreement on key
policies such as agriculture.The EU also uses the WTO’s ruling and enforcement powers
when there is a trade dispute and it is one of the biggest users of the dispute settlement
system.Foreign direct investment in the EU is also regulated. In February 2019, MEPs
approved a new screening mechanism to ensure that foreign investment in strategic
sectors do not harm Europe’s interests and security.
How is the EU's trade policy decided?

Trade policy is an exclusive EU competence, meaning the EU as a whole, rather than

individual member states, has the power to legislate on trade matters and conclude
international trade agreements (article 207 of the Treaty on the Functioning of the
European Union - TFEU).

The Treaty of Lisbon (2007) made the European Parliament a co-legislator on trade and
investment with the Council, representing the member states. International trade
agreements can only enter into force if the Parliament votes in favour of them. The
Parliament can influence negotiations by adopting resolutions.
New challenges for the European Union's trade policy
1. A federal European policy

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The EU's trade policy is one of the most elaborate elements of European integration. It
owes its efficacy to its federal structure: a single negotiator for the 28 Member States and
512 million economic actors[1]. Its strength also lies in the fact that the concept is shared.
Despite their diversity, notably between the more and less liberal, the Member States
succeeded quite early in finding a shared concept of the trade policy vis-à-vis the outside
world: this was defined by Pascal Lamy, the then European Commissioner for Trade in
the 2000's: "trade opening with rules, in view of harnessing globalisation". This position
lies within a triangle, the components of which are: openness, rules and competition.

We might note the distinction from the simple idea of free-trade: the Union is not driven
by an ideological vision of free-trade. It seeks reasoned opening of markets to the benefit
of Europe's economies, together with rules that are deemed vital to sustainable trade. The
rationale that aims to harness globalisation was new, when we recall that globalisation
was then often considered a political option open to questioning, rather than a reality to
be addressed; moreover, most economists and decision makers ignored the social
downsides of globalisation, except, indeed, for a few famous names such as Krugman[2],
Stiglitz, Rodrik and Summers in the USA.

The European approach to trade policy has changed little since then, as illustrated by the
position of the current Commissioner for Trade, Cecilia Malmstrôm, expressed during
her 2014 hearing before the European Parliament: 'Open markets are not an end in
themselves. They are just a means to achieve an end"[3].

This policy includes a notable commitment towards the multilateral framework and
concern to support developing countries in their opening to trade. As the years have
passed, via these trade agreements, effective commitments to the implementation of the
EU's values have been added: human rights, environment, consumer protection, food
safety etc ...Since the trade policy is one of the Union's main levers of "hard power" it is
quite normal for trade to have become an instrument used to promote goals in other areas,
notably in external relations. It is the spirit of the Lisbon Treaty that lays down that "the

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common trade policy shall be conducted in the context of the principles and objectives of
the Union's external action." (art. 207)

2. The EU the trade policy' performance

The European Union is an open economy[4], which cannot do without world trade. It is
also a major player in world trade[5]: it is the leading trade region covering 16.72% of
the world's trade in goods and services in 2017.[6] It is a major exporter of manufactured
goods and services: 2nd exporter of manufactured goods covering 15.2% of world
exports in 2017; and the leading exporter of services, covering 22.2% of world exports in
2017.

The latter achievement is vital, given the place of services in the overall industrial output
and the sector's potential. A major share of exports of manufactured goods embeds
services such as R&D, design, legal services, marketing and distribution, i.e. overall 21%
of world exports and 28.3% of the Union's exports. If we include here the added value of
services, around 50% of all international trade comprises the exchange of services.

However, Britain's secession is likely to cause a setback to this bright attainment, which
is already declining; the European Union has lost 2.5% of its world market share between
2005 and 2015 and this trend is due to continue: from 19% to 12% by 2035, according to
the WTO. The EU's weight in the world economy is also due to decrease by 28% over the
period 2012-2018 to 25% in 2035. This trend shows the harsh nature of competition in
hyper-globalisation, notably marked by a rise in new emerging players, mainly China.

European positions are still strong in high tech and middle of the range products (64% of
the Union's exports) with moderate erosion in low-end products and services[7]. This
reassuring situation should however not hide the strategy of a rapid upmarket move
adopted by our emerging and emerged competitors. China sees itself as the world's
leading economic power by 2049 and is providing itself with the financial means via an
investment fund of 150 billion $.

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Another reassuring - although rarely mentioned - fact: the effect of external trade in terms
of job creation in Europe represents around 36 million jobs, i.e. 1 worker in 7 works for
the export industry[8]. One should acknowledge though that trade also destroys jobs,
although few exact figures are available; the opening up to Chinese imports caused a
major economic shock on developed economies notably in Europe and the USA, even
though the Chinese market is a source of trade opportunities, and therefore of growth for
developed economies. However, trade is far from being the main origin of job losses:
technological progress is, to an 80% degree, also to blame.

Since 2006, the European Union has developed an offensive approach to globalisation via
bilateral trade agreement negotiations with its main partners. These agreements have a
dual goal: the opening of markets, notably via the removal of customs duties and non-
tariff barriers, to the benefit of European companies; the second goal is the adoption of
rules designed to render trade secure and protect economic operators, for example the
rules governing intellectual property or consumer protection. To these goals we might
add a normative agenda that becomes manifest in each agreement in the shape of a
"sustainable development chapter" notably comprising common commitments regarding
workers' rights and the environment. A great many agreements have been concluded with
some 180 countries and territories. The share of preferential trade agreements in the
Union's commercial transactions rose by 25% prior to 2006 to 40% at present.

These are so-called "deep and comprehensive" free-trade agreements, that aim to achieve
a high degree of trade opening, including in the area of services, as well as an in-depth
regulatory rapprochement with European legislation in areas linked to trade. The main
consequence of this development in trade negotiations towards sophisticated rules and
commitments has been an increasingly intrusive trade policy in the economy and
domestic issues, and even in our societal choices[9]. Hence trade issues, which did not
really interest many people in the 1990's, have become an integral part of domestic
political debates, arousing high interest in public opinion. This invasive aspect of trade
policy is not due to Europe, but to hyper-globalisation, as emphasized by Dani Rodrik in

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several works[10]: with hyper-globalisation since the 1990's blurring the limits between
domestic and world economies, "Domestic economic management was to become
subservient to international trade and finance rather than the other way round".

3. Lack of understanding and democratic deficit

Little explanation is required to understand that this spectacular development, which also
entails States losing control, is the cause of multiple, and sometimes robust contestation.
How should we manage economic globalisation, as the economic and political borders no
longer match? Europe's experience in this regard is of interest on two counts: its
preference for the multilateral approach and its experience of regional integration.

Very early on the EU trade policy gave preference to the multilateral approach, (the latter
involving the establishment of rules via international organisations, based on the
fundamental principle of non-discrimination between the participants). The European
Union has been at the forefront in devising approaches to enlarged governance, which
materialized in its preferential commitment to the WTO. It was only in 2006, after the
WTO stalemate that the EU turned to bilateral negotiations, without however forsaking
the multilateral approach[11]. It should be recalled that the European Treaties express a
preference for collaborative and collective governance: article 21 TEU, notably suggests
that the Union "promote multilateral solutions to common problems." The current
collapse of multilateralism, notably under the influence of the USA, sets a specific
challenge for Europe as "multilateralism is in the EU's DNA" (Z.Laïdi)

Moreover the European Union involves an in-depth - albeit incomplete –regional

integration which is an example of the potential and limits of world governance. Pascal
Lamy provided a convincing explanation: "The EU is the most innovative approach to
governance that we can find in today's world. It is in fact a laboratory of global
governance: It combines market opening with the necessary regulation in the economic,
social and environmental field, it seeks to establish a balance between competition and

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co-operation and it has the necessary institutional arrangements to allow for the
development, adoption, implementation and control of rules".

One has to admit the well-known limits of this integration model: the incomplete internal
market (insufficient harmonisation of services, a lack of industrial, political and social
coordination), weaknesses in the design of the euro and the incomplete European
Monetary Union, the absence of a common energy policy, the lack of any external policy
and the lack of a migration policy.

This leads us to the growing mistrust of citizens regarding the European institutions,
notably to the recurrent complaint about a "democratic deficit". The latter naturally
affects the trade policy, as the passionate controversies around the recent free-trade
negotiations with the USA (TTIP, abandoned by President Trump), and the CETA
concluded with Canada illustrate.

Some specific causes can be attributed to the trade policy: the negative impact of trade
openness on those losing out on globalisation is certainly a critical aspect, as the negative
impact of open trade in developed economies has not been compensated for adequately
by social policies. We might also note the feeling that the trade policies lack
"legitimacy", since they affect regulatory issues, for which public opinion does not
recognise the necessary legitimacy of the trade negotiators, and concerns linked to the
protection of European standards and public services.

But this contestation goes beyond trade policy in that the negative effects of globalisation
and the related identity crisis have barely been addressed. A relatively well-known
process is leading to increasing scepticism regarding the ability of democracies to rise to
these challenges and a mistrust of political leaders and experts, especially if they work for
supranational bodies. Withdrawal is often the ultimate response by citizens confronted
with a world they perceive as a threat, because they no longer feel protected either
economically or culturally.

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Paradoxically for the European Union: its credibility to manage globalisation is under
challenge, though it seemed well placed to harness it. Its failings notably relate to its
perceived inability to provide a clear identity in a globalised world, the uncertainty
associated with its approach to world affairs, its perceived inability to protect its citizens
against the negative impact of globalisation and to manage the migratory crisis (a by-
product of globalisation).

4. New challenges

Beyond the contestation of economic globalisation, the EU trade policy faces a series of
challenges to which it will have to adapt.

The multilateral order in crisis

Let us look at the weakening of the multilateral order, which has been the foundation of
world governance since the Second World War. Beyond the harsh reaction to
globalisation, opposition to the multilateral approach has emerged, including within the
Union. And the post-WWII order is progressively unravelling, notably in trade exchanges
where the WTO is threatened by stalemate. This development affects Europe in
particular, since it has been built on the rule of law and has always supported rules-based
international relations. In response to this development the EU has reasserted its
commitment to a multilateral approach. This position has become manifest in trade via an
active policy (alongside Japan and the USA) for the reform of the WTO.

America First and the trade war

The "America First" approach adopted by the current American administration is a

crucial challenge especially as the USA was a founding member of the post-war world
governance system. The Trump administration's approach rests on a preference for
bilateral action, in which it hopes to achieve the best results by exercising pressure on its
partners. In Zaki Laïdi's view "one of the key goals of the Trump administration is to

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replace the rules-based system with one solely based on results. In Trump's eyes rules and
principles are irrelevant; what counts are results (or at least good marks). The ends
always justify the means...

The American President's decision to implement a protectionist policy and to engage in

trade wars challenges open trade, as well as multilateralism. Europe's approach consists
in a firm yet measured response to defend its interests, in view of containing protectionist
initiatives. It is committed to reject any kind of confrontation and to avoid a trade war
with unpredictable consequences. In this conflict the EU sticks to the rule of law and
responding pragmatically, whilst strengthening its trade defence mechanisms, within the
WTO's rules.

Europe's response is threefold: launch judicial procedures against the USA at the WTO;
target a list of US products with additional customs duties; launch an investigation into
the possible implementation of safeguard measures to support European steel and
aluminium markets from the damage caused by additional imports that now enter the
Union following the closing of the American market. Forgoing stronghanded measures is
not as spectacular and possibly less effective in the short-term, but remaining within the
rules is a guarantee of longer-term security. However, Economic operators are depending
on a short-term agenda, Therefore this situation calls for a reform of the WTO, to
address the lack of emergency litigation procedures. In the WTO Dispute Settlement
Mechanism.

5. A secure trade opening strategy

The European trade policy pursues its deployment in its two traditional directions:
continued bilateral open trade negotiations and reform the WTO to defend the
multilateral approach.

The Free Trade Agreement with Japan (JEFTA)[14].

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This agreement, which entered into force on 1st February 2019 provides significant
economic benefits. It is a deep, comprehensive agreement covering tariff reductions and
ambitious commitments in terms of standards and rules and one of the first with an
economy of this size. Japan will lift most of its customs duties on European food products
(wine, cheese, pork), whilst European customs duties on Japanese cars will be
progressively eliminated. Both sides agreed to the full liberalisation of industrial
products, which represent the removal of nearly one billion euros in customs duties.

The EU-Japan agreement naturally includes a full chapter on trade and sustainable
development. One issue requires consideration in the case of Japan, which has just started
hunting whales again despite a moratorium. Since whaling and the trade of whale meat is
prohibited in the EU this is not a trade policy issue. The European trade agreements
cannot refer to activities that are banned in the Union and the latter does not negotiate
commercial concessions for these products. The European Union therefore addresses
whaling in coordination with its partners, who defend the same position under the
International Whaling Committee, the most effective body to counter whaling, that
initially campaigned for the moratorium.

The conclusion of the agreement with Japan clearly sent out a message of trade opening
in response to American protectionism. Likewise, Japan took the lead of the regional
partnership with 11 other countries following the departure of the USA from the Trans-
Pacific Partnership.

The Agreement with Canada (CETA)[15]

This bilateral agreement which entered into force in September 2017 is one of the most
ambitious ever negotiated to date. What was agreed: the abolition of 99% of customs
duties, the opening of public procurement, greater access to the services market
(important for the European economy) and cooperation between European and Canadian
standardization agencies. As with every trade agreement, the EU achieved the protection
of Geographical Indications (important for the European agri-food industry). A product

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that refers to a geographical indication (Champagne, Parma Ham etc ...) must exclusively
originate in the regional production of reference. This rule is law in the Union, but not in
the international context (it is different in the domains in which there is a multilateral
rule, notably of the WTO). Therefore, the protection of Geographic Indications has to be
negotiated with partner countries in each trade agreement. Hence, Parma Ham, of which
Canada is a major producer, will have to modify its labelling to respect the brand of
original ham, which is imported from Parma in Italy. Amongst the 143 protected
geographic indications by the CETA, France was not neglected, with Reblochon, the
Agen prunes and many other products.

What are the aims of EU trade policy?

While its specific direction is subject to political agreement, in recent decades, EU trade policy
has largely been characterised by a commitment to more open and free trade, which is
considered to lead to growth and jobs. Since the 1980s, the Commission has broadly pursued
market access and trade liberalisation, both in terms of tariffs and NTBs, with the exception of
trade defence, even if the specific aims are more nuanced in different areas of trade policy. 47
Reasons for this suggested in academic literature include Member States' delegation of
liberalisation to the supranational level, 48 bureaucratic expansionism, business pressures, and
genuine beliefs in the 'win-win' nature of international cooperation and trade. 49 EU trade
policy also aims to abide by the precautionary principle, as enshrined in the TFEU. This means
that the EU prefers to play on the safe side where there are grounds for concern about
dangerous effects on the environment, human, animal plant life, or health. Within these broad
principles, specific objectives of EU trade policy are set out in the most recent Commission
strategy or communication for trade, and are subject to political change. In 2006, in the context
of the suspension of the WTO Doha Round, the Global Europe: Competing in the world50
communication highlighted the need for EU trade policy to be flexible so as to adapt to the
rapidly changing environment, and initiated a period of concentrated focus on FTAs stretching
beyond the EU's neighbourhood or former colonies. It also suggested that the new FTAs would
need to be 'comprehensive and ambitious in coverage, aiming at the highest possible degree of
trade liberalisation, including in services and investment'. This has resulted in the development
of a new generation of FTAs, which tackle NTBs and regulatory issues, as well as the traditional
market access, in a more concentrated manner. A key rationale behind FTAs is to spread EU

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 regulatory practices, standards and norms to partner countries and to ensure that trade takes
place on the basis of rules.

Unit 13

Market access in International trade

Market access (international trade) describes the possibility of an enterprise or

a country to sell their goods and services across borders and enter a foreign market.
According to the World Trade Organization (WTO), "market access for goods in the
WTO means the conditions, tariff and non-tariff measures, agreed by members for the
entry of specific goods into their markets."[1] Gaining market access is an indispensable
step towards deepening trade relations. However, market access is not synonymous with
free trade because the possibility to enter a foreign market is in most cases conditioned by

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certain requirements, whereas free trade implies a perfect state in which goods and
services can be circulated across borders without such barriers. Indeed, tackling market
access restrictions proves to be a more achievable goal for trade negotiations as compared
to free trade.[2]

Market access concessions and limitations to market access differ greatly between trade
in goods and trade in services. While market access for goods mainly involves measures
at the border such as customs duties or quantitative restrictions, market access for
services relates more to the application of domestic regulation behind the border.
Moreover, in a world of proliferating regionalism, preferential market access for goods
and services also have distinctive characteristics from non-preferential market access
within the multilateral trading system.
Market Access ram in Merchandise Trade
Market access in the multilateral trading system
Market access for goods imported into the market of a WTO Member may be impeded or
restricted in various ways. The most common barriers to market access are customs
duties, quantitative restrictions, technical requirements, lack of transparency of national
trade regulation, unfair application of customs formalities and procedures. Considering
their diversity, there must be different rules to regulate these tariff and non-tariff barriers
to market access.[4]

WTO law provides three main groups of rules on market access: rules governing customs
duties (tariffs), rules governing quantitative restrictions (quotas), and rules governing
other non-tariff barriers such as technical regulations and standards, sanitary and
phytosanitary measures, customs formalities and government procurement practices. In
addition, rules concerning transparency and “justiciability” are also included to ensure
effective market access.[5]

Customs duties

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The imposition of customs duties on imported goods is not prohibited under the General
Agreement on Tariffs and Trade (GATT), but the later encourages WTO Members to
gradually reduce customs duties for mutual benefit. Prior to a country's accession to the
WTO, it must negotiate with existing Members on tariff bindings, which will be listed
later in its Schedule of Concessions. According to Article II:1 of the GATT, whenever a
tariff binding exists for a certain product, the customs duties applied to such product must
not exceed the level at which they were bound.[6]

Quantitative restrictions

While customs duties are in principle not prohibited as long as they do not exceed the
bound rates, quantitative restrictions on trade in goods are generally forbidden.
According to Article XI:1 of the GATT, unless there is an exception, WTO Members are
not allowed to ban the importation or exportation of goods or to subject them to quotas.
[6]

Non-Tariff Barriers

Nowadays, for many products and many countries, non-tariff barriers to trade, such as
technical regulations and standards, sanitary and phytosanitary measures, customs
formalities and government procurement practices are becoming more important than
customs duties or quantitative restrictions.[7] Rules on non-tariff barriers are set out in a
number of GATT provisions (e.g., Article VIII on Fees and Formalities Connected with
Importation and Exportation) and several specific WTO agreements, particularly the
Agreement on Technical Barriers to Trade (the “TBT Agreement”)[8] and the Agreement
on the Application of Sanitary and Phytosanitary Measures (the “SPS Agreement”)[9].

TBT and SPS agreements basically prohibit measures which discriminate between “like”
imported and domestic products. In addition, the TBT Agreement also requires that
technical regulations are not more trade-restrictive than necessary to fulfill one of the
legitimate policy objectives mentioned in the Agreement. Whereas, the SPS Agreement

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requires that sanitary and phytosanitary measures are in line with scientific principles,
and there must be sufficient scientific evidence to apply these measures except when
these measures are maintained provisionally.

Transparency and justiciability

The requirement that Members shall publish all trade laws, regulations and judicial
decisions in order to allow governments and traders to have access to and become
acquainted with them is crucial to ensure effective entry to foreign markets. Likewise, the
obligation on Members to maintain or establish judicial, arbitral or administrative
tribunals in favor of a prompt, objective and impartial review of administrative decisions
affecting trade is also essential to guarantee security and predictability of market access.
These obligations are contained in several GATT provisions (such as Article X on
Publication and Administration of Trade Regulations). Recently, the Agreement on Trade
Facilitation has been concluded in order to clarify and make these obligations become
more enforceable.
Preferential market access
Preferential market access refers to the fact market opening commitments that go beyond
the WTO obligations, either because the exporting country of origin has an agreement to
establish a free-trade area (FTA) with the importing country, or because the latter has
accorded them special treatment by virtue of the former’s low level of development
and/or due to its adoption of certain policies to embrace sustainable development.

The formation of free-trade areas is considered an exception to the most favored nation
(MFN) principle in the WTO because the preferences that parties to an FTA exclusively
grant each other go beyond their accession commitments.[11] Although Article XXIV of
the GATT allows WTO Members to establish FTAs or to adopt interim agreements
necessary for the establishment thereof, there are several conditions with respect to free-
trade areas, or interim agreements leading to the formation of FTAs. According to Article
XXIV:8(b) of the GATT, “a free-trade area shall be understood to mean a group of two
or more customs territories in which the duties and other restrictive regulations of

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commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV,
XV and XX) are eliminated on substantially all the trade between the constituent
territories in products originating in such territories.”

The Decision on Differential and More Favorable Treatment, Reciprocity and Fuller
Participation of Developing Countries adopted by signatories to the GATT in 1979 (the
“Enabling Clause”) allows derogation to the MFN treatment in favor of developing and
least developed countries (LDCs).[12] It is the WTO’s legal basis for the Generalized
System of Preferences (GSP). Particularly, merchandise exports from LDCs benefit from
duty-free, quota-free market access, and from more favorable rules of origin.[13]

In order to gain preferential market access under these preferential trade arrangements,
goods must satisfy applicable rules of origin and obtain proofs of origin to indicate that
they are originating in an FTA partner country, or from a GSP beneficiary country. If
imported goods fail to comply with origin requirements, benefit will be denied, and the
goods will have to enter the importing market under non-preferential basis.

Market Access in Services Trade

Market access for services is by nature more complicated than that for goods. In the
realm of merchandise trade, market access basically concerns the reduction of border
measures as goods enter a foreign market. Whereas, in services trade, market access
involves "reducing government policy interventions which are less visible and may be
applied after a service supplier has entered the market."[14] These measures often take
the form of regulations directed at domestic policy objectives rather than external trade
policy objectives. Governments usually have little consideration of the impacts of such
interventions on market access for foreign services and service suppliers.Within the WTO
framework, the concept on market access for services and services suppliers is provided
for by Article XVI of the General Agreement on Trade in Services (GATS):

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Article XVI: Market Access

1. With respect to market access through the modes of supply identified in Article I, each
Member shall accord services and service suppliers of any other Member treatment no
less favorable than that provided for under the terms, limitations and conditions agreed
and specified in its Schedule

2. In sectors where market-access commitments are undertaken, the measures which a

Member shall not maintain or adopt either on the basis of a regional subdivision or on the
basis of its entire territory, unless otherwise specified in its Schedule, are defined as:

(a) limitations on the number of service suppliers whether in the form of numerical
quotas, monopolies, exclusive service suppliers or the requirements of an economic needs
test;

(b) limitations on the total value of service transactions or assets in the form of numerical
quotas or the requirement of an economic needs test;

(c) limitations on the total number of service operations or on the total quantity of service
output expressed in terms of designated numerical units in the form of quotas or the
requirement of an economic needs test;

(d) limitations on the total number of natural persons that may be employed in a
particular service sector or that a service supplier may employ and who are necessary for,
and directly related to, the supply of a specific service in the form of numerical quotas or
the requirement of an economic needs test;

(e) measures which restrict or require specific types of legal entity or joint venture
through which a service supplier may supply a service; and

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(f) limitations on the participation of foreign capital in terms of maximum percentage
limit on foreign shareholding or the total value of individual or aggregate foreign
investment.
Market Access Tools

ITC's Market Access Map enables users to analyse market access conditions applied all
over the world.
Market Access Map

Market Access Map is a versatile tool which provides information on applied customs
tariffs including MFN tariffs and preferences granted unilaterally and reciprocally in the
framework of regional and bilateral trade agreements. Users can find ad valorem
equivalents (AVEs) for non-ad valorem duties in order to compare tariffs across countries
and simulate tariff reduction scenarios. The application also covers tariff rate quotas,
trade remedies, rules of origin as well as corresponding documentation, bound tariffs of
WTO members, non-tariff measures (NTMs) and trade flows to help users prioritize and
analyse export markets as well as prepare for market access negotiations.

Rules of Origin Facilitator

The Rules of Origin Facilitator helps users to qualify to origin requirements to gain
market access to destination markets
The Rules of Origin Facilitator provides free and user-friendly access to ITC’s database
of rules of origin and origin-related documentation in hundreds of trade agreements. The
Facilitator is also combined with the huge tariff and trade agreements databases
underlying the Market Access Map, resulting in a unique market intelligence solution
enabling companies, particularly ones from developing countries, to benefit from trade
agreements worldwide. The Facilitator currently contains a data for more than 250 FTAs
applied by more than 190 countries. This database is gradually expanding with the

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 ultimate goal to cover over 400 FTAs and preferential schemes that are currently active in
the world.

The Facilitator aims to help small and medium sized enterprises to increase trade by
taking advantage of global trade opportunities in the form of low duty rates under trade
agreements. The tool can also be used by policymakers, trade negotiators, economists as
well as various other users. Any user can simply look for information on origin criteria,
other origin provisions, and trade documentation by entering the HS code of their
product.

Tariff Analysis Online

Tariff Analysis Online is a facility developed by the WTO to assist researching and
analyzing tariff data maintained in two WTO databases: the Integrated Database (IDB,
containing general information on applied tariffs and imports), and Consolidated Tariff
Schedules (CTS, including members’ binding commitments on maximum tariffs). The
information in this facility has been made available to the public since February 2010,
following a decision of the Market Access Committee which allowed public access to the
two databases.

Market Access needs good process, linking

 Value identification, based on payer customer insights

 Value creation through clinical and health economic outcomes and research (HEOR) data, and
 Value communication through the Value Proposition & Value Dossier to the R&D and
commercial 'decision gates'; what gets done when (early enough for consideration in clinical
study design

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Unit 14
Lobbying the Institutions

In politics, lobbying, persuasion, or interest representation is the act of lawfully

attempting to influence the actions, policies, or decisions of government officials, most
often legislators or members of regulatory agencies. Lobbying, which usually involves
direct, face-to-face contact, is done by many types of people, associations and organized
groups, including individuals in the private sector, corporations, fellow legislators or

131
government officials, or advocacy groups (interest groups). Lobbyists may be among a
legislator's constituencies, meaning a voter or bloc of voters within their electoral district;
they may engage in lobbying as a business. Professional lobbyists are people whose
business is trying to influence legislation, regulation, or other government decisions,
actions, or policies on behalf of a group or individual who hires them. Individuals and
nonprofit organizations can also lobby as an act of volunteering or as a small part of their
normal job. Governments often define and regulate organized group lobbying that has
become influential.

The ethics and morals involved with legally bribing or lobbying are complicated.
Lobbying can, at times, be spoken of with contempt, when the implication is that people
with inordinate socioeconomic power are corrupting the law in order to serve their own
interests. When people who have a duty to act on behalf of others, such as elected
officials with a duty to serve their constituents' interests or more broadly the public good,
can benefit by shaping the law to serve the interests of some private parties, a conflict of
interest exists. Many critiques of lobbying point to the potential for conflicts of interest to
lead to agent misdirection or the intentional failure of an agent with a duty to serve an
employer, client, or constituent to perform those duties. The failure of government
officials to serve the public interest as a consequence of lobbying by special interests who
provide benefits to the official is an example of agent misdirection.[1] That is why
lobbying is seen as one of the causes of a democratic deficit.[2]
Etymology
In a report carried by the BBC, an OED lexicographer has shown that "lobbying" finds its
roots in the gathering of Members of Parliament and peers in the hallways ("lobbies") of
the UK Houses of Parliament before and after parliamentary debates where members of
the public can meet their representatives.[3]

One story held that the term originated at the Willard Hotel in Washington, DC, where it
was supposedly used by President Ulysses S. Grant to describe the political advocates
who frequented the hotel's lobby to access Grant—who was often there in the evenings to
enjoy a cigar and brandy—and then tried to buy the president drinks in an attempt to

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influence his political decisions.[4] Although the term may have gained more widespread
currency in Washington, D.C. by virtue of this practice during the Grant Administration,
the OED cites numerous documented uses of the word well before Grant's presidency,
including use in Pennsylvania as early

The term "lobbying" also appeared in print as early as

Other letters from Washington affirm, that members of the Senate, when the compromise
question was to be taken in the House, were not only "lobbying about the
Representatives' Chamber" but also active in endeavoring to intimidate certain weak
representatives by insulting threats to dissolve the Union.

'Lobbying' (also 'lobby') is a form of advocacy with the intention of influencing decisions
made by the government by individuals or more usually by lobby groups; it includes all
attempts to influence legislators and officials, whether by other legislators, constituents,
or organized groups.
A 'lobbyist' is a person who tries to influence legislation on behalf of a special interest or
a member of a lobby.

Overview
Governments often[quantify] define and regulate organized group lobbying as part of
laws to prevent political corruption and by establishing transparency about possible
influences by public lobby registers.

Lobby groups may concentrate their efforts on the legislatures, where laws are created,
but may also use the judicial branch to advance their causes. The National Association
for the Advancement of Colored People, for example, filed suits in state and federal
courts in the 1950s to challenge segregation laws. Their efforts resulted in the Supreme
Court declaring such laws unconstitutional.

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 Lobbyists may use a legal device known as amicus curiae (literally: "friend of the court")
briefs to try to influence court cases. Briefs are written documents filed with a court,
typically by parties to a lawsuit. Amici curiae briefs are briefs filed by people or groups
who are not parties to a suit. These briefs are entered into the court records, and give
additional background on the matter being decided upon. Advocacy groups use these
briefs both to share their expertise and to promote their positions.

The lobbying industry is affected by the revolving door concept, a movement of

personnel between roles as legislators and regulators and roles in the industries affected
by legislation and regulation, as the main asset for a lobbyist is contacts with and
influence on government officials.[citation needed] This climate is attractive for ex-
government officials.[citation needed] It can also mean substantial monetary rewards for
lobbying firms, and government projects and contracts worth in the hundreds of millions
for those they represent.

The international standards for the regulation of lobbying were introduced at four
international organizations and supranational associations:
1) the European Union;
2) the Council of Europe;
3) the Organization for Economic Cooperation and Development;

4) the Commonwealth of Independent States.

Methods

In 2013, the director general of the World Health Organization, Margaret Chan, illustrated the
methods used in lobbying against public health:[16]

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Efforts to prevent non communicable diseases go against the business interests of powerful
economic operators. In my view, this is one of the biggest challenges facing health promotion.
[...] it is not just Big Tobacco anymore. Public health must also contend with Big Food, Big
Soda, and Big Alcohol. All of these industries fear regulation, and protect themselves by using
the same tactics. Research has documented these tactics well. They include front groups, lobbies,
promises of self-regulation, lawsuits, and industry-funded research that confuses the evidence
and keeps the public in doubt. Tactics also include gifts, grants, and contributions to worthy
causes that cast these industries as respectable corporate citizens in the eyes of politicians and the
public. They include arguments that place the responsibility for harm to health on individuals,
and portray government actions as interference in personal liberties and free choice. This is
formidable opposition. [...] When industry is involved in policy-making, rest assured that the
most effective control measures will be downplayed or left out entirely. This, too, is well
documented, and dangerous. In the view of WHO, the formulation of health policies must be
protected from distortion by commercial or vested interests.

Lobbying by country

Australia

Over the past twenty years, lobbying in Australia has grown from a small industry of a few
hundred employees to a multi-billion dollar per year industry. What was once the preserve of big
multinational companies and at a more local level (property developers, for example Urban
Taskforce Australia) has morphed into an industry that employs more than 10,000 people and
represents every facet of human endeavour.[18]

Public lobbyist registers

A register of federal lobbyists is kept by the Australian Government and is accessible to the
public via its website.[19] Similar registers for State government lobbyists were introduced
between 2007 and 2009 around Australia. Since April 2007 in Western Australia, only lobbyists

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listed on the state's register are allowed to contact a government representative for the purpose of
lobbying.[20] Similar rules have applied in Tasmania since 1 September 2009[21] and in South
Australia and Victoria since 1 December 2009.[22][23]

European Union

Wiertzstraat in Brussels. This 'lobby tree' in front of the main entrance of the European
Parliament was planted in 2001 at the initiative of SEAP, the professional organization of
lobbyists.

The first step towards specialized regulation of lobbying in the European Union was a Written
Question tabled by Alman Metten, in 1989. In 1991, Marc Galle, Chairman of the Committee on
the Rules of Procedure, the Verification of Credentials and Immunities, was appointed to submit
proposals for a Code of conduct and a register of lobbyists. Today lobbying in the European
Union is an integral and important part of decision-making in the EU. From year to year
lobbying regulation in the EU is constantly improving and the number of lobbyists increases.[24]
According to Austrian Member of the European Parliament ("MEP") Hans-Peter Martin, the
value of lobby invitations and offers each individual MEP receives can reach up to €10,000 per
week.[25]

In 2003 there were around 15,000 lobbyists (consultants, lawyers, associations, corporations,
NGOs etc.) in Brussels seeking to influence the EU’s legislation. Some 2,600 special interest
groups had a permanent office in Brussels. Their distribution was roughly as follows: European
trade federations (32%), consultants (20%), companies (13%), NGOs (11%), national
associations (10%), regional representations (6%), international organizations (5%) and think
tanks (1%), (Lehmann, 2003, pp iii).[26][27] In addition to this, lobby organisations sometimes
hire former EU employees (a phenomenon known as the revolving door) who possess inside
knowledge of the EU institutions and policy process [28] A report by Transparency International
EU published in January 2017 analysed the career paths of former EU officials and found that
30% of Members of the European Parliament who left politics went to work for organisations on
the EU lobby register after their mandate and approximately one third of Commissioners serving

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under Barroso took jobs in the private sector after their mandate, including for Uber,
ArcelorMittal, Goldman Sachs and Bank of America Merrill Lynch. These potential conflicts of
interest could be avoided if a stronger ethics framework were established at the EU level,
including an independent ethics body and longer cooling-off periods for MEPs.[28]

In the wake of the Jack Abramoff Indian lobbying scandal in Washington D.C. and the massive
impact this had on the lobbying scene in the United States, the rules for lobbying in the EU—
which until now consist of only a non-binding code of conduct-—may also be tightened.[29]

Eventually on 31 January 2019 the European Parliament adopted binding rules on lobby
transparency. Amending its Rules of Procedure, the Parliament stipulated that MEPs involved in
drafting and negotiating legislation must publish online their meetings with lobbyists.[30] The
amendment says that “rapporteurs, shadow rapporteurs or committee chairs shall, for each report,
publish online all scheduled meetings with interest representatives falling under the scope of the
Transparency Register”-database of the EU.

France

There is currently no regulation at all for lobbying activities in France. There is no regulated
access to the French institutions and no register specific to France, but there is one for the
European Union[32] where French lobbyists can register themselves.[33] For example, the
internal rule of the National Assembly (art. 23 and 79) forbids members of Parliament to be
linked with a particular interest. Also, there is no rule at all for consultation of interest groups by
the Parliament and the Government. Nevertheless, a recent parliamentary initiative (motion for a
resolution) has been launched by several MPs so as to establish a register for representatives of
interest groups and lobbyists who intend to lobby the MPs.[34]

Italy

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A 2016 study found evidence of significant indirect lobbying of then-PM Silvio Berlusconi
through business proxies.[35] The authors document a significant pro-Mediaset (the mass media
company founded and controlled by Berlusconi) bias in the allocation of advertising spending
during Berlusconi's political tenure, in particular for companies operating in more regulated
sectors.[35]

United States

Lobbying in the United States describes paid activity in which special interests hire professional
advocates to argue for specific legislation in decision-making bodies, such as the United States
Congress. Some lobbyists are now using social media to reduce the cost of traditional campaigns,
and to more precisely target public officials with political messages.

A 2011 study of the 50 firms that spent the most on lobbying relative to their assets compared
their financial performance against that of the S&P 500, and concluded that spending on
lobbying was a "spectacular investment" yielding "blistering" returns comparable to a high-
flying hedge fund, even despite the financial downturn.[37] A 2011 meta-analysis of previous
research findings found a positive correlation between corporate political activity and firm
performance.[38] A 2009 study found that lobbying brought a return on investment of as much
as 22,000% in some cases.[39] Major American corporations spent $345 million lobbying for
just three pro-immigration bills between 2006 and 2008.

Other countries

Other countries where lobbying is regulated in parliamentary bills include:

Canada: Canada maintains a Registry of Lobbyists.[45]

India: In India, where there is no law regulating the process, lobbying had traditionally been a
tool for industry bodies (like FICCI) and other pressure groups to engage with the government
ahead of the national budget. One reason being that lobbying activities were repeatedly identified
in the context of corruption cases. For example, in 2010, leaked audio transcripts of Nira Radia.
Not only private companies but even the Indian government has been paying a fee every year

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since 2005 to a US firm to lobby for ex. to the Indo-US civilian nuclear deal.[47] In India, there
are no laws that defined the scope of lobbying, who could undertake it, or the extent of
disclosure necessary. Companies are not mandated to disclose their activities and lobbyists are
neither authorized nor encouraged to reveal the names of clients or public officials they have
contacted. The distinction between Lobbying and bribery still remains unclear. In 2012, Walmart
revealed it had spent $25 million since 2008 on lobbying to "enhance market access for
investment in India." This disclosure came weeks after the Indian government made a
controversial decision to permit FDI in the country's multi-brand retail sector.

Types of lobbying clients and services

Today’s post is on the types of lobbying clients and services provided. There are several different types of
clients that contract lobbyists have, each requiring different levels and types of services. Some clients are
at a low end of the service spectrum while other clients are at the very high end, requiring daily attention.

1.Contract lobbyists may have a myriad of clients in different industries while others may specialize in
specific types of clients. Regardless of the subject matter of the client’s interest, there are essentially four
types of clients: monitoring, lobbying, consulting, and procurement.

2.Monitoring clients simply desire to know what is happening at the Legislature and/or with regulatory
agencies and the Governor’s office. This type of client requires a lobbyist to monitor relevant legislation
and regulations, sometimes budget items, and politics generally involving particular issue areas or
industries. As a result of monitoring legislation and regulations, lobbyists may work with their clients to
develop strategic plans, designed to meet their near-term and long-term objectives.

The next type of servicing is lobbying. These services can range from supporting or opposing legislation
or regulations, or sponsoring bills, to make specified changes in the law. There are essentially three types
of lobbying – legislative lobbying, regulatory advocacy lobbying, and budget advocacy.

1.Legislative consulting and advocacy services usually include research and analysis of policy issues,
daily monitoring of legislation introduced and amended, and advocacy for and against legislation
affecting clients. 2.Regulatory advocacy is similar, but it’s a world unto its own with separate rules.
Lobbyists help their clients meaningfully engage in the public comment period and the formal hearings
when regulatory bodies engage in their quasi-legislative activities.

3.The next type of client and service is consulting. This type of client doesn’t require lobbying or
advocacy services, but instead desires to retain a lobbyist to provide consulting or advisory services.

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These types of clients want active advising regarding what they should be doing such that the lobbyist
provides political advice or consulting to the client, such as how to navigate the legislative or regulatory
processes, identify viable candidates for open seats, and recommend candidates without actually
advocating.

The last type of lobbying service provided is 4.procurement lobbying. These types of lobbyists do not
have to register as a lobbyist under the Political Reform Act. In this role, lobbyists try to secure contracts
for the purchase of goods or services by the State of California.

Definitions. Types of Lobbying

 Direct Lobbying: Any attempt to influence legislation through communication with: (i) Any
member or employee of a legislative body, or (ii) any government official or employee (other
than a member or employee of a legislative body) who may participate in the formulation of the
legislation, but only if the principal purpose of the communication is to influence legislation. A
communication with a legislator or government official will be treated as a direct lobbying
communication, if, but only if, the communication: (i) refers to specific legislation, and (ii)
reflects a view on such legislation.
 Grassroots Lobbying: An attempt to influence legislation through an attempt to affect the
opinions of the general public or any segment of the public. A communication with the general
public will be treated as a grassroots lobbying communication if, but only if, it (i) refers to and
reflects a view of specific legislation and (ii) encourages the recipient of the communication to
take action with respect to such legislation by one of the following means:
 Stating that the recipient should contact legislators or other government employees who may
participate in the formulation of legislation for the purpose of influencing legislation;
 Stating a legislator’s address, phone number, or similar information;
 Providing a petition, tear-off postcard, or similar material for the recipient to send to a legislator; or
 Specifically identifying one or more legislators who will vote on legislation as opposing Duke’s view
on the legislation, being undecided about the legislation, being the recipient’s representative in the
legislature, or being a member of the legislative committee that will consider the legislation. (Merely
naming the main sponsor(s) of the legislation for purposes of identifying the legislation will not
constitute encouraging the recipient to take action.)
 Legislation: Action by the United States Congress, any state legislature, any local council, or
similar legislative body, or by the public in a referendum, ballot initiative, constitutional

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 amendment, or similar procedure. It does not include actions by administrative bodies, such as
school boards, housing authorities, zoning boards, or similar bodies.
 Lobbying: Any attempt to influence “legislation” on Duke’s behalf through “direct lobbying” or
“grassroots lobbying.”
 Specific legislation: Legislation that has already been introduced in a legislative body as well as a
specific legislative proposal that may not have been introduced.

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