9

Regional Organizations

Regional organizations have proliferated all over the world after the Second World War. States of a particular region form regional organizations to forge economic, security and political cooperation among themselves. Although the primary motive of several regional organizations after the Second World War was to achieve security guarantee for their members, after the Cold War, in an altered international milieu, such organizations have mainly focused on economic development of the region through meaningful cooperation among member-states. Through the creation of Free Trade Area (FTA), regional organizations are trying to achieve purposeful economic cooperation among members. Moreover, they cater to the needs, desires and aspirations of the people of a particular region. Therefore, the study of regional organizations has assumed an important place in the discourse of International Relations. In this chapter, several such organizations would be taken up for analysis, and the discussion would begin with the SAARC, the regional organization of South Asia.

South Asian Association for Regional Cooperation (SAARC)

Origin and Members

The SAARC is a comparatively newer regional organization in terms of its establishment. It was formally established on 8 December 1985 in Dhaka, the capital of Bangladesh. However, the preparation for forming a regional organization in South Asia started earlier, in early-1980, when the then President of Bangladesh Ziaur Rahman put forward such an idea. After several rounds of discussion and deliberation, the SAARC was formally launched in 1985 with seven members—Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. Afghanistan joined SAARC in 2007. These eight states of South Asia form the SAARC at present. China, Iran and Myanmar have expressed their wishes to join the SAARC as members. Their candidatures for full membership are under consideration and subject to unanimous approval by current SAARC-members. Apart from these members, the SAARC has provided ‘observer’ status to Australia, China, European Union, Iran, Japan, Mauritius, Myanmar, South Korea and the United States. Russia has expressed its desire to be an ‘observer’.

Objectives of the SAARC

The Charter of the SAARC, signed by the Heads of Government (HOGs) of the member-states, has outlined in detail the objectives of the organization. They are: (1) to serve the people of South Asia and to develop their standards of living; (2) to work for economic, social and cultural development of the region, and to ensure dignity of life for every individual; (3) to create an atmosphere of unity and confidence among states in South Asia; (4) to realize others’ problems through mutual trust and cooperation; (5) to establish mutual cooperation in economic, social, cultural, scientific and technological areas; (6) to enhance cooperation with other developing countries of the world; (7) to increase mutual cooperation among member-states in order to protect the interests of South Asia in different international bodies and (8) to seek increased levels of cooperation with all international organizations and other regional organizations.

Administrative Structure of the Organization

Like other regional organizations, the SAARC too has an elaborate administrative structure to run the organization. At the top of this structure is the meeting of the HOGs of the member-states. Known as the SAARC Summit, this meeting of the HOGs is held once a year, and it draws up the policies, programmes and activities of the organization for the year. In reality, the SAARC summit approves policies formulated by the Council of Ministers, which comes next in the organizational hierarchy. The council consists of Foreign (External Affairs) Ministers of member-states, and it meets twice a year to formulate and devise methods of implementation of the policies and programmes of the organization. The Charter of the SAARC has enlisted five major tasks for the Council of Ministers. These are: (1) to formulate policies for the organization; (2) to determine levels of cooperation among member-states; (3) to identify new areas of cooperation; (4) to create new infrastructures for the organization as per requirements and (5) to take decisions on matters of general interest to member-states. The council is, in effect, the main decision-making body of the SAARC. The next in the administrative hierarchy is the Standing Committee. It is composed of foreign secretaries of every member-state. This committee is mainly responsible for the implementation of SAARC policies and programmes, which it analyses and supervises throughout the year. It sends an annual report to the Council of Ministers. The charter has provided for a Secretariat of the organization. This is the main office of the SAARC, located in Kathmandu, the capital of Nepal. It is responsible for coordinating SAARC activities in the region. The Secretariat is headed by a Secretary-General.

Apart from these main bodies, the SAARC Charter has instructed the formation of several committees, such as the Technical Committee and the Action Committee, for smooth implementation of SAARC programmes and policies. These committees would comprise experts from the economic, social, cultural and educational, scientific and technological, and ecological fields. As per the directives of the charter, the SAARC has formulated thirteen technical committees in different areas to spread its activities throughout the region. The areas for which these committees had been set up include agriculture, communication, education, culture and sports, environment, meteorology, health and population, prevention of narcotic drugs, rural development, science and technology, tourism, transportation and women’s welfare. Apart from these committees, the SAARC has also set up five regional centres to spread its programmes. These are located in Dhaka, for the promotion of agriculture and information, and for Meteorological Research; in Kathmandu, for the prevention of tuberculosis; in New Delhi, for documentation; and in Islamabad, for human resource development. Further, the SAARC is engaged in commendable work in areas of child welfare, anti-terrorist activities, food and agriculture.

SAARC Summits

Since its formation on 8 December 1985, nineteen SAARC Summits had taken place (till May 2018) in different parts of South Asia. Table 9.1 enlists different SAARC Summits held since 1985.

 

As Table 9.1 shows, SAARC summits were not held regularly (once every year) due to political disturbances in member-states, and also due to political tensions between the two largest states in the organization, India and Pakistan. The longest interval between two summits occurred between the tenth (1998) and eleventh (2002) summits. This was due to the nuclear tests in India and Pakistan, and the Kargil crisis between these two states.

After the end of the Cold War, the SAARC placed renewed emphasis on economic coordination and development of the member-states. If it committed itself to socio-cultural issues in the 1980s, it placed special importance on economic issues in the 1990s. This could be ascertained from the fact that in 1993 the members signed a SAARC Preferential Trading Arrangement (SAPTA) to facilitate free trade among South Asian states. SAPTA became operational in 1995. It was the first significant step towards building up a FTA in South Asia as it pledged liberal trade among member-states. It announced tariff concessions on more than four thousand items of trade. It also encouraged trade with less or no duties. SAPTA remained effective till 2004, when it was converted, as per provisions of the Arrangement, into an agreement on South Asian Free Trade Area (SAFTA) at the twelfth SAARC summit in Islamabad. The SAFTA Declaration categorically stated that the agreement owed its inspiration to the successful operation of the SAPTA. For a thorough discussion of the FTA in South Asia, the agreement on SAFTA must be analysed carefully.

Agreement on South Asian Free Trade Area (SAFTA)

The SAFTA Agreement (henceforth, only SAFTA) was signed in 2004, but it came into force from 1 January 2006. Article 3 of agreement states the objectives. It says that the agreement would facilitate trade and economic cooperation among the SAARC-states. These are various methods by which such cooperation could be enhanced: (1) by removing trade barriers and facilitating free movement of goods among SAARC-states; (2) by creating an atmosphere of fair competition for free trade and providing equal opportunities to all member-states; (3) by providing for adequate and proper administrative infrastructure to make the SAFTA operational, and to sort out differences; and (4) by providing for appropriate machineries to extend to all member-states the benefits of the agreement. Article 3 also enumerates the main principles regarding the governance of the SAFTA. It says the SAFTA shall be governed in accordance with the following principles: (1) the SAFTA would be governed by the provisions of this agreement and also by the rules, regulations, decisions, understandings and protocols to be agreed upon within its framework by the contracting states; (2) these states would affirm their existing rights and obligations with respect to the World Trade Organization and other treaties or agreements to which such states are signatories; (3) the SAFTA shall be based and applied on the principles of overall reciprocity and mutuality of advantages in such a way as to benefit equitably all contracting states under contract; (4) the SAFTA shall involve free movement of goods between states, inter alia, through elimination of tariffs, para-tariffs and non-tariff restrictions on the movement of goods, as also through other equivalent measures; (5) the SAFTA shall entail adoption of trade facilitation and other measures, and the progressive harmonization of legislations by the contracting states in the relevant areas and (6) the special needs of the least-developed contracting states shall be clearly recognized by adopting concrete preferential measures in their favour on a non-reciprocal basis.

The agreement, in its twenty-five articles, elaborates details of free trade in the South Asian region. For instance, Article 7 discusses in detail the measures required to be taken for implementation of Trade Liberalization Programme in South Asia. It contains provisions as well as methods of tariff reduction used by SAARC-states in order to implement the SAFTA. Article 10 contains provisions for developing adequate and appropriate infrastructure to create a FTA in the region. The special provisions for least-developed economies in the SAARC are declared in Article 11. The provisions for special concessions for Maldives are outlined in Article 12. Article 16 elaborates in detail the safeguard measures for the SAFTA, while Article 20 contains provisions for resolution of differences among contracting parties. Article 21 gives rights to the contracting parties to withdraw from the SAFTA. Article 24 states in detail the procedures for amending the agreement.

The creation of the SAFTA at the twelfth SAARC summit was undoubtedly a major step in forging regional economic integration in South Asia. In an era of globalization and trade liberalization, economic cooperation among states must be given due priority. Further, nations of a particular region may strive to achieve regional economic development through the creation of FTA. The success of ASEAN and EU in achieving economic development through FTA bears testimony to this proposition. FTA also helps individual states of a region towards economic development, because trade within a particular region is cost-effective and it can save valuable foreign exchange for a particular state. As a consequence, intra-regional trade actually benefits all the states of the region. Considering all these advantages, the creation of the SAFTA was indeed a welcome step towards regional economic integration in South Asia. This agreement may also facilitate a SAARC Customs Union and a common currency (such as euro), which the SAARC has plans to achieve in the future.

But the success of the SAFTA became dependent on the political relationship between the two principal states of the region, India and Pakistan. It, or even the SAARC, could not make much headway due to political rivalry between the two major states in the region. Since its inception, the SAFTA as well as its predecessor SAPTA had practically remained dwarfs in regional trade. More than a decade had passed since the introduction of the SAPTA in 1995, but trade among SAARC-states remained abysmally low; intra-regional trade accounted for only 5.5 per cent of total trade of SAARC-members in 2008. This shows how SAARC-members are reluctant to instill life into the SAFTA. Politics is getting precedence over economics in South Asia, while the trend is just the opposite in other parts of the world. Cross-border terrorism, political instability in several member-states, political rivalry between two principal states, and, above all, the reluctance of political elite in the region to go for meaningful economic integration are some of the reasons for the no-show of the SAFTA.

But there is tremendous potential for the SAFTA, provided there is the will to harness it. Business organizations like the Federation of Indian Chambers of Commerce and Industries (FICCI) opined that the total intra-regional trade among SAARC-states, which was around US $7 billion in 2005, could be doubled by 2012 provided the existing tariffs were reduced within the stipulated time frame of the SAFTA (as reported by Media Division of FICCI, New Delhi on 3 January 2006). The agreement holds huge potential for intra-regional trade growth because over 90 per cent of the imports by South Asian states come from outside the region and a major part of exports of South Asia go to states that are not part of the SAARC. Nearly 5,500 tariff lines under the SAFTA have been liberalized and are expected to move towards zero tariffs for non-LDCs (least developed countries) by the year 2013 and for LDCs by 2016. But unless the tariff lines cover items, which have trade potential and member-states have small sensitive lists, the very purpose and objectives of this agreement may remain unfulfilled.

The SAFTA may also enhance the attraction of South Asia as an FDI (Foreign Direct Investment) destination due to concepts like integrated market and liberalized trade. The foreign investors can set base in one country of the region and cater to the supply chain of the entire region. If South Asia becomes an integrated market, it can draw a much higher FDI for the entire region with a huge market size of over 1.5 billion people. The reduction in tariff rates as planned by the SAFTA can multiply trade and commerce only if it is complemented and supported by adequate infrastructure and trade facilitation measures by member-governments. This includes improving and strengthening the network of transportation in roads, railways, air and seas; harmonization of custom regulations; quality standards; easy visa regulations, and; dispute settlement mechanism. But all these shall depend on the will of the political elite of the region. The ASEAN and the EU have overcome many political differences in order to achieve meaningful economic integration. The SAARC can do the same provided there is the inclination of the member-states to make it a forceful regional organization.

The SAARC Social Charter

At the twelfth SAARC summit in Islamabad in 2004, Heads of Government (HOGs) of memberstates signed the Social Charter, originally conceived at the tenth SAARC summit in Colombo in 1998. This charter is an elaborate document that contains provisions of cooperation among member-states in the social sector that includes different areas like health; education; human resource development; youth mobilization; welfare of women and children; poverty alleviation; population stabilization and rehabilitation of drug addicts. It is an ambitious guideline that directs the SAARC and its member-states to forge significant cooperation in social sectors to improve the quality of life of the people of South Asia. The Charter, in its twelve articles, recognizes the urgent need to improve the social conditions of the people, which are inseparably linked to economic development of the region. The opening paragraphs of the charter reiterate the need to create a concerted platform for this regional organization to work for social progress of the South Asian region in words like these:

Observing that regional cooperation in the social sector has received the focused attention of the Member States and that specific areas such as health, nutrition, food security, safe drinking water and sanitation, population activities, and child development and rights along with gender equality, participation of women in development, welfare of the elderly people. Youth mobilization and human resources development continue to remain on the agenda of regional cooperation…. Convinced that it was time to develop a regional instrument which consolidated the multifarious commitments of SAARC Member States in the social sector and provided a practical platform for concerted, coherent and complementary action in determining social priorities, improving the structure and content of social policies and programmes, ensuring greater efficiency in the utilization of national, regional and external resources and in enhancing the equity and sustainability of social programmes and the quality of living conditions of their beneficiaries, the Member States of the South Asian Association for Regional Cooperation hereby agree to adopt this Charter.

Article II of the Social Charter is important in this context as it outlines the principles, goals and objectives of this ambitious programme. It says:

In the light of the commitments made in this Charter, States Parties agree to: place people at the center of development and direct their economies to meet human needs more effectively; fulfill the responsibility towards present and future generations by ensuring equity among generations, and protecting the integrity and sustainable use of the environment; recognize that, while social development is a national responsibility, its successful achievement requires the collective commitment and cooperation of the international community; integrate economic, cultural and social policies so that they become mutually supportive, and acknowledge the interdependence of public and private spheres of activity….

Clearly, the objectives are noble and the SAARC would aim to fulfill these objectives. In a region of acute poverty, social discrepancy and gender inequality, the SAARC Social Charter is a step towards the right direction.

Some of the goals of the Charter have been realized, although many more areas need to be covered carefully. In the field of education, the establishment of a South Asia University in New Delhi will help foster increasing interactions among students, teachers and academics in the region. Further, the creation of a SAARC Development Fund (SDF) will also help realize the goals outlined in the Charter. Under the social window of the SDF, projects on women empowerment, maternal and child health, and teachers’ training would be implemented. In the fifteenth SAARC summit held in Colombo in August 2008, leaders emphasized the need to implement the objectives of the Charter quickly. The Declaration following this summit noted:

The Heads of State or Government underscored the imperative to make steady progress in the implementation of the SAARC Social Charter and directed the Member States to complete the National Plans of Action with a perspective of seeking to transform current challenges into opportunities. They further directed the National Coordination Committees (NCCs) to recommend activities in conformity with the Social Charter and to introduce an efficient and effective monitoring and evaluation mechanism for reviewing the progress in the implementation of the Social Charter. The leaders emphasized the need to implement the selected regional and sub regional programs and projects to complement national implementation efforts. They urged that such activities be suitably accommodated in the SAARC calendar. They called for people’s participation in strategy initiatives, planning and implementation to ensure people’s responsibility and ownership. The leaders directed to develop a policy on the protection of rights of the senior citizens for their geriatric care taking into account existing national policies of the Member States.

But mere lofty rhetoric would not help the cause of social development programmes of the SAARC. Concrete and effective actions are required by member-states to implement the ideals of the Charter. It is pleasing to note that the SAARC is trying to achieve the goals identified in the Social Charter in a planned and phased manner.

Future of the SAARC

The SAARC is a relatively young regional organization burdened with immense social, economic and political problems. It is the world’s largest regional organization in terms of population, but the smallest in terms of intra-regional trade. In a region infected with poverty, social inequality, religious fanaticism, illiteracy, unemployment, terrorist activities and political rivalry among members, this organization faces a real challenge in achieving social and economic integration. The numerous problems speak for the slow progress of the SAARC in achieving its cherished goals. Despite the SAPTA and the SAFTA, economic integration and development of the region are yet to be fulfilled; despite signing of the Social Charter, upliftment of the poor and the underprivileged of the region remains a dream. Persistent political rivalry between the two principal states of South Asia has also affected the progress of the SAARC. But the organization exists, and slowly but steadily moves forward towards its goals. This is the most optimistic point. Despite odds and intense political problems, the organization is alive and taking new and newer initiatives for regional development. The member-states have already realized the importance of having a greater regional platform to initiate dialogues and discussions on regional problems that could only be tackled through mutual cooperation, and not individually by single states.

Chambers of commerce in the region feel that the SAFTA has immense potential, which could be realized if appropriate measures are taken for its proper implementation. Though the contribution of this agreement in the economic life of the region is not yet apparent, the picture may be different in the future. If zero tariffs are achieved by 2016, and other targeted goals realized by that period, the SAFTA may enhance intra-regional trade significantly and contribute towards economic development of the region. Similarly, the objectives outlined in the SAARC Charter are slowly yielding results, as analyses in the previous pages have shown. The formal declaration after the fifteenth SAARC summit in 2008 pointed out significant achievements in areas like women empowerment; child development; transportation; education; science and technology; tourism; environment; and information and communications technology development. These are undoubtedly brighter patches in the not-too-exciting history of the SAARC. If such achievements are sustained, and more are added to this list, and if there is political will on the part of member-states, this regional organization will continue to flourish in the future.

Association of South East Asian Nations (ASEAN)

Origin and Members

The ASEAN was born in 1967 in Bangkok. Five states of South East Asia formed the ASEAN mainly for political and security purposes. These five states were Thailand, Malaysia, Indonesia, Philippines and Singapore. They came together to form a regional organization to seek a security cover against any apprehended threat from China and Japan, the two powerful nations in the region. Although ASEAN later turned into a successful economic organization, its origin was linked to security fears of its founding members. For seventeen long years, the organization consisted of the initial five members. From 1984, the number of members started to increase. That year, Brunei Darussalam (Brunei, in short,) joined and became the sixth member. Vietnam joined in 1995 and Laos and Myanmar in 1997. Cambodia became the tenth member—the last so far—of the ASEAN in 1999. The permanent Secretariat of this regional organization is located in Jakarta, the capital city of Indonesia. Throughout the year, it coordinates various activities of the organization in different parts of the world.

Objectives

The Bangkok Declaration of 1967, which founded the ASEAN, elaborated the main objectives of the organization. It said that the ASEAN would work for regional peace, stability and economic development of South East Asia. Further, the organization would engage itself in maintaining and advancing the rich cultural heritage of the region. In the first ASEAN Summit held in Bali, Indonesia, in 1976, some fundamental principles of the organization were announced. The member-states signed a Treaty of Amity and Cooperation (TAC) there. This treaty outlined the fundamental principles of the ASEAN, which must be respected by all members. These fundamental principles are: (1) mutual respect for the independence, sovereignty, territorial integrity and national identity of member states; (2) recognition of the rights of member-states to live independently without external interference and pressure; (3) non-intervention in the internal affairs of member-states; (4) peaceful resolution of differences among member states and (5) increasing meaningful cooperation among members.

Organizational Structure

The ASEAN has a very strong organizational structure that has contributed immensely towards its success. At the top of this structure belongs the ASEAN Heads of Government (AHG). It is the apex body which takes all major policy decisions of the organization. This body meets ‘formally’ every three years. This formal meeting of the AHG is also known as the ASEAN Summit. But the AHG sits every year ‘informally’ to make policies and review programmes of the organization. In both its ‘formal’ and ‘informal’ meetings, crucial policy decisions are adopted and ASEAN activities reviewed and analysed. Table 9.2 highlights ASEAN Summits and Informal Summits since 1976, the year when the first ASEAN Summit took place at Bali, Indonesia. The table shows that ASEAN summits, both formal and informal, have been held regularly since 1995, although in the initial years, which could be termed as years of consolidation for the organization, summits were not held on a regular basis. Since the year 2009, ASEAN Summits are being held semi-annually, due to increasing organizational activities in recent times.

 

Next to the AHG in the organizational structure comes the ASEAN Ministerial Meeting (AMM). Normally, foreign ministers of member-states meet every year in this forum to review and implement policies and programmes of the organization. But other ministers may also meet under the AMM depending upon issues and programmes. For instance, if the ASEAN decides to have a programme on environmental issues, ministers of member-states related to environment matters would meet under the AMM. A body functioning parallel to the AMM is the ASEAN Economic Ministers (AEM). In this body, Economic Ministers of member-states meet once or more in a year to discuss the economic policies and programmes of the organization. ASEAN’s tremendous emphasis on economic activities could be observed from the creation of the AEM alongside AMM. As per norms of the organization, both these bodies place their joint reports to the AHG during the ASEAN summit.

Next in the organizational hierarchy comes the Sectoral Ministers Meeting (SMM). In this body, ministers related to near-economic activities meet as per requirements to formulate programmes and review activities. Under the SMM falls ministries like commerce and industry, tourism, transport, agriculture and forestry. Parallel to this body remains other Non-Economic ASEAN Ministerial Meetings (N-E-AMMs). In this forum, ministers of non-economic departments meet as per requirements to plan and review agenda. Under N-E-AMM comes ministries like health, education, social welfare, science and technology, and labour. Therefore, ministers of health of member-governments can meet and discuss issues at the N-E-AMM. There is another body called the Joint Ministerial Meeting (JMM). This forum normally meets before the ASEAN summit. Under JMM, foreign and economic ministers of member-states meet before the summit to coordinate the policies and programmes of these two important departments in the ASEAN agenda.

To supervise the activities of the ASEAN all the year round, a Secretary-General is elected by member-states for a term of five years. The Secretary-General is appointed by the AHG on the recommendation of the AMM. They submit their report to the AHG, and remain accountable to this body. They preside over the meetings of the ASEAN Standing Committee (ASC). The ASC coordinates activities of different bodies of the ASEAN throughout the year, and also maintains contact with member states. Next to the ministerial-level bodies in the organization, there is an extensive network of official-level bodies like Senior Officials Meeting (SOM), Senior Economic Officials Meeting (SEOM), Other ASEAN Senior Officials Meeting (OASOM) and ASEAN National Secretariats (ANS). The ANS are located in the foreign ministries of the member-governments, and their main task is to implement ASEAN programmes in their respective states. ASEAN Committees in Third Countries (ACTC) are responsible for promoting programmes of this regional organization in non-member states. The success of the ASEAN in recent years has been possible due to this extensive and very strong organizational network.

Other Collaborative Forums

Apart from this main organizational structure, the ASEAN has also developed—with non-members—very important international collaborative forums to promote its interests. In its initial years, the ASEAN had provided the ‘dialogue partner’ label to ten states and organizations. These are: Australia, Canada, China, European Union (EU), India, Japan, South Korea, New Zealand, Russia and the United States. The dialogue partners are also known as the ASEAN-10. In 2006, it was given observer status at the UN General Assembly. In response, it made the UN a dialogue partner the same year. It further extended its cooperation to the three major countries of South East Asia—China, Japan and South Korea—to create the ASEAN-3 in 1999. Although the ASEAN was initially apprehensive about China and Japan on grounds of security, with its increasing emphasis on economy, it felt the necessity to establish cordial relations with these three major economies of the region. Its economic success also drew these three states towards establishing ties with this organization and creating ASEAN-3. In 1994, it created the ASEAN Regional Forum (ARF) with twenty-two nations. The purpose for the creation of the ARF was to work for peace, security and economic development in the Asia-Pacific region. Ten ASEAN members, along with ten dialogue partners and two observers (Mongolia and Papua New Guinea), came together to create the ARF. The membership of the ARF has increased. With five new members included, the total in 2010 is twenty-seven. These five new members are Bangladesh, North Korea, Pakistan, Sri Lanka and Timor-Leste. In 2005, an East Asian Summit (EAS) was created under the auspices of the ASEAN with sixteen member-states which include ASEAN members, ASEAN-3, and India, Australia and New Zealand. The EAS was a prerequisite to a proposed East Asian Community (EAC). So far, three East Asian Summits were held in 2005, 2006 and 2007. The fourth summit took place in 2009. Further, the ASEAN has completed Free Trade Agreements (FTA) with China, Japan, South Korea, Australia and New Zealand. It has plans to launch an ASEAN Economic Community by 2015. The signing of the FTA with different countries has given a big boost to an already flourishing ASEAN economy. ASEAN has also established diplomatic relations with several individual nations in the world. This extensive network of international collaborative mechanism has benefited the association in significant ways like strengthening its economy, and consolidating its political standing in a new international order after the Cold War.

ASEAN Free Trade Area and Related Free Trade Agreements

At the fourth ASEAN Summit in Singapore in 1992, the ASEAN Free Trade Area (AFTA) was launched. The ASEAN had earlier created the ASEAN Preferential Trading Arrangement (APTA) in 1977. The AFTA has given tremendous boost to regional economy as well as to individual national economies. In 1993, a year after the launch of the AFTA, the volume of intra-ASEAN trade was US $43.26 billion. It increased to US $80 billion in 1996. In 2006, the volume of intra-ASEAN trade reached a staggering US $352.75 billion (all figures from the web site of the ASEAN Secretariat). In comparison, intra-SAARC trade was a little over US $7 billion in 2006. In 2008, the volume of intra-regional trade in the ASEAN amounted to more than 50 per cent of the total trade of the member-states, while it was 15 per cent in 1967, when the association was formed. Compared to that, intra-regional trade in the SAARC was 5.5 per cent of the total trade of SAARC-members in 2008.

The organization has created the ASEAN Comprehensive Investment Area (ACIA) to encourage free flow of investment within the ASEAN. The ACIA aims to achieve the following: (1) elimination of investment impediments; (2) streamlining of investment processes and procedures; (3) enhancement of transparency; (4) immediate grant of national treatment to ASEAN investors; (5) undertaking of investment facilitation measures and (6) opening of all industries for investment, with a few exclusions. Full realization of the ACIA—with the removal of temporary exclusion lists in manufacturing, agriculture, fisheries, forestry and mining—is scheduled to be achieved for most ASEAN members by 2010 and for Cambodia, Laos, Myanmar and Vietnam by 2015. The ASEAN has concluded free trade agreements with China, South Korea, Japan, Australia and New Zealand. Further, free trade agreements with India and the EU are on the anvil.

The ASEAN Charter

The members of the ASEAN launched the ASEAN Charter in Jakarta on 15 December 2008. It was earlier signed by member-states at the thirteenth ASEAN Summit in Singapore in November 2007, with the aim of moving closer to an ‘EU-style community’. The charter turned the ASEAN into a legal entity and aims to create a single FTA for the region encompassing 500 million people. Some of its objectives are: (1) respect for the independence, sovereignty and territorial integrity of member-states; (2) peaceful settlement of disputes; (3) non-interference in internal affairs of member-states; (4) right to live without external interference; (5) establishment of a human rights body and an unresolved dispute mechanism, to be decided at ASEAN summits; (6) development of friendly external relations with international organizations like the UN and (7) increasing the number of ASEAN summits to twice a year and the ability to meet in emergency situations.

The ongoing global financial crisis (2008–09) was referred to in the charter as a threat to the goals envisioned by the charter, but the ASEAN was convinced that the crisis could be overcome.

The ASEAN: An Evaluation

When the ASEAN started its journey in 1967, the region of South East Asia was much diverse politically, culturally and in its socio-economic areas. The region had a communist giant like China, an economic stalwart like Japan with its pro-capitalist leanings, emerging economies like Singapore and South Korea, and vastly poor areas like Myanmar, Laos, Vietnam, Cambodia and Thailand. The founding members of the ASEAN wanted to avoid both China and Japan, the regional bigwigs, and representatives of the communist and the capitalist world. But the success of the organization was in great doubt without these regional powers. Initially, through the mechanism called the ASEAN, the founding members wanted to have a security cover around themselves to thwart any possible aggression from China or South Korea, or economic suzerainty by Japan. But gradually, when these fears started to lessen, the ASEAN concentrated more on economic activities and the turnaround began to be noticed. The economic integration of this greatly diverse region gradually helped to eliminate political and security differences, and instilled confidence in member-states as well as non-member countries of the ASEAN about the prospects of this organization.

The success of the ASEAN in economic integration has been noteworthy. The steady growth of intra-ASEAN trade over the years remains a testimony to this proposition. Members also benefited from intra-ASEAN trade and foreign direct investment into the region which was quite significant since the 1980s. But the ASEAN’s records in non-economic areas have not been as spectacular. Its interaction with civil society institutions and its role in the promotion of democracy and human rights among member-states are not very satisfactory. Its role in facilitating a democratic government in Myanmar is negligible. It is true that the ASEAN works on the principle of non-interference into members’ internal affairs. However, it could pressurize Myanmar in several other ways to establish democracy and human rights in that country. The Bali Concord II, adopted by the ASEAN in 2003, upheld the notion of ‘democratic peace’ which asserted members’ faith in democracy to establish regional peace and stability. The rule of Military Junta in Myanmar is contrary to the pledge of Bali Accord II. It is alleged by critics that ASEAN business has been managed through close interpersonal contacts among the political elites only, which often show a reluctance to institutionalize and legalize cooperation that can undermine their regime’s control over regional cooperation. As a consequence, interaction of the ASEAN with civil society institutions remained at its minimum.

In spite of such criticisms, it should be acknowledged that the success of the ASEAN has outweighed its defects. Its achievements, especially in economic areas, have been recognized by all major states of the world, and international organizations including the UN. It is expected that its charter would go a long way in eradicating the shortcomings of the ASEAN and make it a very successful regional organization. The promise in the charter to create a human rights body and a dispute resolve mechanism could bring in expected changes in the organization. Nevertheless, the ASEAN has already made a mark as an important regional organization, and it should be remembered for what it has achieved over the years and not for what it could achieve.

The European Union

Origin

Today’s EU came into existence in 1993, after the Masstricht Treaty—signed in 1991 in the Dutch city of Masstricht to form the EU—was ratified by the national parliaments of twelve signing countries. The recent Lisbon Treaty that was signed by member-states in Lisbon, the capital of Portugal, in December 2007, made the EU more efficient and effective to take on the challenges of the twenty-first century. The treaty finally came in to effect in December 2009. It made several significant reforms in the structural and functional areas of the EU, to make it a new-look organization compared to what it was after the Masstricht treaty. The reforms made by the Lisbon Treaty will be analysed later, but before that, we must know about the origin of the EU.

The formation of the EU was the outcome of a long historical process that started after the Second World War. The formation of a regional organization in Europe for economic growth after the Second World War was the brainchild of two French politicians, Jean Monnet and Robert Schuman. They planned the formation of this organization to control and enhance business related to coal and steel, the two principal items for industrial development at that time. This idea, which later came to be known as the Schuman Plan (Schuman was the Foreign Minister of France), was materialized through the creation of the European Coal and Steel Community (ECSC) in 1950. France, Germany, Italy and three Benelux countries—Belgium, Netherlands and Luxembourg—joined hands to form the ECSC. Its purpose was to bring the coal and steel industries of these six countries under one regulatory authority to maintain uniform rates in buying and selling of coal and steel, and to control these industries in the six countries. The ECSC was largely under private control, and its management used to keep close links with the Labour Unions of coal and steel industries.

In 1952, the six members of the ECSC formed a European Defence Community (EDC) by another treaty. The objective of the EDC was to create a Unified Military Command in Europe with contribution of defence personnel from members of the ECSC and other willing states. But the unified military command could not be created due to differences of opinion between France and Britain. The ECSC countries also attempted to form a European Political Community in 1953, but this plan too failed due to differences among member-states. A major step towards a unified Europe was the Treaty of Rome of 1957. By this treaty, the ECSC countries formed two very important regional organizations of Europe, the European Atomic Energy Community (also known as the Euratom) and the European Economic Community (EEC). It may be mentioned here that the ECSC was the first regional organization in Europe after the Second World War, and its members endeavoured to build the concept of a ‘unified Europe’. It was due to their efforts that the Euratom and the EEC were formed. The EEC later came to be known as the Economic Community (EC), and also as the Common Market of Europe, where trade without barriers, political or economic, could be carried out. It was considered the real predecessor of today’s EU, because the concept of economic integration on a regional basis was introduced for the first time in the EEC. The idea of FTA, which became popular in the era of globalization, was mooted successfully in Europe by the EEC. Similar to the EEC, the EU today is also trying to achieve economic integration for Europe.

In accordance with provisions in the Treaty of Rome, a Customs Union was created by the ECSC members in 1969. The main objective of this union was to achieve a unified rate of tariffs for its members. The concept of common market was also introduced by these members, and the common market facilitated the unhindered movement of goods, labour and capital among the six countries. In 1960, a Common Agricultural Policy (CAP) was created by the EEC to regulate agriculture-related activities and business. The idea of the common market gradually became popular in Europe, and three more nations, Britain, Ireland and Denmark, joined the EEC in 1973, Greece joined in 1981, and Portugal and Spain in 1986. The community started to become truly ‘European’ with the joining of new members.

The Treaty of Rome (1957) was drastically amended in 1986, and the Single European Act thereby passed to expedite the process of a unified Europe. In 1987, the European Parliament was made more representative by allowing more members to become part of it. The European Court of Justice (ECJ), established in 1957, was also strengthened. It was given the power to annul any national law that might contravene the Single European Act. Experts consider the ECJ more powerful than the International Court of Justice of the United Nations. The amendments made in the Treaty of Rome in 1986 immensely helped in consolidating the concept of the integration of Europe, and paved ways for the creation of a EU.

In 1991, twelve EEC members met in Masstricht to further strengthen the concept of an integrated Europe. These twelve members were Belgium, Britain, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain. A treaty was signed in Masstricht to change the name of the EEC to EU. It was decided that this treaty would come into effect after the national parliaments of the twelve signing members ratified it. This ratification process took two more years, and the EU came into existence on 1 November 1993, after the ratification process was complete. In 1995, the Schengen Treaty was signed by members of the EU to facilitate borderless travel, which effectively means travel across the member states with a single passport. The Masstricht Treaty not only created the EU, it also outlined the future programmes of the organization. It set three major goals for the EU. The first of these goals was the creation of a monetary union for the EU, whose main objective would be to introduce a common currency for member-states of the union instead of separate national currencies. Accordingly, ‘euro’, a common currency, was introduced in 1999 in several member-states. It replaced the earlier national currencies (like Franc, Lira or Marc) of these states. At this moment, euro has been adopted by nineteen member-countries of the EU, and more are likely to introduce this common currency. The second goal set by the treaty was the creation of a European Police Agency (EPA) to check various types of crimes, mainly in the border areas. The third objective is to achieve political and military unity of Europe. A unified military command and a common foreign policy for member-states are parts of this objective. But this third goal would be difficult to realize for the EU because it might infringe upon the sovereignty of member-states. Nevertheless, the introduction of the euro in several states and the creation of the EPA are major achievements on the part of the EU, which has consolidated itself as a regional organization, helped immensely by sixty-eight years (1950–2018) of invaluable experience in regional integration in modern times.

Membership and Organizational Structure

From twelve in 1993, the membership of the EU has risen to twenty-eight at present. Membership will expand further as a few candidates like Croatia, Macedonia and Turkey will join the union soon. The present twenty-eight members are: Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. The EU has named Albania, Bosnia-Herzegovina, Montenegro and Serbia as potential candidates. To join the EU, a country must meet the Copenhagen criteria, defined at the 1993 Copenhagen European Council meeting. These criteria include: (1) a stable democracy which respects human rights and the rule of law; (2) a functioning market economy capable of competition within the EU and (3) the acceptance of the obligations of membership, including EU law. Evaluation of a country’s appeal for membership and fulfilment of the criteria is the responsibility of the European Council. It must be noted in this context that in June 2016, a referendum was held in Britain on the issue of Britain’s continuity as a member in the EU. As a majority of the voters (51.89 per cent) wanted Britain to leave the EU, British Prime Minister Theresa May, a leading proponent for the country’s exit from the union, initiated legal procedures in March 2017 for the same. Till this process is completed, the United Kingdom is counted as a member of the EU.

The organizational structure of the EU is rather simple as compared to the extensive and complex one of the ASEAN. At the top of this structure is the European Council, consisting of Heads of Government (HOGs) of the member-states. At present, twenty-seven HOG from twenty-seven member-states make the European Council, which is the highest decision-making body of the organization. The council is headed by a system of rotating presidency, with every memberstate assuming the responsibility of the President of the European Council for six months. Next to the European Council in the organizational hierarchy is the Council of Ministers, consisting normally of foreign ministers of member-states. It adopts policies and programmes for the EU and places them for approval with the European Council. In the Council of Ministers, other ministers may join and discuss policies depending upon the agenda. Thus, if there is an agenda on health, health ministers of all member-states may join this council. After the Council of Ministers in the organizational structure comes the European Commission, which is the pivotal organ of the EU. The commission now consists of twenty-seven commissioners from member-states, appointed for a term of four years, with provisions for re-appointment. It supervises the activities of the union throughout the year. The commissioners nominate one person as the President of the Commission from among them. The responsibility for implementation of the policies adopted by the European Council lies with the Commission. The council meets the President of the European Commission twice a year to discuss implementation of the policies and programmes of the union. The commission also controls the staff of the EU, known as the Eurocrats. The headquarters of the EU is situated in Brussels, the capital city of Belgium.

Apart from these three bodies (European Council, Council of Ministers and European Commission), other prominent institutions in the EU are the European Parliament, the ECJ, and the Economic and Social Committee. The European Parliament has been given some powers recently. The 785 members of the European Parliament (MEPs) are directly elected every five years by citizens under the union. Although MEPs are elected on a national basis, they sit according to political groups rather than their nationality. Each country has a set number of seats. The Parliament and the European Council form and pass legislation jointly, using codecision, in several areas of policy. The Parliament also has the power to reject or censure the budget of the European Commission and the EU. The President of the Parliament also carries out the role of the speaker in the Parliament and represents it externally. The President and the vice-presidents are elected by MEPs every two and a half years. The judicial branch of the EU consists of the ECJ and the Court of First Instance (CFI). Together, they interpret and apply the treaties and the laws of the union. The CFI deals mainly with cases taken by individuals and companies directly before the EU’s courts; and the ECJ with cases taken by member-states and institutions, as also cases referred to it by the courts of member-states. Decisions of the CFI can be appealed against at the ECJ, but only on a valid legal point. Member-states of the EU are responsible for their own territorial defence.

The EU Today

The EU has traversed a long way since its formation with the Masstricht Treaty of 1993. Several new members have joined the organization, many new policies and programmes were undertaken, and norms and laws were changed to keep pace with time. A few more treaties were signed by member-states to meet new challenges faced by the EU. Prominent among these was the Amsterdam Treaty, which was signed in 1996 and became effective in 1999. This treaty called for the creation of more jobs within the EU, sustainable development of the environment, and protection of consumer rights. The Treaty of Nice, which came into force in 2003 (and was signed in 2001), wanted to make the union more efficient and streamlined. For this purpose, it proposed a reduction in the number of Eurocrats, which was nearly 15,000 at the beginning of the twenty-first century. The Lisbon Treaty, that came into effect in December 2009, has given more power to the European Parliament and the ECJ. The salient features of the treaty, that made important reforms in the EU, are given in Box 9.1.

Today’s EU is an economic powerhouse. Since its origin, it has established a single economic market across the territories of all its members. Considered a single economy, this regional organization generated an estimated nominal gross domestic product (GDP) of US $16.48 trillion (based on purchasing power parity or PPP) in 2016, amounting to over 20 per cent of the world’s total economic output in terms of purchasing power parity. This makes the EU the largest economy in the world on the basis of nominal GDP and the second largest trade bloc economy in the world based on PPP valuation of GDP. It is also the largest exporter of goods, the second largest importer and one of the biggest trading partners to several large countries such as India, China and Brazil. More than one-third of the 500 largest corporations in the world (Fortune 500 companies), measured by revenue, have their headquarters in the EU. The euro, within a decade of its introduction in 1999, has become one of the strongest currencies in the world. The success of the EU in achieving economic integration in the continent could be ascertained from the fact that more and more countries are showing interest in joining it. Many of these countries include the former East Bloc nations who want to be part of the mainstream economic development process of Europe today, and they have found in the union a very effective forum to realize their economic and political objectives.

However, there are grey areas within the EU. In August 2017, unemployment in the union stood at 7.6 per cent while investment was at 21.4 per cent of GDP; inflation was 2.2 per cent and public deficit -0.9 per cent of GDP. Moreover, there is a great deal of variance in annual per capita income within individual EU states, ranging from US $7,000 in poorer states (mainly in the East) to US $69,000 in rich countries. Compared to the EU average, the US GDP per capita is 35 per cent higher and the Japanese GDP per capita is approximately 15 per cent higher. The union currently imports 82 per cent of its oil, 57 per cent of its gas and 97.48 per cent of its uranium demands (all statistics in this section are from the official EU website). There is the concern that this organization is largely dependent on other countries, primarily Russia, for its energy sources, and any adverse relations with Russia may hinder its progress. The financial crisis in Greece in 2010 also posed challenges to the EU. Differences between France and Germany over the ways to resolve the crisis, and EU’s role in this matter, made the EU appear like a disunited organization. Despite these shortcomings, the EU has emerged, due to its success noted earlier, as one of the most successful regional organizations in the world, with important economic and political clout in international affairs.

The Future of the Union

The dream of a unified Europe is nothing new. Through ages, statesmen and the political elite have tried to achieve this dream. This desire could be noticed in Bismarck and Garibaldi; the aggression of Napoleon and Hitler also reflected their desire to bring the whole of Europe under their command. This dream has survived across ages in some form or the other, and the EU was its latest manifestation. But at the same time, it is also true that Europe could never be unified politically or economically despite several attempts. The idea of a unified Europe had always remained out of bounds. This dichotomy leads one to ponder over the future of the EU, its acceptability in all parts of the continent and its possible challenges. It is now well known that the formation of the union was never an easy task. Member-states had prolonged debates in domestic political circles before becoming part of either the EEC or the EU. Britain is a case in point. The conservative government of Margaret Thatcher was reluctant to join the EEC fearing that a common market might be detrimental for Britain’s developed economy. Later, the Labour Government of John Major decided to join the EEC. In 2016 again, the Theresa May government in Britain held a referendum on the issue of Britain’s membership in the EU. As a majority of voters wanted to leave, Prime Minister Theresa May initiated legal procedures in March 2017 for Britain’s withdrawal from the EU. Whether the EU stands to lose or gain from the British exit (popularly known as Brexit) will be assessed in the future; however, this is surely a jolt to the concept of a ‘single Europe’. Further, the introduction of a Customs Union or a common currency faced several hurdles. Even today, the euro has not been accepted by several memberstates; notable among them are Britain, Denmark and Sweden, considered as leading economies in Europe. Unless a uniform bank interest rate is introduced, inflation is controlled and national income achieves some sort of parity in member-states; it would be difficult to introduce euro in all states, especially in the developed ones. This poses a challenge to the concept of a single monetary union in the EU.

Politically, Russia’s lukewarm response to be a part of the EU may prove to be a serious hurdle in its march to the East. If Russia does not join eventually, the union’s dream of a unified Europe would get a severe jolt, not only politically but also economically, because it is dependent on Russia for its energy resources. Moreover, a militarily powerful non-member like Russia may bring in trouble for it. Along with Russia, a few former Soviet states have also stayed away from the EU casting doubts about its acceptability. Further, the EU’s slow progress in achieving a unified military command and a common foreign policy highlights the unwillingness of member-states to place it above national interests.

Despite these challenges faced by the EU, it must be remembered that it is not a supranational organization. It pays due respect to the sovereignty and territorial integrity of member-states, and, like any other regional organization, does not impose its will upon the members. The EU is also considering a proposal under the Lisbon Treaty to allow members to withdraw from the organization. But more and more countries in Europe, including former East Bloc nations, are joining it. This reveals the growing credibility of the organization. Besides its goal of economic integration of Europe, it has also been focusing on socio-political, cultural, educational, scientific and environmental development of the ‘Euro zone’ that consists of territories of member-states. The activities of the union not only benefit itself, it helps the member-states as well, particularly the developing ones. Since the formation of the union, members with weaker economies have reaped rich benefits through preferential and barrier-less trade with the developed parts of Europe. The developed economies have also been benefited because new and large markets have opened up for them through the EU. The success of the EU as an economic organization is attracting both non-members and third parties in other parts of the world. Consequently, it is growing and is poised to expand further in the coming years.

The African Union

Origin and Membership

Today’s African Union (AU) is the continuation of the earlier Organization of African Unity (OAU), established on 25 May 1963 in Addis Ababa, capital of Ethiopia. The main objective of the OAU was to achieve unity among African nations and to work for the development of the region. It started its journey in 1963 with thirty-two member-states. Its name was changed to the African Union at its Durban Conference in 2002. Currently, the AU has fifty-five member-states, including three suspended ones. Almost all states in the African continent are its members.

Box 9.2 lists the current members of the AU.

The three suspended members are Mauritania (suspended after the coup d’état of 2008), Guinea (suspended after the coup d’état of 2008) and Madagascar (suspended after the Malagasy political crisis of 2009). Morocco left the OAU in 1984, but joined the AU again in 2017. South Sudan joined the organization in 2011 after it seceded from Sudan and became an independent state. A member must adhere to the principles and objectives of the African Union which are to promote cooperation among member-states through mutual respect of each member’s sovereignty and territorial integrity.

Organizational Structure

The AU works mainly through ten principal institutions. They are: (1) the Assembly; (2) the Executive Council; (3) the Commission; (4) the Pan-African Parliament; (5) the African Court of Justice; (6) the Permanent Representative Commission; (7) the Specialized Technical Commissions; (8) the Economic, Social, and Cultural Council; (9) the Peace and Security Council and (10) the Financial Institutions. As their names suggest, these bodies work in different fields that include social, cultural, political, economic, technical, peace and security, legal and juridical areas. The first three institutions are the administrative bodies of the AU. The Assembly remains at the top in the organizational hierarchy, and is composed of the HOGs or Heads of State of member-states. It meets once a year to make policy decisions for the organization. Next comes the Executive Council (EC). It is a forum of foreign ministers and other ministers (depending on the issue under consideraton) and is responsible for implementing the policies taken by the assembly. The EC meets twice a year to review the works of the AU, and recommends issues to the assembly for consideration. In reality, the EC is the main policy-making body and the assembly merely approves its decisions. The Commission is the third important administrative body of the AU. Formerly, it was known as the Secretariat. It supervises the activities of the union throughout the year. The Chairperson of the commission (formerly the Secretary-General) is the administrative head, and coordinates work among different bodies of the AU. The commission is accountable to the assembly. It has its headquarters in Addis Ababa.

The Pan-African Parliament under the African Union, situated at Midrand, South Africa, is composed of 265 elected representatives from all the fifty-three member-states. Apart from discussion, debates and legislation over matters related to the union, the Parliament also ensures civil society participation in the functioning of the union. The African Court of Justice has been set up to give its ruling in disputes over interpretation of AU treaties. The Permanent Representatives’ Committee consists of nominated permanent representatives of member-states; it decides the work to be done by the Executive Council. The Peace and Security Council (PSC) intends to work as a collective security mechanism and plans to facilitate early warning arrangement for timely and effective response to conflict and crisis situations in Africa. Other responsibilities of the PSC include prevention, management and resolution of conflicts; and post-conflict peace-building and development of common defence policies. The PSC has fifteen members elected on a regional basis by the assembly.

The Economic, Social and Cultural Council is an advisory organ composed of professional and civic representatives from member-states. Specialized Technical Committees (STC) have been proposed to be set up, and they are not yet functional. The ten proposed areas on which STC would be set up are: (1) energy, natural resources and environment; (2) trade and customs; (3) labour and social affairs; (4) rural economy and agricultural matters; (5) monetary and financial affairs; (6) industry, science and technology; (7) transport, communications and tourism; (8) health; (9) education, culture, and human resources and (10) transport, communications and tourism. Financial institutions have also been proposed. These include: (1) the African Central Bank in Abuja, Nigeria; (2) the African Investment Bank in Tripoli, Libya; and (3) the African Monetary Fund, to be located in Yaounde, Cameroon. Eventually, the AU aims to have a single currency (the Afro), like the euro.

The AU (and the Former OAU) at Work

The main purpose of establishing the OAU was to achieve unity among African nations and to speed up the process of de-colonization in the African continent that had started after the Second World War. The OAU was not a military coalition like the NATO; it was founded with the aim to achieve political unification in Africa, although it also endeavoured to achieve economic integration in the continent after the Cold War. But political unification of a continent torn in conflicts and civil wars was not an easy proposition. The OAU struggled a lot in its initial years to survive as an effective regional organization. For instance, it was practically divided over the issue of civil war in Angola. Angola, which was under Portuguese rule for a long time, became independent in 1974. But soon after the Portuguese relinquished power, different political groups in Angola were engaged in a bloody civil war to capture state power while Cold War politics added fuel to the fire. One political group known as the Popular Movement for the Liberation of Angola (MPLA) was supported by the Soviet Union and its allies; while opposing groups like the National Front for the Liberation of Angola (FNLA) and the National Union for the Total Independence of Angola (UNITA) was aided by the United States and its allies. In 1975, the OAU organized a vote over the issue of formation of the government in Angola, where the organization’s internal squabbles came to light. Half of the members supported the MPLA while the other half supported the FNLA and the UNITA. As a consequence, the union was not in a position to solve the crisis in Angola. Its lack of unity also came to the fore over issues like military intervention in Katanga province of the then Zaire (now Congo) in 1977–78; Somalia’s attack of Ethiopia in 1978 and war between Uganda and Tanzania in 1978–79. Further, in 1981, Morocco, along with a few members, opposed the inclusion of western Sahara into the organization with the status of an independent nation. The animosity over the issue reached such a point that Morocco relinquished membership of the OAU. These events substantiate the fact that the OAU was not very successful in achieving unity in African continent in the 1970s and 1980s.

But the history of the OAU is not altogether a story of failures. In 1965, it succeeded in resolving border disputes between Algeria and Morocco. It was able to solve border conflicts between Somalia and Ethiopia, and between Somalia and Kenya, during 1968 and 1970. It played a much commendable role in the process of de-colonization in Africa in the 1960s and 1970s, as also thereafter. During this period, the OAU actively helped countries like Guinea Bissau, Angola and Mozambique in their freedom struggles against Portuguese rule. It was mainly due to its efforts that these three states got independence in 1974. Moreover, it fought intensely the menace of Apartheid in South Africa, Zimbabwe and Namibia. South Africa was suspended from the OAU for practising Apartheid. In 1994, it regained its membership of the organization after it officially announced the end of Apartheid policies. In 1986, the OAU formed the African Commission on Human and People’s Rights with a view to safeguard human rights and the fundamental freedoms of the people of Africa. All these activities of the OAU immensely helped the member-states as well as the people of Africa, and contributed towards strengthening African unity.

With the aim to facilitate economic integration of Africa through free trade, the members of the OAU formed the African Economic Community (AEC) in 1994. The 1990s was, in fact, a decade of resuscitation for the OAU under the able leadership of the then Secretary-General Salim Ahmed Salim. He was instrumental in the introduction of new economic and social policies in the organization and for bringing about dynamism in its functioning. In 1992, Salim created a Peace Fund to encourage its member-states in avoiding political conflicts and working towards establishment of peace. The main purpose behind the creation of this fund was to rehabilitate victims of political conflicts, to dissuade states from engaging in political conflicts, and to campaign for peace. In 1993, the OAU also sent a peacekeeping force to stop civil war in Liberia. Salim, a popular leader from Tanzania, served three terms as the Secretary-General of the OAU. Under his efficient leadership, the organization scaled new heights to achieve political unity and economic integration—its principal goals—in Africa.

An Evaluation of the AU

The AU, and the OAU, its immediate predecessor, had many daunting tasks before them. Realizing programmes like de-colonization, anti-apartheid, or political and economic integration of Africa were indeed great challenges for the organization. The OAU also had to tackle problems like intense political rivalries among member-states or civil wars among opposing political groups within the territories of a number of member-states. At times, these political crises threatened to divide and break the organization. But it continued to act as an umbrella organization which tried to provide peace and security to its members. The performance of the OAU was mixed in this regard—it failed to bring peace to warring zones on several occasions; while at other times, it was able to provide peace and security to the people of troubled areas in Africa. It helped many African states to achieve freedom from colonial rulers, to fight the menace of apartheid, and to strive towards economic development. The 1970s and the 1980s were troubled times for the OAU, mainly due to socio-political problems in the member-states. This was also the period of consolidation and maturity for the organization. In comparison, since the 1990s it was a period of progression when the OAU launched several new economic and socio-political programmes; the union changed its name in 2002.

If the OAU dealt mainly with socio-political issues, the African Union concentrated more on economic issues, keeping pace with the changing demands of time. The future plans of the AU to establish a monetary union for Africa—along the lines of the EU—include the creation of a FTA, a customs union, a single market, a central bank and a common currency. The union aims at having a single currency for Africa by 2023. Its emphasis on economic issues may usher in new hopes for an economically poor Africa, which lags behind several of its states in terms of GDP. The GDP of all these states stands at a nominal US $500 billion—which is lower than that of many of them individually—while they together had a debt of US $200 billion in 2017. Africa, an economically backward continent, needs strong economic policies for resurgence, and the AU is working positively in that direction.

Emphasis on economic programmes does not in any way undermine the challenges faced by the AU in social and political spheres. Africa is still in political turmoil with severe political crises in Zimbabwe, Sudan, Somalia and Mauritania. Political rivalry among warring groups, leading to problems of governance, is the main reason behind political crises in these states. Keeping in with one of its objectives—to ‘promote peace, security, and stability in the continent’—the PSC of the AU is actively engaged in negotiating peace through peacekeeping operations in these areas. Social problems like illiteracy, poverty, health hazards and environmental degradation, to name a few, are real challenges for the union. Africa ranks very high in cases of malaria and AIDS, as also in the rate of literacy and level of poverty. The union has proposed specialized technical committees (STCs) to deal with such issues. Hopefully, with the guidance of the AU, Africa would be able to resolve these problems in the future.

The African Union has not been as successful as the EU or the ASEAN, because it had to face more political problems within the organization than the earlier two. The process of economic integration started much earlier in the EU and ASEAN, and they reaped great benefits from such programmes. The AU started the process of economic integration as late as 1994; it would take some time more to get the benefits of these policies. At the eighteenth Ordinary Session of the Assembly of Heads of State and Government of the African Union, held in Addis Ababa, Ethiopia, in January 2012, a decision to establish a Continental Free Trade Area (CFTA) was adopted. The CFTA was expected to be operative in 2017. However, it would take some more time for the CFTA to be effective. As observed earlier, due to social and political problems, the AU could not initiate the process of economic integration during the 1970s and 1980s. However, since the early 1990s, it has taken measures to achieve such integration, as well as to address socio-political problems of the continent. The results are yielding slowly. The union itself has become more consolidated as an organization in recent years, and is taking specific initiatives for the development of Africa. If this trend continues, the AU would emerge as a strong regional organization in years to come.

North American Free Trade Agreement (NAFTA)

Origin and Members

The North American Free Trade Agreement (NAFTA) is a trilateral trade agreement among three North American states—the United States, Canada and Mexico. It entered into force on 1 January 1994, after it was ratified by the parliaments of the three nations in 1992. This agreement superseded the Canada–United States Free Trade Agreement, made in 1988. Today, the NAFTA is considered to be one of the most powerful trade blocs in the world because two of its members—Canada and the United States—are among the strongest economies of the globe. It controls the entire spectrum of present North American trade. Since it became operative in 1994, it has been updated with two major additions, the North American Agreement for Economic Cooperation (NAAEC) and the North American Agreement for Labor Cooperation (NAALC). A much recent addition was the Security and Prosperity Partnership of North America, designed to foster cooperation on issues of national security. The NAFTA Secretariat is an independent agency, responsible for impartial administration of provisions of dispute settlement in the NAFTA. It has a section each for Canada, Mexico and the United States, each headed by a national secretary, and each having an office in the respective national capitals—Ottawa, Mexico City and Washington DC. The secretariat is accountable to the NAFTA Free Trade Commission, which comprises ministers responsible for international trade in the three NAFTA partner-states.

Objectives

The objectives of the NAFTA have been elaborated in Article 102 of the agreement. The article states:

The objectives of this Agreement, as elaborated more specifically through its principles and rules, including national treatment, most-favoured-nation treatment, and transparency, are to: (a) eliminate barriers to trade in, and facilitate the cross-border movement of goods and services between the territories of the Parties; (b) promote conditions of fair competition in the free trade area; (c) increase substantially investment opportunities in the territories of the Parties; (d) provide adequate and effective protection and enforcement of intellectual property rights in each Party’s territory; (e) create effective procedures for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes; and (f) establish a framework for further trilateral, regional and multilateral cooperation to expand and enhance the benefits of this Agreement.

It was decided at the time of its formation that the NAFTA would gradually phase out all tariff reductions by the year 2008. This has been done successfully. The removal of tariff barriers had boosted trade in North America, as earlier Mexico used to avoid American and Canadian goods because of higher tariff rates. Intra-regional trade has now increased significantly.

The NAFTA and Regional Trade

Trade relations among Canada, Mexico and the United States have broadened substantially since the implementation of the NAFTA. According to data released by the US Trade Representative (USTR), the overall value of intra-North American trade has more than tripled since then. The USTR adds that regional business investment in the United States rose by 117 per cent between 1993 and 2007, as compared to a 45 per cent rise in the fourteen years prior to the implementation of the NAFTA. Trade with NAFTA-partners now accounts for more than 80 per cent of Canadian and Mexican trade, and more than a third of US trade. In a report entitled ‘Top US Export Markets: Free Trade Areas and Country Fact Sheets’ released in the summer of 2008, the US Department of Commerce noted that ‘overall trade in goods among the United States, the Canada and Mexico has grown from $297 billion in 1993 to $930 billion in 2007, an increase of 213 per cent’. Citing the positive impact of the agreement on regional trade, the report also noted that export of US goods to Canada and Mexico grew from US $142 billion in 1993 to $385.4 billion in 2007, an increase of 171 per cent. Similarly, import of goods from Canada and Mexico into the United States grew from $151 billion in 1993 to $523.9 billion in 2007, an increase of 247 per cent. A Council on Foreign Relations’ (a reputed think tank in the United States) recent report observes:

Economists largely agree that NAFTA has provided benefits to the North American economies. Regional trade increased sharply over the treaty’s first two decades, from roughly $290 billion in 1993 to more than $1.1 trillion in 2016. Cross-border investment has also surged, with U.S. foreign direct investment (FDI) stock in Mexico increasing in that period from $15 billion to more than $100 billion.¹

Member-states have largely benefited from the NAFTA. Since 1994, Mexico’s GDP has increased at an average annual rate of 2.7 per cent, which is lower than those of the United States (3.3 per cent) and Canada (3.6 per cent). Since the implementation of the agreement, Mexican exports to the United States have quadrupled from $60 billion to $280 billion per year. US exports to Mexico have also increased sharply—more than triple—as Mexico’s economy has grown. Trade liberalization between Mexico and the United States has not only brought about a great change in Mexican business, it has directly benefited the Mexican people. For instance, the Council on Foreign Relations (CFR) thinks that the deal has led to a dramatic reduction in prices for Mexican consumers; it refers to GEA, a Mexico City-based economic consulting firm, which estimates that the cost of basic household goods in Mexico has halved since the implementation of the agreement.

Like the United States and Mexico, Canada—leading exporter of goods to the United States—too has experienced economic growth since implementation of the NAFTA. In fact, since 1994, its GDP has grown at a rate faster than those of the other two. Between 1994 and 2003, Canada’s economy showed an average annual growth rate of 3.6 per cent, compared to 3.3 per cent in the United States and 2.7 per cent in Mexico. Canadian employment levels have also shown steady gains in recent years, with overall employment rising from 14.9 million to 15.7 million in the early 2000s (data obtained from the CFR report). The NAFTA has thus strengthened regional trade and helped the member-states to develop their economies further. According to the CFR report mentioned earlier, ‘In the years since NAFTA, U.S. trade with its North American neighbors has more than tripled, growing more rapidly than U.S. trade with the rest of the world’.² This refers to a period from 1993 to 2016.

Controversies Over the Agreement

There emanated controversies from all member-states over the actual success of the NAFTA. Canada protested over several provisions in the text of the agreement. It found chapters 11, 19 and 20 controversial and called for amendments in them. Chapter 11 allows corporations or individuals to sue Mexico, Canada or the United States for compensation if any action taken by those governments adversely affect their investments. Chapter 19 subjects crucial NAFTAissues (such as antidumping and countervailing duty (AD/CVD) determinations) to bi-national panel review instead of the conventional judicial review practised in other FTA. Chapter 20 provides a procedure for inter-state resolution of disputes over the application and the interpretation of the NAFTA.

Further, the CFR report cites several scholars who argue that the deal has not proved beneficial for Mexico. According to the report, these scholars believe that economic growth has been poor in Mexico, averaging less than 3.5 per cent per year or less than 2 per cent on a per capita basis since 2000. Today unemployment rate is higher than what it was when the treaty was signed; and half of the country’s labour force sustains a living in invented jobs in the informal economy, a figure 10 per cent higher than in the pre-NAFTA years. Some critics single out Mexico’s farm industry, saying the agreement has crippled Mexican farming prospects by opening competition to the heavily-subsidized US farm industry. Although such criticisms are contradicted by supporters of the NAFTA, they nevertheless point towards the weak areas of this trilateral agreement. In the run-up to the American presidential elections in 2008, Democratic Party nominees Barack Obama and Hillary Clinton also sought revisions in the NAFTA to make it more time-friendly and progressive. According to the CFR report cited earlier:

Critics of the deal (NAFTA), however, argue that it is to blame for job losses and wage stagnation in the United States, driven by low-wage competition, companies moving production to Mexico to lower costs, and a widening trade deficit. The U.S.-Mexico trade balance swung from a $1.7 billion U.S. surplus in 1993 to a $54 billion deficit by 2014.³

This kind of negative perception about NAFTA prompted President Donald Trump of the United States to talk about renegotiation of the deal and, if possible, to terminate it. In an interview to Reuters on 17 January 2018, President Trump was quoted as saying, ‘We’re renegotiating NAFTA now. We’ll see what happens. I may terminate NAFTA’.⁴ President Trump’s comments came less than a week before trade negotiators from the United States, Canada and Mexico were scheduled to meet in Montreal for the sixth rounds of negotiations to update NAFTA.

The Future of the NAFTA

The NAFTA is the largest trading bloc in the world in terms of combined purchasing power parity (PPP), GDP of its members and the second largest by nominal GDP comparison. It is a unique trilateral agreement where two of the world’s most developed economies joined hands with a third world economy (Mexico) for boosting regional trade and business. Unlike the EU, the ASEAN or the AU, the NAFTA is primarily an economic bloc, which was formed with economic objectives. At its inception in 1994, it had set target to gradually phase out tariff barriers in trade latest by 2008. The target was achieved. This shows the commitment of member-states towards the agreement.

As noted earlier, the NAFTA has significantly benefited regional trade and helped member-states to develop their economies. Many had believed that Mexico, a relatively weak economy in the organization, would benefit the most from agreement. As data given earlier reveals, the NAFTA proved immensely beneficial not only for Mexico, but for Canada and the United States as well. However, it is true that the agreement could not realize all its expectations, and there are reservations about its contribution towards the economic development of member-states, especially Mexico. Criticisms notwithstanding, the NAFTA has consolidated remarkably well as an organization in the last fifteen years, and has become one of the strongest trading blocs in the world. It achieved its most important goal of removing all tariff barriers by 2008; and this would hopefully help it make better progress in the future. The years ahead are of crucial importance—the actual power of this organization could be assessed better now when there are no tariff barriers. If the United States finally withdraws from NAFTA citing American interests, the trade regime would surely get a jolt. Canada and Mexico are in favour of continuing with the NAFTA. President Trump also wanted to follow a flexible approach towards his withdrawal proposal.⁵ Therefore, the future of NAFTA hangs in balance. If it wishes to exist as a noteworthy trade regime in North America, as well as in the world, it must try to remove trade imbalances among participating countries.

ENDNOTES

1. Backgrounder by James McBride, https://www.cfr.org/experts/james-mcbride and Mohammed Aly Sergie, https://www.cfr.org/experts/mohammed-aly-sergie. Last updated October 4, 2017, ‘NAFTA’s Economic Impact’. Accessed on 11 February 2018.
2. Ibid.
3. Backgrounder by James McBride and Mohammed Aly Sergie, https://www.cfr.org. Last updated October 4, 2017, ‘NAFTA’s Economic Impact’. Accessed on 11 February 2018.
4. Business News, January 18, 2018 / 6:22 AM / 2 MONTHS AGO. ‘Exclusive: Trump Says Terminating NAFTA Would Yield the ‘Best Deal’ in Renegotiations. Jeff Mason, https://www.reuters.com/journalists/jeff-mason and David Lawder, https://www.reuters.com/journalists/david-lawder; https://www.reuters.com/
5. Ibid.