International Economic Integration and their Current Practices Part - I

PROF. ANITA RATHOD
Regional Economic Integration &
their current Practices
Dr. Anita Rathod, BBA (IB) Dept, ICCS.

Syllabus -
 European Union [EU] & their current Practices
 North Atlantic FreeTrade Agreement [NAFTA] &
their current Practices
 South Asian Association for Regional Co-
operation[SAARC] & their current Practices
 SAARC PreferentialTrading Arrangement
[SAPTA] & their current Practices

European Union [EU]
The history of the European Union
1945 - 1959
A peaceful Europe – the beginnings of cooperation
1. The European Coal and Steel Community begins to unite
European countries economically and politically in order to
secure lasting peace.
2. The six founding countries are Belgium, France, Germany,
Italy, Luxembourg and the Netherlands.
3. Treaty of Rome creates the European Economic Community
(EEC), or ‘Common Market’.

1960 - 1969
A period of economic growth
1. EU countries stop charging custom duties when they trade with
each other.
2. Agree joint control over food production - surplus agricultural
produce
3. Famous for student riots in Paris, and many changes in society
and behaviour become associated with the so-called ‘68
generation’.
1970 - 1979
A growing Community – the first enlargement
1. Energy crisis and economic problems in Europe
2. The EU regional policy starts to transfer huge sums of money to
create jobs and infrastructure in poorer areas
3. European Parliament increases its influence in EU affairs and in
1979 all citizens can, for the first time, elect their members directly.
4. The EU adopts laws to protect the environment, introducing the
notion of ‘the polluter pays’

1980 - 1989
The changing face of Europe - the fall of the Berlin Wall
1. Single European Act is signed.
2. provides the basis for a vast six-year program aimed at sorting out
the problems with the free flow of trade across EU borders and
thus creates the ‘Single Market’.
3. on 9 November 1989, the Berlin Wall is pulled down and the
border between East and West Germany is opened for the first
time in 28 years.
4. This leads to the reunification of Germany, when both East and
West Germany are united in October 1990.

2000 – 2009
Further expansion
1. The euro is now the new currency for many Europeans.
2. 11 September 2001 becomes synonymous with the 'War on Terror'
after hijacked airliners are flown into buildings in New York and
Washington.
3. A financial crisis hits the global economy in September 2008.
4. The Treaty of Lisbon is ratified by all EU countries before
entering into force in 2009.
5. It provides the EU with modern institutions and more efficient
working methods.

2010 - 2019
A challenging decade
1. The EU helps several countries to confront their difficulties and
establishes the 'Banking Union' to ensure safer and more reliable
banks.
2. In 2012, the European Union is awarded the Nobel Peace Prize.
3. Climate change is still high on the agenda and leaders agree to
reduce harmful emissions.
4. A new security policy is established in the wake of the annexation
of Crimea by Russia.
5. The EU is not only faced with the dilemma of how to take care of
them, but also finds itself the target of several terrorist attacks.

Goals of the EU :
 Promote Peace, Its Values And The Well-being Of Its Citizens
 Offer Freedom, Security And Justice Without Internal Borders
 Sustainable Development Based On Balanced Economic Growth And Price
Stability, A Highly Competitive Market Economy With Full Employment
And Social Progress, And Environmental Protection
 Combat Social Exclusion And Discrimination
 Promote Scientific And Technological Progress
 Enhance Economic, Social And Territorial Cohesion And Solidarity Among
EU Countries
 Respect Its Rich Cultural And Linguistic Diversity
 Establish An Economic And Monetary Union Whose Currency Is The Euro.

Year of country Countries 1 Year of country Countries
1 Jan 1958 Belgium. France,
Germany, Italy,
Luxembourg,
Netherlands
1 Jan 1995 Austria, Finland, ,
Sweden,
1 Jan 1973 Denmark, Irland,
UK (left)
01/05/2004 Cyprus, Czechia,
Estonia, Hungary,
Larvia, Malta,
Poland, Slovakia,
SLovenia
1 Jan 1981 Greece 1 Jan 2007 Bulgaria, Romania
1 Jan 1986 Portugal, Spain 1 July 2013 Crocia
Member countries : 27

EU languages
 The EU has 24 official languages.
 Every time new members have joined the EU, they have added to
the number of official languages.
 Even after the withdrawal of the United Kingdom from the EU,
English remains one of the official languages of Ireland and Malta.
 EU's founding principles is multilingualism. The policy aims at -
 Communicating with its citizens in their own languages
 Protecting Europe’s rich linguistic diversity
 Promoting language learning in Europe

 The EU's main goal here is ambitious: enabling every EU citizen
to communicate in 2 languages other than their mother tongue.
 The EU supports language learning to:
 help more people study and work abroad
 help people from different cultures understand one another
 trade effectively across Europe
 boost the language industry (translation and interpreting,
language teaching, language technologies, etc.)

EU SYMBOLS
 FLAG
 The EU is recognizable by several symbols, the most well-known being the
circle of yellow stars on a blue background.
 They stand for the ideals of unity, solidarity and harmony among the peoples
of Europe.
 EUROP DAY
 Europe Day held on 9 May every year celebrates peace and unity in Europe.
 On Europe Day 2020, the EU institutions paid tribute
through numerous online activities to the many Europeans who, in a
spirit of solidarity, are helping our Union get through the corona virus
crisis.

 EU MOTTO
 "United in diversity", the motto of the European Union, first came into use
in 2000.
 It signifies how Europeans have come together, in the form of the EU, to
work for peace and prosperity, while at the same time being enriched by
the continent's many different cultures, traditions and languages.

EU BUDGET
 The EU budget is funded from sources including a percentage
of each member country's gross national income.
 It is spent on efforts as diverse as raising the standard of living
in poorer regions and ensuring food safety.
 Classified it as –
 EU is funded
 EU Budget is spent

EU is funded -
 The EU's sources of income include contributions from member
countries, import duties on products from outside the EU and fines
imposed when businesses fail to comply with EU rules.
 The EU countries agree on the size of the budget and how it is to be
financed several years in advance.
 The EU budget supports growth and job creation. Under the cohesion
policy, it funds investment to help bridge economic gaps between EU
countries and regions. It also helps develop rural areas in Europe.
 The EU budget:
 is funded chiefly (98%) from the EU's own resources, supplemented
by other sources of revenue;
 is based on the principle that expenditure must be matched by revenue;
 has in-built schemes to compensate certain EU countries;

EU budget is spent -
 The long-term budget sets out the EU's long-term spending priorities and
limits.
 The EU budget finances activities ranging from developing rural areas and
conserving the environment to protecting external borders and promoting
human rights.
 The Commission, the Council and Parliament all have a say in
determining the size of the budget and how it is allocated. But it is the
Commission that is responsible for spending.
 The EU countries and the Commission share responsibility for about 80%
of the budget.

EU budget in 2017 - Total: 157.9 billion

CURRENT PRACTICES -
 Public health
 Climate action and European Green Deal
 Economy, Finance and Euro
 Migration and asylum
 Borders and Security
 Business and Industry
 Single Market
 Digital Economy and society
 Employment and social affairs

 Education and Training
 Research and innovation
 Regional policy
 Transport
 Agriculture and Rural Development
 Maritime affairs and fisheries
 Environment
 Energy
 Foreign affairs and security policy
 EU Enlargement
 Trade
 Food Safety

Public Health -
 Preventing diseases and ensuring an equal chance of good
health and quality healthcare for all
 Capacity building to increase the uptake of vaccinations,
pooling knowledge on cancer, promoting a healthy
lifestyle, and combating smoking through tobacco
legislation

Climate action and the European
Green Deal
 Under the Paris Agreement on climate change the
international community has agreed that the average
global temperature rise must be kept to well below 2 °C
above pre-industrial levels, with the aim being to limit the
increase to 1.5 °C
 Its adaptation strategy promotes actions such as building
flood defenses, developing drought-tolerant crops and
changing building regulations.

Economy, finance and the euro
 EU economies through coordinated economic and fiscal policies, a common
monetary policy and a common currency, the euro
• promote growth and employment;
• promote macroeconomic and fiscal stability;
• improve the efficient functioning of economic and monetary union;
• promote investment;
• prevent or correct macroeconomic imbalances;
• help to coordinate national structural policies; and
• promote prosperity beyond the EU.

Borders and security
 The EU and Member States cooperate to tackle terrorism
and violent radicalization, serious and organized crime
and cybercrime.
• Information exchange between national law enforcement,
customs agencies and border guards;
• Operational cooperation, with the support of EU agencies;
• Training, exchange of best practice, funding, research and
innovation.

Business and industry
• The European Commission has developed sector-specific action plans and
legislation to support more than a dozen key industrial sectors, including the
chemicals,
automotive, food, healthcare, biotechnology and aeronautics industries.
• strengthen its industrial base and promote the transition to a low-carbon
economy;
• promote innovation as a means to generate new sources of growth;
• encourage small businesses and promote an entrepreneurial culture;
• guarantee an EU-wide market for goods; and
• maximize the benefits of the EU’s investment in space.

Single market
• The single market (sometimes also called the internal
market) people, goods, services and money can move
around the EU almost as freely as within a single country.
• Hundreds of technical, legal and bureaucratic barriers to
free trade and free movement between EU Member States
have been removed to make things flow more easily
within the single market.

Contd..
• Address current regulatory or administrative obstacles that prevent people from easily
buying or selling goods and services from or in another Member State;
• Make it easier for companies – big and small – to raise money through the Investment
Plan for Europe and the capital markets union;
• Encourage workers to take up jobs in other EU countries in order to fill vacancies and
meet the need for special skills, including through the European Professional Card and
the EURES job mobility portal;
• Prevent social dumping, the practice of using cheaper labour and moving production to
a low-wage country or area;
• Boost cooperation between national tax authorities; and
• Establish a common consolidated corporate tax base in the EU and a financial
transaction tax.

Employment and social affairs
• The EU’s employment and social affairs policies are designed to:
• create quality jobs throughout the EU;
• help workers to find jobs in their own or another EU country;
• promote skills and entrepreneurship;
• coordinate and modernize social security schemes;
• create better working conditions through common minimum standards;
• support social inclusion and combat poverty; and
• protect the rights of people with disabilities.

Justice and fundamental rights
• Rules preventing discrimination on grounds of sex, racial or ethnic origin,
religion or belief, disability, age or sexual orientation.
• The right for everyone to have their personal data protected thanks to the new
rules (the so-called GDPR) which entered into force in May 2018.
• The Charter of Fundamental Rights, which brings together all the personal,
civic, political, economic and social rights enjoyed by people in the EU.
These are guaranteed by the European Union where EU law is at stake.
• The EU’s justice and fundamental rights policies: the coordination of justice
rules, minimum standards across the EU and access to justice on equal terms
in all countries are key issues. For example, victims of crime have a common
set of minimum rights wherever they are in the EU. This coordination also
helps citizens to use their right of free movement and businesses to trade and
operate throughout the EU’s single market.

Reference Websites -
 https://op.europa.eu/en/home

NorthAmerican Free TradeAgreement [NAFTA]
& their current Practices -
 In 1994, (NAFTA) came into effect.
 Member countries - Canada, the United States, and Mexico.
 Objective – To create one of the world’s largest free trade
zones and laying the foundations for strong economic growth
and rising prosperity for member countries
 NAFTA has demonstrated how free trade increases wealth
and competitiveness, delivering real benefits to families,
farmers, workers, manufacturers, and consumers.

History of NAFTA
1980 -
President Ronald Reagan proposed a North American
common market in his 1980 presidential campaign.
Europe's common market—dubbed the European
Economic Community—had already been initiated with
the Treaty of Rome.
1984
Congress passed the Trade and Tariff Act, which itself built
upon and amended the prior Trade Act of 1974.2
This act
gave enhanced "fast-track" authority to negotiate bilateral
free trade agreements, streamlining negotiations.

1985 -
Canadian Prime Minister Mulroney agreed to begin
discussions for the Canada-U.S. Free Trade Agreement.
Negotiations began in 1986 and it was signed in 1988. It
went into effect on January 1, 1989, and remained in
force until NAFTA replaced it.
1990
Mexican President Carlos Salinas de Gortari requested a
free trade agreement with the U.S. In 1991, Reagan’s
successor, President George H.W. Bush, began
negotiations with President Salinas for a liberalized trade
agreement between Mexico, Canada, and the U.S.

1993
Concerns about the liberalization of labor and environmental
regulations led to the adoption of two addendums. NAFTA was
ratified by the legislatures of the three countries in 1993 and
the U.S. House of Representatives approved it 234–200 on
November 17, 1993. The U.S. Senate approved it 61–38 three
days later.
1992
NAFTA was signed by outgoing President George H.W.
Bush, Mexican President Salinas, and Canadian Prime
Minister Brian Mulroney. Earlier that year, the European
Union had been created by the Treaty of Maastricht.

2018
On November 30, 2018, Canada, the United States, and
Mexico signed an agreement to replace the North American
Free Trade Agreement (NAFTA) with the Canada-United
States-Mexico Agreement (CUSMA) / United States-
Mexico-Canada Agreement (USMCA). This new agreement
will reinforce the strong economic ties between the three
countries and support well-paying middle-class jobs for
Canadians.
1994
President Bill Clinton signed it into law on December 8,
1993.7
It became active on January 1, 1994.

2019
Subsequently, on December 10, 2019, Canada, the United
States and Mexico agreed to update certain elements of
CUSMA/USMCA to improve the final outcome and clear the
path toward ratification and implementation of the
agreement in all three countries.
2020
The United States, Mexico, and Canada updated NAFTA to
create the new USMCA. USMCA is mutually beneficial for
North American workers, farmers, ranchers, and businesses.
The new agreement, which entered into force on July 1, 2020,
will create a more balanced environment for trade, will
support high-paying jobs for Americans, and will grow the
North American economy.

NAFTA ~ Chronology of Events
• June 10, 1990: Canada, the U.S., and Mexico agree to
pursue a free trade agreement
• February 5, 1991: NAFTA negotiations begin.
• December 17, 1992: NAFTA is signed by leaders from
Canada, the U.S., and Mexico.
• August 1993: Additional side agreements on labor and the
environment are negotiated.
• January 1, 1994: NAFTA enters into force

NAFTA Provisions
 FreeTrade Commission
 NAFTA coordination
 NAFTA working groups and committees
 NAFTA Secretariate
 ADR in NAFTA region

Free Trade Commission
• Made up of ministerial representatives from the
NAFTA partners.
• Supervises the implementation and further
elaboration of the Agreement and helps resolve
disputes arising from its interpretation.
• Oversees the work of the NAFTA committees,
working groups, and other subsidiary bodies.

NAFTA Coordinators
• Senior trade department officials
designated by each country.
• Responsible for the day-to-day
management of NAFTA implementation.

NAFTA Working Groups and Committees
• Over 30 working groups and committees have been
established to facilitate trade and investment and to ensure
the effective implementation and administration of NAFTA.
• Key areas of work includes trade in goods, rules of origin,
customs, agricultural trade and subsidies, standards,
government procurement, investment and services, cross-
border movement of business people, and alternative
dispute resolution.

NAFTA Secretariat
• Made up of a “National Section” from each member country.
• Responsible for administering the dispute settlement provisions of
the Agreement and for administering dispute resolution processes
under Chapter 14, Chapter 19 and Chapter 20. Also has certain
responsibilities related to the Chapter 11 dispute settlement
provisions concerning investment.
• Maintains a court-like registry relating to panel, committee, and
tribunal proceedings.
• Maintains a tri-national website containing up-to-date information
on past and current disputes.

ADR (Alternative Dispute Resolution)
 It refers to any method of settling dispute
outside of tradition litigation and courtroom
 ADR 2022 committee established during NAFTA
negotiation – assess availability and
enforcement of private ADR awards within
region.
 It reports and provides recommendation to
NAFTA commission on availability, use and
effectiveness of arbitration and other procedures
for resolving private international commercial
disputes in free trade arena.

NAFTA covers following measure area
 Market access
 Trade Rules
 Services
 Investment
 Intellectual property
 Dispute settlement

Functions of NAFTA -
 Grants most favored nation status to the
member states
 Elimination if tariffs on the imports and
exports among the countries
 Establish procedures to resolve trade barriers
 All members to respect trademarks, patent
and copyright
 To waive tariffs all export should get COI
(Certificate of origin)

Highlights of NAFTA –
 Expanded telecommunications trade
 Tariff reduction for motor vehicles and auto parts
and automobile of origin
 Reduced textile and apparel barriers
 More free trade in agricultural.
 Mexican import licensed were immediately
abolished, with most additional tariffs phased
out 10 years period.
 Expanded trade in financial services
 Opening of insurance markets.

USMCA:
1- Auto Manufacturing
One of the most notable changes is that, in order to benefit from tariff
components should be made in one of the three countries (up from 62.5%).
minimum rage of $16USD an hour for workers.
2- Dairy Farming
USMCA will keep tariffs at 0 for agricultural products moved between the
also further allow the Canadian market access to US dairy, poultry, and
will allow for more Canadian dairy, peanuts, and some sugar.
3- Going Digital
There will be new benefits for the technology sector as well. USMCA forbids
forcing US-based companies to store data on in-country servers. There is
ensures that US companies can’t be sued in Canada and Mexico for the

4- Environmental Protections
The agreement established $600 million to be spent addressing
the regions. In the CNN piece, they use the example of the sewage
that impact San Diego.
5- Biologic Drugs
There was a provision pulled from the agreement that would have
Canada, and Mexico to provide 10 years of exclusivity on
provides 12, Canada 8, and Mexico 5.
6- Labor Laws
NAFTA has been scrutinized for sending jobs to Mexico, where
now an inter-agency committee to monitor Mexico’s labor
There is also a review process for facilities, to ensure workers’
the goods made there.

NAFTA vs. USMCA :

International Economic Integration and their Current Practices Part - I

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