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The Commonwealth dates back to the first half of the 20th century with the decolonisation of the British Empire through increased self-governance of its territories. It was originally created as the British Commonwealth of Nations through the Balfour Declaration at the 1926 Imperial Conference, and formalised by the United Kingdom through the Statute of Westminster in 1931. The current Commonwealth of Nations was formally constituted by the London Declaration in 1949, which modernised the community and established the member states as "free and equal".
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Queen Elizabeth II, in her address to Canada on Dominion Day in 1959, pointed out that the Confederation of Canada on 1 July 1867 had been the birth of the "first independent country within the British Empire". She declared: "So, it also marks the beginning of that free association of independent states which is now known as the Commonwealth of Nations." As long ago as 1884 Lord Rosebery, while visiting Australia, had described the changing British Empire, as some of its colonies became more independent, as a "Commonwealth of Nations". Conferences of British and colonial prime ministers occurred periodically from the first one in 1887, leading to the creation of the Imperial Conferences in 1911.
In the Balfour Declaration at the 1926 Imperial Conference, the United Kingdom and its dominions agreed they were "equal in status, in no way subordinate one to another in any aspect of their domestic or external affairs, though united by common allegiance to the Crown, and freely associated as members of the British Commonwealth of Nations". The term "Commonwealth" was officially adopted to describe the community.
On 18 April 1949, Ireland formally became a republic in accordance with the Irish Republic of Ireland Act 1948; in doing so, it also formally left the Commonwealth. While Ireland had not actively participated in the Commonwealth since the early 1930s, other dominions wished to become republics without losing Commonwealth ties. The issue came to a head in April 1949 at a Commonwealth prime ministers' meeting in London. Under the London Declaration, India agreed that, when it became a republic in January 1950, it would remain in the Commonwealth and accept the British Sovereign as a "symbol of the free association of its independent member nations and as such the Head of the Commonwealth". Upon hearing this, King George VI told the Indian politician Krishna Menon: "So, I've become 'as such'". Some other Commonwealth countries that have since become republics have chosen to leave, while others, such as Guyana, Mauritius and Dominica, have remained members.
At a time when Germany and France, together with Belgium, Italy, Luxembourg, and the Netherlands, were planning what later became the European Union, and newly independent African countries were joining the Commonwealth, new ideas were floated to prevent the United Kingdom from becoming isolated in economic affairs. British trade with the Commonwealth was four times larger than its trade with Europe. In 1956 and 1957 the British government under Prime Minister Anthony Eden considered a "Plan G" to create a European free trade zone while also protecting the favoured status of the Commonwealth. The United Kingdom also considered inviting Scandinavian and other European countries to join the Commonwealth, so that it would become a major economic common market.
Under the formula of the London Declaration, Charles III is the head of the Commonwealth. When the monarch dies, the successor to the crown does not automatically become the new head of the Commonwealth. However, at their meeting in April 2018, Commonwealth leaders agreed that Prince Charles should succeed his mother Elizabeth II as head after her death. The position is symbolic, representing the free association of independent members, the majority of which (36) are republics, and five have monarchs of different royal houses (Brunei, Eswatini, Lesotho, Malaysia, and Tonga).
The criteria for membership of the Commonwealth of Nations have developed over time from a series of separate documents. The Statute of Westminster 1931, as a fundamental founding document of the organisation, laid out that membership required dominionhood. The 1949 London Declaration ended this, allowing republican and indigenous monarchic members on the condition that they recognised King George VI as "Head of the Commonwealth". In the wake of the wave of decolonisation in the 1960s, these constitutional principles were augmented by political, economic, and social principles. The first of these was set out in 1961, when it was decided that respect for racial equality would be a requirement for membership, leading directly to the withdrawal of South Africa's re-application (which they were required to make under the formula of the London Declaration upon becoming a republic). The 14 points of the 1971 Singapore Declaration dedicated all members to the principles of world peace, liberty, human rights, equality, and free trade.
The Commonwealth's objectives were first outlined in the 1971 Singapore Declaration, which committed the Commonwealth to the institution of world peace; promotion of representative democracy and individual liberty; the pursuit of equality and opposition to racism; the fight against poverty, ignorance, and disease; and free trade. To these were added opposition to discrimination on the basis of gender by the Lusaka Declaration of 1979, and environmental sustainability by the Langkawi Declaration of 1989. These objectives were reinforced by the Harare Declaration in 1991.
Although the Commonwealth does not have a multilateral trade agreement, research by the Royal Commonwealth Society has shown that trade with another Commonwealth member is up to 50% more than with a non-member on average, with smaller and less wealthy states having a higher propensity to trade within the Commonwealth. At the 2005 Summit in Malta, the heads of government endorsed pursuing free trade among Commonwealth members on a bilateral basis.
Following its vote in June 2016 to leave the EU, some in the United Kingdom suggested the Commonwealth as an alternative to its membership in the European Union; however, it is far from clear that this would either offer sufficient economic benefit to replace the impact of leaving the EU or be acceptable to other member states. Although the EU is already in the process of negotiating free trade agreements with many Commonwealth countries such as India and Canada, it took the EU almost ten years to come to an agreement with Canada, due to the challenge associated with achieving the necessary EU-wide approvals.