Friday, August 28, 2009

Role of the European Economic Community (EEC)

European Economic Community (E. E. C.) or European Common Market (E. C. M.) was founded in 1957 under the Treaty of Rome by France, West Germany, Belgium, Luxemburg and Netherlands. The community now has 12 members and has an association with Turkey which is expected to become a full member in future. The E. E. C. consists of three organisations based on their separate treaties originally signed by the six member states, first eh ECSC, setup by the treaty of Paris in 1951 valid for 50 years. Second the E. E. C. by the treaty of Rome in 1957 of unlimited duration and third the European Atomic Energy Community (Euratom) by the second Treaty of Rome in 1957, also of unlimited duration. The first treaty was already in operation from July 1952 and the other two came into force from January 1958. Article 2 of the Treaty of Rome lays down that “the community shall have as its task, by setting up a common market to promote throughout the community a harmonous development by economic activities, a continuous and balanced expansion, an increase in stability and accelerated raising by the standard of living and closer relations between the Member States belonging to it”.

The European Economic Community’s relations with the developing countries go back to the Treaty of Rome in 1957. The original six signatories to the treaty agreed to associate the EEC to those non-European Countries and territories which had special relations with France, Belgium, Italy and the Netherlands. The exports and imports of the “associated members” are treated at par with the Community members. With the entry of the UK into the EEC in 1973, a large number of her former colonies have become associated with members of EEC. Initially separate agreements were signed with such developing countries who became associated members of the community. But in 1975, a single agreement was signed under the Lome Convention with 45 African, Caribbean and Pacific (ACP) countries. At present there are 12 countries in the Mediterranean region and 66 ACP countries that have signed the third Lome Convention. The Lome accord includes the relaxation of some non-tarrif barriers, less stringent enforcement of some trade regulations, and exemption from certain bilateral trade agreement such as the MFA. But it is subject to regulations which severely limit free access for the exports of beneficiaries, including safeguard clause which allows the EC to suspend any concession unilaterally. Although the ACP countries as a group have been receiving preferential tarrif rates and exemption from MFA, empirical evidence reveals that there ahs been actually decrease in trade between ACP countries and the EC. But some trade-Creating effects have occurred in the form of diversification of exports from the ACP countries in the form of manufacturers, and processed agricultural and temperate agricultural products. So far as the other developing countries of South East Asia, Latin America and Gulf and Southern Mediterranean are concerned, a link between them and the EC was provided by the Generalised System of Preferences (GSP) in July 1971. The GSP allows the free entry of certain manufactured goods exported by developing countries to the EC and helps them to industrialise. The EC has been importing from 56 Asian, Latin American and Middle East countries under the GSP scheme. All such countries have signed individually commercial and cooperation agreements with EC. Leaving aside those developing countries that are associated members of the Community, the other developing countries have not benefited much from the GSP. They continue to suffer from rising protectionism in their trade relations with EEC. Only about the 10% of the total imports of the Community are covered by the GSP. At the same time, budgetary constraints prevent the community from increasing its financial aid to developing countries. By remaining outside the UNCTAD the EEC has failed to help such countries much.

The EC is the largest textile market in the world. It has negotiated bilateral trade agreements with all South Asian and Latin American countries and other low wage textile exporting countries under the provisions of the GATT Multi-fibre Arrangements (MFA). When the single market becomes full operational, exports of clothing and textile will be boosted. The EC has agreed to a gradual phasing out of the MFA in three stages under the GATT Uraguay Round talks. Until then the bilateral agreements would continue to be extended for the benefit of developing countries.

The EC helps developing countries in developing telecommunication, science and technology, energy and human resource development. It carries on joint research projects in the developing countries which include biotechnology, health and food technology. It aids such countries in trade promotion, stabilisation of exports earnings and encourages regional integration among them. The EEC funded development projects are mostly in rural areas. They include rural electrification irrigation, primary education and community development. The EC has been playing a major role in the international drug control. It launched a special programme to curb drug abuse in 1987 with emphasis on backing the efforts of developing countries to reduce demand for and production of narcotics.

The European Community launched in 1958 the EC Investment Partners (EC IP) in order to boost economic development in Asia, Latin America and the Mediterranean countries. The scheme provides financial help to EC companies willing to undertake direct investment in developing countries. The EC IP promotes joint investment projects so as the encourage transfer of capital and technology and help to create jobs in new industrial sectors. It also helps those companies which want to operate in developing countries through licensing and technical assistance agreements. The emphasis is on promoting small and medium enterprises. It covers all sectors of the economy, including industry services, agriculture and mining. It operates through financial institutions, both in EC and the developing countries. They act as EC agents. They analyse projects, recommend whether to accept or reject joint ventures, draft contracts and make payments. The EC IP provides funds for project identification studies, for human resources development and for equity participation in joint ventures.

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