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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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THE CHALLENGES OF ADDRESSING AN EFFECTIVE INTERNATIONAL TRADE STRATEGY FOR LATIN AMERICAN COUNTRIES

por Félix Peña
June 2024


 

In the Latin American region there is currently a tendency to design, through governmental negotiations, new institutional frameworks to promote international trade and productive integration, as well as to redesign existing ones in order to adapt them to the continuous changes in economic and political realities.

Designing and negotiating new modalities of agreements and adapting those that date from another era will not be an easy undertaking. It is a task in which the logic of power, the logic of economics and even the logic of legality interact in a way that is sometimes difficult to grasp. Such interplay is key to understanding and operating on concrete realities.


The future poses challenges for an intelligent international trade strategy for developing countries, including those in our geographical region, on at least three levels. These are challenges that will require an improvement in the efficiency of the quality of diagnosis of the profound changes that are taking place in different countries, and not just of the current situation.

One of these levels is that of the multilateral world trade system. The existing institutions and rules, which some consider to be obsolete, will require a redesign effort that will not be easy to achieve. The second is the inter-regional level. In the stage that has begun to develop in trade relations between nations, assertive insertion in the growing network of inter-regional agreements will be key to projecting to the world what a country can offer to other markets. Finally, the third is the Latin American regional level. After sixty years of various initiatives aimed at economic integration, physical connectivity and productive linkages between countries of the region, there is a growing awareness of the need for different approaches and working methods than those employed to date.

As we have pointed out on other occasions, Mercosur itself is in need of updating, which may require significant methodological changes, while preserving the fundamental reasons that led the founding countries to decide to work together to achieve their economic and social development goals in a context of peace and political stability in the "neighborhood". Its relations with the countries of the Pacific Alliance, which in some cases are intense and in all cases very necessary, as well as with the other countries of the region, will require taking full advantage of the institutional framework of ALADI, which is not always used, in order to increase trade and economic relations among its member countries, or at least among those most interested.

In any case, there is now a tendency to design, through governmental negotiations, new institutional frameworks to promote international trade and productive integration, as well as to redesign existing ones in order to adapt them to the continuous changes in economic and political realities.

Many of these frameworks are bilateral, involving countries belonging to different regions in the international system. Some are regional in scope and have been developed with different modalities and intensities in recent decades. Such is the case of Mercosur, the Pacific Alliance, ASEAN and the EU. In general, they have a clear political scope stemming from the fact that the countries that constitute them share a geographic space. Others have an inter-regional scope and involve countries or blocs of countries, even if only a few are connected to each other. And there always remains the task of redesigning the global framework institutionalized in the WTO.

Designing and negotiating new modalities of agreements and adapting those that come from another era will not be easy. It is a task in which the logic of power, the logic of economics and even the logic of legality interact in a way that is sometimes difficult to grasp. Understanding such interplay is key to understanding and operating on concrete realities.

This is not an easy task, moreover, because categories and concepts from other historical moments are often used. As we pointed out above, these have been overtaken, at least in some cases, by the profound changes observed in recent years, both in the distribution of world power and, in particular, in the modalities of international trade in goods and services-largely as a consequence of the disruptive effects of technological change and the phenomenon of consumer empowerment of the new urban middle class in many developing countries-and in transnational investment.

In the case of the countries of the Latin American region, the main fronts of international trade negotiations offer complementary options. Reflecting on these options and their relative costs is one of the priorities of any strategic thought exercise on international integration of any given country. In what Professor Amitav Acharya has called a "multiplex" world, a good understanding of the options and their relative costs is essential when developing a strategy for the country's international trade integration, including negotiations with other countries or economic blocs.

A first front of action required is the necessary adaptation of each regional agreement, as in the case of Mercosur, to the new world realities and to those of its own member countries, in some cases in a full and complex evolution. It is not a matter of relapsing into the refounding syndrome, which has occurred with some frequency almost always coinciding with changes of government in some of the larger economic partners. It may be more practical, effective and therefore advisable to practice the art of metamorphosis. That is, to make gradual changes that allow us to capitalize on the experience gained-and the results obtained-and to introduce the changes deemed necessary.

This is all the more advisable when a process of integration between countries faces not only an existential crisis, but also a methodological crisis in the development of the common work of the participating nations. And this seems to be the case with Mercosur today. No member country has raised the idea of withdrawing from the political, economic and legal pact that binds it to its partners, at least not openly. This is tantamount to admitting that none of the partners has a definite Plan B.

A conceivable alternative plan, such as transforming Mercosur into a free trade area -in the sense of Article XXIV of the GATT-WTO-by abolishing the Common External Tariff (CET), could have some high political and also economic costs, especially in the trade of manufactured goods. It would imply a modification of the Treaty of Asunción. It would be up to each country to decide whether or not it would be convenient for them to face these costs. It should be borne in mind that the elimination of the CET, or its open violation, could have a potential negative impact on the commitment made to ensure free trade between the partners, as a consequence of the provisions of Article 2 of the Treaty of Asunción (reciprocity of rights and obligations).

A second front of action is that of convergence in diversity in the Latin American regional space. This was the strategy proposed at the time by the government of President Michelle Bachelet and discussed at a meeting with the participation of the Ministers of Foreign Affairs and Foreign Trade of the countries of Mercosur and the Pacific Alliance, held at the Palacio de la Moneda in Santiago, Chile, on November 24, 2014. It was clear then that what was proposed was not an integration agreement between the two schemes, but the need to develop roadmaps that would lead to the establishment of multiple communicating vessels between the processes of productive transformation and international insertion of countries belonging to both blocs and not necessarily all of them. It was also acknowledged that the 1980 Treaty of Montevideo, which created LAIA, provides an institutional framework and instruments that are more than appropriate and even underutilized (such as, among others, the different types of partial scope agreements) to implement the strategy proposed and shared by the countries of the region.

A third front is that of global negotiations and negotiations with large regional spaces. The protracted negotiations between the EU and Mercosur illustrate the difficulties they sometimes entail. It is possible to foresee that the countries that currently make up the Mercosur customs union-which are the founding partners-will also advance initiatives aimed at expanding the negotiating agenda with other large economic areas, such as China, Japan and India in Asia, and the United States and Canada in North America.

On the three fronts mentioned above, Mercosur countries and their Latin American partners could promote new approaches to the characteristics of the trade agreements they negotiate. Perhaps they should be called "strategic trade and investment promotion agreements". They could not be limited to the level of tariffs, but should cover issues that affect productive investment decisions and technological cooperation oriented to transnational trade. The impact of such agreements on trade and transnational investment involving companies from countries in the region could be threefold: to promote the effect of creating stable jobs; to ensure the fluidity and predictability of trade transactions, investment and technological cooperation; and to maintain a sufficient degree of flexibility in trade policies to deal with complex economic conditions and pronounced uncertainties, for example by using different types of escape clauses with impartial custodians.

All of this will undoubtedly mean a liberation from concepts and paradigms that come from a world that, as we have said, is rapidly being overtaken by new realities.


Recommended reading:


  • Acharya, Amitav, "Turning the idea of the Indo-Pacific into reality", East Asia Forum Quarterly, January-March 2024, pp. 20-22.
  • Bidondo Abril, Camila, "Perspectivas del Acuerdo de Asociación Estratégica Mercosur-UE", Instituto de Relaciones Internacionales, Universidad Nacional de La Plata. Boletín Informativo Grupo de Jóvenes Investigadores, Year 3, Number 11, p. 26.
  • Blanke, Svenja; Reggiani, Andrés H., "Una izquierda nueva cargada de futuro", Le Monde Diplomatique, Edition 299, May 2024, pp. 10 and 11.
  • Halperin Donghi, Tulio, "La Larga Agonía de la Argentina Peronista", Prólogo de Pablo Gerchunoff, XXI Siglo Veintiuno Editores, Buenos Aires, June 2024.
  • Hufbauer, Gary, "Biden-Trump lurch to tariffs a turning point in world economic history", East Asia Forum Quarterly, June 2, 2024.
  • INTAL-BID, "El Giro Verde. La nueva agenda de comercio de América Latina y el Caribe", Buenos Aires, May 2024.
  • Fornillo, Bruno, "Geopolítica del litio", Le Monde Diplomatique, Dossier, Edition 299, May 2024, pp. 4 and 5.
  • Freytes, Carlos, "Como ir del litio a la batería", Le Monde Diplomatique, Dossier, Editions 299, May 2024, pp. 6 and 7.
  • Patman. Robert G., "New Zealand eyes joining AUKUS despite China's warnings", East Asia Forum Quarterly, June 7, 2024
  • Peña, Félix, "La necesidad de restablecer la credibilidad del Mercosur", Comercio Exterior supplement in La Nación newspaper, May 23, 2024.
  • Ranjan, Amit, "India's regional challenges", East Asian Forum Quarterly, January-March 2024, pp. 29-31.
  • Stuhldreher, Amalia, "Interregionalismo y gobernanza global". Apuntes posibles del eje UE-Mercosur", Revista CIDOB D'AFERS INTERNACIONALS, Number 60, pp. 119-145. January 2003.
  • Sumando, Eko, "Indonesia strategically shaping international cooperation through foreign aid", East Asian Forum Quarterly, May 27, 2024.

Félix Peña es Director del Instituto de Comercio Internacional de la Fundación ICBC; Director de la Maestría en Relaciones Comerciales Internacionales de la Universidad Nacional de Tres de Febrero (UNTREF); Miembro del Comité Ejecutivo del Consejo Argentino para las Relaciones Internacionales (CARI). Miembro del Brains Trust del Evian Group. Ampliar trayectoria.

http://www.felixpena.com.ar | info@felixpena.com.ar


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