| NATIONAL INTEREST, SOVEREIGNTY AND INTERNATIONAL
A tension that becomes more evident in times of economic crisis.
by Félix Peña
English translation: Isabel Romero Carranza
During periods where turbulence and uncertainty affect
the growth of the international economy, such as the one experienced in
recent years, there is a dilemma that, in one way or the other, is usually
present at the moment of approaching the foreign trade policies of a country.
This is a dilemma that results from having to choose between what a government
considers that needs to be done in the area of foreign trade and what
it can actually do in accordance with the commitments undertaken with
other countries, or even with what is established by its own domestic
This issue arises due to the fact that, sometimes,
the measures that are considered necessary -as a consequence of the interpretation
of the economic or political situation or, more frequently, a combination
of both- are in contradiction with the formal commitments agreed with
other nations, either through international trade agreements or regional
integration ones. This means that they collide with what has been established
by freely agreed international rules which, in general, presuppose the
reciprocity of the benefits derived from them.
In real life the difference between what is desirable
and necessary and what is possible, as an eventual dilemma at the time
of applying trade policies that may be considered protectionist or against
the convened rules, requires to take into consideration the balance of
relative power between a country and those others who may consider themselves
affected by the measures applied. The more relative power a country hold,
the greater the trend to view the interpretation of the international
commitments in the light of its own sovereign interests.
In a growingly interdependent world, with asymmetries
of relative power, multiple crossed interests and complex transnational
productive networks, the majority of the countries attempt to, at least,
appear as faithful adherents of the agreed rules. However they assume
that, in reality and in the measure that is possible, when the circumstances
call for it they will exert their national sovereign power. In such cases
it will be the task of government experts to present such exercise of
national sovereignty as consistent with the agreed international commitments.
In international trade relations of recent decades there has always
been a tension between the countries' national interests and sovereignty,
on the one hand, and the commitments entered into within the framework
of international agreements, either global or regional, on the other.
This is a tension that becomes still more evident when the world economy
experiences periods of strong systemic crisis.
In fact, it is during those times when turbulence and uncertainty affect
the growth of international economy, such as has been the case of recent
years, that the dilemma tends to sharpen and, in one way or the other,
is often present at the moment of approaching the foreign trade relations
of a country. It is made worse precisely because every economic crisis
has its bearing on the definition of winners and losers, among the countries
that participate in global economic competition and among those competing
within local economies as businessmen, workers or consumers.
It is a dilemma that results from having to choose between what a government
considers needs to be done in the area of foreign trade and what it is
supposed to do in order to comply with the commitments assumed with other
countries, or even with what is prescribed by its own domestic laws.
The effect of an international crisis on the behavior of a national economy
and, in particular, on the level of employment -and thus, on the morale
of citizens- sometimes leads to the need to restrict the flows of imported
goods. It can also lead to adopt different kinds of measures, even imaginative
ones and inconspicuous in the measure that is possible, that in practice
help administer the density and, eventually, the origin of the foreign
Such need can be caused by a number of reasons, among which is the pressure
from those whose interests are apparently affected, such as businessmen
and workers who demand protection. It can also be induced by the difficulties
to finance eventual foreign trade imbalances. These are reasons that that
can lead to many controversies, whose origin can be found in different
values and interests, ideologies or the requirements of the domestic political
game. The latter holds especially true when an election process is under
The problem that usually arises is that sometimes the measures that a
government considers necessary -in relation to its own interpretation
of the economic or political realities or, more frequently, a combination
of both- are in obvious contradiction with the formal commitments assumed
with other nations, either within the sphere of international trade agreements
(such as the GATT-WTO) or in that of regional integration agreements (for
e.g.: Mercosur). This means that they clash with the regulations of freely
agreed international legal rules and that, in general, presuppose the
reciprocity of he benefits derived from them. Moreover, these are regulations
that not always have the necessary flexibility required to contemplate
situations of economic emergency. For example, they lack safety valves
that can be easily applied under certain circumstances.
As a consequence, the respective measures can give way to complaints,
for example within the framework of the mechanisms for dispute settlement,
such as the ones that exist in the WTO and Mercosur, among many others.
Sure enough, the time needed for the application of a dispute settlement
mechanism and of its eventual results could be longer than those of the
practical necessities that lead to the application of the measures that
may be the object of eventual complaints.
This is the reason why sometimes governments tend to apply measures that
can be considered restrictive, even knowing beforehand that they may be
subjected to future claims in relation to the international legal commitments.
(See, for example, the article by Sergio Leo entitled "Liçôes
de una guerra cambial", in Valor Econômico of 5 March, 2012,
where he points out that "in the case of trade policies, there are
members of government who, in private. admit that they are ready to impose
barriers on imports even if these are in contradiction with the international
commitments assumed by the country, such as the WTO -this was evident
in the case of the increase of the Industrialized Products Tax(IPI) applied
on imported cars" -translation is ours-. Sergio Leo is a thoroughly
informed journalist. What he claims in this article in the case of Brazil
could probably be applicable to members of governments in other countries).
Additionally, the measures that are implemented can also give room for
commercial retaliation. This is the type of scenario where "if the
other protects itself, I must do likewise". This has been very frequent
in the past, even in the spiraling path towards some relevant political
conflicts which have ended in war.
In real life, the difference between "want or need to do" and
"can do" as an eventual dilemma at the moment of implementing
trade policies that may be perceived as protectionist or contrary to what
was agreed, requires to consider the balance of relative power between
a country and that or those who may consider themselves affected by the
measures being applied.
This is something that can be measured in terms of how expendable the
trade and investments flows coming from the respective countries are for
both parties affected by the trade restriction. Eventually, the degree
of commercial expendability may be compensated by the geopolitical value
that the country which adopts the restrictive measures has for the country
that considers to be affected. This would explain certain policies of
"strategic patience" that are normally followed in these cases
The more relative power a country has, the greater the tendency to place
the international commitments in the frame of the respective national
sovereignty. Thus, the limits of an institutionalized international trading
system, either global or regional, are made evident. Not long ago, in
Buenos Aires, when Lula was still President he candidly illustrated this
point. When referring to Mercosur -and in the improvised section of a
speech full of analysis and proposals on the regional undertaking within
the scenario of world economy- he held that: "If we pair together
the interests of Argentina and Brazil, plus the interests of emerging
countries such as ours, the interests of South America, -we have to build
consensus in the measure that is possible in order to face the world together,
defending the same flag- we could make a difference in international negotiations.
Obviously, without giving up each country's sovereignty and signing the
bilateral agreements that each country thinks best. That we will not discuss,
because the sovereignty of countries is not to be touched, the sovereign
interests of each State are off limits, but we can build many things together"
-translation is ours-. It was a clear message for Argentine businessmen
on what, in his opinion, were the limits of the commitment between Mercosur
countries: national sovereignty is out of bounds. (For the full text of
the speech given at a bi-national meeting of Argentine and Brazilian businessmen
on 4 August 2008, on http://www.itamaraty.gov.br/).
One of the advantages of presidential diplomacy is that it sometimes allows
Heads of State to express frankly what sometimes is not explicitly acknowledged.
Specifically, in a time when there are many countries that resort to restrictive
measures of world trade, it is quite difficult that the competent government
authorities openly recognize that, above the legal commitments assumed,
for example, within the WTO or Mercosur, lie the national interests such
as they are interpreted in a given moment by the corresponding government
On the contrary, what would be reasonable would be that foreign trade
policies and any measures that impact foreign trade are formally presented
as being consistent with the ground rules agreed at the international
level. Even the respective measures are designed in a way that makes it
very difficult to point out any inconsistency with what has been agreed.
The norm could be expressed as "its bite is worse than its bark".
This is the reason why governments often have the best specialists in
international trade rules among their ranks of officers and consultants.
In a growingly interdependent world, with asymmetries of relative power,
multiple crossed interests and complex transnational productive networks,
the majority of the countries attempt to, at least, appear as faithful
adherents of the agreed rules. They presuppose that, in real life and
in the measure that is possible, when circumstances call for it national
sovereignty will prevail. In this case, it will be the task of government
experts to present such exercise of national sovereignty as consistent
with the agreed international commitments.
A recent initiative by the government of President Obama shows the growing
sensitivity to the "unevenness of the playing field" in world
trade. We are referring to the creation of the Interagency Trade Enforcement
Center for the coordination of those agencies with competence to monitor
and enforce the U.S. rights under international trade agreements, as well
as domestic laws. (For the full text of the executive order and its rationale,
go to http://www.whitehouse.gov/).
The creation of this agency has been interpreted as a decision aimed
at taking action when those who compete against the United States do not
"play by the rules". The measure comes at a time when there
are clear signs of an increased tension in trade relations between China
and the US, in particular due to a recent Congress bill that has a bearing
on the defensive trading measures applied to products coming from China.
(On this regard refer to the articles of the Bridges Weekly Trade News
Digest: "White House Trade Momentum Builds as Election Heats Up",
, Volume 16 - Number 8 - 29th February 2012, on http://ictsd.org/
and "US Congress Takes Aim at Beijing, Preserves Anti-Subsidy Tariffs",
Volume 16 - Number 9 -7th March 2012, on http://ictsd.org/.
For a version from the Chinese side on the measures adopted by the American
Congress in relation to the subsidies granted in an economy that is not
considered necessarily to be a market economy see "Chinese lawmakers
slam U.S. trade bill as protectionism" in Xinhua News - 8th March
2012, on http://news.xinhuanet.com/.
On trade defensive measures in relation with imports from China and the
difficulties that show up in practice, see the article by Assis Moreira,
"Países reforçam defesa comercial contra importaçâo
da China", in Valor Econômico from 5 March 2012).
The fact is that the importance of two key points is becoming more increasingly
evident: on the one hand, the strengthening of the institutional frameworks
of international trade - global, regional and, increasingly, inter-regional-
and their adaptation to the current realities; on the other hand, the
introduction of flexible criteria and mechanisms that allow to take in
consideration the economic emergencies of countries and, in particular,
of those who could be most affected by the asymmetries in relative power
and level of development. (On this regard refer to the previous editions
of this Newsletter of January,
of 2009; June,
of 2011 and January of 2012 on www.felixpena.com.ar). It also shows the
need to address those policies and measures that configure what has been
called the "currency wars", especially within the WTO. An initial
approach to this issue will take place at a WTO seminar in late March.
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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