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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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THE NEIGHBORHOOD (SOUTH AMERICA) AND THE WORLD, TWENTY YEARS LATER: Are still valid Mercosur's strategic idea and methodologies?

by Félix Peña
December 2010

English translation: Isabel Romero Carranza


 

What has been the impact of the global and regional changes on the validity of the strategic idea that generated Mercosur (its existential dimension) and on the work methods used to achieve its fulfillment (its methodological dimension) twenty years after the beginning of its integration process?

A comparative study of the two foundational instruments signed during the period from December 1990 to March 1991 (Economic Complementation Agreement Nº14 and the Treaty of Asuncion) can clarify the scope of Mercosur's strategic idea and of its initial work methods. Both instruments are still formally in force but have been subjected to changes and additions. The contrast between the two throws some light on the existential dimension of Mercosur at its creation - the fact that its was not conceived as a mere trade integration - and on its methodological dimension - the fact that its was conceived with a long term strategic scope and as a gradual construct whose pace was to be determined by the participating governments -.

Mercosur is far from having fully reached its original aims. It is possible that these might not be fulfilled in a foreseeable future either. It is still a work in progress. At the same time, the global and South American contexts of the time of its creation have changed significantly.

However, the existential dimension of Mercosur maintains its validity in the new external context. It implies the development, from within the South of South America, of a strategic project that is seen as essential for the governance of the South American geographical space, for the productive transformation of its member countries, within a framework of democracy and social cohesiveness, and for the development of their capacity for projection into the new global context, taking advantage of the opportunities that have opened up for a relevant and active presence. It is thus in the methodological dimension where the focus should be placed in the future. This implies the development of the multiple dimensions of its agenda, not only limiting it to trade, as well as perfecting its institutional mechanisms.


Mercosur is celebrating its twentieth anniversary. Thus, it is an appropriate time to reflect on the impact that the deep changes that have taken place in the world and in the region since its creation - including of course its member countries -, have had on the validity of the strategic idea that promoted it (the existential dimension) and on the methodologies that are used to achieve its fulfillment (the methodological dimension).

A comparative study of the two foundational instruments signed during the period from December 1990 to March 1991 (Economic Complementation Agreement Nº14 and the Treaty of Asuncion) can clarify the scope of Mercosur's strategic idea and of its initial work methods. Both instruments are still formally in force and are actually the ones celebrating twenty years of existence. During this time they were subjected to changes and additions. The contrast between the two throws some light on the existential dimension of Mercosur at its creation - the fact that its was not conceived as a mere trade integration - and on its methodological dimension - the fact that its was conceived with a long term strategic scope and as a gradual construct whose pace was to be determined by the participating governments-.

The first of these instruments is the Economic Complementation Agreement Nº 14 signed by Argentina and Brazil within the scope of the Latin American Integration Association (LAIA) on December 20, 1990. Thirty-nine additional protocols have been added since then, the last dating from March 2010. Most of these additional protocols are related with the automotive sector (see the corresponding texts on http://www.aladi.org/).

The second is the Treaty of Asuncion, signed on March 26, 1991 (http://www.mercosur.org.uy/ or click here). Unlike the previous one, it also included Paraguay and Uruguay. The protocols complementing the foundational treaty were signed later on and deal with different aspects of the commitments assumed regarding the institutional structure, the resolution of disputes and the addition of Venezuela as a full member (http://www.mercosur.org.uy/).

As it was necessary to protect its tariff preferences within the scope of what was established by article 44 of the Treaty of Montevideo of 1980 ("Any advantages, favorable treatments, franchises, immunities and privileges which member countries apply to products originating from or bound to any other member country or non-member country, pursuant to decisions or agreements not foreseen in the present Treaty or the Cartagena Agreement, shall be immediately and unconditionally extended to the other member countries") (http://www.aladi.org/), the preferential trade commitments adopted in the Treaty of Asuncion were later incorporated into the ambit of LAIA by the Complementation Agreement Nº19, signed on November 29, 1991. Seventy-four additional protocols have been signed since then, the last one dating from May 2010. The majority of these protocols are related to the trade regime within Mercosur and with the rules of origin (for the texts go to http://www.aladi.org/).

The fact that two international legal instruments, negotiated and signed almost simultaneously, were used indicates much in relation to the existential dimension of Mercosur. In fact the first instrument - Economic Complementation Agreement Nº 14 - was aimed at preserving and deepening the asset of trade agreements signed by Argentina and Brazil within the scope of LAIA and within the bilateral Integration and Cooperation Program launched in 1986 by the Iguazú Act. This later gave birth to the bilateral Integration, Cooperation and Development Treaty signed in Buenos Aires by Argentina and Brazil, on November 28, 1988 and which is still in force (for the full text go to http://www.infoleg.gov.ar/).

If the objective had been primarily commercial, the Agreement of Economic Complementation Nº 14 would have enabled to guarantee the future development of the bilateral relation between the two main economies of the area, with no need to create Mercosur. In fact, the program for achieving preferential free trade included in this international instrument was similar to that which was later included in the Treaty of Asuncion, extending over to Paraguay and Uruguay as well. This proves that Mercosur was created for strategic and political reasons which transcended the commercial plane (on the outreach given to the creation of Mercosur, refer to our article "Mercosur: a strong idea" in the book "Momentos y Perspectivas: Argentina en el Mundo y en América Latina", Eduntref, Buenos Aires 2003, on: http://www.felixpena.com.ar/contenido/libro/capitulo12-mercosur-una-idea-con-fuerza.pdf, and which was originally published in Perspectiva Internacional, a publication of the Justicialista Political Party under the direction of José Octavio Bordón, N° 4, Year 3, July 1991. At that time, the author was the National Coordinator for the Common Market Group and as such had participated in the final stages of the negotiations of the Treaty of Asuncion).

The second international instrument - the Treaty of Asuncion - contains broader commitments not restricted only to commercial objectives. It has the hierarchy of an international treaty and the intent of permanence in time. It was conceived as the framework of a process geared towards the creation of a common market within the terms defined by its first article, which has a programmatic scope. The implications of such conception are reflected by the evolving nature of the initial commitments, as well as by the fact that those few which were demandable in the short term were similar in essence to the ones contained in the abovementioned Economic Complementation Agreement Nº 14.

The idea of launching a process aimed at building through time a common economic space between the four constituent countries, with an economic objective but at the same time of a multidimensional nature - as shown, for example, by the actions taken in the area of education and with the field-specific minister meetings - and with clear political implications may also explain the original methodological dimension. This consisted in anticipating that the hard core of liable commitments would be developed by an institutional mechanism of inter-governmental composition. Such core would later have a first evolution with the signing of the Protocol of Olivos, in 1994, concurrently with the establishment of an external common tariff as the main instrument of a customs union.

Twenty years later, the external background of that foundational moment has changed significantly. This is so both for the South American context - the "neighborhood" in the sense of the immediate surroundings of the countries that share a regional geographic space - and for the global one.

As for the South American context, the original demands for regional governance -defined as the prevalence of peace and political stability - had at that time a strong emphasis on the space called the Southern Cone (which was the name of the common market during the negotiations and was later changed at Brazil's request) and, in particular, on the relations between Argentina and Brazil. For the same reasons it also included Chile. This is why this country was initially asked to participate in Mercour. However, Chile opted not to become a foundational member for motives that probably transcend trade policy concerns.

Nowadays and looking into the future, the demands for regional governance encompass the whole South American geographical space. As was pointed out by Brazil's Chancellor, Celso Amorim, at the World Economic Forum of Davos in 2008, for Brazil, Mercosur is the equivalent of "peace and stability in South America". Aside from this, the initiative of the US to develop a hemispheric area of free trade, later materialized in the failed attempt of the FTAA, had a great incidence at the creation of Mercosur. Both in the strategic perception of Argentina and Brazil, as well as of Europe, this American initiative required a response at the sub-regional level and at the level of the bi-regional relation with the former European Community. Neither the initiative to create Mercosur, launched in 1990, shortly after the beginning of the process that would lead to NAFTA, nor the promotion of a bi-regional understanding with Europe, were extraneous to the fact that the US had signaled its intention of enjoying preferential trade standing in the whole of Latin America.

As for the global context, the creation of Mercosur was marked by the impact of the fall of the Berlin Wall and the end of the Cold War, as well as by the strong interest that was awakened, both in the US and especially in Germany and other European countries, by the transformation that had started in the Eastern European countries once part of the Soviet Bloc. Another influence was the process which led to the creation of the World Trade Organization in 1994 as a conclusion of the Uruguay Round.

The current global context is now completely different from that of 1990 and 1991. The rise of China and of other emerging economies has radically changed the geography of global economic competition and the political impacts are increasingly visible. China tends to be an actor of growing relevance in South America, both in the area of foreign trade and in that of investments. Another relevant fact is that Brazil views itself, and is also perceived, as a country with a growing capacity and intention to become a global actor. In such regard, its prominence and eventual leadership as mentor and possible warrantor of the governance of the South American space can contribute significantly to its value before third countries. This may help explain its clear interest in sustaining the institutionalization of the regional space around Mercosur, as a hard core, and UNASUR, as a broader and complementary ambit that comprises the whole of South America. This interest is in clear strategic coincidence with that of Argentina.

Upon celebrating is twentieth anniversary, Mercosur is far from having fully reached its original objectives. These might not be fulfilled in a foreseeable future either. It is still a work in progress. It is not based on any previous models, a fact that may be considered a plus. Its existential dimension remains valid, even in the new external context. This entails the development, from within the South of South America, of a strategic project that can be regarded as essential for the governance of the regional space, for the productive transformation of its member countries within a framework of democracy and social cohesiveness, and for facilitating the projection of each one of them into the new global context, taking advantage of the opportunities that are opening up for relevant and active participation.

Looking into the future, it is in the methodological dimension where the focus should be placed. This requires a continuous development of the multiple aspects of its agenda, not limiting it only to trade. It also involves placing the emphasis on productive and social integration and perfecting its institutional mechanisms, including those which facilitate the effective participation of citizenship as a condition for its efficiency and social legitimacy, and those which help strengthen the role of the Mercosur Parliament. Likewise, it implies advancing international trade negotiations with a broad number of relevant players of the global economic competition - not necessarily regarding tariff preferences or just with the European Union -, as well as improving the ability to give voice to the region through global mechanisms such as, for example, the G20.

In two recent articles cited bellow in the recommended readings section, we presented a closer look at the development of the methodological dimension of Mercosur in the future. One was published under the title "Es posible una visión realista pero positiva de la integración latinoamericana y del Mercosur?" (In Diálogo Político, review of the Konrad Adenauer Foundation: http://www.kas.de/argentinien/es/pages/1602/). The other was entitled "Cuán denso sera el Mercosur del futuro?" (In Letras Internacionales, published by ORT University in Uruguay: http://www.ort.edu.uy/). However, none of these articles considers the implications of Venezuela's full incorporation to Mercosur, including the international trade negotiations and, in particular, those that are currently taking place with the European Union. By December 15, 2010, the Paraguayan Parliament had not yet approved the Protocol of Caracas, signed in 2006 (see the text on http://www.mercosur.org.uy/ or click here). However, it is now possible for this to happen in the short term, at least according to the information that has been circulating among the media in Asuncion during the first days of December.

The needed methodological renewal of Mercosur would be made easier as well by a substantial update of the conceptual framework employed in the systematic approach of the issue of integration of regional geographic spaces. These approach demands an interdisciplinary focus that includes the full complexity of processes that, as is being shown today by the economic crisis and especially that of the Euro in the European Union, cannot be fully understood if they are viewed solely through a single disciplinary outlook as would be for example, the economic one.


Recommended Reading:


  • Alfaro, Laura; Chen, Maggie, "Multinational firms, agglomeration, and global networks", VoxEu, 8 January 2010, en: http://www.voxeu.org/index.php?q=node/4460.
  • Anderson, Kim; Martin, Will; Nelgen, Signe, "Export restrictions and food market instability", VoxEu, 9 November 2010, en: http://www.voxeu.org/index.php?q=node/5760.
  • BBVA Research, "Observatorio Económico. Análisis Transversal Economías Emergentes. Las águilas de BBVA", Madrid, 15 de Noviembre 2010, en: http://www.bbvaresearch.com/ o click here.
  • Bértola, Luis; Ocampo, José Antonio, "Desarrollo, Vaivenes y Desigualdad. Una historia económica de América Latina desde la Independencia", Secretaría General Iberoamericana, Madrid 2010.
  • Biglieri, Alberto, "Estudios de Derecho de la Integración. Contrataciones Públicas. Servicios Públicos. Servicios Profesionales", Ediciones Jurídica, Eduardo Lecca, Editor, Buenos Aires 2010.
  • CARI-KAS, "Argentina en el G20. Oportunidades y desafíos en la construcción de la gobernanza económica global", CARI-KAS, Documentos de Trabajo N° 88, Buenos Aires, Octubre 2010, en: http://www.cari.org.ar/ o click here.
  • Carnegie Endowment for International Peace, "The New Geopolitics: Emerging Powers and the Challenges of a Multipolar World", Transcript, Washington, November 30, 2010, en: http://www.carnegieendowment.org/.
  • CEI, "Revista del CEI. Comercio e Integración", Centro de Economía Internacional, MRECIC, N° 18, Buenos Aires, Agosto 2010, en http://www.cei.gov.ar.
  • CEPAL, "Balance preliminar de las economías de América Latina y el Caribe", Comisión Económica para América Latina y el Caribe (CEPAL), Santiago de Chile, diciembre 2010, en: http://www.eclac.cl/ o click here.
  • Diaz-Bonilla, Eugenio; Ron, Juan Francisco, "Food Security, Price Volatility and Trade: Some Reflections for Developing Countries", International Centre for Trade and Sustainable Development - ICTSD Programme On Agricultural Trade and Sustainable Development, Issue Paper Nº 27, Geneva, November 2010, en: http://ictsd.org/ o click here.
  • Flores, Renato Jr., "The World Fragmentation of Production and Trade: Concepts and Basics Issues", CEPAL-ABDI-IPEA, CEPAL/Brasil, October 2008, en: http://www.eclac.org/ o click here.
  • Gallagher, Kevin P., "China and the Future of Latin American Industrialization", The Frederick S.Pardee Center for the Study of the Longer-Range Future, Issues in Brief, 18 October 2010, en: http://www.bu.edu/.
  • Gamberoni, Elisa; Lanz, Rainer; Piermartini, Roberta, "Timeliness and Contract Enforceability in Intermediate Goods Trade", World Trade Organization, Economic Research and Statistics Division, Staff Working Paper ERSD-2010-14, Geneva, November 2010, en: http://www.wto.org/ o click here.
  • Gorodnichenko, Yuriy; Roland, Gérard, "Culture, Institutions and the Wealth of Nations", Centre for Economic Policy Research - CEPR, Discussions Papers Series, Discussion Paper Nº 8013, London September 2010, en: http://www.cepr.org/pubs/dps/DP8013.asp.
  • Huang, Yukon, "Reinterpreting China's Success Through the New Economic Geography", Carnegie Endowment for International Peace, Carnegie Papers, Asia Program, Number 115 - November 2010, en: http://www.carnegieendowment.org/ o click here.
  • Jay, Peter; Stewart, Michael, "Apocalypse 2000. Economic Breakdown and the Suicide of Democracy, 1989-2000", Sidgwick & Jackson, London 1987.
  • Moncayo Jiménez, Edgar, "The Contribution of the Regional UN Economic Commissions to Regional Integration Processes: The Case of ECLAC", United Nations University - CRIS, UNU-CRIS Working Papers, W-2010/8, Bruges 2010, en: http://www.cris.unu.edu/ o click here.
  • Oxford Analytica, "The Impact of Pre-Salt. A Long-Term Perspective", Oxford, May 2010, en: http://www.oxan.com/ o click here.
  • Peña, Félix, "¿Es posible una visión realista pero positiva de la integración latinoamericana y del Mercosur?", en Revista Diálogo Político, N° 3/2010, ps. 193 a 211, en http://www.kas.org.ar.
  • Peña, Félix, "Cuán denso será el Mercosur del futuro?", en Letras Internacionales, Publicación del Departamento de Estudios Internacionales, Facultad de Administración y Ciencias Sociales, Universidad ORT - Uruguay, Año 4, Número 115, Montevideo, 9 de diciembre de 2010 en: http://www.ort.edu.uy.
  • Perales, José Raúl (ed.), "A New Trade Policy for the United States. Lessons from Latin America", Woodrow Wilson International Center for Scholars, Latin American Program, Washington 2010.
  • Pollio, Emanuele, "What kind of Interregionalism?: The EU-Mercosur Relationship within the Emerging Transatlantic Triangle", Bruges Regional Integration & Global Governance Papers, 3/2010, United Nations University-CRIS, College of Europe, Bruges 2010, en: http://www.cris.unu.edu/ o click here.
  • Prévost, Denise, "Obstacles sanitaires, phytosanitaires et techniques au commerce dans les Accords de partenariat économique entre l'Union Européenne et les pays ACP", ICTSD, Programme sur les APE et le Régionalisme, Document Thématique N° 9, Genève, Novembre 2010, en: http://ictsd.org/ o click here.
  • Rotunno, Lorenzo; Vézina, Pierre-Louis, "Chinese networks and tariff evasion". VoxEu, 24 November 2010, en: http://www.voxeu.org/index.php?q=node/5841.
  • SELA, "Evolución reciente de las relaciones económicas entre la República Popular China y América Latina y el Caribe. Mecanismos institucionales y de cooperación para su fortalecimientos", Sistema Económico Latinoamericano y del Caribe, SP/CL/XXXVI.O/Di Nº 12-10, Caracas, Octubre 2010, en: http://www.sela.org o click here.
  • Velasco e Cruz, Sebastiâo, "O Brasil no mundo: ensayos de análisis política e prospectiva", Programa de Pós-Graduaçâo em Relaçôes Internacionais (UNESP-UNICAMP-PUC/SP), Editora UNESP, Sâo Paulo 2010.
  • World Economic Forum, "From Collision to Vision: Climate Change and World Trade. A Discussion Paper", World Economic Forum, Ad Hoc Working Group on Trade and Climate Change, Geneva, November 2010, en: http://www3.weforum.org/ o click here.
  • World Trade Organization, "Overview of Developments in the International Trading Environment", WTO, Trade Policy Review Body, WT/TPR/OV/13, Geneva, 24 November 2010, en: http://docsonline.wto.org/ o click here.
  • Young, Richard, "Europe's Decline and Fall. The Struggle Against Global Irrelevance", Profile Books, London 2010.
  • Zepeda, Eduardo; Wise, Timothy A.; Gallagher, Kevin, "Rethinking Trade Policy for Development: Lessons From Mexico Under NAFTA", Carnegie Endowment for International Peace, Policy Outlook, December 2009, en: http://www.carnegieendowment.org/ o click here.
  • Zhang, Yunling, "The Impact of Free Trade Agreements on Business Activity: A Survey of Firms in the People's Republic of China", Asian Development Institute, ADBI Working Paper Series, Nª 251, October 2010, en: http://www.adbi.org/ o click here.


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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