Basic Concepts

Regional Organisations are



based on liberal approach to

international politics ,
 alternative to approach of
realists.
an attempt to transform the


relations among neighbours in

a qualitative manner.
 regional organisations seen as


against globalisation because

they form the protectionist
blocs.
 also seen as building blocs of


globalisation because regional

integration is the first logical
step before achieving
integration at world level.
 various models of regional


integration example: European

Union = model of hard
regionalism and closed
regionalism.
 APEC (Asia Pacific Economic


Cooperation) and IORA (Indian

Ocean Rim
Association)examples of soft
 regionalism and open
regionalism.

EU Model is based on


institutionalisation , APEC=
minimum institutionalisation.


EU goes for
binding
commitments
Top-down
Approach whereas
APEC = voluntary
commitments and
bottom-up
approach
 some organisations may go for


Supra-nationalism (pooling the

sovereignty) other
organisations may go for
 internationalism example:
ASEAN.

If EU is intrusive, goes for



interference in domestic affairs,

ASEAN follows “ASEAN Way” =
non interference in domestic
affairs based on the principles
of Panchsheel.

EUROPEAN UNION
Discuss the process of
Regional Integration in
European Union.
What challenges normally
come in achieving regional
integration?
Discuss the future
prospects of EU. Give
arguments in support of
your point of view.
What are the sticking
points in India-EU FTA
Negotiations.
What do you understand
by strategic Partnership?
Why India-EU strategic
Partnership is called as
Love Less Arranged
Marriage?

European Union Introduction

 regional organization of 28


European Countries which have

pooled their sovereignty on
many issues and harmonised
there laws in many matters.
 EU = most advanced model of


regional integration. EU is a
source of inspiration and a
learning exercise for other
regional organisations.
 Source of Inspiration
Immanuel Kant: written a


pamphlet titled “Perpetual

Peace”. He desired perpetual
peace among European nations
 and peace can come by
promotion of democracy and
free trade.
Victor Hugo:

 EU is known as Dream if Victor


Hugo.


his speeches : a
day will come
when arms will
fall of the hands
on ground in
Europe.
 Hugo has planted a tree in his


courtyard. Believed: future of

EU and the tree is interlinked.
Founding Father Robert


Schumann French Foreign

 Minister and Jean Monte
French Statesman.
real push factor for EU was


Uncle Sam. It is part of USA

containment policy.
 external push factor is required


for the success of regional

organisations.
 USA = push factor for both EU


+ ASEAN. external push factor

been missing from SAARC.

Evolution of EU
 1952 Formation Of European


Coal and Steel community.

initiative of 6 European
countries known as Old Europe
or Core EU countries.
 France, Germany, Italy
Belgium Netherlands
Luxembourg.

The choice of Coal and Steel is



symbolic. used for building

 weapons + achieving perpetual
peace.
Within 5 years of cooperation


the trade increased by 129%.

 For France and Germany
Europe integration was first.

1957 Treaty Of Rome and the



foundation of European
Economic Community. Why
 this treaty? The three EU
institutions have come into
existence:
European Coal and Steel


Community.
 Euratom.


European Economic


Community.

Atomic Energy Cooperation



1973 fist EU expansion: Britain,

Denmark, Ireland joined EU
looking at the benefits. These
countries + Uk never had any
emotional reason, it joined only
for the profits.
 Traditionally British Policy =


Europe should remain divided.

Britain = fearful of Europe’s
integration. It never wanted any
country to become too strong to
 create security threat for their
island.
Britain always acted as a


balancer supporting the weaker

 party to challenge the rise of
any hegemon in Europe.
Britain Denmark + Ireland =


Euro phobic nations original

EU countries = Europhiles.
 Britain has been closer to USA
than to Europe.
These countries exercised “opt


out clauses and stayed away

from many EU treaties.
 In one way Brexit is good for


EU because of smooth
integration as Britain has been
obstructionist.
 1981 Second Expansion: Greece


Joined
1985 Schengen Agreement by


which EU become borderless

world movement without visa.
 1986 include Spain and


Portugal.
Germany Britain : their policies


= Neo-liberal socialist policies

 in Souther Countries like
Greece Spain Portugal.
These economies = PIGS.


1987 Single Europe Act: it led to



the establishment of common

 market known as 4 Freedoms in
Europe: Freedom of goods
services capital and people.
The first in 1957 the treaty of


Rome, it took 30 years of

negotiations to arrive at second
treaty. at times regional
integration is extremely slow
and lot of Political will is
 required to carry forward the
process.
today European Union =


common market + a Customs

Union.
 1993 Maastricht Treaty: It made


Europe a common currency

Zone/Eurozone. EU became
monetary Union
 At present there are 19


countries in eurozone.
Eurozone is suffering from


existential crisis. huge

possibility of the exit of Greece.
 Grexit = bigger challenge than


Brexit. Because Britain was not

a part of Eurozone and Greece
is a part of Eurozone.
 The case of Grexit is a huge


challenge to show whether

Europe is united or not and
whether all stand for one or not.
 Grexit = the attack on the very


foundation.
now there is no legal provision


in any of Eurozone treaties to

come out of Eurozone.
 provision exist for coming out
of EU treaty of Lisbon Article
50
Advantage of single currency =


facilitate the trade(domestic +

external) by reducing the cost
by eliminating the cost of
currency exchange.
 Disadvantage: In balance of


payment crisis country will not

be able to devalue its currency
to promote its export. This =
major problem Greece is facing.
 sovereign debt crisis of Greece


cannot be resolved only by

bailing out. It has to restructure
its economy.
 France supports bailing out, the


idea of euro bonds and sharing

of the burden.
 Germany aims to enforce


discipline and austerity

reforms.
German prescription are not


supported by people in Greece.

 Greece recovery became


problematic because of the

victory of Syriza Party. (Type of
AAP).
 Greece need to and reader its


exports or Germany could

bailout Greece. Germany only
net exporter not importer.
countries blame Germany for
the crisis and Germany blame
their policies. Solution:
Investors Confidence- which is
not easy. Due to APP investors
confidence had again gone.
 Solution for Greece
Eu countries should bail out


Greece.
 resentment in Germany and


other countries among the

taxpayers.

Continuous bailout means



setting a wrong example

because other countries will not
observe the discipline. This is
the reason that in euro zone
there has been no provision for
bail out.
 Since bailout provision was not


there EU countries took lot of

time in deciding whether Greek
debt should be bailed out or
not. Delay in bailing out
 resulted into deepening of
crisis.

Greece has to restructure its



economy, it has to promote its

exports but it will take time and
 it also requires Greece to come
out of euro zone and devalue its
currency.
Fresh proposal is to bring Euro


bonds and divide the burden.

 Germany is not in favor of, it
wants “6 pack policy” (Tough
Measures).
So far there is no consensus


how to deal with Greece crisis.

 Greece hold Germany


responsible. Germany’s policies

were such that Germany has
been net exporter, Labor law
had been very competitive.
 Another problem is that


Germany is facing challenge

from China.
2 times bailout and one time


Greece is a defaulter.
 What is the condition to join


EuroZone?
Countries have to fulfil a


convergence criteria:
 Inflation should be less,


inflation should not be more

than average 1.5% of three EU
countries with lowest inflation
rate.
 Public debt should not be more


than 60% of GDP. Greece public

debt was more than 300%.
Budgetary deficit has to be


below 3% of GDP. Greece was

manipulating the data and EU
was not having sufficient
regulatory institutions to check
the manipulations.
 Greece economy was not in a


position also to be a part of

EuroZone when it was inducted.
However EU countries ignored
the health of Greece economy
 just to prove the unity and to
take advantage of bigger
market.
The biggest problem was that it


was monetary union without

 being fiscal union and economic
union.

Other features of Maastricht

Treaty
Monetary union

 Schengen Agreement Of 1985


became the part of EU laws.

Countries to go for common


foreign policy, security policy,

 defence policy and justice and
home affairs.

1995 Fourth Expansion Austria,



Finland, Sweden joined.

 2004 Eight Countries Of


Eastern Europe which were

formerly communist joined
EU. Latvia, Lithuania, Estonia,
Czech Republic, Slovakia,
Slovenia, Hungry,
Poland + two Mediterranean
countries Cyprus and Malta
 joined: Largest expansion of
EU.

Copenhagen Criteria: Since



major Expansion was to take

place EU countries devise a
criteria functioning democracy,
market economy, protection of
human rights specially
minorities geographically
located in Europe.
 EU is accused of imposing


western values as a condition

for joining EU. On the other
hand ASEAN does not have any
such criteria.
 2007 Expansion: Romania and


Bulgaria joined
2009 Treaty Of Lisbon came


into force. EU countries wanted

EU constitution but
constitution was rejected in
referendums in Denmark and
Ireland.

Advantage of possessing
constitution
 At present EU is extremely


complicated, it manages itself

through multiple treaties.
It become difficult for EU


countries + to understand EU
 laws. Hence EU is called as
fortress.
Had EU constitution in


existence it would have

streamlined EU laws and it
 easier for outside world to
interact with EU.
ASEAN = more advance than


EU because ASEAN has been

successful in creating its
 constitution known as ASEAN
charter in 2009.

2013 Expansion: Croatia has



joined.
 Future Members: Ukraine,


Georgia, Moldova, Armenia,

Azerbaijan, Turkey.

Analysis
 EU Expansion = extremely


politicised event. Eu poses

conditionality’s.
Russia is not comfortable in EU


expansion eastward.
 Expansion in one way


strengthens EU image and its

soft power, adds complications.
 More number means more


difficulty in
accepting/formulating plans
 The new countries have


different priorities than the old

countries.
 EU reached a point of


saturation and is not interested

in further . Why?
The new countries of Europe


are not that much economically

strong. EU has to maintain the
similar quality of life for all EU
citizens. increases the burden of
Tax payers of the richer
 countries, reason for the rise of
populist parties.

new countries are closer to



USA. The core EU countries like

 Germany want to have better
relations with Russia.
new countries like Poland,


Hungry have lot of animosity

 towards Russia because of
soviet imperialism.
new members do not share


cultural values of old Europe. +

political culture does not match.
Example: refugee and migration
issues the approach of Hungry,
Poland ,very different than that
of Germany, Sweden.
 Hungry, Poland, Romania,


Slovakia were against giving

asylum to Muslims migrants
and refugees.

EU Organisations
 European Council
It is like summit meetings. EU


leaders meet many times in a

year.

Council of European Union

 Ministerial Council


European Commission
represents EU


Parliament
 represents EU citizens. 791


seats directly elected by list

system.

Future of EU
 In Shakespeare play Banquo’s


Ghost taunted the witches: of

you look into the seeds of Time
and say which grain will grow
and which not, speak than to
 me who neither beg nor fear
your favors to me.
EU = moving bicycle, which has


to keep on moving to prevent

falling down.
 EU leaders : existential crisis


before EU.
seen whether EU leaders have


enough political will to ensure

 that the cycle keeps on moving
or let EU disintegrate.
Internal and external.


Internal Challenges
• EU is not as coherent as it
appears from the outside. The
first fault line is:
 Europhobic Countries vs


Europhiles: Britain Denmark vs

France Germany.

French motivation = peace,



Germany’s = profit.
 fault line between core


economies like Germany,

Austria, Belgium, Sweden,
Finland and PIGS economies.
 Another fault line : They differ


in terms of values. People in old

Europe consider new Europe as
burden.
 Another fault line : countries


who favor stronger partnership

with USA and who are not so
comfortable with USA’s
interference.
 there is a difference over EU


relationship with Russia.

The other fault line emerged



because of the refugee crisis

because northern countries
 have more refugee liberal
policies than southern
countries.

The overall situation of Euro



Zone has not return to normal.

 The biggest fear of Grexit is
looming large.

The rate of growth and



employment in EU is not
 improving. Brexit adversely
impact EU’s image.

a lack of consensus as to how to



move in future whether more

 integration or integration has
reached to a saturation point.

growth of Euro Sceptic parties.



elections to EU parliament in
2014, 25% Of the seats went to
 the rightists nationalists Euro
Sceptic.

in domestic elections there is a



significant increase in the %age

of votes in favour of rightist
 parties in France, Germany,
Netherlands.

EU lacks strong leadership at



present, EU is going with ad-

hoc responses, French
President has proposed
stronger Europe, mutualisation
of debt, new asylum policy,
budgetary reforms, financial
reforms + post of EU finance
minister with the idea of
bringing alignment in the fiscal
m economic policies.

External Challenges
 The biggest challenge is


migratory pressure. Since 2015

the number of migrants and
refugees is reaching to 2
millions and there is a lack of
 consensus of how to deal with
the pressure in an effective
manner.

Terrorism: Since crisis in



Middle East, EU have been

consistently facing the terror
attacks. resulted into rolling
back of Schengen and
enforcement of border controls.
 The Geo-Strategic challenge by


Russia: Russia is at its

strongest, increasing popularity
of Purim even in countries of
Europe
 Because of USA policies EU-


Russia tensions are continuing

on the issue of Ukraine.
 Competition from China: China


is continuing with its

protectionist policies.

Protectionist policies of Trump



Administration.
 Thus EU is facing the worst


times and future remains

uncertain.
Analysis of Integration Process
 Integration process is not easy


because nations find it difficult


to sacrifice their sovereignty.

a long drawn process.


 It requires a lot of Political will.


Sometimes many years pass

without any further movement.
Expansion and deepening often


do not go well because it

 becomes difficult to arrive at
consensus.
The integration process can


continue only when there is a

proper give and take. Example:
Germany didi not follow a
policy that benefits all
countries.

Case of Turkey: Why not

Member?
 Turkey have been trying for EU


membership for long but failed

to get membership. Cyprus got
the membership.
 This further reduces the


chances. Greece and Cyprus

oppose Turkey’s membership.
 Turkey has been USA ally and


EU countries didn’t want

another Britain.
Germany does not also want


Turkey entry because turkey

will be the second largest
country in terms of population
and at present the Advantage
Germany is having, it will lose
the advantage. How?
 In EU most of the matters are


decided by qualified majority.

There are very few matters
where consensus is required.
 In qualified majority it is not


necessary that all countries

agree. Only when majority of
countries agree, decision can be
taken subject to the condition.
 These countries also represent


majority of the population. In

SAARC as well as ASEAN
decisions are taken by
consensus.
 EU countries want to maintain


themselves as Christian Bloc

whereas Turkey is
predominantly Muslim.
 Turkey is a buffer zone between


Eurozone and Middle East.

They do not want to extend EU
to the Middle East. Thus they
want to avoid “Bloody Borders”.
 What is the present status of
Turkey Issue?
Turkey has lost the interest in


EU membership and has moved

towards strengthening its
 Islamic Identity which is also
not in WU interest.
Turkey’s Role in Syrian Crisis


with respect to ISIS is

questionable.
 Recently EU has entered into


agreement with turkey over

refugee by which EU has
promised Turkey’s membership
in future.
 Conflict in Turkey and Cyprus
Cyprus was under Ottoman


Empire. Ottoman gifted Cyprus

to Britain in exchange of British
Help against Russia.
 Like Sri Lanka, Cyprus has two


ethnic communities: Greeks

which are in majority and
Turkish.
 Once Cyprus was gifted to


Britain, there was demand for

national self determination in
Cyprus. British followed divide
and rule.
 British proposed an


arrangement by which:
President of Cyprus will be


Greek
Vice President from Turkish

 In Civil services 70% seats to


Greek origin and 30% to

Turkish origin.
Turkey intervened militarily


and brought Turkish dominated

northern part of Cyprus under
its control. Thus Cyprus is
divided into two parts.
 North is controlled by Turkey, it


maintained its military also. UN

peacekeepers are also deployed.
Southern Part is free and closer


to Greece.
 India has good relations with


Cyprus whereas for India

“Turkey is Cold”. Turkey has
always been favourable to
Pakistan. It has said that
Pakistan has inherited all the
warmth of the historical links
between India and Turkey.
 Turkey opposes India’s position


on Kashmir and Indians entry

in NSG.
Since India is looking for


membership in NSG, India has

invited Turkey. However Modi
government played “Hard Ball
Diplomacy”.
 Before the visit of Turkey’s


President, India also invited

President of Cyprus.

India and EU
Partnership/Relations
 Evolution of the Relation
India and EU are having


Diplomatic relations since the

formation of EU.
 Since 2004 EU has become


India’s strategic partner.

In 2005 India and EU even


formulated joint action plan to

take partnership forward.
 Since EU is primarily a trading


Bloc. The most important

aspect of India-EU partnership
is the trade and investment
relations.
 India and EU have been


negotiating comprehensive
trade and investment
partnership agreement since
2007.
 Even at after multiple rounds it


have not been possible to

resolve the deadlock.
 EU India’s largest trading


partner. 13% with EU, 11% with

China and 9.6% is with USA.
EU is the second largest


investor in India after

 Mauritius. EU investments are
more than 51.2 Billion Euros in
India.
The primary goods of export


and imports are: engineering

 goods, textiles, chemicals,
gems, IT services, Travel,
Tourism.
EU can play significant role in


clean energy, smart cities,

 higher education, urbanization,
biotechnology, renewable
energy.

The sticking points in India EU



Free Trade Negotiations are:

 India is protectionist and not


giving liberalization to EU in
certain sectors.
EU does not give India the


status of data secure country. If

EU grant this Status there will
be significant jump in earnings
from BPO sector. Though
government of India has taken
 steps for cyber security yet it
fails to satisfy EU terms.

Dairy Sector: EU has



comparative advantage in dairy

sector. India maintains high
tariff wall which makes EU
product costlier. Cooperatives
like AMUL impose tariff
liberalization because 3.2
million rural women belonging
to marginalized sections are
involved in dairy sector. EU
gives huge subsidy in dairy
sector and impose non-tariff
barriers on Indian exports.
 Automobile Sector: Indian


automobile manufacturing
association is against
liberalization on this ground. It
will impact investment in
 automobile sector, loss of jobs
and will go against make in
India initiative.

Wine and Spirit: The farmers



and local producers oppose the

 liberalization. Another area
where EU has advantage.

Pharmaceuticals: Most


controversial area. EU is not

 satisfied with Indian patent
laws.

Service Sector: EU is reluctant



to liberalize mode 4 (WTO)

 Intellectual Property Rights: EU


accuses India for not having

sufficient protection of
intellectual property rights.
 Major problem is in
pharmaceuticals.
There has been conflict over


issue of:
 Compulsory licensing for


generic drugs.
The ever-greening of patents, as


expected by EU but Indian laws

prohibit.
 According to India its patent


regime is very much in

accordance to WTO norms.

8. Investment related
disputes: The major dispute is
in context of dispute
resolution mechanism. India
prefers domestic mechanisms
whereas EU prefers
international arbitration.
 Thus there are various issues


which are still pending. There

are apprehensions in the mind
of civil society in India because
 negotiations are going on in a
secret manner.
Talks started in 2007 and more


than 16 rounds of talks have

taken place.
 The success of India-EU


strategic partnership largely

depends on the successful
negotiation of Free Trade
Agreement.
 Other Areas of India-EU
Strategic Cooperation
India m EU share the view of


multi-polar world order.

 India and EU are today facing


common problems like

transnational terrorism.
There is a scope of cooperation


in cyber security, maritime

 security, nuclear non-
proliferation, disarmament.

The political instability in



Middle East creates challenges

for both India and EU. - For
the first time India was invited
to EU conferences in:
Afghanistan in 2016, in Syria
2017.
 India and EU also instituting


dialogue on human rights. -

There is scope for cooperation
in civil nuclear. Why India EU
 partnership is called loveless
arranged marriage?
Since EU is primarily a trading


Bloc, there is a limit to which

relationship can be strategic.
 Traditionally India and EU had


lot of divergences on geo-

strategic issues. Example: EU’s
advocacy for Human Rights in
 context for Kashmir has been
an irritant.
India’s close partnership with


Russia and continuous EU-

 Russia tensions also limit the
scope.
EU’s position on Doha talks and


Climate Change have not been

favorable to developing
countries. However EU’s stand
is comparatively mild in
comparison to the stand of
USA.
 India prefers to maintain


stronger bilateral relations with

individual countries like
Britain, Germany and France
in comparison to the entire
bloc.

Future Prospects
 appear bright because greater


convergence is emerging on
Geo-Strategic issues. Example
like terrorism.
 In context of USA’s America


First Policy, EU needs to

diversify its relation with other
countries.
 Though China and EU


interdependence is much
greater than India, European
countries are part of OBOR yet
 China’s protectionist policies
though harm EU’s interest also.
Under the strong leadership of


PM Modi, India is increasingly

recognized as “Net
Security Provider” in Indian
Ocean which is of crucial
significance even for EU.
ASEAN
 ASEAN is the most successful


example of regional integration

in developing world.
 ASEAN is a regional


organisation of 10 countries of
South-East Asia.
 ASEAN came into existence in


August 1967 by Bangkok

Declaration.
In the year 2017 ASEAN


completes the 50 years.

 Kishore Manu Bhai in his book-


ASEAN Miracle suggested that

in tumultuous world South-East
Asia has achieved very high
degree of peace and stability.
 The region pose much of its
success to ASEAN.
South-East Asia is one of the


world’s most diverse region.

The approximate population is
640 million out of which 240
million are Muslims, 120
million Christians, 150 million
Buddhists and million of
 Hindus, Taoists, followers of
Confucius, Communist etc.

Even in economic terms the



region has huge differences.

The per capita income of
 Singapore is $52,960, Laos is
$2,353.
In terms of population


Indonesia is giant with 261

 million whereas Brunei has
small population of 450,000.

The diversity put south-East



Asia at distinct disadvantage in

 terms of fostering regional
cooperation.
Even the strategic environment


has not been very conducive.

 The region divided because of
Cold War.
There have been wars for


example: Vietnam War, Conflict

between Vietnam and
Cambodia, Conflict between
Singapore and Malaysia,
Thailand and Philippines,
Territorial disputes in South
China Sea, poor human rights,
 organised crimes, human
trafficking.
The above situation has created


skepticism among the scholars.

British historian CA Fisher
 describe south-East Asia as
“Balkans of Asia”, get ASEAN
defile all skepticism.
It became the most successful


regional organisation after EU.

At present ASEAN is the 7th
largest economy on track to
become 4th largest economy by
2050.
 ASEAN is the 7th largest


market, 3rd Largest source of

labor, ASEAN’s GDP was
$95 Billion in 1970, it has
become $2.5 Trillion in 2014.
 Today ASEAN is the only


reliable platform for Geo-

Political engagement in Asia
Pacific. ASEAN’s dialogue
partners and Summit level
 partners include ASEAN + 3 +
3.
It means Japan, China, South


Korea and Australia, New

Zealand, India.
 ASEAN has established East


Asia Summit where all major

powers including USA and
Russia meet.
 ASEAN has been able to


establish itself as a community.

ASEAN has been successful in
weathering the storm by the
culture of Musyawarah and
 Mufakat means consultation
and consensus.
EU was once the gold standard


for regional cooperation but

ASEAN has become the way of
future. It is ASEAN rather than
EU which should be the source
of inspiration for developing
regions like Gulf and South
Asia.
 ASEAN has not only


contributed of peace and

prosperity of its own people but
it has acted as stabilising force
in Asia-Pacific.
 Developments
1967 Bangkok Declaration,


original members five:

Singapore, Indonesia, Malaysia,
Thailand, Philippines. With the
 exception of Indonesia which
was nonaligned the other
countries were pro-USA.
ASEAN was seen as pro-USA


Bloc and that is why India was

 initially reluctant towards
ASEAN.
CLMV Countries Cambodia,


Laos, Myanmar, Vietnam; were

under communist influence. At
 present they are known as Least
Developed Countries of ASEAN.
Historically India has closest


relations with Vietnam and

 other countries have been
closer to China.

1971 ASEAN countries declared



ASEAN as zone of peace,

friendship and neutrality. In
 1971 there was war between
India and Pakistan.

1976 TAC: Treaty Of Amity and



Cooperation, ASEAN among

 themselves signed. No such
treaty exist in South Asia.
1976 Bali Concord: A Program


of social development of
 ASEAN region. No such
program in South Asia.

1977 ASEAN Preferential



Trading Agreement. South

Asian countries entered into
 preferential trading agreement
SAPTA in 1997 after 20 years.

1992 ASEAN Free Trade



Agreement. SAARC countries

entered into an agreement for
SAFTA in 2004 at Islamabad
summit but suppose to be
implemented from2016.
However SAARC process has
come to halt.
 According to S Jai Shankar,


SAARC is a jammed vehicle and

no hope that traffic will move.
According to C Raja Mohan,


Pakistan is a camel that slows

down the Caravan of South
Asia, SAARC is heading towards
mortuary, India should catch
new wind.
 1994 ASEAN Regional Forum


came into existence, it is the

only platform of security
dialogue in Asia where India,
 Pakistan, North and South
Korea are present together.
Thus ASEAN is not only


working for the good of its

members but also for peace and
 stability in the entire region. No
such initiative in SAARC.

1995 ASEAN countries declared



South East Asia as nuclear

weapon free zone. In 1998 India
 and Pakistan acquired nuclear
weapons.
1995 ASEAN FTA in services.


No finalisation in SAARC.
 1997 ASEAN adopted vision


2020. However they achieve the

targets in 2015 itself. They have
adopted a new vision.
 1999 ASEAN FTA in


investment. No such initiative

in SAARC.

2007 ASEAN Charter.


 2015 ASEAN declared itself as


community with three pillars:

Economic, Political and
security, Social and cultural.
 ASEAN declares itself as


concert of nations and a caring

and sharing society.
ASEAN leaders meet twice in a


year. The first meeting is their

 internal and the second meeting
is with ASEAN dialogue
partners.

Once ASEAN was criticised for



neglecting the human rights but

 the present ASEAN charter
incorporates commitment for
human rights.
“ASEAN Way” based on


principles of Panchsheel,
though initially criticised by the
West but ultimately proved
more practical approach to
achieve cooperation.
 The way ASEAN could achieve


the political transition in

Myanmar by including
Myanmar rather than isolating
has proved to be a much better
 approach than the isolationist
policies adopted by Western
Countries.
It is true that ASEAN is far from


perfect, it is also true that

ASEAN process is also
extremely slow and ASEAN is
compared with “Crab” which
takes two steps forward and one
 step backward and sideways yet
ASEAN is consistently on move.

Challenges in front of ASEAN

The biggest challenge is the


external environment.
 If tension rises between USA


and China, China and India, it

will threaten the economic and
political stability.
 The slowdown of international


economy which means

slowdown in demand will
impact the rate of growth.
 Domestic instabilities in


countries like Malaysia and

Thailand. ASEAN is also under
the major threat of
transnational terrorism,
organised crime like drug
trafficking, human trafficking,
Islamic fundamentalism,
environmental crisis.
 Lack of internal consolidation


in Myanmar and Rohingya's

issue also challenges ASEAN
commitment to Human Rights
and the future prospects of
Peace and
Stability.
 ASEAN continues to remain


divided between pro-USA and

pro-China.

What have been the causes

behind the success of ASEAN?
 Leadership and strong political


will to sail through the storm.

Strategic convergence which


emerged between China and

 USA in 1970 provided stability
in the region.
ASEAN Way Of Non-


Interference in domestic affairs

and gradual engagement.
 India and ASEAN
One of the most successful area


of India’s foreign policy.

 South East Asia is the region


where India is able to “Punch

Beyond Its Weight”.
Look East Policy/Act East


Policy has been one of the

significant initiatives of
government of India with both
economic and strategic
implications.
 ASEAN has been the gateway


for India’s engagement to wider

Asia-Pacific.
ASEAN is consider as the


nucleus of Asia-Pacific Region.

 ASEAN is responsible for
creating “Security Architecture”
in the Region.
Initially India was reluctant


towards ASEAN because India

 was looking at ASEAN through
the “Cold War Prism”.
It considered ASEAN as pro-


USA Bloc. India’s economy was

also inward looking.
 India had closed relations with


Vietnam whereas at that time

ASEAN countries were against
Vietnam.
 After the end of Cold War, India


had to look towards “Extended

Neighbourhood” because
SAARC process was not moving
forward.
 By this time ASEAN was


emerging as economically
dynamic region. India’s new
economic policy forces India to
engage with ASEAN.
 In 1992 India became sectoral


dialogue partner. In the same

year Pakistan also became
sectoral dialogue partner. (Only
2-3 sectors not all)
 Within four years i.e in 1996


India became Full Dialogue

Partner whereas Pakistan is still
the sectoral partner.
 In 2002 India’s Status was


elevated and India became

Summit Level partner.
ASEAN has involved India in
all of its regional initiatives for
example ASEAN Regional
Forum, East Asia Summit,
ASEAN defence minister meet
+, Regional comprehensive
Economic Partnership.
 India and ASEAN had entered


into FTA in 2010. So far India-

ASEAN FTA is the only FTA
with Regional organisation.
 In 2015 India and ASEAN


entered into FTA in services.

With FTA in services it is
expected that the trade balance
will come in India’s favour.
 India-ASEAN bilateral trade


was $9.4 Billion in 1990, it is

touching $76 Billion T present
and there is a target of $200
Billion for the year 2020.
 In 2012 India and ASEAN


became strategic partners.

India-ASEAN partnership has
been a two way street but it has
 strengthened India’s diplomatic
clout.
It is because of ASEAN that


India is considered as an
 indispensable component of
Asia-Pacific region.
ASEAN countries look towards


India as a balancer vis-a-vis

China. However at times there
has been disappointment with
India; example India had
cancelled Joint Explorations
with Vietnam in South China
 Sea in context of Chinese
Resentment.
Such approach of India


weakens India’s credibility as a

balancer and which may force
 ASEAN countries to go closer
towards China.

The future prospects of India



and ASEAN are strong.

However much will depend on
 the future of USA and China
relations.
Both ASEAN and India have


common aims to ensure peace

and stability in the region.
 India is helping ASEAN


countries and specially in the

capacity building of “CLMV”
countries.
 India has also taken sub-


regional initiative known as

Mekong Ganga
 Cooperation. It is India’s
partnership with Thailand
(Thailand was never a colony).
Mekong Ganga Cooperation


provides institutionalised basis

for India’s cooperation with
CLMV countries.

Mekong Ganga Cooperation is

not just a developmental
 initiative. It is a strategic
initiative. Why?
It is India’s attempt to recover


the lost ground in the natural

 sphere of India’s dominance,
which it has lost to China.
India is trying to recover the


advantage it has in terms of

 proximity, historical and
cultural linkages.
Much before India China had


launched platform known as

GMR (Greater Mekong Region).
 MGC was established in the
year 2000 at Vientiane, Laos.
The four pillars of cooperation


are: Tourism, Culture,

 Education, Transport and
communication.

Ganga and Mekong are k own



as civilisational rivers. There is

 a huge influence of India in the
region.
However unfortunately MGC


initiative has reached to dead

 end despite its strategic and
economic importance.

Successive governments in New



Delhi lost the interest, Thailand

 has been going through political
instabilities.
Modi government has provided


new momentum to MGC under

Act East Policy.
 In 2016 a plan of action has


been adopted to expand

cooperation in trade and goods,
IT, pharmaceuticals and
intermediate goods.
 Up till now India has given


Lines of Credit worth $2 billion

to CLMV countries.
 Connectivity is the focus. India


is trying to achieve the earliest

completion of:
Kaladan Multi model transport.

 India Myanmar Thailand


trilateral highway starting from

Moreh in Manipur, Bagan in
Myanmar reaching to Maesot in
Thailand.
 Another imporTant initiative is


Naranda University
reestablishing cultural linkages.
In Manila Prime Minister has


signalled India’s intent to

promote rules-based
architecture in Asia. However
the problem is with the Delhi’s
capacity to deliver on the
promises. Without a plan to
advance economic integration
with the East Asia, the Gap
between India’s strategic
promise and its performance
will continue to grow and
undermine Delhi‘s political
credibility.
APEC

Nature of Platform
 • It has many unique feature.
Example:
Soft Regionalism


Open Regionalism

 Massive participation of private


sector
The members are known as


member economies rather than

states.
• Hence both China and
Taiwan are part of APEC.

Purpose of APEC
 • The liberalisation of trade in
Asia-Pacific Region to achieve
following aims:
Economic Growth


Promotion of Trade

 Creation of prosperity


Origin
It was created in 1989 with 12


Member economies and

presently has 21 members.
 Members include Australia,


Brunei, Canada, Chile, PRC,

Hong Kong, Taiwan ,
Indonesia, Japan, Republic of
Korea, Malaysia, Mexico, New
Zealand, Papua
 Nee Guinea, Peru, Philippines,
Russia, Singapore, Thailand,
USA, Vietnam.
In 1997 after the Asian financial


crisis, APEC has put a

 moratorium on increasing the
number of member economies.
In 1998 it included Russia, Peru


and Vietnam. However it did

not include India.
 It is one of the objective of


India’s Look East Policy to be a

member of APEC.

Features of APEC
 Bogor (Indonesia) Goals: In


1994 at Bogor members

committed to create free and
open trade and investment in
Asia-Pacific by the year 2010.
 For developing countries the


target has been 2020.

APEC focuses on three areas:


Trade and investment



liberalisation
 Business facilitation


Economic and technical



cooperation.

APEC works in close



cooperation with private sector.

 Private sector is include in


APEC Business Advisory

Council.
APEC has four core committees


and their working groups.

Committee are responsible for
formulation and
implementation of the decisions
taken at APEC summits.
 Since 1989 when APEC came


into existence the trade has

grew more than 7 times. APEC
represent a GDP of $44 Trillion
 (60% of Global GDP and 40% of
the global population).

APEC has played significant



role in the regional

liberalisation especially after
the deadlock in WTO.
India and APEC
 India is a third largest economy


in PPP terms. It is a paradox

that India is out.
If India becomes the part of


APEC it will benefit both.

 APEC countries will be in


position to push India towards

greater liberalisation. They will
get opportunity of India’s
growing market, Abundant
 labor supply, huge investment
opportunities.

India will be benefited in



following ways:
 It will facilitates India’s


economic reforms.
It will force Indian officials and


business groups to become

more competitive.
 As a trading nation India’s


performance is much below the

potential. India is not yet as
much integrated as it should be.
 It will benefit Make in India


program by attracting FDI.

India will be among the rule


makers. India can take the pro-

active steps because India will
understand the evolving
environment of trade and can
go for fast adaptations.
 It will strengthen India’s


strategic objectives in South

East Asia and Asia Pacific.
 It’s a low risk venture because


the approach is voluntary in

nature.

Following factors have stopped

India’s entry
 Many country feel India’s stand


at WTO specially in agriculture

is too protective.
Indian politics is extremely


divisive and hence there is no

guarantee of India’s
commitment. In India politics
over shadow economic logic.
 Indian bureaucracy and


business class is reluctant to

change.
India has huge trade deficits


and India is fearful.

 Steps taken by India
India is at present actively


lobbying for its membership.

 India has entered into Trade


Facilitation Agreement of WTO.

3. India has introduced GST.
4. India is taking steps to
increase the ease of doing
business.

• Next APEC summit is in

Vietnam 11-12 November 2017.
 SAARC

I dream of a day, while



retaining our respective

national identities, one can
have breakfast in Amritsar to
Lunch in Lahore and Dinner in
Afghanistan. That is how mine
forefathers lived. That is how I
want our grandchildren to live.
Manmohan Singh.
 The South Asian Association for


Regional Cooperation (SAARC)

is the regional
intergovernmental organization
 and geopolitical union of
nations in South Asia.
Its member states include


Afghanistan,Bangladesh,Bhuta
n,India,Nepal,the
 Maldives,Pakistan and Sri
Lanka.
SAARC comprises 3% of the


world's area, 21% of the world's

population and
 3.8% (US$2.9 trillion) of the
global economy, as of 2015.
Areas of Cooperation: Human


Resource Development and

Tourism; Agriculture and Rural
Development; Environment,
Natural Disasters and
Biotechnology; Economic,
Trade and Finance; Social
Affairs, Information and
Poverty Alleviation;
Energy, Transport, Science and
Technology; Education,
Security and Culture.
Context of Regionalism in
South Asia
 Why regional cooperation and
what is the logic?
To avoid wars and to overcome


security dilemma with

additional benefits.
 Based on liberal perspective of


international politics, regional

organization provide for peace
and prosperity.
Why regionalism is more
important at present than
ever?
 Rise of global challenges and no


country is sufficient to deal on

its own.
Multilateralism as a process is


at halt. No further movement in

 WTO. Regions are going for
regional trading arrangements.

Regional blocs are like



Protectionist blocs (the policy of

shielding a country's domestic
 industries from foreign
competition by taxing imports).
In case South Asia does not


have its own regional

organization which is functional
in real sense, South Asia will be
left out and all countries of
South Asia will be adversely
impacted.
What are imperatives for
regional cooperation in South
Asia?
 The partition of Indian sub-


continent is artificial and

historically, geographically and
culturally it is one unit.
 South Asia has become most


vulnerable to nuclear war, non-

conventional security threats
like terrorism, natural disasters,
organised crimes, radicalism.
 South Asia is a home to the


largest number of world’s poor

and malnourished children.
South Asia is located in
 proximity to the arcs of
instability (Middle East).
No other area is under nuclear


war but South Asia is.

Scenario in South Asia

 With the exception of Middle


East, South Asia is the most

polarised of all regions.
Intra-Regional Trade is not


more than 5% of the Total

external trade these countries
have with the outside world.
Intra-Regional trade in EU is
beyond 65% and in ASEAN is
beyond 25%.
There is no other way to
increase prosperity except
through trade and investment
and the most attractive
partners are immediate
neighbours.

History of South Asian

Integration
 Considering the geo-Strategic


and geo-Economic importance

of the region, situated in
proximity of Far East, Central
Asia, Middle East, Indian
 Ocean, there has been
involvement of major powers
since beginning.
India was the most important


colony of the British Raj. Lord

Curzon in one of his essays
mentioned that the son of
British empire will set on the
day it will loose India.
 After the decline of British


Empire, there was competition

between the two superpowers to
bring South Asia to their side.
 It is to be noted that the biggest


factor that has checked the

natural evolution of South
Asian integration has been
superpowers rivalries.
 Had superpower rivalry not


been there, Pakistan would

have automatically looked for
cooperative relations with
India.
 Besides superpower rivalries,


the domestic politics in all the

countries have always acted as
an obstacle.
 Considering the huge


asymmetry in the size of India

and the other south Asian
neighbours, political groups in
 South Asian countries always
projected India as a threat.
India as a big brother (bullying


big brother) going for micro

 managing the domestic affairs
of the neighbours.
Anti-Indian approach became


the defining feature of

nationalisms in South Asia-
 narrow approach of different
countries.

Even India cannot be absorbed



from the responsibilities. India

has not taken enough steps to
 address the genuine concerns of
smaller neighbours.
Smaller neighbours have been


fearful of India’s imperialist

ambitions after the creation of
 Bangladesh and incorporation
of Sikkim in Indian territory.
Smaller neighbours always


looked for external balancer

 either USA or China to counter
Indian hegemony.
Till the end of Cold War India


was not any source of

inspiration. Neither India’s
economic growth nor India’s
administrative developmental
achievements generated any
power of attraction.
 In fact the situation of human


development has been much

better in other countries like Sri
Lanka and Bangladesh.
 India continues to have various


disputes including territorial

and water disputes with her
neighbours.
 In all south Asian countries,


there is ethnic conflict and

because of unnatural partition,
ethnic groups are also present
in India and as a result ethnic
conflicts have over-shadowed
the scope of regional
cooperation.

Origin of SAARC
 SAARC was proposed by the


than President of Bangladesh

Ziaur Rehman; SAARC is a
regional organization with
negative mindset.
 The reason for formation of


SAARC was not Cooperation

with India rather to create
coalition of neighbours to resist
 India and to check Indian
hegemony.
Hence initially India was not


very interested in SAARC

 because India knew that it is
anti-India platform.

Initially even Pakistan was not



interested in SAARC because

 Pakistan thought it would be an
India dominated platform.
However later on it decided to


join SAARC because by

remaining inside SAARC,
Pakistan would be in a better
position to stop Indian
initiatives.
 SAARC charter was adopted on


8 December 1985. (Nothing but

Rhetoric)

SAARC Principles
 SAARC principles are based on


the principle of Panchsheel i.e

non-interference in domestic
affairs.
 SAARC Countries would not


take up the bilateral issues. It

would be a platform only for the
regional multilateral issues.
 However SAARC does not


substitute bilateralism rather it

complements bilateralism.
It was decided that all decisions


should be taken by consensus.

 Comparison with European
Union
Consensus based Model is


based on the Westphalian idea

 of sovereignty, it is increasingly
loosing its relevance.
In European Union, majority of


the subjects are decided by

“Qualified Majority” and
 consensus is required only for
few areas.
Hence SAARC process comes to


halt when only one country uses

veto whereas other countries
agree for the proposal.

SAARC members
 All south Asian countries have


been members from the

beginning.
 On the initiative of India,


Afghanistan gained
membership in 2007.
Observer States: USA, China,


Iran, Myanmar, Japan,

 Mauritius, South Korea,
Australia and EU.
Though SAARC is considered as


hopeless platform yet the

presence of large number of
 observers show that there is a
potential in SAARC.
Recently Turkey has also


expressed its interest in

 becoming the observer in
SAARC.
Pakistan, Nepal, Bangladesh,


Sri Lanka have proposed full

membership for China in
SAARC, however India is
reluctant for China’s
membership.

India’s Position
 Before Expansion, internal


consolidation is required.

Should India supports China’s

Entry?
 There is no harm if China


becomes the member for the

following reasons:
China already has huge


presence in South Asia.

 SAARC is anyway a dead


platform.
India should reciprocate to


China’s gesture as China has

 accepted India’s partnership in
SCO.
In case China becomes the


member, there is a possibility

that SAARC process may gain
 some dynamism (something
may happen).

When Pakistan is there China is



already there. Take steps for

image building with other
countries. If not allowed it
shows fear.

SAARC’s Scope of Activities

 SAARC started with a very


small agenda. The initial

SAARC program use to be
known as SAARC Integrated
Development Program.
 Initially cooperation started in 5


areas: Agriculture, Rural

Development,
Telecommunications,
 Meteorology, Health and
Population.

Gradually SAARC Cooperation



is expanded in other fields like

SAARC Cooperation in Disaster
Management, SAARC Food
Bank, South Asian university,
SAARC Film Festival, SAARC
Milk Grid.
 SAARC has a huge potential


because SAARC represent a

market of 1.65 Billion people.
Intra-Regional Trade is just


$40.5 Billion whereas Intra-

 Regional Trade in NAFTA is
more than one trillion.

For SAARC process to reach to



its logical ends the biggest

challenge is “Connectivity”.
 Despite proximity, all sorts of


connectivity is extremely poor.

Neither rail links nor road links,
very poor in land-water ways
and air connectivity.
 Pakistan has blocked all


initiatives to develop
connectivity and SAARC transit
agreements.
 At Kathmandu Summit, India


has proposed sub-regional

initiative known as BBIN
(Bangladesh, Bhutan, India,
Nepal), even with respect to
 BBIN initiative there is a
resentment in Bhutan and it is
in deadlock state.

Without connectivity and



transit agreements regional

 economic integration cannot
make any progress.
Recently Asian Development


Bank has produced a study

which shows that how South
 Asia can be benefited if
countries go for greater
connectivity.

One of the major initiative of



SAARC i.e SAFTA (South Asian

Free Trade Area) has also failed
to come into existence.

Short note on SAFTA and

SAPTA
 Any regional organization has


to move in following stages:

PTA, FTA in goods,
FTA in services, FTA in
investment, Comprehensive
Economic Partnership,
Customs Union, Freedom of
Movement of People.
 SAARC has introduced


Preferential Trading
Arrangement (PTA) in 1997.
 However it had not resulted


into any increase in intra-

regional trade. Why?
SAARC economies continue to


be protectionist.
 SAPTA adopted positive list


concept (Restrictive List).

Even after SAPTA trade did not


increase because only those

items were included in the
positive list which have not
been the commodities of trade
between countries.
SAFTA 2004
 Up till now SAARC was not


having any push factor. Since

USA got involved in war in
Afghanistan, USA became
interested in normalisation of
 relations between India and
Pakistan.
Hence under USA’s pressure


countries agreed for

introduction of SAFTA. SAFTA
came into effect in 2006.

Features of SAFTA
 More ambitious than SAPTA


because SAFTA follow the

sensitive list (negative
list).
 Like WTO, SAFTA is perhaps


the only regional initiative to

establish consultation and
dispute settlement body.
 SAFTA has adopted special and


differential responsibilities,
differential treatment to Least
Development Countries (India,
 Pakistan, Sri Lanka are
developed countries of SAARC).
Member countries agreed for


bringing down the tariffs and

 maximum permissible limit is
5%.
Rules of origin have been in


accordance to the interest of

smaller countries. It permits
foreign content up to 70%.

Causes For Failure for

SAARC or South Asian
Regionalism
 The most important factor at


present is the state of relations

between India and Pakistan. In
the words of C Raja Mohan,
Pakistan is the camel that slows
 down the pace of South Asian
Caravan.
India and Pakistan are the


largest countries of SAARC and

until and unless their relations
 improved there is no hope for
SAARC.
Any real South Asian


Regionalism has to be “SAARC

minus Pakistan”.
 It is to be noted that with


Pakistan-China Access,
Pakistan dependence on India
and other countries of South
Asia has become negligible.
 Hence Pakistan will never go


for strengthening SAARC.

Hence it is proposed that India
should explore the idea of
SAARC minus Pakistan.
 It is in this context India is


Revitalising the platform of

BIMST-EC.

For India connectivity with



Central Asia, Afghanistan has

 been very important, hence
India had brought Afghanistan
in SAARC.
Recently India has been


successful in influencing
Afghanistan. Pakistan gives
transit rights to Afghanistan but
not to India (Afghan trucks can
come but go back empty).
 Afghan president suggested that


if Pakistan does not allow full

transit rights to Afghanistan to
reload the trucks, Afghanistan
 will deny Pakistan Access to
Central Asia.

The other problems in the



region include:
Protectionist economies.

 Opportunist politicians.


Lack of political will.



China Factor.


Asymmetry in size and power.


 The existence of South Asian


countries as an independent
nations is very New, there
national identities are still not
consolidated.
 Hence it is difficult for them to


compromise with their

sovereignty and to go for
solution of sovereignty which is
 necessary for regional
cooperation.
If SAARC become successful,


integrated in terms of transit,

 trade and transport it will be
annulment of partition.
Sanjay Baru’s book: India and


the World: Essay’s on Geo-

Economics and Foreign
Policies. The key factor have
shaped the formation of
regional cooperative
institutions in post Cold War
period:
 Market driven economic policy.


Movement of people across



borders.
Political factors.

 None of these factors played


role in South Asia, there has

been limited people to people
contacts.
 Instead of trade deficit there is


a trust deficit. Protectionist

economies limits business to
business contacts.
 Out of the three processes P2P,


G2G, B2B only G2G has been

the main driver. In present
times Relations cannot be
moved only on G2G basis.
 In South Asia there has been no


“Flying Geese” factor.

Gauhar Rizvi, Bangladeshi



Analyst: even though strong

compulsions for regional
cooperation exist considering
the poverty and common
challenges, SAARC has been
slow, hesitant and uncertain.
 SAARC itself lacks strong


institutional structures and

resources.
A former Ambassador Shel


Kant Sharma, Article: Wither

South Asia: despite it checkered
record SAARC remains highly
desirable. There is a need of
broad base involvement of
stakeholders beyond
governments and bureaucracy.
South Asia is a valuable public
good. SAARC Nations must
consciously exploit every
window and should remember
 that every window is not open
for ever.
Foreign Secretary S Jai


Shankar: SAARC is a jammed

vehicle, neighbours need to be
connected, SAARC is a vehicle
to connect. However
unfortunately it seems traffic
will not move.
Bay of Bengal Initiative
For Multi-Sectoral
Technical and Economic
Cooperation
 Members: India, Nepal,


Bhutan, Bangladesh, Sri Lanka

+ Thailand, Myanmar. No
Pakistan, Afghanistan and
Maldives.
 It was established in 1997 with


four countries: Bangladesh,

India, Sri Lanka Thailand.
Towards the end of 1997
 Myanmar joined and Nepal and
Bhutan joined in 2004.
Profile: 1.5 Billion people $2.7


Trillion GDP.
 Despite global financial


meltdown economies are

growing at an average rate of
6.5%.
 Significance: Strategic move of
India
Since SAARC will not move


because of India-Pakistan
conflict, India has preferred to
replace an economically
dynamic country Thailand in
place of Pakistan.
 BIMST-EC act as a bridge


between South Asia and South

East Asia.
BIMST-EC has huge geo-


strategic significance because it

 brings India closer to the three
strategic regions:
Bay of Bengal sub-Regionalism


Mekong sub-Regionalism

 Sub-Himalayan sub-


Regionalism

• Thus it brings the three

strategic peripheries under one
umbrella. The other advantage
 is neither Pakistan nor China is
present.

Principles
Panchsheel

 BIMST-EC is in addition to


bilateral and other regional

cooperations and not a
substitute.
 BIMST-EC has 14 priorities


area, each country takes the

ownership of two priorities.
The important areas are


counter-terrorism,
 telecommunications, tourism,
disaster management.

Since BIMST-EC came into



existence, BIMST-EC process

was languishing. Only in last
 few years the government of
India has realised the
importance of the organisation.
Hence few steps have been


taken to revive the BIMST-EC.

 Example Secretariat have been


established in Dhaka, countries

are negotiating
FTA (FTA will be of huge
importance as economies are
growing at an average
6.5%).
 With the cancellation of


SAARC, India is now showing

greater interest in BIMSTEC.
Countries were invited on the
 sidelines of BRICS summit in
Goa.

However BIMST-EC also has



multiple challenges:
 Thailand is suffering from


domestic instability.
Myanmar is also not free from


ethic issues.
 Economies remain


protectionist.
Ease of doing business is very


poor.
 Neither physical infrastructure


nor financial infrastructure is

developed.
 Hence the biggest challenge is


to develop the connectivity. It is

also the focus at present.
 India Myanmar Thailand


Trilateral Highway is one of the

key projects in the region.
 India has ambitious plans to


strengthen connectivity in
North Eastern Region.
In the recent Summit Of


BIMST-EC foreign ministers in

Kathmandu, it has been
declared that BIMST-EC FTA
will be signed soon, Grid inter-
connectivity will be
operationalised, Text Of
Technology transfer has been
prepared, Commitment to
revitalise it, Future Areas
Negotiation in Investment and
Trade Facilitation.
NAFTA
 Introduction
NAFTA is not an example of


regional integration like that of

European Union, ASEAN or
 SAARC. It is just a free trade
agreement.
It is the first free trade


agreement between the

 developed and developing
countries.
NAFTA came into existence in


1994. The idea was proposed by

however Bush administration
and implemented by Clinton
Administration. Thus there was
BiPartisan support for NAFTA
in USA.
 However at present both the


parties in USA are critics of

NAFTA. Even Obama
Administration aimed at
revision of NAFTA.
 Present President Trump calls


NAFTA as the Worst Trade Deal

Level. Since August 2017, the
three countries are re-
 negotiating the terms of
NAFTA.
NAFTA is an ambitious regional


trading arrangement. Focus

area have been agriculture,
automobile, textiles, IPR issues,
labor issues and environmental
standards.

What was the motivation

behind NAFTA?
 For USA and Canada, Mexico


was a new market for exports,

offers scope for investment,
source of cheap labor which
 enhances the competitiveness
of USA products.
One of the reason was to stop


legal and illegal immigration

from Mexico to USA.
 It will create Job opportunities


in Mexico itself.

Incentives for Mexico:



Integration to highly developed



economies.
 Huge investment.


Access to technology.


Source of employment in


manufacturing sector.
Increasing farm exports.

 Checking illegal immigration


and exporting products rather

than persons.
 NAFTA has significantly


increased the regional trade and

investment.
 Regional trade in 1993 was


$290 Billion. It has become $1.1

Trillion.
Similarly Mexico was receiving


American FDI of $50 Billion

earlier which has become $100
Billion at present.

What are the main grievances

of USA?
 According to USA president it


has resulted into job losses

specially in
manufacturing/automobile
sector.
 However economist disagree


over the real Loss to USA.

NAFTA has actually created


million of jobs related to export

sector.
 NAFTA has made consumer


goods cheaper for USA

consumers.
NAFTA has actually increased


the competitiveness of USA’s

 automobile sector vis-a-vis
tough competition from China.
Job losses are concentrated in


specific sectors but benefits

have spread more widely. USA
 has actually gained more jobs
than loss (exports, services).
It has also increased USA’s corn


exports to Mexico.
 Job loss in USA is not because


of NAFTA it is because of
Automation, China.

Impact on Mexico
 There is a mix impact on


Mexico also. There is increase

in investment from both USA
as well as Canada.
 More job creation and


manufacturing sector. Increase

in farm exports to USA.
 Indirect impacts are: It has


made Mexican economy more

competitive, liberalise.

Negative impacts:
 Primarily the negative impact is


on agriculture because USA’s

product’s have been too much
subsidised.
 It has increased regional


disparity. The northern pat of

the Mexico which is an
industrial belt has benefited but
southern which is primarily
 agrarian has been adversely
impacted.
As such there is no overall


improvement in wages as it was

expected.
 The rate of growth of Mexican


economy have been much less

than that of other Latin
American economies (Rate of
growth of Mexico from 1993 to
 2013 has been at an average of
1.3% only).
Economy closely tied to USA


economy, has suffered because

 of recession in USA at the time
of global financial crisis 2008.
Its exports declined and


economy contracted.
 Corn producers are adversely


impacted. Has not addressed

the unemployment problem.
Illegal immigration has


increased two times. No

 significant impact on poverty
eradication.
Export promotion of Mexico is


not just because of NAFTA but

 also because of devaluation of
Peso in 1994.

Slowdown of job creation in



manufacturing sector is not

only because of USA but also
because of China and other
South East Asian countries.

Impact on Canada
 It strongly gained in cross


border investment from both

USA as well as Mexico.
 The export to USA has


increased but import has been

almost equal to export.
 Canada’s Agriculture Trade in


USA has increased three times

to USA’s Advantage.
No real change in


manufacturing sector. There is

 no increase in the competitive
ness of economy of Canada.

The greater concerns of USA is



with Mexico.
 USA has huge trade deficit. The


areas of re-negotiation are:

Reduce the trade deficit.


Tightening the rules of origin



requirement.
 Reforming investor state


dispute mechanism.
Updating pact on IPR and


digital services.
 USA’s stand is threatening.


According to economists USA’s

problem will not be resolved by
coming out of the deal rather
USA may further loose its
 competitive advantage over
China.
USA should think in a creative


manner, how to compensate job

losses by relocation of workers
going for skill development and
those areas where USA has
comparative advantage.
 USA should also think for


adjustments, social assistance,

creation of jobs in new areas.