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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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PRESERVING THE ESSENTIAL, MAKING METHODS MORE FLEXIBLE: WTO, EU and Mercosur adaptation to new international realities.

by Félix Peña
June 2011

English translation: Isabel Romero Carranza


 

Certain signs of stress are becoming evident in some of the major institutionalized spaces of cooperation among nations both at a regional level and in the different regional geographic spaces. Recently they have become even more evident. Examples of this are the obvious difficulties to move forward in the WTO Doha Round negotiations, the growing concern over the future of the euro and on how to continue building the European Union itself, and the trade disputes that have updated the debate on the real scope of the customs union and the automotive integration within Mercosur.

These stress signs seem to result from a gradual enlargement of the gap between the international reality in which these cooperation spaces were born, including their goals and operation modalities, and the current reality. In almost two decades the political and economic conditions surrounding the interaction between nations at a global and regional scale have changed dramatically.

In any case, the signs of fatigue are increasingly becoming more visible in the area of methodology of working together. They are evident in relation to the efficiency of the mechanisms and rules and in the difficulties to obtain the desired results or, alternatively, to adopt decisions that enable an adaptation to the new realities that are being confronted. The risk, however, is that with time the loss of efficiency impinges on the legitimacy of the respective space of multinational cooperation and that it starts to be perceived by its member nations -or by some of them-as irrelevant or detrimental to their own national interests. In such case, the difficulties would become even greater given that they would involve the existential dimension of working together, i.e. the main rationale underlying the cooperation effort between the associated nations.

Overcoming such state of affairs will require a collective political leadership of the main protagonists aimed at limiting the effects of the efficiency crisis and preventing them from transferring from the methodological to the existential dimension. In order to preserve the essential it will be necessary to make the methodological more flexible.


Several of the main institutional spaces for the cooperation between nations, both at a global and regional level, are increasingly showing signs of stress. If the causes leading to this were to continue, the future of complex multinational structures such as the World Trade Organization (WTO), the European Union (EU) and Mercosur may come into question. At the very least, it could lead to a crisis in their legitimacy and slide them into a gradual oblivion, which would be a setback in the predominance of reasonable guidelines for international governance.

Such signs are becoming evident in the great difficulties being faced in the WTO Doha Round negotiations, even in the less ambitious version which was launched after confirming that the "window of opportunity" was already closed (refer to the report by Patrick Messerlin and Erik van der Marel listed in the Recommended Reading Section, among others). The signs are also becoming evident in the uncertainty regarding the political and macro-economic conditions needed to face, and eventually overcome, the current crisis of the euro, with its potential chain reaction on the construction of the EU (see the articles by Simon Kuper, Kenneth Rogoff, and Nouriel Roubini listed in the Recommended Reading Section, among others). On another level, and with much less impact and scope, the signs are becoming evident in the striking precariousness of the ground rules of Mercosur. This was recently made manifest in relation to the automotive industry, at the core of the sub-regional integration process, and which has contributed to intensify the debate over the extent of the common economic space that is being built in the South of Latin America.

These are stress indicators that seem to result from a gradual widening of the gap between the international reality in which such multinational organizations were born -or in which some of its current goals and operation modalities were originated- and the reality that has been manifesting in recent years.

It is a well known fact that the two last decades have deeply changed the political and economic conditions in which nations interact, both at a global and regional scale. A new era of international relations has begun in which, due to the distribution of real power, the world has become decentralized (there are many relevant players). Due to the dynamics of interactions, it is now more intense (the changes are constant and sudden, with a penchant for the unpredictable, the so called "black swan" of Nassim Taleb). As a result of the high degree of connectivity between the different national political and economic systems, it has become dense (all sorts of trans-national networks are flourishing, including production ones which have led to install the "made in the world" concept -on this regard refer to http://www.wto.org).

We have entered an international scenario that will demand, from the main protagonists, a greater flexibility to craft all types of cross-alliances and networks that are non-exclusive and non-excluding. At first sight it might appear as a chaotic and even toxic world, a world "in times of cholera" paraphrasing Gabriel García Márquez. To discover its implicit logic will be one of the main challenges, both for those who aspire to decode reality and, especially, for those who seek to exert political leadership at an international scale.

The gap that was previously mentioned is affecting the ability of the three referred organizations (and of many others) to be effective in producing the expected results. The difficulties arise in the methodological dimension of the corresponding institutional space, which is the result of the joint work methods and modalities used by the partner countries.

On this regard, the following are some of the questions that have surfaced recently and that may help explain the evident stress:

  • Among others in the case of the WTO, are the following: How to build, among 153 countries with diverse interests, the consensus needed to close the Doha Round while preserving the single undertaking modality? How to attract the attention of the political and business leadership of the main countries -as per their relative weigh in the world trade flows of goods and services- to incentive the adoption of the measures needed to conclude negotiations -particularly those with clear short-term political costs and eventual long-term benefits- all in the midst of election calendars that mobilize citizens who become aware of their power and express a growing displeasure and even "indignation" for their political leadership? How to explain the adoption of measures for the development of other countries when the respective country is eventually facing an agenda of hard-to-solve complex social issues of strong political impact?

  • In the case of the EU, some of the questions are: How to preserve the euro among countries that are facing the unequal effects of a deep financial crisis, with repercussions at multiple levels, including the political? How to explain to the respective public opinions the costs of resolving the problems caused by what is perceived to be the result of the fiscal indiscipline of other countries? How to abandon partner countries to their own fate if, on the other hand, they have become indebted with the financial institutions of some of the most wealthy countries of the EU?

  • In the case of Mercosur: How to continue building a customs union or a common economic space in a context of pronounced economic asymmetries and with rules whose fulfillment often depends on the single-sided discretionary will of each one of the partners? How to reconcile the idea of a multidimensional strategic alliance with the perception of an unequal distribution of its benefits?

In the three cases and in spite of the differences that exist between these institutional spaces, the problems observed are so far and in essence more methodological -how to work together- than existential -why to work together-.

However, there is a risk that, with time, the efficiency deficits end up impacting on the legitimacy of each one of the multinational spaces and that they begin to be viewed by the people of the member countries -or of some of them- as irrelevant or even as adverse to their own national interests.

In this case, the difficulties would be even greater given that they would be referring to the existential dimension of the agreement of working together among nations, including its principles, aims, main functional mechanisms, rules and instruments. What would be under question then would be the very same "raison d'être" of the corresponding cooperation effort.

In both aspects -those of efficiency and legitimacy- the main problem would be that the partners either fail to envision or to agree on reasonable alternatives that are convenient for all. This would imply an absence of the political conditions needed to continue building an institutionalized space for the cooperation among nations, or to devise and materialize other possible options. In that case Plan A is not working but it would seem that there is no Plan B either.

If this were to happen, a period of systemic crisis might begin, with possible negative consequences on the governance goals at both the global or regional level. What would be at stake then would be the preservation of the conditions that contribute to political stability and peace in the corresponding international space. History is full of examples of what may happen when nations that are connected and interdependent fail to agree on acceptable forms of global or regional governance.

History also shows that the situation being faced today in the international scenario, reflected by the state of the three multinational institutional spaces referred to on this occasion, requires of a strong political leadership -concerted but not hegemonic- in order to be confronted, and eventually overcome, without resorting to different modalities of violence -normally refer as war.

Given the multiplicity of relative power centers that exists today and the heterogeneous interests and visions of the world's future of the main protagonists, in order to be effective such leadership will need to be a collective one. The three spaces mentioned above are precisely the ones that could contribute to the construction of these collective leaderships. This is one of their main reasons for being, maybe even the essence, of their existential dimension.

In these types of situations, the collective political leadership has to be aimed at limiting the effects of the loss of efficiency, preventing these effects from transferring from the methodological to the existential dimension.

Preserving what is essential, i.e. the acquired assets (for example, the collective disciplines in terms of trade policies and the idea of a direct relation between trade and development, in the case of the WTO, and the idea of a common political and economic space, in the cases of the EU and Mercosur) and adapting methodologies of working together, including mechanisms, instruments and common rules to the new international reality, with a strong dose of pragmatism and flexibility, would seem to be the priority. This would imply eventually postponing more ambitious goals in the construction of the corresponding multinational institutional space.

In the case of the WTO it would not necessarily involve sacrificing Doha in favor of the systemic requirements. However, it would entail adapting its modalities and pace of evolution to what is possible, taking into account the new international realities and, at the same time, keeping the agenda open to new measures necessary to strengthen the efficiency of the multilateral trade system. This should be a key issue in the agenda of the upcoming WTO Ministerial Conference that will take place next December.

In the cases of the EU and Mercosur -regional integration schemes with obvious and marked differences in their historic roots, scope, methods and results- what is essential is to preserve, in practice, the idea of a space of regional governance with common instruments and goals -there are not set formulas as to which these should be-. With time, though not lineally or without setbacks, these will nourish the creation of ground rules, different kinds of networks -not just productive ones- and symbols that help citizens identify with the respective regional space and eventually contributing to its potential irreversibility. As for the methodological dimension, it may be adapted to the circumstances and needs that prevail at the different stages of the construction of the corresponding institutionalized regional space, as was propounded by Jean Monnet and the founding fathers of European integration.

It should always be remembered that even when the idea of taking advantage of the crisis to generate forward leaps might seem attractive -and European integration has been enlightening on this regard- it might also lead to leaps in the dark, or to dangerous and costly regressions that would seem most convenient to avoid.


Recommended Reading:


  • Adiga, Aravind, "The White Tiger" (a novel), Free Press, New York-London-Toronto-Sidney 2008.
  • Baccini, Leonardo; Dür, Andreas; Elsig, Manfred; Milewicz, Karolina, "The Design of Preferential Trade Agreements: A New Dataset in the Making", WTO, Economic Research and Statistics Division, Staff Working Paper ERSD-2011-10, Geneva 16 June 2011, en: http://www.wto.org/.
  • Baldwin, Richard, "21st Century Regionalism: Filling the gap between 21st century trade and 20st century trade rules", Center for Economic Policy Research (CEPR), Policy Insight n° 56, London-Geneva, May 2011, on http://www.cepr.org/.
  • Baldwin, Richard; Evenett, Simon J (eds.), "Next Steps: Getting past the Doha Round Crisis", VoxEU eBook, published 28 May 2011, on http://www.voxeu.org/.
  • Barfield, Claude, "The Trans-Pacific Partnership: A Model for Twenty-First-Century Trade Agreements?", American Enterprise Institute for Public Policy Research, International Economic Outlook, N° 2, Washington DC, June 2011, on http://www.aei.org/.
  • Baumann, Renato (org.), "O Brasil e os demais BRICs - Comércio e Política", CEPAL - IPEA, Brasília 2010.
  • Biancareli, André M. "O Brasil e a Integraçâo na América do Sul: Iniciativas para o Financiamiento Externo de Curto Plazo", Instituto de Pesquisa Econômica Aplicada (IPEA), Texto para Discussão 1589, Rio de Janeiro, março de 2011, on http://www.ipea.gov.br/.
  • Castells, Manuel, "Communication Power", Oxford University Press, Oxford-New York 2009.
  • Coetzee, J.M., "Disgrace" (a novel), Penguin Books, London 2008.
  • Conselho Empresarial Brasil-China, "Investimentos Chineses no Brasil. Una nova fase da relação Brasil-China", CEBC, http://www.cebc.org.br/.
  • Docquier, Frederic; Rapoport, Hillel, "Globalization, Brain Drain and Development", Center for International Development at Harvard University, CID Working Paper, N° 219, March 2011, on http://www.hks.harvard.edu/.
  • Estevadeordal, Antoni; Shearer, Matthew; Suominen, Kati, "Regional Integration in the Americas: State of Play, Lessons, and Ways Forward", ADBI Working Paper Series, N° 277, Tokyo, April 2011, on http://www.adbi.org/.
  • Fulponi, Linda; Shearer, Matthew; Almeida, Juliana, "Regional Trade Agreements - Treatment of Agriculture", OECD-IDB, OECD Food, Agriculture and Fisheries Working Papers N° 44, Paris 2011, on http://www.oecd-ilibrary.org/.
  • Giordano, Paolo; Nogués, Julio J.; Piñeiro, Martín (eds), "Proteccionismo agrícola y pobreza en América Latina", Banco Interamericano de Desarrollo, Washington DC, 2010.
  • IPEA, "Inserçâo Internacional Brasileira: temas de política externa", IPEA - Projeto Perspectivas do Desenvolvimento Brasileiro, Livro 3, Volume 1/2, Brasília 2010.
  • Kuper, Simon, "Por qué el euro está en problemas", in La Nación, Buenos Aires, June 17, 2011, page 25.
  • Lamy, Pascal, "Harnessing Global Diversity", 2011 Panglaykim Memorial Lecture on "Harnessing Global Diversity" at the Centre for Strategic and International Studies in Jakarta on 14 June 2011, on http://www.wto.org/.
  • Matar, Hisham, "In the country of men" (a novel), Dial Press Trade Paperbacks, New York 2008.
  • Messerlin, Patrick; van der Marel, Erik, "Polly wants a Doha Deal. What does the trade community think", CUTs International, Jaipur, June 2011, on http://www.cuts-citee.org/pdf/Polly_wants_a_Doha_Deal.pdf
  • Plummer, Michael G., "East-Asia Free Trade Areas? Economic and Policy Considerations", ADBI Working Paper Series, N° 255, Tokio, December 2010, on http://www.adbi.org/.
  • Rogoff, Kenneth, "El euro, en la encrucijada", in El País, Madrid, June 19, 2011, page 22.
  • Roubini, Nouriel, "The eurozone heads for break up", en Financial Times, London, June 13, 2011.
  • SELA, "Las asimetrías en los procesos de integración de América Latina y el Caribe", Sistema Económico Latinoamericano y del Caribe, Secretaría Permanente del SELA, SP-LAPI-ALC-Di N° 12-11, Caracas, June 2011, on http://www.sela.org/.
  • SELA, "La Integración Fronteriza en el Marco del Proceso de Convergencia de América Latina y El Caribe", Sistema Económico Latinoamericano y del Caribe, Secretaría Permanente del SELA, SP/Di, N° 05-11, Caracas, June 2011, on http://www.sela.org/.
  • Telles Ribeiro, Edgard (romance), "O punho e a renda", Editora Record, Rio de Janeiro - São Paulo 2010
  • WTO/IDE-JETRO, "Trade patterns and global value chains in East Asia: From trade in goods to trade in tasks", World Trade Organization and The Institute of Developing Economies (IDE-JETRO), Geneva, June 2011, on http://www.wto.org/.
  • Zhang, Yunling; Shen, Minghui, "The Status of East-Asian Free Trade Agreements", ADBI Working Paper Series, N° 282, Tokio, May 2011, on http://www.adbi.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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