M.Com., M .Phi., PGDHRM., PGDIB., M.B.A., Ph.D

INTERNATIONAL RELATIONS

Dr. KRISHNAVENI MUTHIAH

M.Com., M .Phi., PGDHRM., PGDIB., M.B.A., Ph.D.,

Head, Department of International Business,

Shri Nehru Maha Vidyalaya College,

(Affiliated to Bharathiar University),

Coimbatore - 641 021.

FIRST EDITION : 2001

Himalaya Publishing House

MUMBAI • DELHI • NAGPUR • BANGALORE • HYDERABAD

No part of this publication may be reproduced, stored in a relevant system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording and/or otherwise without the prior written permission of the publisher.

FIRST EDITION: 2001

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State Planning Commission

Government Of Tamilnadu,

"Ezhilagam"

Chepauk, Chennai -600 005.

Tel. No. : 8545460

Fax : 044 - 8545485

Dr. A. Venkataraman I.A.S. (Retd.)

Member - Agriculture&Irrigation

FOREWORD

Interaction of social concepts, economic perceptions, and political philosophies influenced by scientific technologies govern and guide the development of nations of the world. In this arena of human strife for betterment there is constant power struggle among nations for sitting in the driver's seat to secure maximum gains for their own people. A clearer understanding of the forces that influence international relations would be of value to everyone, more so now when social and economic concepts are undergoing rapid changes and national barriers are getting dismantled by technological innovations.

In the past fifty years the world power structure has transformed dramatically. At end of the second-world war, the USA emerged as the leader of the 'free world', and stood for human rights, free trade and democratic institutions. Northern Europe that enjoyed monopoly of world dominance till then for almost three hundred years by its colonial hold over other nations was pushed to the third place in power equation and virtually became a dependent on USA.

End of the colonial era led to birth of innumerable free nations, all with great aspirations for providing richer and better living conditions to their people with the assistance of the international community. The USSR, the leader of communist block emerged as a strong contender to USA led capitalism in international affairs. This new power struggle of two opposing economic concepts resulted in a prolonged cold war that ultimately led to the collapse of the challenger, the USSR and a setback to We concept of communism as an effective strategy for economic development. The world is at the threshold of a new economic order with capitalism as the major driving force.

Simultaneously the social fabric of the world has also undergone rapid changes. Demographic changes, urbanization, breakdown of traditional communities with dominance of nuclear families, overall improvements to health, nutrition and education standards, empowerment of women and their liberation, challenge to race and class supremacy, international concerns for human rights, environmental degradation, and poverty are the

prime factors for setting the pace of social change. Proliferation of illegal arms trade, use of narcotics and spread of international terrorism threaten orderly growth of the society.

With increased interaction among nations social change, with its benefits and pitfalls, would assume new dimensions and cause chain reactions in economic thoughts and political philosophies. Advances in information technology, biotechnology particularly in medicine, and space research would accelerate these interactions and resultant changes. Directing change in desirable pathways would emerge as a major task of the future for the governments and other social institutions.

The USA with its strong commitment to capitalism, free trade and democratic institutions is in the driver's seat of world economy now. It acts as the peacekeeper and pacesetter for the world. Sound economy, unparalleled-armed might with nuclear capability, and strong influence over monetary and fiscal policies of other nations through international institutions are its strength. But other nations are responding to the changed conditions in varied ways: Northern Europe has formed an union with a common currency and unrestricted trade; East Asia has established a group for economic cooperation, China is transforming as a major economic power by shedding off communistic doctrines and oil producing countries have formed a cartel. The Pacific-rim countries are emerging, for the first time, as yet another economic power center. India is also refining its public policies and international relations to adjust to the changing world. What does the future hold for us? How should we structure international relations to secure better benefits to our people?

All individuals and institutions involved in the pursuit of understanding and planning for the development of the nation in this era of open global economy, need to have basic knowledge of the underlying events and factors which govern the external relations of the country. Towards gaining a comprehensive knowledge on this field of vital importance, the present book - 'International Relations', is a treasure. It provides a fundamental grasp of the subject. It offers a basic understanding to be gained, by anyone who would like to widen ones knowledge on relations between nations.

I deeply appreciate the efforts and skill of the author, Dr. Krishnaveni Muthiah, in setting out in understandable terms the whole gamut of factors involved in international relations. This book, I am sure, would help to kindle the interest of the reader towards the day-to-day happenings in the world arena, make him/her more conscious of our nation's status in the context of world nations, and would help to foster the much needed factor of 'public opinion' on building healthy international relations.

Dr. A . VenKataraman

Chennai

04.01.2001

FOREWORD

In this era of Globalisation and Liberalisation greater scope has developed for professionalism in international business. Nations are taking great efforts to cope up with trade openness. Business houses have the necessity to develop competency to expand across the national borders and therefore have come to accept the need for professional managers in their effort of expanding their foreign trade. Sensing this need, universities have taken up the challenge of developing specialisation courses in international business.

Bharathiar University started its Master of International Business (M.I.B.) course in July 1995 and it has been the unique privilege of Shri Nehru Maha Vidyalaya to be the first institution to offer this course. Subsequently this PG specialisation course has been widely accepted by many self-financing colleges affiliated to this University. Moreover, various management institutes in the country have acknowledged studies on international business as a stream of specialisation.

In the field of international business, the subject of international relations among nations is of current day importance. To have greater awakening towards the day to day changes in the world affairs, it is important, that everyone has a basic understanding of the relations between nations. It is imperative that any person persuing studies in the field of international business is tuned properly towards understanding, the underlying currents between nations, in their cross border dealings.

Towards this particular need, this present book authored by Dr Krishnaveni Muthiah H.O.D., of M.I.B. of our Institution, helps in gaining a clear, fundamental understanding of the state of international relations, among the nations of the world and in particular from India's viewpoint.

The effort, initiative and spirit of the author towards this academic contribution are deeply appreciated.

Shreegopal Maheswary

President

Coimbatore Welfare Association

Coimbatore

04.01.2001

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PREFACE

The world nations have fully understood the worth of peaceful coexistence after having felt the effect of two world wars. International relations in the present period has centered on the search for a new international system to replace the old order that was shattered in the two world wars. Factors influencing international relations and the stand of nations against one another is undergoing noteworthy changes due to the technological advancements, especially the nuclear and space age developments. The technological improvements have also increased the interdependence of nations.

The political, economic and social well being of mankind is affected to a greater or lesser degree by the happenings in the international arena. Hence it is imperative, for any individual to have a basic interest in the current happenings, a minimal knowledge of the past activities that form the basis for the present trends and in general have a conceptual understanding of the whole gamut of national reactions in the international arena. It is more so a necessity for any person whose career is directly affected by international affairs. Towards providing this, the present book offers a basic knowledge of past history in international relations, traces out the regional integration that has set in and the future threat of nuclear warfare.

International relations are not about past happenings alone, it is knowledge to be gathered every day based on the present day happenings. As it has been popularly claimed, the study of international relations is not a science with which we solve the problems of international life. It offers a basic understanding to the underlying factors and provides a systematic approach to those problems. Hence this book will be of value, to those who wish to persue a career in the field of international business, to personnel directly involved in the maintenance of cordial, diplomatic relations between nations, to policy makers and organisations involved in the upliftment of the nation in the international sphere. It will be of help to have a fundamental grasp of the subject, for the students of commerce, foreign trade, economics, business administration, political science, professionals in import export trade management and entrepreneurs venturing into overseas business.

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In this effort, I would like to express my gratitude to Dr. M. Manickam., Professor and Head, Dept. of Commerce, and Mr. B. Kalidoss, Deputy Registrars of Bharathiar University who have been instrumental in the development of my academic interest in the field of international business. This endeavour has been under the portals of Shri Nehru Maha Vidyalaya established by the Coimbatore Welfare Association(CWA) and I express my gratefulness to the CWA for the oppurtunity they provided me to expand my academic work experience in this field, their unstinting support and encouragement.

Special acknowledgement is made to reports of the World Bank, the published works of Rama Melkote, A Narasimha Rao, L.N. Srivastva, Norman D. Palmer and Howard C. Perkins, for the conceptual clarity gained from them. This book has been the result of extensive reference work, for both the past history and the happenings to date in the international affairs, undertaken on the Internet and in various libraries. To be specially mentioned among the libraries are the ones at Shri Nehru Maha Vidyalaya, SIMA Golden Jubilee Library and Indian Institute of Foreign Trade. A special thanks to the above individuals and institutions.

Teachers receive continuous inspiration from students and I herein appreciate the input of the students of international business, who have used this text in manuscript form and hence have instigated further search for knowledge in the various aspects covered in this book. I express my deep sense of gratitude to M/s Himalaya Publishing House, for having undertaken this publishing work and my special thanks to Mr. Niraj Pandey of Himalaya Publishing House.

Author

CONTENTS

Page No.

1. INTERNATIONAL RELATIONS 1

Meaning and scope

World order of relations over the years

Study of international relations

Approaches to the study of international relations

Transitive nature of the study of international relations

War and peace

2. NATIONAL POWER 9

The state system

Inseparable features of state system National power- the concept

Forms of national power

Elements of national power

Consciousness of national power

3. DIPLOMACY AS AN INSTRUMENT OF NATIONAL POLICY 22

Nature of diplomacy

Diplomacy and foreign policy

Diplomatic factions

Diplomatic embryos and consular officers

Diplomacy in the twentieth century Diplomacy by conferences

4. ECONOMIC INSTRUMENTS OF NATIONAL POLICY 31

Tariffs policy

International cartels

Intergovernmental commodity agreements

Dumping and preemptive buying

Quotas and licenses

State trading and subsidies

Boycotts, Volorization, Embargoes, Black list

5. IDEOLOGIES AND PROMOTION OF NATIONAL INTEREST 42

Role of ideologies

Imperialism, colonialism, nationalism

Motives of imperialism

6. BALANCE OF POWER 48

Characteristics

Devices .for maintaining the balance of power Bipolar or multipolar world

Today's world order: Multipolarity - vision and reality

7. COLLECTIVE SECURITY AND PEACEFUL SETTLEMENT 56

Nature of collective security

Methods of pacific settlement

The future trend

8. THE UNITED NATIONS 63

Organisational setup

Political and security issues

Social achievements Economic issues

Organisational issues

UN and India-Current affairs

UN-The Millennial Summit

UN-Sanctions

9. INTERNATIONAL LAW 98

Nature

Material sources of international law International disputes

Treaty relations

International law and business houses

10. REGIONAL INTEGRATION 115

NAFTA

APEC

LAFTA

ASEAN

Arab league

G-8, G-15, G-77 SAARC

NATO

11. WORLD TRADE ORGANISATION 180

Genesis of WTO Administrative setup

Key agreements

Impact and implications of the agreements on the Indian economy

Current status- Seattle Meet

Areas of concern for India

Future outlook for WTO

12. INDIA'S FOREIGN POLICY 199

Opposition to colonialism and imperialism

Opposition to racial discrimination

Promotion of international peace

Panchsheel

Non alignment

Relevance of NAM

NAM's Cartagena Conference April 2000

India's foreign policy-50 years of achievement

13. INDIA'S RELATIONS WITH HER NEIGHBOURS 212

Indo-Pakistan relations

Recent happenings

Sino-Indian relations

Sino-Indian relationship - towards togetherness

Indo-China economic ties-new dimensions

Perception about current threats from China

14. INDIA AND THE SUPER POWERS 231

Indo-American relations

American President's visit-March 2000

In the new millennium-bilateral cooperation

Future outlook

Indo-Russian relationship

Russian President's visit-Oct.2000

India and the major powers- Pointers for the future

15. INDIA'S STANCE ON NUCLEAR WEAPONS 252

Hiroshima and after

Nuclear disarmament treaties - History of disarmament

Current status of India on nuclear disarmament

Review meet 2000

Beyond nuclear obsession

1. INTERNATIONAL RELATIONS

Meaning and scope

World order of relations over the years

Study of international relations

Approaches to the study of international relations

Transitive nature of the study of international relations

War and peace

International relations today have been characterised by a high degree of interaction and interdependence between the states. An insight and study into the nature of international relations is a basic need for safeguarding the nation's security, the peoples' welfare and survival. With the shrinking of the globe the actions of one state have a deep impact on the interest of others. In modern times no state can afford to live in isolation. It has to cultivate relations with other states of the world out of sheer necessity. International relationship is as much a product of necessity as social existence itself.

"The study of international relations is not a science with which we solve the problems of international life. At its best it is an objective and systematic approach to those problems" - Palmer and Perkins.

The discipline of international relations is concerned with the factors and activities, which affect the external policies of the state. States should necessarily maintain a proper relationship between national interests and international responsibilities. For this states should ascertain their rights, obligations, interests and responsibilities in international context and make decisions so as to protect those rights, fulfill obligations, promote their interests and discharge those responsibilities. This in itself is the art of conducting foreign relations or international affairs.

International relations is the state of peaceful co-existence that prevails among the nations of the world, which is governed by various factors some of which are the power politics, economic interdependence among states and the social patterns that set in, due to various happenings in the course of the passing years.

Meaning and scope

International relations are those relations carried on or otherwise existing between different nations. But it is not confined exclusively to relations among nations alone since it also includes studies on political actions and interaction of non-nations, namely, international organisations like the ASEAN or the United Nations. It is now generally accepted that

the term 'international' covers 'nations', 'states' and 'non-state' actors. The term relations includes, diplomatic relations, economic (trade and commerce), cultural and political relations. What constitutes politics is not easily identifiable since practically all interactions between nations impinge on the authority of the state. (International politics is more concerned about the factors and activities that affect the external policies, the power of the nations and polarisation of power between nations.)

Interaction among nations ranges from conflict to cooperation. In their choice of maintaining international relations, nations have a range of options. They can enter into alliances; use international organisations and the like. The means by which states and non-state actors manage, or fail to manage their conflicts and the ways in which they cooperate or fail to cooperate is the subject matter of international relations.

In the management of their relations with each other, states have developed rules, institutions and procedures to deal with international conflict and cooperation. They range from balance of power, to alliances, to international organisations, from hegemony, colonialism, neocolonialism to international law.

When there exists agreement between nations over the regulation of conflict, co-operation becomes possible. In the absence of such an agreement, conflict might escalate to war. While nations are willing to go to war, they are also in the constant search for peace. More so is this search, in these days of nuclear warfare, which has the potential for great destruction. Peace in a narrow sense is a state of no-war, but the causes of such war continue to exist. Peace movements in the present century are concerned with not only promoting international organisations, but also with the underlying factors, the nature of conflict itself and the question .whether power is a primary motivation or merely means to an end.