Understanding Regional Economic Integration

Regional Economic Integration

• It is eliminating restrictions on international trade, payments, and factor mobility

• It is cooperation between two or more national economies during international trade

• Most regional trade agreements were entered into after 1990

• Regional economic integration enhances regional cooperation through regional institutions and rules

• It is an agreement among countries in a geographic region to reduce and ultimately remove tariff and non-tariff barriers to the free flow of goods or services and factors of production among each other

• Objectives of the agreement range from economics, politics, to environmental factors

• It has typically taken the form of a political economy initiative, where commercial interests have been the focus for achieving broader socio-political and security objects, as defined by National Governments

• Regional integration has been organised either via supranational Institutional structures or through inter-governmental decision-making or a combination of both

Level of Regional Economic Integration

• Preferential Trading Area
• Free Trade Area
• Custom Union
• Common Market
• Economic Union
• Economic and Monetary union
• Political Union

Preferential Trading Area

• Member countries were reducing tariffs but not abolished completely

Free Trade Area

• It occurs when a group of countries agree to eliminate tariffs between themselves, but maintain their own external tariff on imports from the rest of the world
• The North American Free Trade Area (NAFTA) is an example Free Trade Area

Custom Union

• Member countries abolished tariff and nontariff barriers and apart from that the member countries also maintain a common or union external tariff trade policy
• The objective is to prevent any non-members country taking advantages of shipping goods to the members nation having the lowest tariff

Common Market

• It involves common external tariff and in addition to that, it also involves the free movement of a factor of producing among the member countries

• It establishes free trade in goods and services, sets common external tariffs among members and also allows for the free mobility of capital and labour across countries

• It is also called fast stage of Single Market

• A common (or single) market is the most significant step towards full economic integration

• In the case of Europe, the single market is officially referred to a the "Internal market

• The key feature of a common market is the extension of free trade from just tangible goods, to include all economic resources

• This means that all barriers are eliminated to allow the free movement of goods, services, capital, and labour

• In addition, as well as removing tariffs, non-tariff barriers are also reduced and eliminated

• For a common market to be successful there must also be a significant level of harmonisation of micro-economic policies, and common rules regarding product standards, monopoly power and other anti-competitive practices

• There may also be common policies affecting key industries, such as the Common Agricultural Policy (CAP) and Common Fisheries Policy (CFP)

Economic Union

• It includes all the features of common market and additionally the member countries maintain a common monetary and fiscal policy
• An economic union typically will maintain free trade in goods and services, set common external tariffs among members, allow the free mobility of capital and labour and will also relegate some fiscal spending responsibilities to a supernational agency

Economic and Monetary Union

• If an Economic Union also involves unifying currencies, then it became of Economic and Monetary union
• This can also be merged in the stage of Economic Union

Political Union

• Common parliament is created with representation of member countries

What is the European Union?

• European Union is an international organisation consisting of European Countries, which was formed in 1993
• It came into force after the signing of the Maastricht Treaty by 28 countries
• The Maastricht Treaty is also known as the Treaty of the European Union (TEU)
• Maastricht is a city located in the Netherlands
• The Maastricht Treaty was amended thrice

Amendments to the Maastricht Treaty

• Treaty of Amsterdam (1997)
• Treaty of Nice (2001)
• Treaty of Lisbon (2007)

European Union – Objectives

• To increase political cooperation
• To enhance economic integration by creating a single currency the EURO
• Unified security and foreign policy
• Common citizenship Rights
• Enhanced cooperation in the areas of judiciary, immigration and asylum
• European Union was awarded the Nobel Prize for Peace in 2012

European Union - Origins

• Following the aftermath of World War II, European leaders realised that only large-scale integration would be an antidote to the extreme nationalism that was the cause of the global war
• Winston Churchill advocated the emergence of the United States of Europe
• The 1948 Hague Congress was a pivotal moment in European federal history, as it led to the creation of the European Movement International and of the College of Europe, where Europe's future leaders would live and study together
• The founding of the following unions which eventually evolved into the European Union:
• European Coal and Steel Community (ECSC) – Treaty of Paris 1951
• European Economic Community (EEC) – Treaty of Rome 1957

Original Members of European Communities

• France
• Italy
• Netherlands
• Belgium
• West Germany
• Luxembourg

European Union – Brexit

• On January 31, 2020, the United Kingdom (U.K) formally left the European Union
• U.K is the first country to leave the E.U
• The exit was in accordance with Article 50 of the Treaty of the European Union

European Union – Decision-Making Bodies

• European Parliament
• European Council
• European Commission
• Council of the European Union
• Court of Justice of the European Union
• European Central Bank
• European Court of Auditors

European Parliament

• It is one of the 3 legislative institutions of the E.U
• On the basis of proportional representation, Members of the European Parliament are elected by European Union citizens every 5 years
• There are 705 Members of the European Parliament (MEP) in the European Parliament

European Council (E.C)

• Political direction for the European Council is given by the European Council
• European Council was established as an informal summit in 1975
• However, with the enactment of the Treaty of Lisbon EC was formalised as an institution in 2009

European Commission

• European Commission acts as the executive arm of the European Union
• It is responsible for the day to day functioning of the European Union
• European Commission is considered as the guardian of the treaties signed
• It also has legislative powers like proposing laws for debate

Council of the European Union

• It is made up of government ministers from each member state
• It has executive powers like addressing common foreign and security policy

European Union – Economy

• EU has a share of around 14% of the global Gross Domestic Product (PPP)
• In 2020, the combined GDP of E.U is $ 20 trillion
• E.U also has representation in the World Trade Organization (W .T.O)
• 19 member states of E.U are part of the Eurozone
• Euro is used as the common currency in the Eurozone
• Euro is the 2nd most traded currency in the world
• Euro is the 2nd largest reserve currency in the world
• As of 2010 data, out of the top 500 largest corporations in the world, 161 of them had their Headquarters in the European Union

G20

• The G20 is an informal group of 19 countries and the European Union, with representatives of the International Monetary Fund and the World Bank
• The G20 membership comprises a mix of the world's largest advanced and emerging economies
• Together, the G20 members represent more than 80% of world GDP, 75% of international trade and 60% of the world population

How did G20 come into Existence?

• 1997-1999 ASIAN Financial Crisis: This was a ministerial-level forum which emerged after G7 invited both developed and developing economies
• The finance ministers and central bank governors began meeting in 1999
• Amid 2008 Financial Crisis the world saw the need for a new consensus building at the highest political level
• It was decided that the G20 leaders would begin meeting once annually
• To help prepare these summits, the G20 finance ministers and central bank governors continue to meet on their own twice a year

How G20 Works?

• The work of G20 is divided into two tracks:
• The finance track comprises all meetings with G20 finance ministers and central bank governors and their deputies. Meeting several times throughout the year they focus on monetary and fiscal issues, financial regulations, etc.
• The Sherpa track focuses on broader issues such as political engagement, anti-corruption, development, energy, etc.
• Each G20 country is represented by its Sherpa; who plans, guides, implements, etc. on behalf of the leader of their respective country. (Indian Sherpa, at the G20 in Argentina, 2018 was Shri Shaktikanta Das)

Who are the G20 Members?

• On the number of its members, its name is termed as the G-20 i.e. the group of twenties
• G20 members represent around 85% of global GDP, over 75% of global trade, and two-thirds of the world's population

List of G 20 Members

• Argentina
• Australia
• Brazil
• Canada
• China
• France
• Germany
• India
• Indonesia
• Italy
• Japan
• Mexico
• Republic of Korea
• Russia
• South Africa
• Saudi Arabia
• United States of America
• United kingdom
• European Union
• Turkey

G20 Summits & Members

• The G20 Summit 2020 was organized in Riyadh, Saudi Arabia in November 2020
• It was the 15th G20 summit which was held virtually on November 21st and 22nd, 2020
• It was chaired by the Saudi King, Salman bin Abdulaziz
• In the 15th G20 summit Indian delegation is headed by PM Narendra Modi

List of G20 Summits

• 1st, November 14th-15th, 2008, United States, National Building Museum, Washington, D.C, George W Bush
• 2nd, April 2nd, 2009, United Kingdom, ExCeL London, London, Gordon Brown
• 3rd, September 2th -25th, 2009, United States, David L. Lawrence Convention Center, Pittsburgh, Barack Obama
• 4th, June 26th-27th 2010, Canada, Metro Toronto Convention Centre, Toronto, Stephen Harper
• 5th, November 11th-12th 2010, South Korea, COEX Convention & Exhibition Center, Seoul, Lee Myung-bak
• 6th, November 3rd-4th, 2011, France, Palais des Festivals, Cannes, Nicolas Sarkozy
• 7th, June 18th-19th, 2012, Mexico, Los Cabos Convention Center, San José del Cabo, Los Cabos, Felipe Calderón
• 8th, September 5th-6th, 2013, Russia, Constantine Palace, Saint Petersburg, Vladimir Putin
• 9th, November 15th-16th, 2014, Australia, Brisbane Convention & Exhibition Centre, Brisbane, Tony Abbott
• 10th, November 15th-16th, 2015, Turkey, Regnum Carya Hotel Convention Centre, Serik, Antalya, Recep Tayyip Erdoğan
• 11th, September 4th-5th 2016, China, Hangzhou International Exhibition Centre, Hangzhou, Xi Jinping
• 12th, July 7th-8th 2017, Germany, Hamburg Messe, Hamburg, Angela Merkel
• 13th, November 30th - December 1st 2018, Argentina, Costa Salguero Center, Buenos Aires, Mauricio Macri
• 14th, June 28th- 29th, 2019, Japan, Intex Osaka, Osaka, Shinzō Abe
• 15th, November 21st-22nd 2020, Saudi Arabia, King Abdullah Financial District, Riyadh, Salman
• 16th, October 30th-31st 2021, Italy, Rome, Giuseppe Conte
• 17th, November 15-16, 2022, Indonesia, The Apurva Kempinski, Bali, Joko Widodo
• 18th, September 9 – 10, 2023, India, Pragati Maidan Convention Centre, New Delhi, Narendra Modi
• 19th, 2024, Brazil,, Luiz Inácio Lula da Silva

Structure and Functioning of G20

• The G20 Presidency rotates annually according to a system that ensures a regional balance over time

• For the selection of presidency, the 19 countries are divided into 5 groups, each having no more than 4 countries

• The presidency rotates between each group

• Every year the G20 selects a country from another group to be president

• India is in Group 2 which also has Russia, South Africa, and Turkey

• The G20 does not have a permanent secretariat or Headquarters

• The G20 president is responsible for bringing together the G20 agenda in consultation with other members and in response to developments in the global economy

• TROIKA: Every year when a new country takes on the presidency, it works hand in hand with the previous presidency and the next presidency and this is collectively known as TROIKA

• This ensures continuity and consistency of the group's agenda

Association of South-East Asian Nations (ASEAN)

• ASEAN was established on 8th August, 1967 in Bangkok by the 5 original member countries: Indonesia, Malaysia, Philippines, Singapore and Thailand
• Brunei Darussalam joined on 8th January, 1984, Vietnam on 28th July, 1995 Laos and Myanmar on 23rd July, 1997 and Cambodia on 30th April, 1999

Objectives of ASEAN

• The ASEAN Declaration states that the aims and purposes of the association are to accelerate the economic growth, social progress and cultural development in the region through joint endeavours in the spirit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of South-East Asian Nations

Fundamental Principles of ASEAN

• The Treaty of Amity and Cooperation (TAC) in South-East Asia, signed at the first ASEAN summit on 24th February, 1976, declared that in their relations with one another, the high contracting parties should be guided by the following fundamental principles:
• Mutual respect for the independence, sovereignty, equality, territorial integrity and national identity of all nations
• The right of every state to lead its national existence free for external interference, subversion or coercion
• Non-interference in the internal affairs of one another
• Settlement of differences or disputes by peaceful manner
• Renunciation of the threat or use of force

South Asian Association for Regional Cooperation (SAARC)

• SAARC is an organisation of South Asian nations, which was established on 8th December, 1985, when the government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka formally adopted its charter providing for the promotion of economic and social progress, cultural development within the South Asia region and also for friendship and cooperation with other developing countries
• It is dedicated to economic, technological, social and cultural development emphasising collective self-reliance
• Afghanistan joined the organisation in 2007
• Meetings of heads of state are usually scheduled annually and meetings of foreign secretaries are held twice in a year
• It is headquartered in Kathmandu, Nepal

Objectives of SAARC

• To promote the welfare of the people of South Asia and to improve their quality of life
• To accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realise their full potential
• To promote and strengthen selective self-reliance among the countries of South Asia
• To contribute to mutual trust, understanding and appreciation of one another's problems
• To promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields
• To strengthen cooperation with other developing countries
• To strengthen cooperation among themselves in international forums on matters of common interest
• To cooperate with international and regional organisations with similar aims and purposes
• To maintain peace in the region

Principles of SAARC

• Respect for sovereignty, territorial integrity, political equality and independence of all member states
• Non-interference in the internal matters is one of it objectives
• Cooperation for mutual benefit
• All decisions to be taken unanimously and need quorum of all 8 members
• All bilateral issues to be kept aside and only multilateral issues to be without being prejudiced by bilateral issues

Bay of Bengal Initiative on Multi-Sectoral Technical and Economic Cooperation (BIMSTEC)

• The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) is a regional multilateral organisation
• Its members lie in the littoral and adjacent areas of the Bay of Bengal constituting a contiguous regional unity

Nations Participating in BIMSTEC

• There are five Southasian nations:
• Bangladesh
• Bhutan
• India
• Nepal
• Sri Lanka
• There are two southeast Asian nations:
• Myanmar
• Thailand
• It came into being in 1997 through the Bangkok Declaration
• Initially, it was formed with four Member States with the acronym 'BIST-EC' (Bangladesh, India, Sri-Lanka and Thailand Economic Cooperation)
• It became renamed ‘BIMST-EC' in 1997, following the inclusion of Myanmar
• With the admission of Nepal and Bhutan in 2004, the name of the grouping was changed to 'Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation' (BIMSTEC)

Main Objectives of BIMSTEC

• Creating an enabling environment for the rapid economic development of the sub-region
• Encouraging the spirit of equality and partnership
• Promoting active collaboration and mutual assistance in the areas of common interests of the member countries
• Accelerating support for each other in the fields of education, science, and technology, etc

Principles of BIMSTEC

• Sovereign Equality
• Territorial Integrity
• Political Independence
• No-interference in Internal Affairs
• Peaceful Co- existence
• Mutual Benefit
• Constitute an addition to and not be a substitute for bilateral, regional or multilateral cooperation involving the Member States

Potential of BIMSTEC

• Bridge between South and South East Asia and represents a reinforcement of relations among these countries
• The Bay of Bengal region has the potential to become the epicentre of the Indo-Pacific idea, a place where the strategic interests of the major powers of East and South Asia intersect
• Platform for intra-regional cooperation between SAARC and ASEAN members
• Home to around 1.5 billion people that constitute around 22% of the global population and a combined Gross Domestic Product (GDP) of USD 3.8 trillion, BIMSTEC has emerged as an influential engine of economic growth
• A fourth of the world's traded goods cross the bay every year

Important Connectivity Projects

• Kaladan Multimodal Project - links India and Myanmar
• Asian Trilateral Highway - connecting India and Thailand through Myanmar
• Bangladesh-Bhutan-India-Nepal (BBIN) Motor Vehicles Agreement - for seamless flow of passenger and cargo traffic

Significance of BIMSTEC for India

• Allows India to pursue three core policies:
• Neighbourhood First - primacy to the country's immediate periphery
• Act East - connect India with Southeast Asia
• Economic development of India's northeastern states - by linking them to the Bay of Bengal region via Bangladesh and Myanmar
• Allows India to counter China's creeping influence in countries around the Bay of Bengal due to the spread of its Belt and Road Initiative
• A new platform for India to engage with its neighbors with South Asian Association for Regional Cooperation (SAARC) becoming dysfunctional because of differences between India and Pakistan