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INDIA'S LOOK-EAST POLICY AND ITS IMPACT ON NORTH EASTERN REGION OF INDIA
The Look-East policy is being pursued aggressively and has started yielding results on the economic and political fields. This policy which was primarily directed towards improving relations with ASEAN will now be enlarged to cover other nations of the region such as China, Japan and Korea to facilitate more political and economic integration.
The Look-East policy was launched in 1992 just after the end of the cold war, following the collapse of the Soviet Union. After the start of liberalization, it was a very strategic foreign policy decision taken by the Government of India.
The policy was given an initial thrust with the then Prime Minister Narasimha Rao visiting China, Japan, South Korea, Vietnam and Singapore and India becoming an important dialogue partner with ASEAN (Association of South Asian Nations) in 1992. Since the beginning of this century, India has given a big push to this policy by becoming a summit level partner of ASEAN (2002) and getting involved in some regional initiatives such as the BIMSTEC (Bangladesh, India, Myanmar, Thailand, China) and the Ganga Mekong Cooperation and a member of the East Asia Summit (EAS) in December, 2005.
India – ASEAN
India's interaction with ASEAN in the cold war era was very limited. India declined to get associated with ASEAN in the 1960s when full membership was offered even before the grouping was formed.
It is only with the formulation of the Look-East policy in the last decade (1992), India had started giving this region due importance in the foreign policy. India became a sectoral dialogue partner with ASEAN in 1992, a full dialogue partner in 1995, a member of the ASEAN Regional Forum (ARF) in 1996, and a summit level partner (on par with China, Japan and Korea) in 2002.
The first India-ASEAN Business Summit was held at New Delhi in October 2002. The then Prime Minister A.B. Vajpayee addressed this meet and since then this business summit has become an annual feature before the India-ASEAN Summits, as a forum for networking and exchange of business experiences between policy makers and business leaders from ASEAN and India.
Four India-ASEAN Summits, first in 2002 at Phnom Penh (Cambodia), second in 2003 at Bali (Indonesia), third in 2004 at Vientiane (Laos) and the fourth in 2005 at Kuala Lumpur (Malaysia), have taken place till date.
The following agreements have been entered into with ASEAN:
Framework Agreement on Comprehensive Economic Cooperation (for establishing a FTA in a time frame of 10 years) was concluded in Bali in 2003.
An ASEAN-India Joint Declaration for Cooperation to Combat International Terrorism has been adopted.
India has acceded to the Treaty of Amity and Cooperation (TAC) in 2003, on which ASEAN was formed initially (in 1967).
Agreement on "India-ASEAN Partnership for Peace, Progress and Shared Prosperity" was signed at the 3rd ASEAN-India Summit in Nov 2004.
Setting up of Entrepreneurship Development Centres in ASEAN member states – Cambodia, Myanmar, Laos and Vietnam. (The one in Laos is already functional)
The following proposals were announced by the Prime Minister at the 4th ASEAN-India Summit:
Setting up centres for English Language Training (ELT) in Cambodia, Laos, Myanmar and Vietnam.
Setting up a tele-medicine and tele-education network for Cambodia, Myanmar, Laos and Vietnam.
Organising special training courses for diplomats from ASEAN countries.
Organising an India-ASEAN Technology Summit in 2006.
Organising education fairs and road shows in ASEAN countries.
Conducting an India-ASEAN IT Ministerial and Industry Forum in 2006.
The ASEAN region has an abundance of natural resources and significant technological skills. These provide a natural base for the integration between ASEAN and India in both trade and investment. The present level of bilateral trade with ASEAN of nearly US $ 18 billion is reportedly increasing by about 25 % per year. India hopes to reach the level of US $ 30 billion by 2007. India is also improving its relations with the help of other policy decisions like offers of lines of credit, better connectivity through air (open skies policy), rail and road links.
Thailand. The first Framework Agreement for a bilateral FTA (with an ASEAN nation) was signed with Thailand in October 2003. Under this agreement, the commencement of FTA in Services and Investments will be in 2006 and in Goods from 2010. Some Memorandums of Understanding were also signed in October 2003, on tourism, agriculture and cooperation in bio-technology. A Joint Working Group is also in place for information and intelligence sharing on terrorism.
Malaysia. Indiais Malaysia's largest trading partner among countries in the south, excluding China and the ASEAN, with the bilateral trade valued at US $ 4.29 billion in 2004. Indian public sector undertakings such as BHEL and IRCON have undertaken and successfully completed a number of projects in Malaysia. There are 57 Indian joint ventures in Malaysia in the fields of palm oil refining, power, railways, civil construction, training and information technology.
During the visit of Prime Minister Manmohan Singh in December 2004, India and Malaysia agreed to initiate a Comprehensive Economic Cooperation Agreement (CECA). 12 agreement/MOUs were also signed covering wide ranging cooperation in satellite technology, biotechnology, information technology, infrastructure and education.
Indonesia. During the visit of the Indonesian President, Susilo Bambang Yudhoyono, to India in November 2005, Indonesia and India agreed to establish a "strategic partnership" based on shared values and commitment to democracy and aimed at broad based development of relations in the political, security, economic, commercial, cultural and science and technology fields. Three MOUs were signed- one on marine and fisheries cooperation, one on establishment of Joint Study Group for CECA and one on training cooperation for training of diplomats.
India has many joint ventures in Indonesia since the 1970s. The bilateral trade currently at around US $ 4 billion will be tripled to US $ 15 billion in the next five years. Indonesia was insistent on the inclusion of India into East Asia Summit and had supported India at the other forums like WTO and OIC (Oil Importing Countries).
Myanmar. Myanmar is the only ASEAN country with which India shares both land and maritime boundaries. Hence Myanmar has to be accorded a special position in its foreign policy, especially in view of India's strategic and security concerns. Consequent to visit of Senior General Than Shwe, Chairman SPDC,to India in 2004, the bilateral relations are at an all time high.
India has extended a number of general and project-specific credit lines to Myanmar in the last few years. A number of agreements and MOUs, including the Tripartite Maritime Agreement between India, Myanmar and Thailand, the Border Trade Agreement and an agreement on Cooperation between Civilian Border Authorities, have been signed. Indian companies are involved in oil and gas exploration in Myanmar. A feasibility study has been undertaken for a rail link between India and Myanmar.
India had upgraded the 160 km long Tamu-Kalewa-Kalemyo highway in 2001 and will be maintaining it for the next six years. There is an ongoing project for construction of a trilateral highway from Moreh in India to Mae Sot in Thailand to Bagan in Myanmar, the progress of which is being reviewed regularly by the foreign ministers of the three nations. True to Myanamar's assurances, it has been launching operations against the Indian rebel groups such as NSCN (K) camping in its soil.
Singapore. Comprehensive Economic Cooperation Agreement (CECA) between India and Singapore was signed on 29 June 2005 during the visit of Singapore Prime Minister to India. This agreement which came into effect on 01 August 2005, includes a bilateral investment promotion treaty, a double taxation avoidance agreement and an air services agreement in addition to an FTA. It may be recalled that it was Singapore that paved the way of India's association with ARF. Lee had also supported India's bid for a permanent seat in the UN Security Council. Singapore along with Indonesia had also supported India's entry in to the East Asian Summit.
Cambodia, Laos and Vietnam
These three economically under developed countries of this region, in comparison to the rest of ASEAN, have enough scope and opportunity for India to extend its influence and reap the benefits.
Since 1981, when India recognized the Hang Samrin regime, India had cordial relations with Cambodia. India has entered into a number of bilateral treaties and agreements for cooperation in the fields of trade, science & technology, agriculture, tourism, air services and visa exemption. India has some major projects in the areas of education, entrepreneurship development and information technology. India has helped Cambodia in a big way through the ITEC programme.
India and Laos have signed a number of agreements and MOUs in the fields of culture, cooperation in defense, cooperation in science & technology, agricultural cooperation, drugs and illicit trafficking, and exemption of visas for diplomats and officials. India has also set up and Entrepreneurial Development Centre in Laos and will be setting up an Information Technology Centre shortly.
India has a number of bilateral treaties and agreements with Vietnam in the areas of Consular relations, Avoidance of Double Taxation, Narcotics, Science & Technology and Culture. Since 1976, India has extended 14 lines of credit amounting to Rupees 3,610 million to Vietnam. Another credit line of US $ 27 million to Vietnam was signed in August 2004 between Exim Bank of India and Ministry of Finance, Vietnam. India is also helping Vietnam in setting up an Advanced Resource Centre in IT in Hanoi and HRD in the field of IT in six educational institutions in Vietnam.
India has also proposed in the 4th India-ASEAN Summit at Kuala Lumpur in 2005 to set up Centers for English Language Training, tele-medicine and tele-education centers in these three states.
The China Factor: India getting preference over China
China is virtually dominating this region. By the ASEAN-China Accord entered into in November 2004 (during the 10th ASEAN Summit in Vientiane), the world's biggest free trade area has been created removing all tariffs. The tariff cuts that began in 2005 will be completed by 2010 drawing the ASEAN's combined economies of US $ 1 trillion closer to China's US $ 1.4 trillion.
In the Cold war era, India perceived China as dangerous country because of its high military expenditure and ambitious plans in this field. But now the image of China has changed and now is seen as an economic powerhouse. To gain confidence and to build trust among the Asian countries Chinese Premier Wen Jiabao, said in a speech during the last ASEAN Summit that "China will continue to seek peace and development through cooperation and will strive to achieve development that will bring about peace, openness, cooperation and harmony as well as benefit to itself and other countries".
Despite the remarks of the Chinese Premier some analysts are of the opinion that China preferred a smaller Asian grouping (without U.S., India, Australia and New Zealand) that can integrate quickly on the economic front and which China can influence more significantly. Perhaps it is this increasing influence of China and its motives that had prompted countries like Singapore and Indonesia to cooperate with India, Australia and New Zealand into the EAS.
Hence India must be aware that it has not been invited to EAS because of its rising economic potential alone but more as a balancing force to offset the China factor. Although it is being said that India and China are not rivals and they can complement rather than compete in the EAS.
Conclusion
Advantages of the policy: Implications for India’s Northeast Region
* 1991 was a turning point in India's economic relations due to its new Look east policy. Before 1990 India's main focus was on the Soviet Union because of which ties with the other major Asian powers like China and Japan were not strong. India's inward-looking orientation disconnected it from the neighborhood to the East, kept it apart from the economic growth of East Asia. By the turn of the 1990s, India had totally marginalized itself. The first phase of the Look East policy launched by the Narasimha Rao Government in the early 1990s focused on renewing contact with a region that India had drifted away from.
* The Look-East policy has been given a significant thrust since the beginning of this century and the results achieved are evident as mentioned. Now India has entered into the phase two of this policy.The second phase in India's Look East policy has a new dimension — the development of India's remote northeast.India's search for a new economic relationship with South East Asia is no longer driven by considerations of globalization, but to facilitate development of the Northeast by increasing its connectivity to the outside world. Instead of trying to isolate the Northeast from external influences, as it had done in the past, New Delhi is now recognizing the importance of opening it up for commercial linkages with South East Asia.
* Increased economic integration with Asia has helped India because the core competencies of these economies are different. So India can import the goods from other countries which can be produced by other countries at a lower cost then India. India can export those goods for which India has a competitive advantage. This arrangement is mutually beneficiation for India and East Asia countries .Due to this there is a Substantial potential of Asian Economic Integration in helping Asia resume a high growth path.
East Asia's Strengths India's Strengths
1) Electronic equipment Computer Software
2) Heavy engineering Light engineering and pharmaceuticals
3) Product development and marketing Process development
4) Underutilized capacity in construction Huge potential demand
* Look east policy has helped India in strengthening its place in the global economy and gets a better deal in its interactions outside the region. America and European countries had entered into a lot of different mutual agreement which has further increased their reputation and bargaining power. India was in danger of isolation in the global economy. India was not getting its due importance. But due to its Look east policy India economy is getting integrated with the Asian economy, so India gets support from Asian countries which have increased India's importance at global level.
Short comings in the policy
* The Look East policy did not find Japan on its radar and failed to improve India's economic ties with it. Trade with Japan actually declined dramatically dropping its share to one-third of its level of 7 per cent in 1993. One of the causes, of course, was the fact that the Japanese economy was stagnate during this period. But still it is difficult to explain the reason behind this dramatic drop. This was the biggest failure of Look east policy. Failure to involve Japan and a build economic relationship with it also resulted in closing the doors on Japanese foreign direct investment (FDI).
India missed out on Japanese FDI in the in the early 1990's because of its policies that discouraged FDI. Following the reforms, however, the dedicated policy instruments of Look East policy should have succeeded in attracting Japanese FDI to India but that did not happen. During 1993-2003, Japan's global FDI averaged at $ 50 billion a year, of which India received $ 220 million a year or less than one-fourth of 1 per cent! Even at the regional level, India received just 2 per cent of Japanese FDI. (China's share was 10 times higher at 22 per cent).But now the situation is getting better and trade with Japan is increasing.
* India has entered into a number of pacts, agreements and FTAs but its record for implementation of such accords has been poor as can be seen from the follow up of the Indo-Thai FTA and CECA with Singapore.
The reason for poor implementation of the pacts, agreements and FTAs –
#The Indian industry's doubts about its competitive efficiency.
# Indian industry does not want competition at home.
# Indian industry is scared of cheaper exports to India from these countries.
India should go ahead with proper implementation of the pacts, agreements and FTAs without bothering about the aforementioned factors. The Indian industry will ensure that India will always gain from these arrangements.
Suggested future framework
·The rise of China's economic potential and the resultant influence on this region should not deter India, as the region is looking for an alternative in India because of its fair practices and peace loving nature. India is preferred over China by many countries because India is a democratic country. However India has to set its house in order and go ahead with its economic reforms, liberalization process and infrastructure development to gain the confidence of this region, which at present is not all that high. Economic reforms and liberalization process is being negatively affected by the left parties which is supporting the government.
·India should tailor the bilateral relations with every country in different ways to suit the requirements of that particular country and that of India.
·ASEAN and EAS hold great promise for India. Adequate interaction with these groupings will result in better integration with this region and facilitate India economic development. Indian businesses which are looking to go global will get huge markets in other countries. They will be able to export their goods and get a market share because of low tariffs due to the pacts, agreements and FTAs. Although foreign companies will also get this advantage but Indian companies will be able to compete with these because of their competitiveness.
·CMI and emerging FTAs / RTAs between Asian countries provide foundations for a broader and more ambitious initiative to take the existing India-ASEAN relationship to a higher level, like an Asian Economic Community, which constitutes ASEAN, China, Japan, Korea and India as member countries. Such a community would be roughly the size of the European Union in terms of income, and bigger than NAFTA in terms of trade. It would account for half the world's population and it would hold foreign exchange reserves exceeding those of the EU and NAFTA put together. This can give a greater push to Indian growth.
Impact and Implications of recent steps on Northeast India:
With the signing of free trade agreement with 10-member ASEAN countries in mid-August 2009 by India, subsequent to its FTA with BIMSTEC nations comprising Bangladesh, India, Sri Lanka, Thailand, Myanmar, Nepal and Bhutan together with the prospect of similar agreement with South Korea, the possibility of enlarged trade and industrialisation of north-eastern region, the gate-way to India, is certainly the brightened up. Assam being the biggest State and potentially the biggest trade partner in the upcoming hub in the region, vested with vast deposits of natural resources, obviously, has an added reason to be happy.
This is a crucial step forward to look-east policy and would achieve an increase of at least $ 10 billion worth of trade in the first year itself after the agreement comes into force in January, 2010.
Also, several products like agricultural commodities, auto components, textiles, plastics, chemicals, etc have been safeguarded through India’s negative list on which there will be no tariff reduction. This apart, the lobbying from domestic industry had led to the exclusion of as many as 489 items from the list of tariff concessions and 590 items from the list of tariff elimination to address sensitivities in agriculture, crude and refined palm oil, coffee, tea, pepper, etc on which the import duties will also be lowered to around 40-45 per cent from almost 200 per cent by 2019.
The FTA with ASEAN would be bringing down tariffs on electronics, chemicals, machinery and textile goods while the duty-free imports and exports ranging from steel to sugar and tobacco would increase to 4000 products over a period of eight years. Though, till now, there is no significant presence of industries coming into the region, the recent FTA agreements and further approach to look-east policy with Myanmar suggesting an alternative route to South-east Asian market through the “Rangoon Road” instead of controversial Stilwell road appear to have now attracted a number prospective investors eyeing on north-eastern region. It is not only that Bangladeshhas decided to improve its infrastructure in order to enhance its trade with this region but also the much-touted Indo-Myanmar border trade is geared up with inclusion of 18 new items in the list of tradable products. This apart, a leading company from Thailand has evinced a keen interest in setting up of a manufacturing plant in the North-East with an investment of nearly Rs 45 crore to generate telecom services and also several Thai companies expressed their keen interest to invest in agriculture and infrastructure sectors. It is only in the first week of September that the Federation of Industry and Commerce of North Eastern Region signed memorandum of understanding with Brazil and Turkey for exporting tea, handloom, handicraft products and spices against investment from these countries in the region’s hydropower sector.
India-ASEAN trade has risen from around $7 billion in 2000-01 to $39 billion in 2007-08. With tariffs rationalised, it is expected to balloon many times over. Plus, Indian exporters will gain access to the $1.1 trillion ASEAN market. Fears about influx of foreign goods flattening domestic players are unfounded if India's experience with cheap Chinese imports is anything to go by. If anything, trade regularisation via FTAs creates an institutional framework that spells out the rules of the game. There's also the bigger picture. Asia's globally recognised economic clout in the 21st century would be reinforced if Asian nations did business with each other on the basis of mutual synergies.
The region has however, for long been waiting to see the results of such prospects.
The creation of a European single currency became an official objective of the Europena Union in 1969. However, it was only with the Maastricht Treaty in 1993 that member states were legally bound to start the monetary union no later than 1 January 1999. On this date the euro was duly launched by eleven of the then fifteen member states of the EU. It remained an accounting currency until 1 January 2002, when euro notes and coins were issued and national currencies began to phase out in the eurozone, which by then consisted of twelve member states. The eurozone has since grown to sixteen countries, the most recent being Slovakia which joined on 1 January 2009.
The euro (€) is the official currency of 16 of the 27 member states of the European Union (EU). The states, known collectively as the Eurozone, are Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.
The currency is also used in a further five European countries, with and without formal agreements and is consequently used daily by some 327 million Europeans. A number of other countries outside the EU, such as Montenegro, use the euro without formal agreement with the ECB. Over 175 million people worldwide use currencies which are pegged to the euro, including more than 150 million people in Africa.
The euro is the second largest reserve currency and the second most traded currency in the world after the U.S. dollar. As of November 2008, with more than €751 billion in circulation, the euro is the currency with the highest combined value of cash in circulation in the world, having surpassed the U.S. dollar. Based on IMF estimates of 2008 GDP and purchasing power parity among the various currencies, the Eurozone is the second largest economy in the world.
The name euro was officially adopted on 16 December 1995. The euro was introduced to world financial markets as an accounting currency on 1 January 1999, replacing the former European Currency Unit (ECU) at a ratio of 1:1. Euro coins and banknotes entered circulation on 1 January 2002.
The euro is designed to help build a single market by, for example: easing travel of citizens and goods, eliminating exchange rate problems, providing price transparency, creating a single financial market, price stability and low interest rates, and providing a currency used internationally and protected against shocks by the large amount of internal trade within the eurozone. It is also intended as a political symbol of integration and stimulus for more.
The euro, and the monetary policies of those who have adopted it in agreement with the EU, are under the control of the European Central Bank (ECB). There are eleven other currencies used in the EU.
Administration
The European Central Bank (ECB) in Frankfurt, Germany, is in charge of the Eurozone's monetary policy.The euro is managed and administered by the ECB and the Eurosystem (composed of the central banks of the Eurozone countries). As an independent central bank, the ECB has sole authority to set monetary policy. The Eurosystem participates in the printing, minting and distribution of notes and coins in all member states, and the operation of the Eurozone payment systems.
The 1992 Maastricht Treaty obliges most EU member states to adopt the euro upon meeting certain monetary and budgetary requirements, however, not all states have done so. The United Kingdom and Denmark negotiated exemptions, while Sweden turned down the euro in a 2003 referendum, and has circumvented the obligation to adopt the euro by not meeting the monetary and budgetary requirements. All nations that have joined the EU since 1993 have pledged to adopt the euro in due course.
Characteristics
All euro coins have a common side, and a national side chosen by the respective national authorities.
The euro is divided into 100 cents (sometimes referred to as euro-cents, especially when distinguishing them from other currencies). In official contexts the plural forms of euro and cent are spelled without the s, notwithstanding normal English usage. Otherwise, normal English plurals are recommended and used. All circulating coins have a common side showing the denomination or value, and a map in the background. For the denominations except the 1-, 2- and 5-cent coins that map only showed the 15 member states which were members when the euro was introduced. Beginning in 2007 or 2008 (depending on the country) the old map is being replaced by a map of Europe also showing countries outside the Union like Norway. The 1-, 2- and 5-cent coins, however, keep their old design, showing a geographical map of Europe with the 15 member states of 2002 raised somewhat above the rest of the map. All common sides were designed by Luc Luycx. The coins also have a national side showing an image specifically chosen by the country that issued the coin. Euro coins from any member state may be freely used in any nation which has adopted the euro.
The coins are issued in €2, €1, 50-cent, 20-cent, 10-cent, 5-cent, 2-cent, and 1-cent denominations. In order to avoid the use of the two smallest coins, some cash transactions are rounded to the nearest five cents in the Netherlands (by voluntary agreement) and in Finland (by law).
Commemorative coins with €2 face value have been issued with changes to the design of the national side of the coin. These include both commonly issued coins, such as the €2 commemorative coin for the fiftieth anniversary of the signing of the Treaty of Rome, and nationally issued coins, such as the coin to commemorate the 2004 Summer Olympics issued by Greece. These coins are legal tender throughout the Eurozone. Collector’s coins with various other denominations have been issued as well, but these are not intended for general circulation, and they are legal tender only in the member state that issued them.
The design for the euro banknotes has common designs on both sides. The design was created by Robert Kalina. Notes are issued in €500, €200, €100, €50, €20, €10, €5. Each banknote has its own colour and is dedicated to an artistic period of European architecture. The front of the note features windows or gateways while the back has bridges. Some of the highest denominations such as the €500 are not issued in all countries, though they remain legal tender throughout the Eurozone.
Payments clearing, electronic funds transfer
All intra-EU transfers in euro are considered as domestic payments and bear the corresponding domestic transfer costs. This includes all member States of the EU, even those outside the Eurozone providing the transactions are carried out in euro. Credit/debit card charging and ATM withdrawals within the Eurozone are also charged as domestic, however paper-based payment orders, like cheques, have not been standardised so these are still domestic-based. The ECB has also set up a clearing system, TARGET, for large euro transactions.
Currency sign
A special euro currency sign (€) was designed after a public survey had narrowed the original ten proposals down to two. The European Commission then chose the design created by the Belgian Alain Billiet. Inspiration for the € symbol itself came from the Greek epsilon (Є) – a reference to the cradle of European civilisation – and the first letter of the word Europe, crossed by two parallel lines to ‘certify’ the stability of the euro.
Eurocurrency
Currency deposited by national governments or corporations in banks outside their home market. This applies to any currency and to banks in any country. For example, South Korean won deposited at a bank in South Africa, is considered Eurocurrency or euromoney. Having "euro" doesn't mean that the transaction has to involve European countries. However, in practice, European countries are often involved.
Eurocurrency Market
The money market in which Eurocurrency, currency held in banks outside of the country where it is legal tender, is borrowed and lent by banks in Europe. Thus, it is a market where financial and banking institutions provide banking services denominated in foreign currencies.
The Eurocurrency market allows for more convenient borrowing and lending, which improves the international flow of capital for trade between countries and companies. For example, a Japanese company borrowing U.S. dollars from a bank in France is using the Eurocurrency market. Unlike Eurocredit markets, however, loans in this market are made short-term.
The European Union (EU) is an economic and political union of 27 member states, located primarily in Europe. But the EU’s territory is not the same as that of Europe, as parts of Europe
Committed to regional integration, the EU was established by the Treaty of Maastricht on 1 November 1993 upon the foundations of the pre-existing European Economic Community.
[The EU has developed a single market through a standardised system of laws which apply in all member states, ensuring the freedom of movement of people, goods, services and capital. It maintains common policies on trade, agriculture, fisheries and regional development. A common currency, the euro, has been adopted by sixteen member states that are thus known as the Eurozone. The EU has developed a limited role in foreign policy, having representation at the WTO, G8 summits, and at the UN. It enacts legislation in justice and home affairs, including the abolition of passport controls between many member states which form part of the Schengen Area. Twenty-one EU countries are also members of NATO.]
An international organisation, the EU operates through a hybrid system of supranationalism and intergovernmentalism. In certain areas, it depends upon agreement between the member states; in others, supranational bodies are able to make decisions without unanimity. Important institutions and bodies of the EU include the European Commission, the Council of the European Union, the European Council, the European Court of Justice (ECJ), and the European Central Bank (ECB). The European Parliament is elected every five years by member states' citizens, to whom the citizenship of the European Union is guaranteed.
The EU traces its origins to the European Coal and Steel Community formed among six countries in 1951 and the Treaty of Rome in 1957. Since then the union has grown in size through the accession of new countries, and new policy areas have been added to the remit of the EU's institutions.
Member states The European Union is composed of 27 independent sovereign states which are known as member states: [Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, 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.]
To join the EU, a country must meet the Copenhagen criteria, defined at the 1993 Copenhagen European Council. These require a stable democracy which respects human rights and the rule of law; a functioning market economy capable of competition within the EU; and the acceptance of the obligations of membership, including EU law. Evaluation of a country's fulfilment of the criteria is the responsibility of the European Council. The current framework does not specify how a country could exit the Union (although Greenland, a territory of Denmark, withdrew in 1985), but the proposed Treaty of Lisbon contains a formal procedure for withdrawing.
History After the end of the Second World War, moves towards European integration were seen by many as an escape from the extreme forms of nationalism which had devastated the continent. One such attempt to unite Europeans was the European Coal and Steel Community (1951) which was declared to be "a first step in the federation of Europe". The founding members of the Community were Belgium, France, Italy, Luxembourg, the Netherlands and West Germany.
In 1957, the "Six" mentioned before signed the Treaties of Rome. These treaties extended the earlier cooperation within the European Coal and Steel Community and created the European Economic Community, (EEC) establishing a customs union and the European Atomic Energy Community (Euratom) for cooperation in developing nuclear energy. In 1967 the Merger Treaty created a single set of institutions for the three communities, which were collectively referred to as the European Communities, although more commonly just as the European Community (EC).
[In 1973 the Communities enlarged to include Denmark, Ireland and the United Kingdom. In 1979 the first direct, democratic elections to the European Parliament were held. Greece joined in 1981, and Spain and Portugal in 1986. In 1985 the Schengen Agreement created largely open borders without passport controls between most member states. In 1986 the European flag began to be used by the Community and the Single European Act was signed. In 1990, after the fall of the Iron Curtain, the former East Germany became part of the Community as part of a newly united Germany.
The European Union was formally established when the Maastricht Treaty came into force on 1 November 1993, and in 1995 Austria, Sweden and Finland joined the newly established EU. In 2002, euro notes and coins replaced national currencies.]
Economy Since its origin, the EU has established a single economic market across the territory of all its members. Currently, a single currency is in use between the 16 members of the eurozone. If considered as a single economy, the EU generated an estimated nominal gross domestic product (GDP) of US$18.39 trillion (15.247 trillion international dollars based on purchasing power parity) in 2008, amounting to over 22% of the world's total economic output in terms of purchasing power parity, which makes it the largest economy in the world by nominal GDP and the second largest trade bloc economy in the world by PPP valuation of GDP. It is also the largest exporter of goods, the second largest importer, and the biggest trading partner to several large countries such as India and China.
Single market (Four Freedoms) Two of the original core objectives of the European Economic Community were the development of a common market, subsequently renamed the single market, and a customs union between its member states. The single market involves the free circulation of goods, capital, people and services within the EU, and the customs union involves the application of a common external tariff on all goods entering the market. Once goods have been admitted into the market they can not be subjected to customs duties, discriminatory taxes or import quotas, as they travel internally. The non-EU member states of Iceland, Norway, Liechtenstein and Switzerland participate in the single market but not in the customs union.
Free movement of capital is intended to permit movement of investments such as property purchases and buying of shares between countries. The free movement of capital is unique insofar as that it is granted equally to non-member states.
The free movement of persons means citizens can move freely between member states to live, work, study or retire in another country. This required the lowering of administrative formalities and recognition of professional qualifications of other states.
The free movement of services and of establishment allows self-employed persons to move between member states in order to provide services on a temporary or permanent basis. According to the Treaty the provision of services is a residual freedom that only applies if no other freedom is being exercised.
Monetary union The creation of a European single currency became an official objective of the EU in 1969. However, it was only with the advent of the Maastricht Treaty in 1993 that member states were legally bound to start the monetary union no later than 1 January 1999. On this date the euro was duly launched by eleven of the then fifteen member states of the EU. It remained an accounting currency until 1 January 2002, when euro notes and coins were issued and national currencies began to phase out in the eurozone.
Competition The EU operates a competition policy intended to ensure undistorted competition within the single market. The Commission as the competition regulator for the single market is responsible for antitrust issues, approving mergers, breaking up cartels, working for economic liberalisation and preventing state aid. However, it is unclear whether this will have any practical effect on EU policy.
Development The Common Agricultural Policy (CAP) is one of the oldest policies of the European Community, and was one of its core aims. The policy has the objectives of increasing agricultural production, providing certainty in food supplies, ensuring a high quality of life for farmers, stabilising markets, and ensuring reasonable prices for consumers. It was, until recently, operated by a system of subsidies and market intervention. Until the 1990s, the policy accounted for over 60% of the then European Community's annual budget, and still accounts for around 35%.
[For WTO and its impact on the agriculture of developing countries: The EU’s policy of price controls and market interventions led to considerable overproduction. These were intervention stores of produce bought up by the Community to maintain minimum price levels. In order to dispose of surplus stores, they were often sold on the world market at prices considerably below Community guaranteed prices, or farmers were offered subsidies (amounting to the difference between the Community and world prices) to export their produce outside the Community. This system has been criticised for under-cutting farmers in the developing world. The overproduction has also been criticised for encouraging environmentally unfriendly intensive farming methods.]
Energy The Commission has five key points in its energy policy: increase competition in the internal market, encourage investment and boost interconnections; diversify energy resources; establish a new treaty framework for energy co-operation with Russia while improving relations with energy-rich states in Central Asia and North Africa; use existing energy supplies more efficiently while increasing use of renewable energy; and finally increase funding for new energy technologies. The EU currently imports 82% of its oil, 57% of its gas and 97.48% of its uranium demands.
Infrastructure The EU is working to improve cross-border infrastructure within the EU, for example through the Trans-European Networks (TEN). The developing European transport policies will increase the pressure on the environment in many regions by the increased transport network. In the pre-2004 EU members, the major problem in transport deals with congestion and pollution. After the recent enlargement, the new states that joined since 2004 added the problem of solving accessibility to the transport agenda.
Regional development There are substantial economical disparities across the EU. On the high end Frankfurt has €71,476 PPP per capita, Paris €68,989, and Inner London €67,798, while Vaslui County with €3,690 PPP per capita, Botoşani County with €4,115, and Giurgiu County (all in Romania) with €4,277. Compared to the EU average, the United States GDP per capita is 35% higher and the Japanese GDP per capita is approximately 15% higher. There are a number of Structural Funds and Cohesion Funds to support development of underdeveloped regions of the EU.
Environment The first environmental policy of the European Community was launched in 1972. Although the Commission's right to propose criminal law against “ecological crimes” was contested, it was confirmed by the Court of Justice. In 2007, member states agreed that the EU is to use 20% renewable energy in the future and that is has to reduce carbon dioxide emissions in 2020 by at least 20% compared to 1990 levels. This includes measures that in 2020, one-tenth of all cars and trucks in EU 27 should be running on biofuels.
Education and research Education and science are areas where the EU's role is limited to supporting national governments. In education, the policy was to develop university exchange programmes which began in 1987. Scientific development is facilitated through the EU's Framework Programmes, the first of which started in 1984. The aims of EU policy in this area are to co-ordinate and stimulate research.
The county’s urban poor, according to the Planning Commission’s estimates, number 80 million and constitute 25.70 per cent of the urban population. The dynamics of urban poverty are very different and the problems the urban poor face are also different from that faced by their rural counterparts who at 220 million form 28.3 per cent of rural population. Though the urban poor have better access to employment and income, these are often irregular and are mostly in the informal sector. The other key determinants of urban poverty are the levels of access to basic facilities, namely, housing, sanitation and drinking water and services such as healthcare and education.
It is significant that poverty alleviation programmes in India have had a marked rural bias, evident from the decrease in absolute numbers of the rural poor from 261 million in 1973-74 to 220 million in 2004-05. This is in contrast to the rise in the numbers of the urban poor from 60 million to 80 million over the same period. Addressing urban poverty alleviation through the rural prism runs the risk of coming up with partial solutions, such as those based on self-employment schemes. Lack of access to housing and public utilities that causes urban poverty more than factors related to employment and income, so the strategies should differ from those for the rural poor.
Given the fair measure of success the ongoing National Rural Employment Guarantee Scheme (NREGS) has achieved, it is only appropriate that the 42nd Indian Labour Conference held recently, should have recommended the launching of a similar scheme for the urban poor. But replicating the NREGS will not yield the same results because urban realities differ. The success of the NREGS is set against the rural-specific milieu characterized by poorer educational attainment levels, lower levels of economically active population, declining employment opportunities in the agriculture sector and a shift towards the tertiary sector as a job provider. The demographic and economic differences that exist between rural and urban India call for a modification of the NREGS pattern in devising as urban employment guarantee scheme.
Again, the National Sample Survey (NSS) data for 2005-06 point to a pronounced difference in the educational attainment levels of those in the 15-plus age group. While 42 per cent of the urban population completed secondary education, this proportion is a mere 16 per cent in rural India. Urban India, also has a higher working age population at 65 per cent, compared with 58 per cent in rural areas. The causes of unemployment in rural and urban areas differ, and so do the possible avenues of employment.
Naturally therefore, a national urban employment guarantee scheme should improve upon the current prototype, which hinges on creating jobs largely through public works such as construction and road maintenance. India’s long experience of employment generation programmes has lessons to offer. The lack of comprehensive planning, improper targeting of beneficiaries, and leakages in implementation are some of the major deficiencies. An employment scheme for urban India should go beyond the present scope of public works projects, and address urban demands. For instance, urban renewal and restoration projects that build on the conceptual framework of rural public works but are in tune with urban necessities merit consideration. An important requirement for a successful scheme is the involvement of local bodies, since they are closer to the problem. Empowering local bodies to create jobs in education, healthcare and other public services such as construction of roads, buildings, water and sanitation projects will cater to the varied requirements of urban job seekers and serve as an efficient starting point. However, wage employment schemes supported by government can only offer transitional solutions. The government should simultaneously address skills-shortage and create the environment necessary for fostering economic development. A social security system for all unorganized workers, therefore, is a priority. Improving the conditions of housing for the urban poor is another area for urgent action. The larger aim of poverty reduction programmes should be to ensure that the vulnerable are not impoverished because of the pressure of urban living.
Meanwhile, the Centre has decided to revise the cost of a dwelling unit provided under the Integrated Housing and Slum Development Programme (IHSDP) under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to Rs 1 lakh from Rs 80,000. The Centre also decided on certain modifications in the guidelines for the Swarna Jayanti Shahari Rojgar Yojana (Golden Jubilee Urban Employment Scheme) based on the recommendations of the third party evaluation of the scheme. From now, there would be no more educational qualification criteria for the beneficiaries under the urban self employment programme. For group enterprises set up by urban poor women, the subsidy would be now 35 per cent of the project cost or a maximum of Rs 60,000 per member. The minimum number of members required to form a women’s group would also be lower at five instead of 10 and the revolving fund entitlement per member would be enhanced to Rs 2000. The component for skill training has also been restructured to ensure that quality training was provided, with the involvement of reputed institutions such as Indian Institute of Technologies (IITs), National Institute of Technologies (NITS) and Polytechnics.
(By HK Goswami. Published in Assam Tribune, 8 June 2009).
