4.1 ECONOMIC INTEGRATION | unit 4 regional and international economic co operation

IECO

Unit – 4

Regional and International Economic Co-operation

4.1 ECONOMIC INTEGRATION

Economic integration is an arrangement among nations that commonly includes the reduction or removing of trade barriers and the coordination of monetary and fiscal policies. Economic integration aims to minimize charges for both consumers and producers and to increase alternate between the international locations involved in the agreement.

Meaning of Economic Integration:

The modern industrial device rests upon such strategies that can be employed economically solely if the production takes vicinity on a very large scale. This requires expanding markets on the one hand and increasing buying electricity with the human beings on the other.

For the fullest exploitation of the production potential of the modern techniques, certain countries having small inner geographical markets, have tried to organise themselves into regional groupings. The economic integration in the broadest sense, ability the unification of economies into a single larger economy

The tariffs and different restrictions upon trade are applied in a discriminatory manner. Such discrimination is of two forms—country- discrimination and commodity-discrimination. The monetary integration, according to Salvatore, is the “commercial coverage of discriminatively reducing or putting off exchange limitations only among the international locations joining together.”

Thus the economic integration refers to an arrangement whereby two or more countries combine into a larger economic location via the removal of discontinuities and discriminations current along countrywide frontiers, while following a common tariff and trade policies towards the nations outside the group.

Tinbergen has described financial integration as “the introduction of the most suited structure of global economy, eliminating artificial hindrances to the most fulfilling operation and introducing deliberately all suitable factors of co-ordination and unification.” Tinbergen has distinguished-between the negative and fine aspects of integration.

The negative elements of integration contain the elimination of discrimination and restrictions on the movement of goods amongst the member countries. The wonderful aspects of integration contain the adoption of such coverage measures and institutional arrangements as facilitate the removal of market distortions inside the given monetary region.

The economic integration can be understood each as a system and as a country of affairs. As a process, it is involved with the measures which aim at abolition of discrimination between economic units belonging to different nation states. As a state of affairs, it can be dealt with as an area comprised of different kingdom states among which there is an absence of quite a number forms of discrimination.

There are two indispensable elements of economic integration:

(i) Re-introduction of free trade among the member nations.

(ii) Imposition of common external tariff coverage against the non-member countries.

From these two features, it follows that economic integration is a synthesis between free trade and tariff protection.

Benefits of Economic Integration:

The monetary integration between two or more nations brings the following important benefits:

(i) Economies of Scale:

The character countries, having small internal market, have limited capacity to extend production. The financial integration gives an unrestricted get entry to of the products produced through any member country. This gives sturdy inducement to expand manufacturing and exploit fully the economies of scale.

(ii) International Specialisation:

The monetary integration enables the member countries to obtain a greater degree of specialisation in each merchandise and processes. Specialisation primarily based on comparative value benefit by means of a unique geographical vicinity can cause appreciably massive expansion in production.

(iii) Qualitative Improvement in Output:

The regional economic co-operation amongst a quantity of nations leads to fast technological changes and larger and easier capital movements. The member countries, in such beneficial conditions, can carry about qualitative improvement in production.

(iv) Expansion of Employment:

As some countries organise themselves into regional economic groups and permit unrestricted float of labour within the region, there can be maximisation of employment and income.

(v) Improvement in Terms of Trade:

The economic integration greatly increases the bargaining power of the member nations vise-a-versa the relaxation of the world. That brings about a significant improvement in their phrases of trade.

(vi) Increase in Economic Efficiency:

The financial integration consequences in increased competition in the region that helps in retaining a higher stage of financial affectivity of the group as a whole

(vii) Improvement in Living Standard:

As some countries organise themselves into regional groups, there is easier availability of superior sorts of goods at competitive prices. The make bigger in employment opportunities and the purchasing power too contributes in improving the living standards of the people.

(viii) Increase in Factor Mobility:

The financial integration leads to dismantling of boundaries upon the movement of labour and other factors among the member countries. Increased component mobility enlarges employment; lowers component costs; and promotes productive exercise in all the member countries.

Forms of Economic Integration:

The essence of economic integration is the economic co-operation among the collaborating countries.

On the groundwork of the diploma of cooperation, the financial integration can be of the following principal forms:

(i) Preferential Trade Area or Association:

The preferential trade area or association is the most-loose form of economic integration. In this arrangement, the member international locations lower tariffs on imports from every other. It skill they provide preferential treatment to the member countries.

As regards the outdoor world, they continue to keep their individual tariffs. The best occasion of preferential trade area or association is the Commonwealth System of Preferences, set up in 1932. It is headed by using Britain and includes all the Commonwealth countries.

(ii) Free Trade Area:

In this form of economic integration, the member nations abolish definitely both tariff and quantitative exchange restrictions amongst themselves. However, each member u .s .is free to maintain its very own trade boundaries against the non- member countries a necessary example of free alternate area is the European Free Trade Association (EFTA).

This affiliation was formed in November, 1959. It covered such countries as United Kingdom, Austria, Denmark, Norway, Sweden, Portugal, Switzerland and Finland as associate members. Another such affiliation is Latin American Free Trade Association (LAFTA). It used to be formed in June 1961 by 10 Latin American countries.

(iii) Customs Union:

A greater formal type of integration amongst two or extra nations is the customs union. In this shape of integration, the member countries abolish all tariffs and different limitations on trade amongst themselves. As regards the rest of the world, they adopt a frequent external tariff and commercial policy.

The customs unions and free trade region are similar in respect of abolition of all change barriers for the member countries. But the customs union is distinct from the free trade place in respect of the common exterior tariff towards the non-member countries.

In case of free change area, the member nations hold their very own tariff and other trade limitations against the non-member countries. Thus customs union is a greater closely- knit shape of integration than the free change area. In a customs union, all the member countries act as a single monetary unit against the non-member countries.

The customs union has been defined by way of GATT as the Substitution of a single customs territory for two or extra customs territories, so that:

(i) Duties and other policies of commerce are eliminated with respect to considerably all exchange between the constituent territories of the Union or at least with admire to substantially all the trade in products originating in such territories, and

(ii) The same, obligations and other regulations of commerce are applied by every of the participants of the union to the exchange of territories not protected in the union. J.E. Meade explained that a customs union is characterized by “complete freedom of movement of goods and services within the territories of the member countries or a frequent tariff applicable to all the member nations of the customs union and a frequent tariff adopted by all the member countries of the customs union with appreciate to the relaxation of the world.”

The most essential instance of a customs union is the European Economic Community formed by West Germany, France, Italy, Belgium, the Netherlands and Luxembourg in 1957.

The theory of customs union used to be first of all given by means of Jacob, Viner in 1950. According to him, customs union ensures, on the one hand, extended competition among the members and, on the other, an increased measure of protection against change and opposition from the relaxation of the world. Viner truly stated that the synthesis of factors of competition and protection may or may no longer enlarge the welfare of the member nations.

Jacob Viner’s pioneering work in this area was accompanied by the contribution made via the writers like J.E. Meade (1955), R. G. Lipsey (1957), H.G. Johnson (1962), J. Vanek (1965), Cooper and Masell (1965), Murry Kemp (1969), J. Bhagwati (1971), P.J. Lloyd (1982) and many others.

(iv)Common Market:

The common market signifies a greater unified arrangement among a team of countries than the customs union. The common market involves the abolition of tariff and alternate restrictions amongst the member countries and adoption of a common external tariff. It goes even beyond that and lets in free movement of labour and capital amongst the member nations.

Thus in case of a frequent market, there is a free and integrated motion of items and factors amongst the member countries. The European Common Market (ECM) called also as the European Economic Community (EEC) is the best example of the common market.

(v) Economic Union:

The most superior form of economic integration involving the best degree of co-operation is the monetary union. In case of an financial union, two or greater international locations shape a frequent market. In addition, they proceed to harmonise and unify their fiscal, monetary, trade rate, industrial and different socio-economic policies. The member international locations strive to have a frequent foreign money and banking system.

An instance of economic union is BENELUX (including Belgium, Netherlands and Luxembourg) which used to be formed in 1948 at first as a customs union bat later got converted into an economic union in 1960. These nations have now joined the EU. The European Economic Community (EEC) has modified itself into an financial union called as European Union (EU) in 1991.

An interesting latest development, based on the concepts of integration, has been the duty-free zones or economic zones. Such areas have been set up in different international locations or regions with the object of attracting foreign investment thru duty-free imports of raw materials and intermediate products.

4.2 EUROPEAN UNION

The European Union is a team of 28 international locations that operate as a cohesive financial and political block.

19 of these countries use EURO as their reliable currency. 9 EU participants (Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, Sweden, and the United Kingdom) do not use the euro.

The EU grew out of a desire to shape a single European political entity to stop centuries of warfare amongst European countries that culminated with World War II and decimated a lot of the continent.

The EU has developed an internal single market thru a standardised gadget of laws that practice in all member states in matters, where contributors have agreed to act as one.

Goals-

Promote peace, values and the well-being of all residents of EU.

Offer freedom, security and justice besides interior borders.

Sustainable development based on balanced monetary growth and fee stability, a highly aggressive market financial system with full employment and social progress, and environmental protection.

Combat social exclusion and discrimination.

Promote scientific and technological progress.

Enhance economic, social and territorial brotherly love and harmony among EU countries.

Respect its wealthy cultural and linguistic diversity.

Establish an economic and financial union whose currency is euro.

History.

After World War II, European integration was once seen as a therapy to the immoderate nationalism which had devastated the continent.

In 1946 at the University of Zurich, Switzerland, Winston Churchill went in addition and advocated the emergence of a United States of Europe.

In 1952, European Coal and Steel Community (ECSC) was once situated below Treaty of Paris (1951) via 6 countries called Six (Belgium, France, Germany, Italy, Luxembourg and the Netherlands) to resign phase of their sovereignty with the aid of placing their coal and steel production in a frequent market, beneath it.

European Court of Justice (called "Court of Justice of the European Communities" till 2009) was once additionally set up in 1952 underneath Paris Treaty.

European Atomic Energy Community (EAEC or Euratom) is an international organization set up by the Erratum Treaty (1957) with the unique motive of growing a expert market for nuclear strength in Europe, by means of creating nuclear strength and distributing it to its member states while promoting the surplus to non-member states.

It has identical individuals as the European Union and is ruled by means of the European Commission (EC) and Council, running underneath the jurisdiction of the European Court of Justice.

European Economic Community (EEC) used to be created with the aid of the Treaty of Rome (1957). The Community's preliminary goal was once to deliver about financial integration, including a frequent market and customs union, amongst its founding participants (Six).

It ceased to exist by Lisbon Treaty-2007 and its activities were incorporated in EU.

Merger Treaty (1965, Brussels) in which an agreement used to be reached to merge the three communities (ECSC, EAEC, and EEC) under a single set of institutions, developing the European Communities (ECs).

The Commission and Council of the EEC have been to take over the duties of its counterparts (ECSC, EAEC) in other organizations.

The ECs originally increased in 1973 when Denmark, Ireland, the United Kingdom became members. Greece joined in 1981, Portugal and Spain following in 1986.

Schengen Agreement (1985) paved the way for the creation of open borders besides passport controls between most member states. It used to be effective in 1995.

Single European Act (1986): enacted with the aid of the European Community that committed its member nations to a timetable for their economic merger and the institution of a single European forex and common foreign and home policies.

The Maastricht Treaty-1992 (also known as the Treaty on European Union) was signed on 7 February 1992 via the contributors of the European Community in Maastricht, Netherlands to in addition European integration. It obtained a excellent push with the cease of the Cold War.

European Communities (ECSC, EAEC, and EEC) incorporated as European Union.

European citizenship was created, permitting residents to reside in and cross freely between Member States.

A common overseas and protection policy was established.

Closer cooperation between police and the judiciary in crook things was agreed.

It paved the way for the introduction of a single European currency – the euro. It was the fruits of countless a long time of debate on growing economic cooperation in Europe.

It installed the European Central Bank (ECB).

It enabled people to run for local office and for European Parliament elections in the EU United States they lived in.

A economic union was once installed in 1999 and came into full force in 2002 and is composed of 19 EU member states which use the euro currency. These are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, and Spain.

In 2002, Treaty of Paris (1951) expired & ECSC ceased to exist and its activities utterly absorbed by way of the European Community (EEC).

The Treaty of Lisbon 2007:

European Community (now composed solely of EEC, EAEC, as ECSC already ceased in 2002) used to be ceased and its activities incorporated in EU.

EAEC is only last neighborhood organization legally distinct from the European Union (EU), but has the equal membership, and is governed with the aid of many of the EU's institutions.

Euro Crisis: The EU and the European Central Bank (ECB) have struggled with excessive sovereign debt and collapsing growth in Portugal, Ireland, Greece and Spain in view that the global monetary market cave in of 2008. Greece and Ireland acquired economic bailouts from the neighborhood in 2009, which were accompanied by using fiscal austerity. Portugal observed in 2011, alongside with a 2d Greek bailout.

Multiple rounds of hobby fee cuts and financial stimulus failed to resolve the problem.

Northern nations such as Germany, the United Kingdom and the Netherlands increasingly resent the financial drain from the south.

In 2012, the EU received the Nobel Peace Prize for having "contributed to the advancement of peace and reconciliation, democracy, and human rights in Europe.

Brexit: In 2016, a referendum (called Brexit) used to be held via U.K. government, and the country voted to leave the EU. Now the technique is underneath UK Parliament for formal withdrawal from EU.

Governance European Council:

It is a collective physique that defines the European Union's ordinary political route and priorities.

It comprises of the heads of state or government of the EU member states, along with the President of the European Council and the President of the European Commission.

The High Representative of the Union for Foreign Affairs and Security Policy additionally takes part in its meetings.

Established as an informal summit in 1975, the European Council was once formalised as an institution in 2009 upon the entry into pressure of the Treaty of Lisbon.

The selections of its summits are adopted by using consensus.

European Parliament: It is the only parliamentary organization of the European Union (EU) that is immediately elected with the aid of EU citizens aged 18 years or older. Together with the Council of the European Union (also known as the 'Council'), it exercises the legislative characteristic of the EU.

European Parliament does no longer possess as lots legislative strength as its member countries’ parliaments do.

Council of the European Union: It is section of the in fact bicameral EU legislature (the other legislative body being the European Parliament) and represents the government governments (Minister) of the EU's member states.

In the Council, authorities ministers from each EU united states of America meet to discuss, amend and undertake laws, and coordinate policies. The ministers have the authority to commit their governments to the moves agreed on in the meetings.

European Commission (EC): It is an executive physique of the European Union, responsible for proposing legislation, enforcing decisions, upholding the EU treaties and managing the day-to-day business of the EU.

The Commission operates as a cabinet government, with 28 members of the Commission. There is one member per member state. These individuals are proposed via member nations and European Parliament gives final approval on them.

One of the 28 individuals is the Commission President proposed by using the European Council and elected by way of the European Parliament.

The Commission is divided into departments recognized as Directorates-General (DGs) that can be likened to departments or ministries is headed by a director-general who is accountable to a commissioner.

High Representative (HR) of the Union for Foreign Affairs and Security Policy is appointed by the European Council by means of voting and The President of the EC need to be in agreement with the decision. HR is charged with shaping and carrying out the EU's foreign, protection and defence policies.

European Court of Auditors (ECA): It investigates the desirable management of finances inside each the EU entities and EU funding supplied to its member states.

It can refer unresolved issues to the European Court of Justice to arbitrate on any alleged irregularities.

ECA contributors are appointed with the aid of the Council, after consulting the Parliament, for renewable 6-year terms.

The Court of Justice of the European Union (CJEU): It interprets EU regulation to make sure it is utilized in the identical way in all EU countries, and settles criminal disputes between national governments and EU institutions.

It can also be approached by means of individuals, businesses or organisations to take motion towards an EU institution, if they experience their rights are infringed below EU system.

Each decide and advocate widespread is appointed jointly by means of countrywide governments (member country).

It is located in Luxembourg.

The European Central Bank (ECB): It is the central bank for the euro and administers financial coverage within the Euro zone, which comprises 19 member states of the European Union.

Governing Council – It is the main decision-making physique of ECB. It consists of the Executive Board plus the governors of the country wide central banks from euro zone countries.

Executive Board – It handles the everyday running of the ECB. It consists of the ECB President and Vice-President and four different contributors appointed by national governments of euro area countries.

Sets the interest costs at which it lends to industrial banks in the euro zone, hence controlling money supply and inflation.

Authorizes production of euro banknotes through euro zone countries.

Ensures the protection and soundness of the European banking system.

It is located in Frankfurt (Germany).

The European system of financial supervision (ESFS): It used to be delivered in 2010. It consists of:

the European Systemic Risk Board (ESRB)

3 European supervisory authorities (ESAs):

the European Banking Authority (EBA)

the European Securities and Markets Authority (ESMA)

the European Insurance and Occupational Pensions Authority (EIOPA)

Functions

EU’s law and law is supposed to create a cohesive monetary entity of its countries, so that items can flow freely across the borders of its member nations, except tariffs, with the ease of one currency, and the introduction of one enlarged labour pool, which creates a greater efficient distribution and use of labour.

There is a pooling of financial resources, so that member nations can be "bailed out" or lent money for investment.

Union's expectations in areas such as human rights and the environment have political implications for member countries. Union can precise a heavy political value such as extreme cutbacks and an austerity budget on its members as a circumstance of giving aid.

this is a great experiment, really, in cooperation amongst nations, who want to be economically unified, ceding as little political and country wide strength as possible.

Trade

Free trade among its members was once one of the EU's founding principles. This is possible thanks to the single market. Beyond its borders, the EU is also committed to liberalising world trade.

The European Union is the biggest alternate block in the world. It is the world's biggest exporter of manufactured items and services, and the largest import market for over a hundred countries.

Humanitarian aid

The EU is committed to assisting victims of man-made and natural failures international and helps over 120 million people each year.

EU and its constituent nations is the world's leading donor of humanitarian aid.

Diplomacy and security

The EU performs an necessary function in diplomacy and works to foster stability, protection and prosperity, democracy, quintessential freedoms and the rule of regulation at global level.

Challenges & Reforms

It is no longer self-evident that all old member states will continue to be in the Union. The Treaty of Lisbon gave the members the right to go away the EU. The monetary crisis has hit Greece so challenging that many human beings have predicted for a long time that the United States will exit from the Union.

Layoffs, redundancies and migration of jobs to international locations where labour is low-cost have an effect on the everyday lives of European citizens. The EU is expected to discover options to economic issues and employment.

There is also demand for general labour agreements on phrases of employment and working prerequisites that would practice across Europe and even worldwide. As a member of the World Trade Organisation, the European Union is in a position to have an effect on tendencies worldwide.

EU is a world leader in the development of Key Enabling Technologies (KETs). However, EU’s record in translating this knowledge advantage into marketable merchandise and services doesn't match this. KETs-related manufacturing is reducing in the EU and patents are more and more being exploited outdoor the EU.

Europe is experiencing a renaissance of national sovereignty supported with the aid of a nationalistic flip of public opinion and represented by using parties on both ends of the political spectrum. Popular disaffection towards EU membership is fuelled by using the contemporaneous occurrence of two shocks, the economic and the migration crises.

USA, through withdrawing from the Paris climate change deal, via pulling out of the Joint Comprehensive Plan of Action (JCPOA) on Iran’s nuclear programme, and via attacking the integrity of the worldwide trading machine through the unilateral imposition of tariffs, has known as into question Europeans’ formerly unshakeable trust in diplomacy as a way to resolve disagreements and to defend Europe.

European leaders now concern that the transatlantic security guarantee will centre not on alliances and frequent interests however purchases of American technology and materiel.

Like the United States, the EU has been forced to rethink its relationship with a greater assertive Russia with implications for European security and stability. The EU has sought to assist Ukraine's political transition, condemned Russia's annexation of Crimea in March 2014, and strongly urged Russia to stop backing separatist forces in jap Ukraine.

Democratic regression in Ukraine combined with a hardening attitude in Moscow imposes constraints on the Ukrainian government’s freedom of maneuver in pursuing its European Union membership.

Brexit: EU has imposed too many policies on business and charged billions of pounds a yr in membership expenses for little in return.

The EU added eight eastern European countries in 2004, triggering a wave of immigration that strained public services. In England and Wales, the share of foreign-born residents had swelled to 13.4 percent of the population by 2011, roughly double the level in 1991.

Brexit supporters wanted Britain to take again full control of its borders and minimize the range of humans coming right here to live and/or work.

They argued that the EU is morphing into a super-state that increasingly impinges on national sovereignty. Britain has world clout barring the bloc, they said, and can negotiate better trade treaties on its own.

Withdrawal from the EU is governed by Article 50 of the Treaty on European Union.

A deal between UK & EU that gives it control over immigration and also preferential access to the EU’s tariff-free single market of 500 million human beings (UK), the financial backbone of the world’s greatest buying and selling bloc is rejected with the aid of Germany & other EU leaders.

EU & India

The EU works carefully with India to promote peace, create jobs, boost economic growth and enhance sustainable development throughout the country.

As India graduated from low to medium earnings united states (OECD 2014), the EU-India cooperation also advanced from a usual financial assistance kind towards a partnership with a focus on common priorities.

At the 2017 EU-India Summit, leaders reiterated their intention to beef up cooperation on the implementation of the 2030 Agenda for Sustainable Development and agreed to explore the continuation of the EU-India Development Dialogue.

The EU is India's greatest trading partner, accounting for €85 billion (95 billion USD) worth of change in items in 2017 or 13.1% of total India trade, beforehand of China (11.4%) and the USA (9.5%).

The EU's share in foreign investment inflows to India has more than doubled from 8% to 18% in the remaining decade, making the EU the first foreign investor in India.

EU overseas direct funding shares in India amounted to €73 billion in 2016, which is massive however way beneath EU overseas investment shares in China (€178 billion).

INDIA-EU Bilateral Trade and Investment Agreement (BTIA): It is a Free Trade Agreement between India and EU, which used to be initiated in 2007. Even after a decade of negotiations, India and EU have failed to get to the bottom of sure troubles which have led to a deadlock.

"Data Secure" status not granted by EU affecting prospects of India’s IT-enabled exports.

Presence of non-tariff barriers on Indian agricultural products in the form of sanitary and phyto-sanitary(SPS) measures which are too stringent and enable the EU to bar many Indian agricultural products from getting into its markets.

EU wants India to liberalise accountancy and legal services. India denies on the ground of already shortage of jobs.

EU demands tax reduction on wines and spirits however in India these are viewed as ‘sin goods’ and the states which derive huge income from liquor income would be reluctant to cut taxes.

Reduction of taxes on cars no longer proper to India as its own automobile industry would now not be able to match the opposition from EU automobiles.

India has rejected an casual attempt by way of the European Union (EU) to work closer to a world funding settlement at the World Trade Organisation (WTO)-level that would include a contentious Investor-State Dispute Settlement (ISDS) mechanism which will allow firms to take sovereign governments to worldwide arbitration. The ISDS mechanism permits companies to drag governments to international arbitration besides laborious the neighborhood remedies and claim large quantities as compensation citing losses they suffered due to reasons, along with policy changes.

The non-tariff limitations in prescription drugs that EU has imposed include requirement of WTO—Good Manufacturing Practice certification, import bans, antidumping measures and pre-shipment inspection amongst others.

India has cancelled most man or woman bilateral funding agreements with EU member states on grounds that they were outdated. By doing this India is putting pressure on EU to sign BTIA on favouring terms.

4.3 SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION (SAARC)

The South Asian Association for Regional Cooperation (SAARC) is an economic and political organization of eight countries in Southern Asia.

In terms of population, its sphere of influence is that the largest of any regional organization: almost 1.5 billion people, the combined population of its member states. it had been established on December 8, 1985 by India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives and Bhutan. In April 2007, at the Association’s 14th summit, Afghanistan became its eighth member.

History:

In the late 1970s, Bangladeshi President Zia ur Rahman proposed the creation of a trade block consisting of South Asian countries. the concept of regional cooperation in South Asia was again mooted in May 1980.

The foreign secretaries of the seven countries met for the first time in Colombo in April 1981. The Committee of the whole, which met in Colombo in August 1981, identified five broad areas for regional cooperation. New areas of cooperation were added within the following years.

The objectives of the Association as defined within the Charter are:

i. to push the welfare of the peoples of South Asia and to enhance their quality of life;

ii. To accelerate economic growth, social progress and cultural development within the region and to provide all individuals the opportunity to live in dignity and to understand their full potential;

iii. to market and strengthen collective self-reliance among the countries of South Asia;

iv. To contribute to mutual trust, understanding and appreciation of 1 another’s problems;

v. to push active collaboration and mutual assistance within the economic, social, cultural, technical and scientific fields;

vi. To strengthen cooperation with other developing countries;

vii. To strengthen cooperation among themselves in international forums on matters of common interest; and

viii. To cooperate with international and regional organizations with similar aims and purposes.

The Declaration on South Asian Regional Cooperation was adopted by the Foreign Ministers in 1983 in New Delhi . During the meeting, the Ministers also launched the Integrated Programme of Action (IPA) in nine agreed areas, namely, Agriculture; Rural Development; Telecommunications; Meteorology; Health and Population Activities; Transport; Postal Services; Science and Technology; and Sports, Arts and Culture.

The South Asian Association for Regional Cooperation (SAARC) was established when its Charter was formally adopted on 8 December 1985 by the Heads of State or Government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka .

Afghanistan was added to the regional grouping at the behest of India on November 13, 2005 and have become a member on April 3, 2007. With the addition of Afghanistan, the entire number of member states were raised to eight (8). In April 2006, the United States of America and South Korea made formal requests to be granted observer status.

The European Union has also indicated interest in being given observer status and made a proper request for an equivalent to the SAARC Council of Ministers meeting in July 2006. On August 2, 2006 the foreign ministers of the SAARC countries agreed in theory to grant observer status to the US, South Korea and therefore the European Union . On 4 March 2007, Iran requested observer status followed shortly by the doorway of Mauritius.

Secretariat:

The SAARC Secretariat was established in Kathmandu on 16 January 1987 and was inaugurated by Late King Birendra Bir Bikram Shah of Nepal.

It is headed by a Secretary General appointed by the Council of Ministers from Member Countries in alphabetical order for a three-year term. he's assisted by the Professional and also the General Services Staff and also an appropriate number of functional units called Divisions assigned to Directors on deputation from Member States.

The Secretariat coordinates and monitors implementation of activities, prepares for and services meetings and is a channel of communication between the Association and its Member States also as other regional organizations.

The Memorandum of Understanding on the establishment of the Secretariat which was signed by Foreign Ministers of member countries on 17 November 1986 at Bangalore, India contains various clauses concerning the role, structure and administration of the SAARC Secretariat also as the powers of the Secretary-General.

In several recent meetings the heads of state or government of member states of SAARC have taken some important decisions and bold initiatives to strengthen the organization and to widen and deepen regional co-operation.

The SAARC Secretariat and Member States observe 8 December because the SAARC Charter Day.

Free Trade Agreement:

Over the years, the SAARC members have expressed their unwillingness on signing a free trade agreement. Though India has several trade pacts with Maldives, Nepal, Bhutan and Sri Lanka , similar trade agreements with Pakistan and Bangladesh are stalled thanks to political and economic concerns on each side . India has been constructing a barrier across its borders with Bangladesh and Pakistan.

In 1993, SAARC countries signed an agreement to gradually lower tariffs within the region, in Dhaka. Eleven years later, at the 12th SAARC Summit at Islamabad, SAARC countries devised the South Asia trade Agreement which created a framework for the establishment of a trade area covering 1.4 billion people. This agreement went into force on January 1, 2006. Under this agreement, SAARC members will bring their duties right down to 20 per cent by 2007.

Areas of Co-operation:

At the inception of the Association, the Integrated Programme of Action (IPA) consisting of variety of Technical Committees (TCs) was identified because the core areas of cooperation. Over the duration of years, the numbers of TCs were changed as per the need .

The current areas of cooperation under the reconstituted Regional Integrated Programme of Action which is pursued through the Technical Committees cover:

1. Agriculture and Rural Development;

2. Health and Population Activities;

3. Women, Youth and Children;

4. Environment and Forestry;

5. Science and Technology and Meteorology;

6. Human Resources Development; and

7. Transport.

Recently, high level Working Groups have also been established to strengthen cooperation within the areas of information and technology, Biotechnology, property Rights, Tourism and Energy.

Given the stress laid down at successive Summits on the necessity to expand the areas of cooperation and strengthen the regional cooperation, variety of other areas are included within the SAARC agenda. Several Ministerial level meetings have taken place to offer due emphasis in various fields. the details of work programme under each agreed areas of cooperation are often viewed by clicking the respective links.

Economic Co-operation:

The acceleration of economic growth may be a Charter objective of SAARC. Cooperation within the core economic areas among SAARC Member Countries was initiated following the Study on Trade, Manufactures and Services (TMS), which was completed in June 1991.

Currently, the subsequent important processes of SAARC are promoting cooperation within the field of Trade, Economy and Finance and related areas:

i. Committee on Economic Cooperation: Overall Coordination of cooperation in economic areas;

ii.South Asian free trade Area (SAFTA) Committee of Experts and SAFTA Ministerial Council: Administration and implementation of SAFTA;

iii. Finance Ministers Mechanism: Cooperation within the field of Finance and related areas;

iv.Standing Group on Standards and SAARC Standards Coordination Board: Cooperation within the field of harmonization of Standards;

v. Group on Customs Cooperation is handling issues associated with harmonization of Customs rules and procedures.

International Co-operation:

Successive SAARC Summits have acknowledged the importance of SAARC pursuing mutually beneficial cooperation with regional, United Nations (UN) and other international organizations within the areas of cooperation agreed to in SAARC.

A Memorandum of Understanding was signed with the United Nations Conference on Trade and Development (UNCTAD) in February 1993 on UNCTAD Database on Trade Control Measures and Trade Analysis and knowledge System (TRAINS).

A Memorandum of Understanding on cooperation between SAARC and therefore the European Commission was signed in July 1996 under which projects for cooperation are identified out of which some have already been implemented.

A Memorandum of Understanding (MOU) has also been signed with the German Metrology Institute with reference to capacity building for the harmonization of Standards among the SAARC countries.

Economic Relationship among SAARC Nations:

The South Asian Association for Regional Cooperation or SAARC was created to push economic integrity and cooperation among 7 South Asian nations namely India, Bangladesh, Pakistan, Bhutan, Nepal, Maldives and Sri Lanka .

The Association was formed in 1985 with the aim to make sure social and economic development of the member countries. However, over the years it's been seen that SAARC mainly worked towards development of economic relationship among the SAARC nations. Attempts also are on to further trade relations with the member nations of ASEAN (Association of South East Asian Nations) and the European Union .

In spite of lying within the vicinity of one another, trading activities were restricted among the SAARC nations. Over the years, there has significant improvement within the trade relations among the seven SAARC members.

The focus has been shifted to induce access to the markets of the opposite members. Methods have also been devised to draw in foreign direct investments to strengthen economic infrastructures of the SAARC nations. of these initiatives point towards an improvement within the economic relationship among the 7 South Asian countries.

Despite the sincere attempts of the Association, there are several factors that substitute the way of economic integrity among the SAARC nations. The clashes between India and therefore the neighbouring countries have prevented the SAARC members to form the most of the economic benefits derived from the Association.

This has prompted the South Asian countries to travel for bilateral trading activities rather than getting involved in multilateral trade agreements. However, the Association is anticipated to take more proactive steps to boost the economic relationship among its members.

Besides devising policies for economic integration, SAARC is meant to function as a medium to facilitate discussions among the South Asian nations. Seminars and conferences are getting to be helpful measures for promoting cross border trade and investment.

As an aftermath of globalization, Indian government has resorted to open trade policy. The economic reforms of early 1990s have opened an array of challenges for the Indian entrepreneurs. the expansion rate of the Indian economy was around 7% during the amount from 1994-1997. The inflow of foreign fund also recorded substantial increase.

All these resulted from the flexible economic policies adopted by the Indian government. The economic prosperity of India prompted the opposite SAARC members to hunt resort to international trade as a platform for economic growth.

Both Sri Lanka and Nepal have shown their interests to boost intra regional trade. Bangladesh is additionally following an equivalent trend. With the increased intra regional trading activities, the economic relationship among the SAARC nations is sure to be stronger in future.

4.4 REGIONAL TRADING ARRANGEMENTS: DIFFERENT LEVELS, FEATURES AND BENEFITS

Regional Trade Arrangements (RTAs) are agreements between any two or more of sovereign nations of geographical proximity for the aim of economic and trade promotion.

Regional trade agreements (RTAs) cover more than half of international trade and operate alongside global multilateral agreements under the world Trade Organisation (WTO). the first eleven years (1995- 2005) of the WTO were paralleled by a tripling of RTAs officially notified to the WTO and effective .

In other words, the various sorts of economic integration between countries, across continents or within a region are referred to as regional trading arrangements (RTAs). There are different’ degrees or levels of economic integration.

Five different levels are often visualised as follows:

Table 22.1

Free Trade Area	Free trade among members
Common Market	Free trade among members	Common external commercial policy
Customs Union	Free trade among members	Common external commercial policy	Free factor mobility within the market
Economic Community	Free trade among members	Common external commercial policy	Free factor mobility within the market
Economic Union	Free trade among members	Common external commercial policy	Free factor mobility within the market

It would be seen that at each succeeding stage, members surrender a greater measure of their national sovereignty.

With globalisation, regionalism is on the rise. this is actually ironical and inconsistent with the spirit of multilateralism. Hence, initially, the Director General of WTO was against the proliferation of regional arrangements, after WTO was launched in 1995. the amount of regional trading agreements (RTAs) notified to the WTO stands at about 200.

An estimated 70 per cent of the world trade is now covered by RTAs. as an example , the Americas-North and South, all of Europe, including the transition economies of the eastern part, most of Africa, Asia, Australia and New Zealand are signatories to free trade areas, customs unions and partial scope agreements. The new trends in regionalism, however,- are often accepted as a supplement to globalisation.

Features of RTAs:

The major features of the RTAs are as follows:

i. Almost all RTAs show an inherent dynamism towards greater liberalisation and open market. For instance: European Union (EU) where one market and a common currency are introduced to strengthen internal competition and external competitiveness.

ii. The new regionalism brings with it an increase within the size of regional groupings.

iii. There's emergence of overlapping regionalism. Countries belong to over one RTA. There's an inherent scope that these RTAs may turn the world trade system into what Jagdish Bhagwati calls a ‘noodle blow’ of overlapping and potentially inconsistent and unmanageable RTAs.

iv. In the current practice, regionalism covers many issues beyond the removal of barriers to trade in goods and services, like social policy, environmental policy and competition policy.

v. RTAs thus exist altogether regions of the world. They follow a strategy that mixes internal liberalisation with external agreements.

Thus, generally , currently regionalism is a benign and dynamic initiative compatible with the general aims of the multilateral trade order.

Benefits of RTAs:

The important benefits of RTAs are:

i. Members see economic benefits from a more efficient production structure by exploiting economies of scale. additionally to spreading fixed costs over larger regional markets, it enhances economic growth from foreign direct investment, and research and development.

ii. Members value non-economic benefits like strengthening political ties and managing migration blocs.

iii. Smaller countries seek increased security of market access by forming regional trading blocs and joining with associations of larger countries.

iv. Countries might want to lock-in unilateral domestic policy reforms.

v. Members’ bargaining power in multilateral trade negotiations is improved where they will more effectively express in pursuance of their regional interests.

vi. Members can promote industries that aren't viable without a protected regional market – e.g. regional infant industries – the thought being that they would be internationally competitive if given sufficient time and scope to develop.

vii. Open regionalism i.e. agreements with low external trade barriers, service markets and a dominant specialise in reducing transaction costs at borders, help get round the complexity of the international trading system.

4.5 REGIONAL TRADING BLOCS

A regional trading bloc (RTB) may be a co-operative union or group of nations within a selected geographical boundary. RTB protects its member nations within that region from imports from the non-members. Trading blocs are a special sort of economic integration. There are four sorts of trading blocs −

Preferential Trade Area − Preferential Trade Areas (PTAs), the first step towards making a full-fledged RTB, exist when countries of a selected geographical region agree to decrease or eliminate tariffs on selected goods and services imported from other members of the area.

Free trade Area − Free Trade Areas (FTAs) are like PTAs but in FTAs, the participating countries comply with remove or reduce barriers to trade on all goods coming from the participating members.

Customs Union − A customs union has no tariff barriers between members, plus they comply with a common (unified) external tariff against non-members. Effectively, the members are allowed to negotiate as one bloc with third parties, including other trading blocs, or with the WTO.

Common Market − A ‘common market’ is an exclusive economic integration. The member countries trade freely all kinds of economic resources – not just tangible goods. All barriers to trade goods, services, capital, and labor are removed in common markets. Additionally to tariffs, non-tariff barriers also are diminished or removed in common markets.

Regional Trading Blocs – Advantages

The advantages of getting a Regional Trading Bloc are as follows −

Foreign Direct Investment − Foreign direct investment (FDI) surges in TRBs and it benefits the economies of participating nations.

Economies of Scale − The larger markets created leads to lower costs thanks to mass manufacturing of products locally. These markets form economies of scale.

Competition − Trade blocs bring manufacturers from various economies, leading to greater competition. The competition promotes efficiency within firms.

Trade Effects − As tariffs are removed, the value of imports goes down. Demand changes and consumers become the king.

Market Efficiency − The increased consumption, the changes in demand, and a greater amount of products lead to an efficient market.

Regional Trading Blocs – Disadvantages

The disadvantages of getting a Regional Trading Bloc are as follows −

Regionalism − Trading blocs have bias in favor of their member countries. These economies establish tariffs and quotas that protect intra-regional trade from outside forces. instead of following the world Trade Organization, regional trade bloc countries participate in regionalism.

Loss of Sovereignty − A trading bloc, particularly when it becomes a political union, results in partial loss of sovereignty of the member nations.

Concessions − The RTB countries want to let non-member firms gain domestic market access only after levying taxes. Countries that join a trading bloc must make some concessions.

Interdependence − The countries of a bloc become interdependent on one another. A natural disaster, conflict, or revolution in one country may have adverse effect on the economies of all participants.

4.6 SAFTA SOUTH ASIAN FREE TRADE AREA

The South Asian Free Trade Area or SAFTA is an agreement reached on 6th January 2004 at the 12th SAARC summit held in Islamabad of Pakistan. It created a trade area of 1.6 billion people in Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka (as of 2011, the combined population is increased to 1.8 billion).

The seven foreign ministers of the region signed a framework agreement on SAFTA so as to reduce customs duties of all traded goods to zero by the year 2016. the method of establishing a free trade area like SAFTA has been delayed thanks to India-Pakistan differences on Kashmir issue.

However, during a momentous decision, the Foreign Ministers of SAARC countries in their SAARC summit persisted 2nd January, 2004 at Islamabad, approved the framework treaty for free of charge trade the region by 2006. Foreign Ministers of all the seven member countries of SAARC have given their consent for the framework treated on South Asian free trade Areas (SAFTA) and extra protocol on terrorism.

The SAFTA agreement came into force on 1st January, 2006 and become operational following the ratification of the agreement by the seven governments of the region. SAFTA requires the developing countries in South Asia (India, Pakistan and Sri Lanka) to bring their duties right down to 20 per cent within the first phase of the 2 year period ending in 2007.

In the final five year phase ending 2012, the 20 per cent duty are going to be reduced to zero during a series of annual cuts. the least developed nations of South Asia (Nepal, Bhutan, Afghanistan and Maldives) have a further three years to cut back tariffs to zero. India and Pakistan ratified the treaty in 2009, whereas Afghanistan as 8th number state of SAARC ratified SAFTA protocol on 4th May, 2011.

Objectives of SAFTA:

The objective of SAFTA is to push good competition in the free trade area and to produce equitable benefits to all or any the countries involved in the contracts. It also aimed to benefit the people of the country by bringing transparency and integrity among the nations.

Moreover, SAFTA came into existence so as to increase the amount of trade and economic cooperation among the SAARC nations by reducing the tariff and barriers and also for providing special preference to the least Developed Counties (LDCs) among the SAARC nations.

________________________________________

Instrument of SAFTA:

The main instruments involved in SAFTA are:

1. Trade Liberalisation Programme.

2. Rules of Origin.

3. Institutional Arrangements.

4. Consultations and Dispute Settlement Procedures.

5. Safeguard Measures.

6. Try other instrument which will be agreed upon.

Trade Liberalisation Programme of SAFTA:

As per Trade Liberalisation Programme, contracting countries must follow the subsequent tariff reduction schedule. There should be a fall to twenty per cent tariff from the prevailing tariff by the Non Least Developing Countries and 30 per cent reduction from the prevailing tariff by the least Developing Countries.

However, the trade liberalisation scheme isn't to be applied for the sensitive list because this list is to be negotiated among the contracting countries then to be traded. This sensitive list may be a list of products with every country which doesn't include tariff concession.

Sensitive list will involve common agreement among the contracting countries favouring the least developed contracting countries. SAFTA Ministerial Council (SMC) is going to be participating to review the sensitive list in every four year with the intention of reducing the list of products included within the sensitive list.

Although SAARC countries have agreed to push free trade area amongst them, but it's still doubtful how far they might be able to promote such economic integration. Although Pakistan has accepted the SAFTA and agreed to operationalize it by 2006 but its leaders are still having reservations about unrestricted entry of Indian imports and exports to India.

But SAFTA alone can't be considered a satisfactory agreement. The Eminent Persons Group had suggested a more comprehensive and impressive agreement in its report to Secretary General .

These include—achieving-SAFTA by 2006, a customs union by 2015 and an economic Union by 2020. But the SAFTA doesn't contain any provision for including any such additional roadmap or measures because it was done hurried by with none serious thought given in it.

But whatever are also the mental barriers or hurdles between the countries of the region, but it's certain that both the countries are likely to realize much from trade between them.

Moreover, the biggest advantage of improved political relations between India and Pakistan might be enjoyed within the area of energy cooperation.

Pakistan can play a possible role in facilitating transmission of energy supplies to India, might be in terms of providing the transit route for oil and gas from Iran and Central Asia. Therein case, two pipelines would need to be constructed through Pakistan which might benefit both the countries economically.

But construction of such pipelines, which require huge investments, would become possible as long as political stability and economic reliability of the projects are fully ensured. Now everything would depend upon how far the SAARC countries would compared together to mapped out their differences and to realise the economic benefits of regional cooperation at their earliest.

4.7 NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)

On August 12, 1992, a trilateral agreement between United States of American (USA), Canada and Mexico happened which declared North American region as free trade Area. This Agreement is called as NAFTA. USA played the dominant role during this established.

NAFTA was constituted mainly to satisfy the challenges of European Economic Community (EEC) and Japanese economic policies. Before NAFTA, trade was already happening between USA and Canada but this free grade facility was now extended to Mexico. the most objective of NAFTA is to utilize economic resource of North American region for developing the area during a better way.

NAFTA has generated economic growth and rising standards of living for the people of all three member countries since 1994. By strengthening the rules and procedures governing trade and investment throughout the continent, NAFTA has proved to be a solid foundation for building Canada’s future prosperity.

Canada’s merchandise trade with its NAFTA partners has increased 122% since 1993 reaching $598.7 billion in 2005. Canadian merchandise exports to the us grew at a compounded annual rate of 6% between 1994 and 2005. With reference to Mexico, bilateral trade in 2005 reached $18 billion, a 296% increase from pre-NAFTA levels (1993). But NAFTA partners account 84.7% of Canada’s total merchandise exports.

Trade in services has also increased under NAFTA..Canada’s trade services with the us and Mexico grew at a mean annual compounded rate of 5.4% to achieve $82.7 billion in 2004, up from $46.4 billion in 1994, our trade services with the us reached $81.2 billion in 2005, up from $42.3 billion in 1993.

Two-way trade services between Canada and Mexico has grown at an annual compounded rate of 9%, to achieve over $1.6 billion in 2004. Approximately 57% of Canada’s services exports go to our NAFTA partners.

NAFTA has also had positive impact on investment. Since 1994, the annual stock of foreign direct investment in Canada has averaged $279.1 billion. IN 2005, total Foreign Direct Investment (FDI) in Canada reached $415.6 billion, of which over 64% came from our NAFTA partners.

FDI in Canada from the us increased to $266.5 billion in 2005. Canadian direct investment nits NAFTA partners also grew, reaching $213.7 billion in the United Stated and $3.14 billion in Mexico.

In turn, the improved economic activity and production in the region have contributed to the creation of more and better paying jobs for Canadians. near to 3.1 million net new jobs are created in Canada since 1994, representing a rise of 126.6% over pre-NAFTA employment levels.

For Canadians, it's important that trade and investment liberalization proceed hand in hand with efforts to guard the environment and improve working conditions. Under NAFTA, our three countries are able to introduce the successful approach of parallel environmental and labour cooperation agreements.

The economic collaboration promoted by NAFTA has spurred better environment performance across the region. Through the North American Agreement on Environmental Co-operation, the three partners agreed to market the effective enforcement of environmental laws. Through the North American Agreement on Labour Cooperation, the three partners agreed to work together to protect, enhance and basic worker’ rights.

Canada and its NAFTA partners will still work together to reduce the costs of trading within the region and to and improve the competitiveness of North America.

NAFTA called for immediately eliminating duties on the majority of tariffs between products traded among the us , Canada and Mexico and gradually phasing out other tariffs, over a 15- year period. Restrictions were to be faraway from many; categories, including motor vehicles and automotive parts, computer, textiles and agriculture.

The treaty also protected intellectual property rights (patents, copyrights and trademarks) and outlined the removal of investment restrictions among the three countries. The agreement is trilateral in nature (that is, the stipulations apply equally to all or any three countries) altogether areas except agriculture, during which stipulation, tariff reduction phase-out periods and protection of selected industries, were negotiated bilaterally. Provisions regarding worker and environmental protection were added later as a results of supplemental agreements signed in 1993.

This agreement was an expansion of the earlier Canada-US free trade Agreement of 1988. Unlike the european Union. NAFTA doesn't create a set of supranational governmental bodies, nor does it create a body of law United. NAFTA may be a treaty under international law.

Under us law it's classed as a congressional-executive agreement instead of a treaty, reflecting a peculiar sense of the term “treaty” in us constitutional law that's not followed by international law or the laws of other nations.

4.8 BRICS

BRICS is an acronym for the grouping of the world’s leading emerging economies, namely Brazil, Russia, India, China and South Africa .

The BRICS Leaders’ Summit is convened annually.

Structure

BRICS doesn't exist in sort of organization, but it's an annual summit between the supreme leaders of 5 nations.

The Chairmanship of the forum is rotated annually among the members, in accordance with the acronym B-R-I-C-S.

BRICS cooperation within the past decade has expanded to include an annual programme of over 100 sectoral meetings.

Salient Features

Together, BRICS accounts for about 40% of the world’s population and about 30% of the GDP (Gross Domestic Product), making it a critical economic engine.

It’s an emerging investment market and global power bloc.

Genesis

The acronym "BRICS" was initially formulated in 2001 by economist Jim O'Neill, of Goldman Sachs, during a report on growth prospects for the economies of Brazil, Russia, India and China – which together represented a major share of the world's production and population.

In 2006, the four countries initiated a regular informal diplomatic coordination, with annual meetings of Foreign Ministers at the margins of the general Debate of the UN General Assembly (UNGA).

This successful interaction led to the choice that the dialogue was to be administered at the level of Heads of State and Government in annual Summits.

Timeline

The first BRIC Summit happened in 2009 in the Russia and focused on issues like reform of the global financial architecture.

South Africa was invited to hitch BRIC in December 2010, after which the group adopted the acronym BRICS. South Africa subsequently attended the Third BRICS Summit in Sanya, China, in March 2011.

Objectives

The BRICS seeks to deepen, broaden and intensify cooperation within the grouping and among the individual countries for more sustainable, equitable and mutually beneficial development.

BRICS takes into consideration each member’s growth, development and poverty objectives to make sure relations are built on the respective country’s economic strengths and to avoid competition where possible.

BRICS is emerging as a new and promising political-diplomatic entity with diverse objectives, far beyond the first objective of reforming global financial institutions.

Areas of Cooperation

1. Economic Cooperation

There are rapidly growing trade and investment flows between BRICS countries also as economic cooperation activities across a variety of sectors.

Agreements are concluded in the areas of Economic and Trade Cooperation; Innovation Cooperation, Customs Cooperation; strategic cooperation between the BRICS Business Council , Contingent Reserve Agreement and also the New Development Bank.

These agreements contribute to realisation of the shared objectives of deepening economic cooperation and fostering integrated trade and investment markets.

2. People-to-People exchange

BRICS members have recognised the necessity for strengthening People-to-People exchanges and to foster closer cooperation in the areas of culture, sport, education, film and youth.

People-to-People exchanges seek to forge new friendships; deepen relations and mutual understanding between BRICS peoples within the spirit of openness, inclusiveness, diversity and mutual learning.

Such People to people exchanges include the Young Diplomats Forum, Parliamentarian Forum, union Forum, Civil BRICS also because the Media Forum.

3. Political and Security Cooperation

BRICS member political and security cooperation is aimed at achieving peace, security, development and cooperation for a more equitable and fair world.

BRICS provides opportunities for sharing policy advice and exchanges of best practices in terms of domestic and regional challenges also as advancing the restructuring of the global political architecture in order that it's more balanced, resting on the pillar of multilateralism.

BRICS is utilised as a driver for South Africa’s policy priorities including the pursuit of the African Agenda and South-South Cooperation.

4. Cooperation Mechanism

Cooperation among members is achieved through:

Track I: Formal diplomatic engagement between the national governments.

Track II: Engagement through government-affiliated institutions, e.g. state-owned enterprises and business councils.

Track III: Civil society and People-to-People engagement.

Impacts of BRICS on global institutional reforms

The main reason for co-operation to start out among the BRICs nation was the financial crises of 2008. The crises raised doubts over sustainability of the dollar-dominated monetary system.

The BRICs involved the “the reform of multilateral institutions so as that they reflect the structural changes within the world economy and therefore the increasingly central role that emerging markets now play”.

BRICs managed to push for institutional reform which led to International monetary fund (IMF) quota reform in 2010. Thus the financial crises had momentarily reduced western legitimacy and briefly let the BRICs countries become “agenda setters” in multilateral institutions.

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