| INTEGRATION, SUPRANATIONALITY, CUSTOMS UNION
Three concepts to be reviewed for the construction of a Mercosur that aspires
to have a future
by Félix Peña
English translation: Isabel Romero Carranza
An initiative such as that announced by Pascal Lamy
on April 13th creating a WTO Panel to analyze the future of global trade
could also make sense in the case of Mercosur. Perhaps the next Summit,
to be held in June under the temporary presidency of Argentina, proves
and opportunity to launch the idea of a top-level think tank that could
present a report at the December Summit, during the temporary presidency
of Brazil. Said report could include concrete proposals on how to adapt
Mercosur to the new global and regional realities, ensuring in this way
the continuation of a construction that will require -so as not to become
watered-down- an update of its work methods and a precise definition of
its future vision.
A work of such scope could include an assessment and
proposals referred to methodology issues that are relevant for the preservation
of the validity of the existential dimension of Mercosur. This means that
they would deal with the issue of how to continue the joint work among
the nations that have decided to combine their efforts in a common project,
in such a way that would prevent the tendency to question the same existence
of Mercosur as a viable regional undertaking from surfacing.
However, there are three concepts that will need to be reviewed in order
to avoid counterproductive rigidities at the moment of tuning the national
interests at stake with the future construction of Mercosur, particularly
taking into account the asymmetries in relative power and economic dimension
between the member countries. These are the concepts of integration itself,
of supranationality and of the customs union.
Gains in flexibility without losses in predictability
that can affect productive investment decisions in terms of the markets
expanded by an integration agreement; efficiency of the mechanisms for
the coordination of national interests starting from what each country
defines as a realistic strategy for the international insertion in a world
with multiple options; a high degree of transparency and social participation
in the development of the integration process. These would seem to be
three recommendations to consider when those attempting to work together
are countries that share a contiguous geographical space and value the
idea of coexisting in a high-quality regional environment, meaning that
it is propitious for peace, political stability, democracy and the economic
and social development of each one of the adjoining nations.
Such as he had anticipated in the Eighth Ministerial Conference last
December, on April 13th the Director General of the World Trade Organization
announced the creation of a WTO Panel to analyze the future of global
trade. At the announcement he pointed out that this panel will be formed
by experts from all over the world and almost every field of endeavor.
Their task will be completed by the beginning of next year, after having
periodic work meetings. (On this regard see the press release number 659
from April 13th, 2012 on http://www.wto.org/).
When making this announcement, Pascal Lamy noted that "The difficulties
we, and many other multilateral institutions, have encountered in recent
years is indisputable proof that yesterday's solutions simply cannot be
applied to the problems we face today". He added that the analysis
entrusted to the group "will spark debate and open new channels of
thinking on how we can best confront the stumbling blocks that today's
rapidly evolving world has strewn in our collective path".
It is thus a timely and necessary initiative, especially considering
that there is the risk that, in the future, the WTO -and its rules- might
become too distant from the real functioning of the international trading
system. Some of the factors that could eventually contribute to this separation
are the subtle and innovative modalities for the protection of the national
markets and a strong trend towards the proliferation of preferential trade
agreements with discriminatory effects -also innovative and subtle- for
the non-member countries. This might be so especially taking into account
the ambiguity in the phrasing of some of the rules (such as, for example,
those in article XXIV, 8 from GATT-1994) that were conceived for a radically
different world to that which is emerging now.
In this sense, on a previous opportunity we have pointed out that "One
of the most important conditions required for the validity, effectiveness
and social legitimacy of an institutionalized international system, either
of regional or global scope, is its ability to adapt to the new realities
that have an impact on its objectives, functions and rationale. This implies
the timely adaptation of its regulations, instruments and rule-making
processes to the continuous changes that are taking place in the context
where they operate and, particularly, in the distribution of power among
the countries that form part of it. This becomes much more necessary if,
as is currently happening, such changes are deep structural ones, meaning,
in historical terms, that they deserve the qualification of "revolutionary".
They mark a clear "before and after" in the evolution of the
international system. In doing so, they might render obsolete concepts,
paradigms, and, above all, institutions and ground rules" (refer
to the October 2011 edition of this newsletter on http://www.felixpena.com.ar/).
Additionally, we stated that in the case of the WTO a joint evaluation
by the member countries of which are the most relevant deficiencies or
inadequacies of the system of rules, collective disciplines and negotiation
mechanisms of the WTO was needed. However and most importantly, there
is a need for realistic proposals on how to overcome these shortcomings
through gradual changes, that is, through some sort of systemic metamorphosis.
Thence, for such purpose we suggested that as a result of the Eighth Ministerial
Meeting -that was going to take place in December of 2012- a step in the
right direction would be to "commission a report to a group of experts
at the highest level and of notorious practical experience in international
However, something that we alerted then is still valid after Pascal Lamy's
announcement: such initiative will be positive only "under the condition
that it meets a different fate than that of the Sutherland Report which,
in spite of the wealth of its contents, never had a proper follow-up and
ended up being archived." (For the full text of the report of the
commission presided by Peter Sutherland entitled "The future of the
WTO: Addressing institutional challenges in the new millennium" published
in Geneva in 2004 go to http://www.wto.org/).
In our opinion, an initiative such as that announced by Pascal Lamy for
the WTO could also make perfect sense in the case of Mercosur (on
this respect see our analysis in the February 2012 edition of this newsletter).
Perhaps the next Mercosur Summit, to be held in June under the temporary
presidency of Argentina, could prove an opportunity to launch the idea
of a task force at the highest level -led, for example, by a former President
of one of the member countries- that could present, in the following December
Summit during the period of the temporary presidency of Brazil, a report
with concrete and realistic proposals on how to adapt Mercosur to the
new global and regional realities, ensuring in this way the continuity
of a construction that requires the updating of its work methods and especially
a precise definition of its future vision.
An exercise of such scope could contain assessments and proposals related
with methodology that are relevant for the preservation of the validity
of the existential dimension of Mercosur. This means that they are related
with the issue of how to continue the joint work among the nations that
have decided to combine their efforts in a common project in a manner
that prevents the tendency to question the existence of Mercosur as a
viable regional undertaking from surfacing. The debate that can be observed
on this regard, for example in Uruguay, is indicating that this tendency
is indeed real.
The acronym Mercosur allows for a division of the necessary diagnostic
into three levels that are susceptible of a separate but, at the same
time, simultaneous analysis. The first level refers to a common space,
the second to a strategic idea and the third, to a process.
As a common space (geographical, political, economic or cultural) Mercosur
shows a picture of variable geometry in its respective spaces. This can
even be traced back to the origin of the name. In fact until the last
moment of the drafting of the text that would be subscribed by the negotiators,
the first article referred to a Common Market of the Southern Cone. At
the request of the Brazilian negotiator, the word "cone" was
dropped. It was left open to the possibility of a potential South American
scope, which was further on recaptured by UNASUR. Sometimes it has even
been noted that, as an economic space, Mercosur is a network of just about
twenty large cities that spans from Belo Horizonte, Sâo Paulo and
Rio de Janeiro, in the north, to Montevideo, Buenos Aires and Santiago
de Chile, in the south. At least, some years ago it was understood that
this network concentrated more than 70% of the population with the highest
income level as well as of the production of goods and services of the
region. Due to its radiation effects, it may be considered that the political
space of Mercosur projects itself to the whole of South America as a hard
core of peace and democratic stability for the region.
As a strategic idea, Mercosur reflects the will to work together of nations
sharing a geographical space. It succeeds in making cooperation counteract
any trends towards fragmentation. It reflects as well the willingness
to place the aims of the economic and social development of democratic
countries in a common regional governance matrix that facilitates productive
integration and maximizes the negotiation capability in international
trade relations, with other nations or economic blocks.
At the same time, as a process, Mercosur is the name given to a system
of objectives, institutions and ground rules aimed, precisely, at materializing,
with time, the strategic idea between nations that share spaces of variable
The experience accumulated since its creation in 1991 -and even before
if we consider the period of bilateral integration between Argentina and
Brazil, triggered between 1985 and 1986 by the vision of presidents Alfonsín
and Sarney- proves that as a common space and strategic idea Mercosur
has maintained its validity. It is difficult to question the membership
of its countries to a "neighborhood", or to doubt the advantages
of the prevalence of peace and political stability and the will to work
in a cooperative manner.
In turn, it would seem that the greatest inadequacies arise when we evaluate
the quality of Mercosur as a process aimed at achieving common goals that
are functional to the national interests of each member country. The deficiencies
in the mechanisms for the agreement of national interests, the precariousness
of the ground rules and the discordances in the respective economic policies
are some of the traits that influence the appraisal that citizens, businessmen,
workers, analysts and third countries, among others, make of the quality
of the process named Mercosur.
Such appraisals are more complex when those making them are summoned
to materialize productive investments in relation to the market expanded
by the rules of the process. Within a context of marked differences between
the relative economic potential of the four partners, the effect of productive
investments of a low quality Mercosur has a relevant political connotation
in that fewer citizens in the respective countries can correlate the common
project with their sources of employment, their level of wellbeing and
their outlook for the future.
In the adaptation of Mercosur to the new regional and global realities
-similar to that being made today by the EU member countries and to that
which the WTO countries will have to undertake, probably urged by the
G20- there are some advantages. One of them is the experience of over
twenty years in the institutional construction and joint work. The other
is that many paradigms, models and formulas for the integration of countries
in a common space, sometimes conceived almost as religious dogmas, are
becoming outdated due to the speed and depth of the changes taking place
in the international system and in particular in the global economic competition.
This facilitates the work for Mercosur's adaptation, maximizing the principle
of "freedom of organization" -that, among others, was advocated
by the Italian internationalist Angelo Piero Seregni - in the definition
of the aims and mechanisms to be used for the joint work of nations sharing
a given physical space and strategic objectives. The limitations to said
principle derive from the prevailing interpretation of the national interests
and of the respective legal systems of each country; from other international
commitments -for example within the WTO-, and from the conjoint goals
and the times allotted for the development of the strategic idea of joint
work. It is clear that the assets accumulated in the years of validity
of the Treaty of Asuncion have a bearing as well. This is certainly ample
enough so as to allow many adaptation modalities for the fulfillment of
its foundational goals.
However, there are three notions that will need to be re-examined in
order to avoid any counterproductive rigidities at the moment of harmonizing
the national interests at stake in connection with the future construction
of Mercosur, taking into account in particular the existing asymmetries
in relative power and economic dimension between the member countries.
The first notion is the very same concept of integration. At times a
monist vision seems to prevail, which leads to envision the result of
the process as the creation of a new political or economic unit in the
international system. On the contrary, it would seem more advisable a
perspective that emphasizes integration as a plurality of States that
share common goals and institutions without resigning their respective
sovereignties. In this case, the key elements of the integration concept
will refer to the density of connectedness (physical and economic), to
the degree of compatibility between the respective political and economic
systems and to the predictability in the behavior of the countries, especially
in the compliance of what is agreed.
The second concept is that of supranationality. It is often associated
with yielding sovereignty to common institutions. In such case it is the
result of the monist vision of the integration between nations. Somewhat,
the implicit model is often the conformation of a federal state or confederation,
something like a new nation. However, even in the experience of the European
Union, the concept of supranationalism is further referred to the idea
of sharing the exercise of the respective sovereignties -in the sense
of accepting the restrictions on its discretionary exercise- with institutions
aimed at facilitating the dynamic coordination of national interests for
mutual gain. This is why by forming part of this kind of process no country
resigns the sovereign right to eventually leave the common undertaking.
Finally, the third concept is that of the customs union. What has been
learnt form theory usually prevails in its definition, especially when
related to international trade. It corresponds then to the monist view
of integration that can trace its precedent back to processes such as
those that led, for example, to the emergence of Germany as a federal
state. Nevertheless, if the principle of freedom of organization is applied
those countries that decide to articulate their economies -with a pluralist
outlook and not necessarily a monist one- may take the greatest advantage
of the ambiguities that characterize the only legal international instrument
limiting the creation of a customs union, the abovementioned Article XXIV,
paragraph 8, of GATT-1994.
Gains in flexibility without losses in predictability that can affect
productive investment decisions in terms of the markets expanded by an
integration agreement; efficiency of the mechanisms for the coordination
of national interests starting from what each country defines as a realistic
strategy for the international insertion in a world with multiple options;
a high degree of transparency and social participation in the development
of the integration process. These would seem to be three recommendations
to consider when those attempting to work together are countries that
share a contiguous geographical space and value the idea of coexisting
in a high-quality regional environment, meaning that it is propitious
for peace, political stability, democracy and the economic and social
development of each one of the adjoining nations.
- Abreu, Sergio, "La relación bilateral con Argentina: una
visión objetiva", Consejo Uruguayo de Relaciones Internacionales,
Análisis del CURI, N° 01/12, Montevideo, 16 de marzo 2012,
- Baumann, Renato; Ng, Francis, "Integraçâo Produtiva.
Complementaridade produtiva regional e competitividade", en RBCE
(FUNCEX), janeiro/março de 2012, ps. 22 a 43.
- Ferrantino, Michael, "Using Supply Chain Analysis to Examine
the Costs of Non-Tariff Measures (NTMs) and the Benefits of Trade Facilitation",
WTO, Research and Analysis, Geneva, 15/02/2012, en: http://www.wto.org/.
- Freeman, Lawrence; Gamba, Virginia, "Señales de Guerra.
El conflicto de las Malvinas - 1982", Editorial El Ateneo, Buenos
- FUNCEX, "Revista Brasileira de Comércio Exterior",
Fundaçâo Centro de Estudos do Comercio Exterior (FUNCEX),
RBCE, Rio de Janeiro, Ano XXV, janeiro/março de 2012 (http://www.funcex.org.br/).
- Huchet-Bourdon, Marilyne; Korinek, Jane, "Trade Effects of Exchange
Rates and their Volatility: Chile and New Zealand", OECD Trade
Policy Working Papers, N° 136, Paris, March 2012, en: http://www.oecd-ilibrary.org/.
- Kassum, Julian, "The G20. What it is. What it does. A business
guide", International Chamber of Commerce (ICC), Paris 2012.
- Lamy, Pascal, "The Changing WTO Landscape: changes in trade challenges
how we manage trade policies", WTO, DG Speeches, Speech at the
Japan Institute of International Affairs, Tokio 16 March 2012, en: http://www.wto.org/.
- McLinden,Gerard, "Collaborative Border Management: A New Approach
to an Old Problem", World Bank, Economic Premise, Number 78, Washington
DC, April 2012, en: http://siteresources.worldbank.org/.
- McLinden, Gerard; Fanta, G.E.; Winddowson, D.; Doyle, T, "Border
Management Modernization Handbook", World Bank, Washington DC.,
2011, en: http://issuu.com/.
- Nkuepo, Henri, J., "African Countries and the New Generation
of Non-Tariff Barriers: "Standard-takers", "Standard-Compliers"
and "Standard-Victims"", WTO, Research and Analysis,
Geneva, 15/03/2012, en: http://www.wto.org/.
- Parlamento Europeo, "Una nueva política de cooperación
para el desarrollo de la Unión Europea con América Latina",
Dirección General de Políticas Exteriores, Departamento
Temático, Bruselas, diciembre 2011.
- Preston, Félix, "A Global Redesign? Shaping the Circular
Economy", Chatham House, Briefing Paper, EERG BP 2012/02, March
2012, en: http://www.chathamhouse.org/.
- Ruta, Michele; Venables, Anthony, "International Trade in Natural
Resources: practice and policy", WTO, Economic Research and Statistics
Division, Staff Working Paper ERSD-2012-07, Geneva, March 2012, en:
- Torres, Raúl A., "Use of the WTO trade dispute settlement
mechanism by the Latin American countries - dispelling myths and breaking
down barriers", WTO, Economic Research and Statistics Division,
Staff Working Paper ERSD-2012-03, Geneva, February 2012, en: http://www.wto.org/.
- Wise, Timothy A.; Gallagher, Kevin P., "US.Trade Policy: Still
Waiting for a "21st Century Trade Agreement"", LATN,
Red Latinoamericana de Política Comercial, SerieBrief 67 - Buenos
Aires, Agosto 2011, en: http://www.latn.org.ar/.
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