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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
INSTITUTIONAL QUALITY, OFFENSIVE STRATEGIES AND REGIONAL COORDINATION: Three conditions to navigate towards the international trade of the future.

by Félix Peña
July 2009

English translation: Isabel Romero Carranza


 

Two simultaneous and interconnected processes are taking place at a global scale. These processes require assessments and approaches that may have differentiated aspects but that, in any case, would be convenient to coordinate.

One of these processes is the current economic and financial crisis. The other is the shift of relative power between nations.

Several social, political and economic qualities are required for a country to face both processes simultaneously. There are three conditions that can be highlighted as essential for a country strategy. These are: institutional quality, offensive strategies by those companies looking for an active participation in international markets and the coordination of efforts at the corresponding regional scale.

At the level of regional coordination, three fronts of action appear to be most relevant for Argentina, at least for the next months. These are the WTO Ministerial Conference, that will take place at the end of this year; the re-launching and eventual conclusion of the Doha Round, and the strengthening of the existing institutional ambits in the region, particularly Mercosur, LAIA and UNASUR.

Aside from the necessary action of government leadership there exists, at the level of regional coordination, an ample margin for initiatives originating in the respective business sectors at least in the South American space.

At least in other regions, such as Europe or Asia, businessmen have had a main role in the development of strategies and concrete proposals for regional cooperation.


Two simultaneous processes are taking place at a global scale. Both have current and potential effects on the global exchange of goods and services as well as on international trade negotiations, especially within the current WTO Doha Round.

One of the current processes taking place is that of the economic and financial crisis with its well-known consequences, among others, in the level of production and consumption and of international trade of goods and services. The drop in economic activity has an impact on the level of employment and on the mental state of people, thus transferring the effects of the crisis into the social and political planes. Depending on the intensity of such effects an international crisis may give rise to systemic problems that affect the political stability of the most vulnerable countries. This, in turn, might generate a chain reaction in other countries, particularly those belonging to the same region.

This is a process with evident immediate effects that requires short-term answers -especially at the national level but also at the level of regional and global coordination between countries- precisely due to its possible social and political consequences.

The other process that is currently taking place is that of the shift of relative power among nations. Its origins are deeply rooted in history. Its pace has accelerated in the last twenty years. It is reflected by the emergence of new players -countries, companies, consumers, workers- with a bearing on global economic competition and on international trade negotiations. However, its full effects will probably only become evident in the long run, sometimes even through hardly noticeable shifts, almost as in slow motion.

Even when these processes are interconnected, they would seem to require assessments and approaches with differentiated aspects, which nevertheless would be convenient to coordinate. This idea is expressed by the current assertion that it is essential for countries to have, at the same time, an agenda to face the crisis and an agenda for "the day after". The latter would apply when the mot immediate effects of the current situation have been overcome and the deep transformations that are shaping the international system become fully evident.

Several social, political and economic qualities would be necessary for a country to attempt to face both processes simultaneously. This would mean to navigate with relative success the waters of the current global financial and economic crisis and, at the same time, to position itself as an active player in the world trade of the future as well as in the arena of international trade negotiations, both within the WTO and in the multiple regional, inter-regional and bi-lateral spaces.

Three different conditions may be highlighted as being essential in the strategy of a country, such as for example Argentina, that wishes to capitalize on the effects of both processes with the aim of promoting a favorable insertion in the global economic competition of the future.

These conditions are institutional quality, offensive strategies developed by those companies looking for an active participation in international markets and coordination of efforts together with other countries at the corresponding regional scale.

Institutional quality entails the development of capabilities to articulate the different social interests in a stable manner in order to translate the agreed objectives into effective behaviors and realities. It is an essential condition for the development of pubic-private synergies. These are necessary to define national interests in relation to the most relevant matters of the international trade agenda, translate them into strategies and roadmaps, and reflect them in behaviors of government and non-government sectors -especially businesses- in the multiple external scenarios where the country is involved.

In global economic competition and in international trade, such institutional quality is nurtured by the efficiency of the organization technologies used at the government level. This enable the adoption and application of strategies, decisions and public policies with a strong potential to permeate reality and to become sustainable in time, including the necessary flexibility for the continuous adaptation to the change dynamics of the present world.

However, institutional quality is also nurtured by the organizational quality of the business sector and its articulation with other social sectors. This involves companies with offensive strategic interests in relation to the home market as well as to the multiple international markets, especially those which are a priority in view of the competitive advantages that a country may develop. To survey such interests becomes then an essential factor for the planning and implementation of the strategy for the international trade insertion of a country. The report published in Brazil in 2007 by the National Confederation of Industry (CNI) is a clear example of this (see www.cni.org.br). This practice also requires continuous adaptations to the ongoing changes and excludes the possibility of a fixed-target mindset.

The second condition is, precisely, that companies develop offensive strategies as a result of their desire to participate in international markets. This involves updated assessments of the opportunities presented by different international markets for a country's capability of producing goods and providing services. This assessment needs to be reviewed on a permanent basis, given that the effects of the current global crisis and the structural changes that are taking place in world scenarios may alter in a most dynamic way the opportunities that exist for companies with presence in the country, turning their relative competitive advantages either for or against them.

Additionally, such desire requires having a positive outlook on the opportunities that a country and its companies may have in world markets. In sporting terms it would mean to act with a winning mindset. This is a cultural factor that is present in those developing countries which, during the last years, have given rise to a growing number of internationalized firms. Chile and several Chilean companies are an interesting example of this precisely due to the fact that this country does not constitute one of the larger scale emerging economies.

Finally, the third condition is the coordination of efforts and the development of joint actions among those countries that share the same regional space -but also among those which share relative conditions and similar interests such as, for example, the food-producing countries-.

At the South American regional level, this implies the promotion of a continuous process for the development of quality physical connectivity works (comprising issues such as the financing of infrastructure projects -including the inter-oceanic axis- and the facilitation of trade). This continuous process would favor an increasingly growing weave of shared interests that would be nurtured by the reciprocal trade flows and transnational productive networks (this would include issues related to the implementation at a regional level of aid for trade programs, especially in favor of those less developed economies). In the investment required for this purpose, a country may find converging elements between the agenda of measures destined to overcome the effects of the global crisis and that of the necessary productive transformation required for navigating successfully into the world of the future.

This would also imply a greater coordination between South American countries, both in the corresponding assessment of the two international processes mentioned above as well as in the strategies for the approach of global trade negotiations, especially within the sphere of the WTO and with the main players of world trade. The relations with the U.S., the countries of the European Union and emerging economies -particularly with China- are, in this sense, a priority.

This also applies for those negotiations related to the adaptation of international multilateral organizations to the new international reality, especially within the sphere of the so called Group of 20 (the next Summit to be held in Pittsburg, U.S., will be an opportunity for participating Latin American countries to effectively present the points of view of the region as a whole -or at the very least of the corresponding sub-region- which will have been previously discussed in regional forums).

On this plane of regional coordination, three fronts of action become more relevant for Argentina, at least for the next months. The first one is the Seventh WTO Ministerial Conference to be held in Geneva from next November 30 to December 2nd (see http://www.wto.org/). The second front is the re-launching and eventual conclusion of the Doha Round (see the declaration by WTO Director General, Pascal Lamy, in Paris on 25 June 2009: http://www.wto.org/. This month, during the meeting in L'Aquila, Italy, G8 countries together with G5 countries -Brazil, China, India, Mexico and South Africa- committed themselves to finalizing the Doha Round before the end of 2010. A mini-ministerial meeting will take place in New Delhi next September). The third front is the strengthening of the existing institutional spaces of the region, especially LAIA, UNASUR (its constituent agreement is not yet in effect) and Mercosur. Regarding the latter, no new developments related to the pending implementation of the customs union could be expected at least in the short term; the Parliaments of Brazil and Paraguay have still to sanction the Caracas protocol; and, above all, the negotiation for the adaptation of Venezuela to the customs union has not been concluded yet. On this last respect, the main issues that will need to be resolved are Venezuela's requests in relation to what are considered sensitive-products and which therefore should have longer periods for their final adaptation to the customs union.

Aside from the necessary action of government leadership there exists, at the level of regional coordination, an ample margin for initiatives originating in the respective business sectors, at least in the South American space. Such initiatives should attempt, for example, to make a diagnostic assessment of the profitable use of institutions, experiences and commitments accumulated throughout the years -especially in terms of preferential access to markets and of the payment and financing mechanisms for trade, productive investments and physical infrastructure- and also include constructive proposals on how to evolve towards future joint goals which combine realism and ambition.

An initiative of this kind could originate, at least initially, in the business institutions of those South American countries which are more closely connected through commercial and productive networks (Mercosur countries and Chile). Additionally, there is a higher density of cross-investment among these countries, both in the agro-industrial and manufacturing sectors as well as in the services sector. A growing number of multi-latin firms run operations in these countries, particularly if we consider the hundreds of companies of varying sizes which have a sustained and simultaneous commercial and productive presence in several of these markets. Together with the respective business institutions of each country, these are the companies that should express more interest in advancing measures to promote the full use of the existing preferential agreements and move forwards towards more ambitious goals.

Such as it happened in the past, at the time of the foundation of the process of regional commercial integration - when LAIA was founded, 50 years ago (on this regard, please refer to the May Newsletter) - organizations such as the Economic Commission for Latin America and the Caribbean (ECLAC) could provide the necessary technical assistance to an initiative coming from the business sector such as the one that has been proposed. Their most recent precedent on this regard is their last December report on "International crisis and opportunities for regional cooperation" (see the reference to this work under the recommended readings section). One of the sections of this report, entitled "Losing the competitive race may be more dangerous than the current global crisis", follows the line of thought which was expounded previously regarding the need for correlation between the crisis agenda and the "the day after" agenda. The Andean Development Corporation, with its vast experience, as well as that of its President, may also contribute significantly to a business sector initiative such as the one proposed.

The experiences of other regions illustrate the effects that business initiatives can produce. One of them is the Trans-Atlantic Business Dialogue (http://www.tabd.com) between the business sectors of the United States and the European Union. However it is primarily in Southeast Asia where we can find the most inspiring experiences of the role of businessmen and business institutions in the advancement of regional cooperation. Some examples are the ASEAN Business Advisory Council (http://www.asean-bac.org) and the Confederation of Asia-Pacific Chambers of Commerce and Industry (CACCI) (http://www.cacci.tw). Such experiences have contributed to give credit to the "bottom-up" methodology for the construction of a regional space where the networks of business institutions, especially those of productive chains of transnational scope, have played a fundamental role.

Most recently, the Economic and Social Commission for Asia and The Pacific (ESCAP) has published an encouraging report whose title illustrates its eminently practical approach: "Navigating Out of the Crisis: "A Trade-led Recovery. A practical guide for trade policy makers in Asia and the Pacific" Bangkok 2009 (on http://www.unescap.org). It is a report that provides down-to-earth advice on the measures that are required in the short-term to face the effects of the current global crisis (especially through the increase of regional trade) and on those measures that are needed to guarantee long-term competitiveness in the new international scenario. An example of this are its two final sections entitled "Promoting Asia-Pacific Businesses for Long Term Competitiveness" and "Looking Beyond the Crisis: Positioning the Asia-Pacific Region for the Future" respectively. The information and recommendations contained in this work would be valid for application in our region.


Recommended Readings of Recent Publication:

  • Benedicto VI, "Caritas in Veritate", Encyclical Letter by the Pope Benedict VI, Rome, July 2009, http://www.vatican.va.
  • Calder, Kent E. & Fukuyama, Francis (eds.), "East Asian Multilateralism. Prospects for Regional Stability", The John Hopkins University Press, Baltimore 2008.
  • Casado Cañeque, Fernando (coord.), "Hacia la concertación público-privada para el desarrollo en América Latina", Fundación Carolina CeALCI, Madrid 2008.
  • Castro, Lucio; Saslavsky, Daniel, "Cazadores de mercados. Comercio y promoción de exportaciones en las provincias argentinas", CIPPEC, Buenos Aires 2009.
  • Celli, Umberto, "Comércio de Serviços na OMC. Liberalizaçâo, Condiçôes e Desafios", Juruá Editora, Curitiba 2009.
  • ECLAC, "International Crisis and Opportunities for Regional Cooperation", Report by the UN Economic Commission for Latin America and the Caribbean, presented at the Americas and the Caribbean Integration and Development Summit, Bahía, Brazil, 16 December 2008.
  • Gallagher, Kevin P.; Porzecanski, Roberto; López, Andrés, and Zarsky, Lyuba, "Foreign Investment and Sustainable Development. Lessons from the Americas", Working Group on Development and the Environment in the Americas, published by the Heinrich Bull Foundation North America, May 2008, http://www.hbfus.org.
  • Mahbubani, Kishore, "Beyond the Age of Innocence. Rebuilding Trust Between America and the World", Public Affairs, New York 2005.
  • Mahbubani, Kishore, "The New Asian Hemisphere. The irresistible shift of the global power to the East", Public Affairs, New York 2008.
  • Nueva Sociedad, "¿Volver al futuro? Estado y Mercado en América Latina", nº 221, May-June 2009, on http://www.nuso.org.
  • OMC, "Trade and Climate Change". Report by the United Nations Environmental Program and the World Trade Organization, Geneva 2009, http://www.wto.org.
  • Pérez, Mamerto; Schlesinger, Sergio, and Wise, Timothy A., "The Promise and the Perils of Agricultural Trade Liberalization. Lessons from Latin America", Washington Office on Latin America (WOLA) and the Global Development and Environment Institute (GDAE) at Tuft University, Washington, DC - Medford, MA, June 2008, http://www.wola.org - http://www.gdae.org.
  • Política Externa, "G-20", GACINT-USP, IEEI-UNESP, Paz e Terra, vol.18, nº 1, Jun/Jul/Ago 2009, Sâo Paulo, www.politicaexterna.com.br.
  • Razzaque, Mohammad A. and Raihan, Selim, "How does Trade Lead to Development and Poverty Reduction? Evidence of the field", CUTS International, Jaipur 2008, http://www.cuts-international.org.
  • South African Institute of International Affairs, "South African Journal of International Affairs", volume 13 - Issue 1 - Johannesburg - Summer/Autum 2006, http://www.wits.ac.za/saiia.
  • Valles, Guillermo, "Desafíos en la gobernanza global: el caso del comercio internacional", Consejo Uruguay para las Relaciones Internacionales, Análisis nº 08/09, Montevideo, 8 July 2009, http://www.curi.org.uy.
  • White, Lyal (ed.), "Is there an Economic Orthodoxy. Growth and Reform in Africa, Asia and Latin America", South African Institute of International Affairs, Jan Smuts House, Johannesburg 2006.
  • World Economic Forum, "The Global Enabling Trade Report 2009", WEF, July 2008, http://www.weforum.org/documents/getr2009_explorer/index.html.
  • WTO, "Report to the TPRB from the Director-General on the Financial and Economic Crisis and Trade-Related Developments", JOB (09)/62, Geneva 1 July 2009.
  • WTO-OECD, "AID for Trade at a Glance. 2009. Maintaining Momentum", WTO-OECD, July 2009, http://www.wto.org.

Félix Peña Director of the Institute of International Trade at the ICBC Foundation. Director of the Masters Degree in International Trade Relations at Tres de Febrero National University (UNTREF). Member of the Executive Committee of the Argentine Council for International Relations (CARI). Member of the Evian Group Brains Trust. More information.

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


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