International business issues

INTERNATIONAL BUSINESS ISSUES

UNIT 1

EUROPEAN COMMUNITY

and

INTERNATIONAL BODIES and PROGRAMMES

The two World Wars convinced statesmen that some form of political unity was desirable, and in 1949 the Council of Europe was created - the basis, it was hoped, of a European Parliament. But organizations with definite functions - the Organization for European Economic Co-operation, The North Atlantic Treaty Organization (1949) and the Western European Union (1954) proved more fruitful than did the Council of Europe with its broad aim.

Although these organizations involved co-operation, they were merely voluntary associations, not federal bodies exercising supra-national powers in the interest of members as a whole. While federation was the ultimate aim of European statesmen they realized that it could only proceed piecemeal and on a functional basis. The first supra-national organization, the European Coal and Steel Community (ECSC) was formed in 1951 to control the whole of the iron, steel and coal resources of the six member countries - France, West Germany, Italy, Holland, Belgium and Luxembourg. The old divisions created by inward-looking national interests were thus broken down.

The success of the ECSC led to the setting up in 1957 of the Atomic Energy Community (EURATOM), a similar organization for the peaceful use of atomic energy, and the European Economic Community (EU), an organization to develop a 'common market' between the six member countries.

The 1957 Treaty of Rome set up a 'community' whose government and institutions were developed from those of the old ECSC.

Maastricht Treaty on European Union came into force on 1 November 1993 stating the aim of creating a European Union founded on the previous Communities. The Treaty of Amsterdam in 1997 had improved policies and forms of cooperation among the Member states.

The Union is served by a single institutional framework to 'ensure the consistency and the continuity of the activities carried out in order to attain certain objectives while respecting and building upon the acquis communautaire' The union autonomous institutions was created by the Community Treaties in order to make them able issue legislation binding as law throughout every Member State. A Court was also created to exercise judicial control over relationship between the community institutions and the Member States ready to be invoked not only by the states and Community institutions but also by private individuals against their own governments and national legislation.

The Member States and the candidates to accede to the European Union have to be European and their system of government be founded on principles of democracy, liberty, respect of human rights and fundamental freedom and the rule of law. The founder members are France, Germany, Italy, the Netherlands, Belgium and Luxembourg. In 1973 they were joined by the United Kingdom,

Ireland and Denmark (though Greenland are of Denmark left the Community in 1985), in 1981 by Greece and in 1986 by Spain and Portugal. In 1995, Austria,

Sweden and Finland acceded to the European Union. As a result of 1994 referendum, Norway decided not to join the Union, but it remained a member, together with Iceland and Liechtenstein, of the European Economic Area. (EEA).

These countries participates effectively in the single market of the European Community concerning the free movement of goods, persons, services and capital and apply the bulk of EC's economic and social legislation, but they do not participate directly in the EC's institutional structure as the Maastricht Treaty introduced the concept of a 'two-speed' or 'variable geometry' Community.

The Commission is the most important body of the EU as it is now called. Its thirteen members act as an independent body in the interests of the Community as a whole, and not as representatives of the individual governments that have nominated them.

The Commission is responsible for formulating policy proposals, promoting the Community interest, trying to reconcile national viewpoints and implementing Community decisions.

Each member country sends a cabinet minister (usually the Foreign Secretary) to the Council of Ministers. This is the supreme decision-making body. Its task is to harmonize the policy of the Commission and the wishes of the member governments. Thus while the Commission drafts community policies; they have to be approved by the Council before they can be implemented. On matters of major importance, which affect vital national interests, the rule in practice is usually that decisions shall be unanimous. If the Council becomes deadlocked, the Commission reconsiders the proposal in order to meet some or all of the demands of the opposing countries.

It consists of ten judges appointed for a six-year term by agreement among member governments. Its task is to interpret the Rome Treaty and adjudicate on complaints, whether from the member states, private enterprises or the institutions themselves. Its rulings are binding on member countries, community institutions and individuals.

This is a body of 410 elected members that sit according to party affiliation, not nationality. The Assembly debates Union policies and also examines its budget.

The over-riding aim of the EU is to integrate the policies of its member countries. Its economic policy is based on two main principles:

1. Customs union

2. a common market

There is a crucial difference between a free-trade area and a customs union. The former simply removes tariff barriers between member countries but allows individual members to impose their own rates of duty against outsiders. A customs union goes further. While it too has internal free trade, it also imposes common external tariffs. The EU has a customs union since this is essential for an integrated common market. Otherwise goods would enter the market through low-duty countries and be resold in those imposing high rates.

The common market of the EU envisages moving goods and factors of production completely freely within the Union through the operation of the price system. Member countries had already developed their own individual taxes, welfare benefits, monopoly policies, methods of removing balance of payments, full employment policies and so on. If such differences were allowed to persist they would tend to disrupt the working of the pricing system because they would give some members of the Union an advantage over others. Furthermore, it is

the Commission which is entrusted with the negotiation of international agreements on behalf of the Union, even if they are ultimately concluded by the

Council.

But one of the major duties of the Commission is to ensure that the provisions of the European Community Treaty and the measures taken are applied. In its unique position of proposer and enforcer of the Community legislation, the Commission has the opportunity to fulfill this duty in the legislative process and subsequently in ensuring the observance of the legislation itself.

The members of the Commission must neither seek nor take any instructions from any government or from any other body. The bulk of the legislation of the European Community is not enacted under the provisions of the Treaties themselves, but under powers delegated to the Commission or to the Council itself. If the Commission considers that a Member State has failed to fulfill an obligation under the Treaty, it shall deliver a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations, and the state concerned does not comply with the opinion within the period laid down by the Commission, it may bring the matter before the Court of Justice. Under the E. C. Treaty, it is the Court which determines whether it is a breach.

The interests of the Member States at the Community level are represented also in the Council of European Union. It consists of a team of the responsible regional ministries of each Member State. The participants may be also accompanied by other officials on events. Each delegation may have up to 9 members. There are relatively few provisions allowing the Council to act by a qualified majority, so the co-decision procedure was added. Qualified majorities involve a system of weighted voting, approximately related to the size of the Member State.

The European Parliament is the only directly elected international institution in the world. The Community legislation does not emanate from the Parliament, but the co decision procedure, introduced by the Maastricht Treaty means that legislation is adopted jointly by the Council and the Parliament. The role of the Parliament appears to have been quite effective: some 6o per cent of the European Parliament's amendments to proposed legislation are accepted in the final version. Since 1979 the European Parliament has been elected directly by the citizens of the Community. The seats are nevertheless allocated to each Member State. Lately, after the Germany reunification, the relative representation of the Big Member States has increased as compared to the smaller ones.

The members of the Parliament group themselves according to political ideology rather than national origin. The current groups are;

Party of European Socialists

European People's Party (Christian Democrats and Conservatives)

Group Union for Europe

European Liberal Democratic and Reformist Party

Confederal Group of the European United Left

Green Group

Group of the European Radical Alliance

Europe of Nations Group

Non-attached

1.1. Enlargement of the European Union

When considering the background of the enlargement of the European Union to the countries of Central and Eastern Europe (CEE) it is important to remember the historical ties which bind Europe together. In a period when Western Europe enjoyed peace and growing prosperity, Central and Eastern Europe was locked up behind the 'iron curtain'. The integration of Europe East and West before the WWII was not only political and administrative; Europe was also integrated economically, that can be demonstrated through economic statistics as well as through the records of individual companies. But the history of Europe since the Second World War was marked by a forced division of the continent decided by the Allied leaders meeting in Yalta in 1944, certainly against the will of their peoples who suffered the consequences of this division for the next 45 years.

In the 1980's as reforms in the communist centrally-planned systems became more general (without reforming the basis political one-party system or giving democratic rights to citizens), it became commonplace in intellectual circles to argue that the reforming communist system was an acceptable alternative to the capitalist market economy system. This was the opposite feeling of that developing to the east where citizens are becoming more and more aware that the criminal, corrupt and inefficient system of one-party rule and central-planning, held together by the power of the Soviet army, must be swept away.

Until 1989, questions of geopolitics had gone completely out of fashion in Europe. The European architecture was clear and constant: Western Europe, defended by NATO alliance and gradually integrating economically in the European Community stood opposite and stretching from the Elbe to the Barents Sea and from Murmansk to the Black Sea. The scope for the expansion of either bloc was extremely limited in the shadow as of the nuclear deterrent.

The changes which have taken place since 1989 have led, in the first stage at least, to the break-up of the Soviet empire and the freeing of the states of Central and Eastern Europe from the Soviet occupation. The result has been, of course, that that the former satellite countries of Central Europe, having regained their freedom, had looked for their places in the European Union. 'The ten associated countries which have Agreements with the European Union and all of which have applied for membership do not however, form the Eastern limits of Europe. Russia, the Ukraine, Belarus and Moldavia are also clearly European and must be considered in any new geographical map of Europe.'

(Emerson, 1996)

The countries of Central Europe freed themselves from Communism through their own efforts and with only the moral support of the Member States of the European Community.

As it became clearer and clearer that integration into the structures of the European Union became the objective of these countries, more and more problems raised: the course of the reform and its costs, security and migration, etc. Overall, however, the policy of the EU has been supportive to the challenges of the economic and social reform. The Unpreparedness of the Western countries in the year of the revolution can be evaluated by considering officials and unofficial documents at the time. At the European Council in Rhodes in December

1988, the heads of the Member States and governments produced a declaration of the role of the division of our Continent by some general steps: develop the

Conference on Security and Cooperation in Europe (CSCE), promote disarmament in Europe and promote the respect of human rights. At the Madrid Summit six months later, the Central and Eastern Europe does not figure amongst the main points of the agenda. There is only a summarily treated chapter entitled 'Political Cooperation' The Summit came after the Polish elections and after Gyula Horn, the Hungarian Foreign Minister, had ordered the removal of the border controls between Hungary and Austria.

The first coordinated western response came in the G7 Summit meeting in Paris in July 1989, which was convened in the follow-up to both the developments in Poland and Hungary and the human rights violation in China. The G7 leaders stated that 'we offer the countries of the east the opportunity to develop balanced economic cooperation on a sound commercial basis consistent with the security interests of each of our countries and with the general principles of international trade' (G7 Declaration, Summit of the Arch, Paris July 1989)

The opening of the inner-German border and the fall of the Berlin Wall were clearly indicating a major look of further measures to support reforms, including the creation of the European Bank for Reconstruction and Development (EBRD) designed to play a significant role in the transition in Central and Eastern Europe, and the opening up of Community programmes in education, training and technology.

At the Summit in Strasbourg in December the European Council enforced commitment to the coordination of assistance for the newly come nations in Europe. It followed the creation of PHARE programmes which was meant to implement economic and aid measures to support the process of reform in Poland and Hungary, in particular by 'financing or participating in the financing of projects aimed at economic restructuring' (Council Regulation 3906/89). Assistance was extended to the more eastern countries that were added. Romania had to wait another year before being admitted, owing to the unclear situation following the 1990 elections and miners movement.

The decision to offer Association Agreements to Romania and Bulgaria underlined clearly the policy of the Community towards the countries of Central Europe which set out on the course of the reform.

The question of future enlargement of the Community was extensively dealt with at the Lisbon European Council in June 1992 and a joining calendar was proposed.

The Association Agreements became the basic legal instruments of the relationship between the European Union and the associated countries of Eastern Europe. They state the responsibilities of the Community and of the Member States that were ratified by the European Parliament and by the European Council.

All the Association Agreements with CEE states have the same structure. The Preamble states the reasons why the parties are making the agreement, lists past agreements which are taken into consideration and makes references of general nature. It underlines the common values of the two parties and the common commitment to strengthening political and economic freedoms. In the Preamble and the 'General principles' are also brought some conditionality of the full association that is linked with progress of free trade and complying with the rules of GATT, some references to the world Trade Organization, to the Partnership for Peace agreement.

The objectives of the agreements cover the most important elements of any strategy towards the full integration of the countries into the European Union and provide certain markers against which to measure performance.

The Preamble

Objectives of the agreement

Title I general principles of the agreement

Title II: political dialogue

Title III free movement of goods

Chapter 1: industrial products

Chapter 2: agriculture

Chapter 3: fisheries

Chapter 4: common provisions (trade protection instruments)

Title IV: movement of workers, establishment, supply of services

Chapter 1. movement of workers

Chapter 2: establishment

Chapter 3: supply of services

Chapter 4: general provisions

Title V: payments, capital, competition and other economic provisions, approximation of laws

Chapter 1: current payments and movement of capital

Chapter 2:competition and other economic provisions

Chapter 3: approximation of laws

Title VI: economic cooperation

Title VII: cooperation in the prevention of illegal activities

Title VIII: cultural cooperation

Title IX: financial cooperation

Title X: institutional, general and final provisions

(Alan Mathew, Recreating Europe The European Union's Policy towards Central and Eastern Europe; Cambridge University Press, 1998)

They establish that respect for democratic principles and human rights and of the market economy, lay down economic reform. The transition has the purpose of legal adaptation in areas where immediate change is not possible or not desired. Historic arguments are worth considering when about the enlargement. Most of the countries of Central Europe have suffered throughout history by being sandwiched between expansionist powers and Russia and Prussia or Germany. Today, the situation has changed. All governments in the region feel the need to be bound in to NATO and the European Union for security reasons as well as the more obvious economic and political reasons.

1.1.1 Accession Problems

The most important objective of accession strategy is the transforming the economies from centrally-planned dictatorship to market economy democracies. The achievements in the area of the democratic process proved to be somewhat less difficult and less controversial than economic and social reforms. In all the associated countries free and fair elections led to normal changes of the

governments. The one-party system is evolving as different parties gain and lose their support, leading to shift in alliances and government crises.

In economic area, the progress has been also remarkable. Much of the dynamism that the economies have shown has been due to the expansion of an entrepreneurial private sector. The associated countries have all introduced measures to ensure that legislation is progressively adopted, but legal problems are considerable, partly because of the shortage of legal experts in the associated countries and partly because of the relatively restricted assistance which the Member States of the Community and the Community institutions can make available.

1.2.2. Accession Strategies

The objectives of the associated countries to accede to the Union under certain conditions became clear with the European Council at Copenhagen. Although these conditions could be realistically fulfilled, they rather limited the enthusiasm of the associated countries.

The Union aimed at helping the associated countries meet their requirements namely the existence of a functional market economy, the ability to understand the competitive pressures inside the Union and the stability to take on obligations of membership (the acquis communautaire).

The Council at Luxembourg in 1997 decided the countries to start negotiations for joining the EU and the 'Agenda 2000' a complete and rapid time table. But while the timetable for the opening negotiations is more or less confirmed, there was no real indication of a date of accession. Clear political changes in policy in the associated countries could mean delay, if they prove to be incapable with membership of the Union.

Specific strategies to prepare for accession were set by the applying countries. Systems have been developed to make sure that new legislation conforms to EU law, and timetables were drawn up for the adoption of the key pieces of legislation. But the adoption of the acquis communautaire is likely to be a complex process, as it is not simply a legal approximation of legislation. It is changing both the legal framework in which society and economy operates and revolutionizes the institutions of the state. Each piece of legislation involves a transition until citizens or economic operations adapt completely to it. Associated countries need to review their strategies periodically, decoding more resources to them and tightening up timetables. They are also supposed to discuss their negotiating position between themselves to make sure that there is some common position on the macro politics of transition period, even though different countries need to be considerable lobbying of the Member States in order to get this positions accepted by the Union. The associated countries are to develop plans to inform the public of the needs and implications of accessing to the Union. Certain social groups need particular attention. The business community in each country needs to be helped to understand and plan for the changes which will come before and at accession. Much of this work falls to the government, due to the weakness of chambers of commerce and other business organizations.

The first sort of criteria is set in the world of macroeconomic policy. They concern for objectives of inflation, government deficit, reduction on the stock of government debts and in certain circumstance, the balance on current account. Further criteria, of a more macroeconomic type are set relating to privatization, the degree of state or private monopoly, and the level of state subsidies. Interim targets are set jointly by the Commission and the country concerned and the programmes are checked annually. If targets are missed, joint discussion seek to

analyze the causes and the interim targets for the following year are adjusted correspondingly.

The second sort of criteria is even more complicated to set and to monitor. Each year agreed areas of approximation is tackled and the associated countries themselves are in the control of the agenda, as they decide the sequencing of priorities, specific for their own. Every piece of legislation the associated countries take over from the Union is a far-reaching impact on the reform process, and on economic growth. Giving priority to economic growth and reform is not only important for the associated countries. It will be easier for the Union to integrate countries which are developing quickly and which are rapidly becoming more like the older Member States in terms of market economy than if the countries are very poor and reform is beginning to buckle under the weight of poverty and deprivation.

However, the needs of the transformation process in the associated countries in specific sectors will mean that the transition periods should be as limited as possible, but most include those policy areas where rapid alignment would curb investment and economic growth.

1.1.3. Conclusions

Enlargement is a win-win process, as it is a process necessary in order to complete the reintegration of the European Continent and to ensure peace and stability on the continent. But it will also bring economic benefit for the new Member States. Integration is a process which is transforming CEE countries into normal middle-income European countries after more than 45 years of central planning and separation. The internationalization of the associated countries must go well beyond their integration into the European structures. The associated countries have to decide their own political and economic policies and achievement is done only by accession.

Enlargement to include the CEE countries is meant to lead to the stronger European Union, with stronger political influence in the world and a stronger economy. The flexibility beyond the core policies of the Union is also meant to determine the development of new policies. The centralization of power to Brussels will be effectively controlled by the growing influence of the regions and an increase in their own power. The future of the Continent depends on the success of enlargement and for this reason it must be the central objective of European policy in the coming decade.

1.2. PHARE Programme

Originally, PHARE Programme was set in 1989 to assist Poland and Hungary, but extended for the applicant countries of Central and Eastern Europe as a pre-accession instrument financed by the European Union. Now it covers currently the needs ten countries of the recently joining 8 countries the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia and the two countries that are to join the European Union in 2007: Romania and Bulgaria.

The programme is meant to assist the massive restructuring their former centrally planned economies and political change. Phare support was reoriented to the aim of Eastern European countries' membership of European Union, for their market economy expansion and infrastructure investment.

The pre-accession priorities lighted by the accession Partnership Agreements represent the National Programmes for the adoption of the Acquis in

the candidate's country time table. The timing and the costs are evaluated and the steps implications and financial resources needed are planned. The Phare objectives set originally in 1989 were further refined in the coming years:

strengthening public administration and institutions function effectively inside the Union

adoption of Acquis Communautaire and shorten transition period

promotion of economic and social cohesion

New programmes were created: SAPARD and ISPA undertook rural and agricultural development and transportation. This way it became possible that PHARE programme focus on its key priorities only. 2003 was the final programming year for the new 8 Member States although projects have covered 2005 too, although they have undertaken full responsibility for the management of PHARE projects through a process of extended decentralization.

The key requirements for enlargement for the applying countries are to implement and comply with the Community legislation so far reaching improvements that are needed for their administration and judiciary based on professionalism and mentality.

Democratic institution building activities focus on the weaknesses identified at central, regional and local level, and on the transfer of the know-how and investment.

The process of transferring 'know-how' to develop structures, strategies, human resources and management skills is needed to strengthen the applicant countries' economic, social, regulatory and administrative capacities. 30% of PHARE financing sources are allocated for this purpose and are mainly deployed and implemented with member states through Twinning projects.

The instrument of Twinning is based on the priority areas identified by monitoring and regular reports prepared for enlargement. Twinning projects provide technical and administrative assistance to newly joining countries and candidate countries and also help in building wider contacts with practices inside addresses to improvement cover long and medium term assignments. The projects provide civil servant expertise from member states for assignment of up to eight months, with possible but limited extensions.

Around 35% PHARE resources are also allocated for institution building involving physical investment. Support money is invested in key regulatory institutions whose equipment or infrastructure needs to be upgraded in order to monitor and enforce the acquis communautaire. But this sort of investment is only made on the basis of a clear-cut government strategy and commitment on public administration reform, modernization and governance supported as necessary by Institution Building involving transfer of know-how.

Nation al programmes of the applying countries account for the most of the PHARE budget as it indicates the priorities and the time table needed to adopt the acquis or fulfill the accession criteria. This process continues with Bulgaria and Romania until their accession.

Cross-border assistance of PHARE in the applicant countries is meant to overcome specific economic and social developments in the countries of Central and Eastern Europe and within their own national economies. The programme has been extended to cover Bulgaria with Turkey and the Bulgarian and

Romanian borders with their adjacent countries Ukraine, Moldova, Serbia, Montenegro and the former Yugoslav Republic of Macedonia.

PHARE Multi-country Programmes have increasingly been integrated into national programmes too. The largest of these have been developed in co-operation with International Financial Institutions and deal with the promotion of

small and medium-sized enterprises and intermediary banks are encouraged to provide finance for the partner countries in the field of Monitoring and Evaluation, Statistics, Environment and Institution Building in fraud fighting.

Phare Programmes are planned centrally, but implemented in a decentralized way, i.e. by candidate countries. Decentralization involves responsibility transfer from the Commission to the Contracting Authority in the recipient country, which becomes responsible for tendering the contracting as well as the financial and administrative management of the projects.

Erasmus Programme is a studentship, exchanger and trainings programme based on a wide student organization. Its goal is to support and develop student exchange knowledge and experience for its member states. Its local sections and over 2500 members in 27 countries work in Higher Education Institutes (Universities, Polytechnics, and University Colleges). Erasmus Student Network (ESN) members mainly act and support social and practical integration of Exchange students, and provides relevant information about academic exchange programmes and ESN resources. It also makes its contribution to the celebration of different exchange programmes.

2. INTERNATIONAL INSTITUTIONS

The evolution of modern-nation societies and international order inevitably gave rise to questions of international cooperation. Diplomatic representation became more widespread as the system expanded and political and economic relationships multiplied. But it became evident that only diplomatic contacts in themselves were unable to cope completely with the complexity of the international system, so the concept of international conference appeared and developed as a form of extended diplomacy. Conferences dealt with problems that at least two or three countries were interested in and an international treaty or formal peace resulted. The Peace of West Westphalia was the first major instance of this in 1648 that ended the thirty-year-old. The wars of Louis XIV and the Napoleonic wars, a century later were terminated similarly by international agreements of interested powers. The Congress of Vienna in 1815 is considered as a significant turning point as it marked the first systematic attempt to regulate international affairs by means of regular international conferences (El Eriam, Legal Organizations, p 58)

The Congress system lasted and institutionalized not only the balance of power approach to politics, but also a semi-formal international order. Then, world affairs were influenced to a large extent by periodic conferences held in Europe until the outbreak of the II WW. The conferences of this period (The Paris conference of 1856, and the Berlin gathering of 1871 dealt with Balkan problems) led to the establishment of international institutions.

The 19^th century witnessed a considerable growth in international non-governmental associations such as the International Committee of the Red Cross founded in 1863 and the International Law Association (1873). They represented a wide-range committee of interests on specific topics and an awareness that international corporation must be effective, as they created the machinery for regular meetings and established permanent bodies. These organizations work to influencing governmental activities and stimulating action, and they fulfilled an increasingly felt need for more complex methods of international co-operation and regulation in an inter-dependent world.

In 1865 the International Telegraphic Union was set up and nine years later the Universal Postal Union was also created. They combined the activity of permanent bureaus with periodic conferences with decisions being taken by majority vote that marked a step forward since unanimity process was

needed. The nineteenth century was marked by the proliferation of such public international unions covering transportation, communication, health and economic co-operation which laid the basis for contemporary international institutions. But the innovation of the past century has been, of course, the creation of the global, comprehensive organizations of the League of Nations, and the United Nations which was the culmination of the pioneering work of the private and public international unions that required some form of central co-ordination. The development of the United Nations into a real world authority has been beneficial in the long run by the gradual increase in its influence and responsibility in all fields of international peace and security.

The League of Nations created in 1919 sought to promote international co-operation, peace and security upon the basis of disarmament, the peaceful resolution of disputes, a guarantee of the sovereignty and independence of member states and sanctions. But although an international organization, it never became universal. It stayed to all intends and purposes a European-centered institution and it was formally dissolved in 1946.

2.1. The United Nations

It arose as an attempt to remedy the defects of the League organization. The series of war-time declarations and conferences culminated in the San Francisco conference in 1945 which finally adopted the United Nations Charter. The newly established international organization has proved to be one of the major innovations of the 29^th century in international relations, not only in the use of force, but also with regard to wide-ranging economic and social co-operation among states.

The General Agreement for Tariffs and Trade (GATT) arose out of an international conference held at Havana in 1947-8 at which was established the International Trade organization. The arrangements operated on the basis of bilateral approach to trade negotiations coupled with unconditional acceptance of the most favored nation principle (the most favorable benefit obtained by one state are passed on to other states). A series of tariffs and trade negotiations rounds were held under its auspices that offered a package approach to trade negotiation, and a wide variety of tariff reductions was achieved. The eight rounds, termed the Uruguay round in 1986, concluded with the signature at Marrakech on 15 April 1994 of a long and complex agreement covering a range of economic issues, such as agriculture, textiles and clothing, rules of origin, import licensing procedures, subsidies, intellectual property rights, and procedures on dispute settlement. The GATT continued until the end of 1995, when it was effectively subsumed with changes as GATT within the World Trade Organization.

2.2. Regional Institutions

The proliferation of regional institutions, linking together geographically and ideologically related states since the end of the Second World War, has been impressive. The outset of the Cold War stimulated the growth of regional defense alliances and block politics. NATO and its various linking organizations covering the Middle and Far East, confronted the Warsaw Pact. Regional organizations developed to reflect common interests in a superpower Organization of American States and the Organization of African Unity. But it was in Europe that regionalism became most constructive and political. The establishment of the European Economic Community, in particular, was intended to lay the basis for a resurgent Western Europe with meaningful economic and political integration.

The North Atlantic Treaty Organization was created in 1949 to counter possible threats from the East. It associated the United States and Canada with 14 European powers for the protection, in essence, of Western Europe (although Greece and Turkey are involved). By the Treaty the parties agreed to consult where the territorial integrity, political independence or security of any of them has been threatened and accepted that an armed attack against one or more of them in Europe or North America should be considered an attack against all.

The alliance consists of a Council which is the supreme organ and on which all members are represented and a series of civil and military committees covering all aspects of security work.

The ending of the Cold War brought about a variety of changes in the organization. A North Atlantic Co-operation Council (NACC) was established in 1991 with the membership consisting of NATO states and former members of the Warsaw Pact countries, including the successor states to the USSR. In 1994 a partnership for Peace Programme was inaugurated within the framework of NACC. Countries participating in the Partnership for Peace signed Framework Document, affirming their commitment to the preservation of democratic

societies and the maintenance of the principles of international law, to fulfill in good faith the obligations of the UN Charter and the principles contained in the Universal Declaration of Human Rights and to respect the existing borders. NATO has, in in-cooperation with the Western European Union, helped in implementing UN sanctions in the former Yugoslavia and currently leads the multinational implementation force (IFOR) in Bosnia in enforcement of the Dayton Peace Agreement of 1995.

The Organization for Security and Co-operation in Europe (OSCE) was originally created in 1975 following the Helsinki Conference of European Powers (plus US and Canada) that established some basic principles of behaviour among the participating states: sovereign equality, prohibition of threat or use of force, inviolability of frontiers, territorial integrity of states, peaceful settlement of disputes, non intervention in internal affairs and respect for human rights. The Final Act is not a binding treaty but a political document, concerned with three area of 'baskets' being security questions in Europe; co-operation in the fields of economics, science and technology, and co-operation in humanitarian fields. The diplomatic conference in Helsinki had regular follow-up meetings, but it was only in the late 1980s that it began to assume a coherent structure.

The Charter of Paris for a New Europe signed in 1990 provided for the first standing institutions: the Conflict Prevention Centre in Vienna, the Office for Free Elections in Warsaw (now renamed the Office for Democratic Institutions and Human Rights) and the Secretariat based in Prague. Further institutional steps were taken at the Budapest Summit in 1994 when the organization was renamed the Organization for Security and Co-operation in Europe as from January 1995. The organization has established Missions to assist in dispute settlements. In March 1995 the Conference on the Pact on Stability in Europe adopted a Final Declaration, which, together with some 100 bilateral and regional cooperation agreements, represents an attempt to mitigate tensions. The Declaration contains a commitment to act against intolerance and discrimination which the agreements include dealings with cross-border co-operation, economic, environmental and minority protection issues. The pact is supplemented by measures to be taken by the European Union and is integrated within OSCE system. In the event of difficulties over observance of the agreements, the states participating in the Pact would rely on existing OSCE institutions and procedures

for settling disputes peacefully, including the Court of Conciliation and Arbitration.

The Commonwealth of Independent States (CIS) was established by Russia, Belarus and Ukraine in 1991 to which eight other former Republics of USSR adhered so the organization now comprises all the former Soviet Republics apart from the three Baltic States. The organization is set on respect of the territorial integrity of member states and upon co-operation particularly in safeguarding international peace and security and implementing effective measures for the reduction of armaments. A large number of agreements have been signed by the member states on a variety of subjects, including prevention of drug smuggling and terrorism, but many of these agreements have not been ratified.

After the II WW the Organization of American States emerged and built on the 1947 Inter-American Treaty of Reciprocal Assistance signed at Rio de Janeiro, and the 1948 Pact of Bogota which is the original Charter of OAS which was amended in 1967 by Buenos Aires Protocol in 1985 by the Cartagena de Indias Protocol and by the 1992 Washington Protocol and the 1993 Managua Protocol. The organization comprises currently 35 member states and it is the most developed of the regional organizations outside Europe, but without any of the supranational powers possessed by the European Union.

The Arab League was created in 1944. It encourages regional co-operation in economic, cultural and social issues. Its headquarters is based in Tunisia.

The Organization of African Unity was established in 1963 in Ethiopia dealing with economic, health, defense, educational and scientific matters amongst others. Its liberation committee is based in Dar es Salaam to assist the various liberation organizations. The OUA has faced considerable problems in reconciliation member states' policies that led to Morocco's withdrawal or to the noticeable unsuccessful mediation attempts in the Chad civil war.

The Eastern European former communist countries had their own organization such as Warsaw Pact, which mirrored the NATO organization and Comecon (the Council for Mutual Economic Aid). Both of them have disintegrated with the collapse of the Soviet system.

The Association of South East Asian Nations (ASEAN) was created in 1967 on both political and economic aims. Its members: Indonesia, Thailand, Malaysia, Singapore, the Philippines, Brunei and later Vietnam affirmed their commitment to peace and peaceful settlement of disputes.

2.3. Norms and Legal practice of international organizations

The different types of international organizations have brought their contribution to the norms and practice of international law. This is particularly true as for the United Nations with the universality of membership and extensive field of activity and interest. It is worth noting the importance of international legal norms with the operations of these organizations. The constituent instruments in dealing with international affairs are the treaties that are particularly relevant.

An important aspect of the role of international organization in the world order is the possession of international legal personality. Once established, the organization becomes subject of international law and thus capable of enforcing laws, rights and duties as distinct from operating merely within the confines of separate jurisdiction. Legal personality of the organization may be inferred from the powers or purposes of the organization and its practice. The attribution of international legal personality to an international organization is important in establishing that organization as an entity operating directly upon the

international stage rather than obliging the organization to function internationally through its member states. Many constituent instruments of international organizations provide that the organization in question shall have personality in domestic law so as to enable it, for example, to contract or acquire or dispose of property or to institute legal proceedings in the local courts or to have the legal capacity necessary to exercise its functions. This issue also arises as to whether states that are not parties to the treaty in question and thus not member states of the particular international organization are obliged to recognize the personality of such organization. This can be achieved either directly by entering into an agreement with the organization and a headquarters agreement permitting the establishment of the organization within the jurisdiction, or indirectly, by virtue of the rules of private international law. By virtue of this approach, adopted in most legal systems, a domestic court will determine the legal status and capacity of a legal person by reference to the applicable or proper laws, which will be in the case of international organizations,

international law. Thus, if the organization had personality under international law, this would suffice to establish personality under domestic law.

The very nature status and autonomy of international organizations will depend primarily upon the terms of their constituent instruments or constitution under which they are established. These are the multilateral treaties, since they are binding agreements entered into by member states. They have a special character since they are also methods of creation of new subjects of international law. However, far-reaching powers are not ascribed to the international organizations so as not to lead to conflicts with member states and third parties, as well as not to undermine the internationally recognized nature and scope of the organization.

The international Institutions are governed by the principle of speciality and they are invested by the states which created them with powers the limits of which are a function of the common interests whose promotion those states entrust to them. Such powers may be expressly laid down in the constituent instruments or may arise subsidiary as implied powers, being those deemed necessary for fulfillment of the functions of the particular organization.

An important question is the capacity of international organizations to conclude treaties which is usually governed by the rules of each international organization. Responsibility is also a necessary consequence of international legal personality of the organization, and the resulting possession of international rights and duties. Such rights and duties may flow from treaties or from principles of customary international laws. The precise nature of responsibility will depend upon the circumstances of the case but also analogies drawn from the laws of state responsibility with regard to the conditions under which responsibility will be imposed.

International organizations relate to their own legal requirements. They can be held responsible, inquiry arising out of a breach by the organization of an international obligation deriving from a treaty provision or principle of customary international law. Analogies can be also drawn from the general rules relating to state responsibility with regard to the condition under which responsibility is imposed.

3. The Nature and Development of the International Law

Societies have created for themselves a framework of principles within which to develop. The rights and obligations have all been spelt out within the consciousness of the communities. Law is that element which binds the members of the societies together in their adherence to recognized values and standards.

It attempts to create a framework which can act as a shock-absorber clarifying and moderating claims and endeavoring to balance interests. Just as any domestic community must have a background of ideas and hopes to aim, so the international community must bear in mind its ultimate values. It is both permissive, in allowing individuals to establish their own legal relation with rights and duties, and coercitive as it punishes those who infringe its regulations. Law consists of a series of rules regulating behaviour, and reflecting the ideas and preoccupations of the society within which it operates. The subject of International laws is nation-states, not individual citizens. There are many contrasts between the law between states, international organizations and, in certain cases, individuals. International law is divided into private international law and public international law. The former deals with the cases within particular legal systems in which foreign elements raise questions as to the application of foreign law or the role of foreign courts. If an Italian business man concludes a contract in France, to sell goods, any Italian court would apply French law as regards the terms of the contract. By contrast, public international law is but a separate system altogether. The mistake is to confuse courtesy laws, specific for different nations, or morality which is a branch of ethics.

International law is generally considered an emanation of a recognized body to legislate or create laws and implemented by a hierarchy of courts with compulsory jurisdiction to settle disputes over such laws and an accepted system of enforcing those laws.

International law has no legislature. The resolutions of United Nations are not legally binding on anybody save for certain of the organs of the United Nations for certain purposes. There is no system of international courts, except the International Court of justice at the Hague, but it can only decide cases when both sides agree and it cannot ensure that its decisions are complied with. It is important, but only peripheral to the international community. Above all, there is no executive or governing entity. The Security Council of the United Nations, which was intended to have such a role, has at times been effectively constrained by the veto power of the five permanent members: USA, now the Russian Federation, China, France, and the United Kingdom.

International law does not state a unified system of sanctions, but there are circumstances in which the use of force is regarded as justified and legal. Within the United Nations system, sanctions may be imposed by the Security Council upon the determination of a threat to the peace, breach of the peace or act of aggression. Such sanctions may be economic or even military and the states themselves decide whether to take action on the extent of their measures as there is no supreme body to rule on their legality, although international law does lay down relevant rules. Neither must it be forgotten that the current trend in international law is to restrict the use of force as far as possible, thus holding to the absurd result that the more force is controlled in international society, the less legal international law becomes.

While the legal structure within all but the most primitive societies is hierarchical and authority is vertical rather like a pyramid with the sovereign person or unit in a position of supremacy on top, the international law system is horizontal consisting of over 180 independent states, all equal in legal theory, and reorganizing no one in authority over them. International law is primarily formulated by international agreements, which issue rules binding upon the signatories, and customary rules which are basically state practices recognized

by the community at large as laying down patterns of conduct that have to be complied with.

International law can only constitute a neutrally understandable specific vocabulary and suggest possible solutions which follow to a study of its principles. The principle of auto-limitation, on self-limitation, states that states could only be obliged to comply with international rules of they first agreed to be so obliged. In abroad sense, states accept laws, as without that, no such a system could possibly operate.

But the inextricable bonds linking law and politics must be reorganized. The formulation of policy and the method of enforcement are distinctive within developed societies in order to prevent a concentration of too much power within the same branch which makes laws and creates the legal systems. A number of factors also operate to conceal and lessen the impact of politics upon the legal process. Foremost amongst these is the psychological element of tradition and the development of the so called law-habit. The arbiters of the world order are, in the last resort, the states and they make the rules, interpret and enforce them.

3.1. International Law Today

In the second half of the 2oth century the complexity of life has multiplied so international law has developed in many directions. International law is a result of its environment, as human community has developed certain specific sets of values, social, economic and political.

There are many instances of how modern developments demand a constant reappraisal of the structure of international law and its rules. The regulation of space expeditions, the divisions of ocean floor, protection of human rights, management of international financial system, preservation of peace embrace all interests and aims of contemporary international life and international law. Its determining factor is the characteristic of the international political system that needs the acknowledgement of the rights of other: which leads inevitably to a system of their regulation.

International law faced with radical changes in the world structure of power and had to come to terms with new ideas that could no longer be ignored.

The Eurocentric character of international law has been weakened in the late 50 years and the needs of other cultures and civilizations have begun to play an increasing role in the evolution of world juridical thought. The basic state-oriented character of the world politics and international law is reflected by the principles of non intervention in internal affairs, territorial integrity, non-use of force and equality of voting in the United Nations General Assembly. But there are also many cut-cross state borders factors that generate tensions such as economic relationships, human rights, new technological forces.

The growth of positivism in the 19^th century focussed concern of the international law upon sovereign states. But the new approaches of the 20^th century regarding international relations extended the role played by non-state entities, such as individuals, multinational firms and international institutions. The developing concern with human rights is recognition of individual responsibility under international law without the interposition of the state. The Universal Declaration of Human Rights adopted by the United Nations in 1948 lists a series of political and social rights, although it is only a guide line and not legally binding as such, prior to perestroika that denied that individuals may have rights as distinct from duties against the state they belong to. Thus, while states remain the primary subject of international law, they are now joining by other non-state entities, whose importance is likely to grow in the future, such as regional organization. They develop a regional international law sub-system within the original universal framework. The range of topics covered by international law has expanded with the upsurge in difficulties faced and the proliferation in the member participants within the system. The specialized problems of contemporary society have begun to represent concerns of the International law: economic development covering financial matters, environmental despoliation, space exploration, exploitation of ocean resources and deep sea-bed, bureaucracy of international institutions, international labor standards, health regulations, communications controls, etc

EXERCISES

I. Find the key words in the following text and then draft the main ideas it conveys:

Despite its increased visibility, the International Monetary Fund remains a mysterious presence on the international scene. Considerable confusion reigns about why it exists and what it does. Some observers, confusing it with the World Bank, are under the impression that IMF exists to subsidize economic development in the poor nations. Others imagine it as an international central bank controlling the creation of money on a world scale. Still others regard the IMF as a powerful and disapproving political institution, imbued with missionary zeal for fiscal rectitude, which somehow compels its members to tread a path of economic austerity.

The IMF is in fact none of these. It is neither a development bank, nor a world central bank, not an agency that can or wishes to coerce its members to certain things. It is rather a cooperative institution that 182 countries have voluntarily joined because they see the advantage of consulting with one another in this forum to maintain a more stable system of buying and selling their currencies so that payments in foreign money can take place between countries smoothly and without delay.

The IMF is the enemy of surprise. Members of the IMF believe that keeping other countries informed of their intentions regarding policies that influence payments by the governments and residents of one country to those of another, rather than making a secret of such policies, is to everyone's advantage. They also believe that occasionally modifying those policies (by reducing export taxes, for instance), when fellow members agree that this is in the common interest, will help international trade to grow and will create more and higher-paying jobs in an expanding world economy. The IMF lends money to members having trouble meeting financial obligations to other members, but only on condition that they undertake economic reforms to eliminate these difficulties for their own good and that of the entire membership.

Contrary to the widespread perception, the IMF has no effective authority over domestic economic policies of its members. It can, and often does urge members to make the best use of scarce resources by refraining from unproductive military expenditures or by spending more money on health and education. There is no question of forcing a member to adopt any policy. Whatever authority the IMF may possess is confined to requiring the member to disclose information on its monetary and fiscal policy and to avoid, as far as possible, putting restrictions on exchanging domestic for foreign currency and on making payments to other members.

Its members have given the IMF some authority over their payments policies because these policies are of paramount importance to the flow of money between nations and because experience has confirmed that without a global monitoring agency, the modern system of payment in foreign currency simply does not work. Changing money is the central point of financial contracts between nations and the indispensable vehicle of the world trade. Each currency, be it the dollar, franc or the Gambian dalasi or Haitian gourde, has a value in terms of other currencies. The relative exchanging values of the world's major currencies now fluctuate continuously and are reported daily in the financial columns of the newspapers. Although the operations of the exchange market, where money (much the same as such commodities as wheat or apples) is bought or sold, may seem remote from daily life, these operations deeply affect

us all. Most commonly, we experience the reality of exchange values abruptly when we travel abroad as tourists and find we must first buy local money before we can buy anything else. Purchasing foreign currency is a fact of life not only for tourists, but also for importers, bankers, governments and other institutions that must acquire foreign currency, often on a very large scale, before they can do business abroad. No country restricts the exchange of its national currency into another nations money, and this greatly facilitates international trade.

The current confident expectations that one currency will be converted into another on demand makes it difficult to imagine circumstances in which this was not the case. And yet it was largely in reaction to circumstances of widespread inconvertibility and related exchange problems that the international community decided over 50 years ago to work out these problems in a common form that was to become the International Monetary Fund.

(External Relations Department, Publications Services International Monetary Fund, Washington DC, USA).

II. Match the words with the gaps in the text:

1. assistance; 2. promote; 3. projects; 4. finance; 5. instrument; 6. funds; 7. granted; 8. support; 9.debt; 10. backing.

One of the most important banks in the world is the World Bank, its official name being the International Bank for Reconstruction and Development. The bank was projected to a) ____ economic development and reconstruction. It was formed in order to b) __________ the European countries whose economies were affected by the World War II. The bank was created on July 1944 and began operations in 1946 and first granted credits to post World War II economic c) __________. It has as its main goal to lend assistance to governments or private enterprises with government d) _________. Many of the loans e) __________ were given so as to assure the fulfillment of specific projects as: introduction of electric power, water supply and transportation. But by the late 20th century agricultural development became its focus of lending and as a result, Poland's agriculture got credits so as the state to f) ___________________ agriculture in order to help to the country's economic expansion.

It lent g) ___________ also to Romania whose government received financial support for the growth of the economy. Many of the loans received helped Romania build modern roads and ensure the development of some specific h) _________.

A series of institutions were created to make loans easier to obtain by nations heavily in i) __________. The World Bank is an j) _________ designed to help the world to have a united economy and to create the spirit of community between all countries.

III. Match the words with the definitions:

a) indicator; b) budget; c) investment; d) liability; e) assets; f) equity capital.

1. claim on the assets of a company or individual excluding ownership Equity. It represents a transfer of assets or services at a specified or determinable date.

2. technical measurement securities market analysis use to forecast the markets direction such as investment advisory sentiment, volume of stock trading direction of interest rate, and buying or selling by corporate insiders.

3. The part of the share capital of a company owned by ordinary shareholders.

4. The purchase of capital goods, such as plant and machinery in a factory in order to produce goods for future consumption

5. financial plan setting targets for the revenues, expenditures of an organization for a specified period.

6. any tangible or intangible object, that is of value to its owner. It is either cash or it can be turned into cash.

I. Translate into English:

Nevoia pentru o organizatie ca Fondul Monetar International a devenit evidenta in timpul Marii Crize care a distrus economia mondiala in anii 1930 si care a avut un impact foarte puternic asupra tuturor formelor vietii economice. Bancile au dat faliment cu miile, preturile din agricultura au cazut sub preturile de productie, fermele abandonate s-au transformat in locuri salbatice, fabricile si-au inchis portile, flotele asteptau in porturi incarcatura care nu avea sa vina, si zeci de milioane de muncitori umblau pe strazi in cautarea unei slujbe.

Criza a fost la fel de distrugatoare pentru lumea nevazuta a finantelor si a schimbului monetar. Lipsa de incredere generalizata in banii scripturali (fiduciary money) a dus la o cerere pentru aur ce nu a putut fi acoperita de trezoreriile nationale. Un numar de natiuni au renuntat la etalonul aur, acest lucru conducand la complicarea schimburilor comerciale, cauandu-se chiar modalitati de plata gen barter (o locomotiva pentru 100 tone cafea), ceea ce elimina folosirea banilor in totalitate.

Cooperarea internationala se impunea, prin stabilirea unui sistem monetar inovativ si a unei institutii internationale care sa-l monitorizeze.

Harry Dexter White din SUA si John Maynard Keynes din Regatul Unit, propun un asemenea sistem la inceputul anilor '40, sistemul urmand sa incurajeze convertirea nerestrictionata (unrestricted conversion) a unei valute in alta, sa stabileasca o valoare clara si fara echivoc pentru fiecare valuta si sa elimine restrictiile si practicile gen devalorizare competitiva (competitive devaluation).

Dupa o perioada lunga de negocieri in conditii dificile impuse de razboi, comunitatea internationala a acceptat sistemul si organizatia care sa-l urmareasca: 44 de tari si-au trimis delegatii reuniti la Bretton Woods, New Hampshire, SUA, in iulie 1944. FMI si-a inceput activitatea la Washington DC in mai 1946, avand 39 de membri.