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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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DIALOGUE BETWEEN TWO REGIONS IN PROFOUND TRANSFORMATION
The challenges facing the upcoming Cadiz and Santiago de Chile Summits

by Félix Peña
June 2012

English translation: Isabel Romero Carranza


 

At an inter-regional level, when the Latin American political leaders soon meet with their European counterparts, they will have the opportunity to prove that the Summit diplomacy still has the necessary strength to produce efficient outcomes or, at the very least, media ones. We are referring to the summits of the Ibero-American interregional space, to be held in Cadiz in November, and of the Euro-Latin American space, that will take place in Santiago de Chile, in January 2013. In these opportunities, the leaders at the highest political level of two regional spaces that have experienced profound transformations since the moment of the creation of the Summit system are expected to meet.

Nowadays, the European space has become enlarged with the addition of new member countries, especially those of Eastern Europe. It is also a regional space that, during the last four years, has experienced the unequal effects of a deep economic and financial crisis that has also had systemic connotations in the local political life of several of the countries that form part of the European Union. Today, the very same idea of integration is being questioned. The crisis has translated into a heated debate on the methods to be used to continue and eventually deepen the European construction.

At the same time, the Latin American interregional space has also experienced deep transformations during the last two decades. These can be seen at a local level in the respective political and economic systems where, even when democracy seems more consolidated, the expectations regarding the economic and social development of each country and the options for their insertion in the world economy show differences in many cases. There are also different approaches as to how to face the respective strategies for Latin American integration.

Possibly, the main outcome of the Santiago Summit would be the conclusion -or at least a substantial progress towards it- of the much postponed agreement of cooperation between the European Union and Mercosur. This could be feasible, but it will greatly depend on that the strategic purport of the agreement manages to permeate all aspects of the negotiation, including of course those related with trade.


In times of marked uncertainties and of frequent turbulences, such as those we are unquestionably experiencing today, it is usual for societies to expect that their leaders provide guidance on how to overcome critical situations and on how to build a future that today seems uncertain and, sometimes, even worse than the present. When citizens fail to perceive such leadership they become outraged or even rebellious.

At the international level, these social expectations focus on the summits that take place periodically with the participation of the political leaders of a region or an interregional space (or even multiregional, such as the case of the G290). The frequency with which the different summits take place and their sometimes unclear results may account for certain deterioration of their image and credibility before the public opinion. In spite of this, they constitute meetings at the highest political level where the exercise of leadership is expected, if possible a collective one, aimed at overcoming eventual crises by indicating possible ways in which through joint action a group of nations may attain the goals of governance (peace and political stability) and a sustainable economic and social development (welfare, equality and employment).

At the interregional level, the Latin American political leaders when meeting with their European counterparts -and in the midst of the current economic and financial crisis that is especially affecting Europe- will soon have the opportunity to appreciate and demonstrate that the diplomacy of the summits still has the necessary strength to produce effective results or, at least, media ones. This will be the case of the Summit of the Ibero- American regional space that will take place in Cadiz, Spain, on November 16th and 17th (http://segib.org/), and that of the Euro-Latin American interregional space, that will be held in Santiago de Chile on January 26th and 27th, 2013. (http://www.minrel.gob.cl/).

A significant number of the political leaders of the regional spaces that have experienced deep transformations since the moment when the system of summits was launched -the first Ibero-American Summit took place in 1991 in Guadalajara, Mexico, and the first LAC-EU Summit was held in Rio de Janeiro in 1999- are expected to meet at the highest political level on these occasions.

We are referring to two different spaces but which share, on the one hand, the participation of a significant group of Latin American countries -in terms of economic dimension, relative power and population- and, on the other hand, of two European countries -Spain and Portugal- with strong ties and interests in Latin America and with the recurring aspiration of voicing the region's interests before other EU countries.

Nowadays, the European space has become enlarged with the addition of new member countries, especially those of Eastern Europe. It is also a regional space which, during the last four years, has experienced the unequal effects of a deep economic and financial crisis that has also had systemic connotations in the local political life of several of the countries that form part of the European Union. Today, the very same idea of integration is being questioned. The crisis has translated into a heated debate on the methods to be used to continue and eventually deepen the European construction.

At the same time, the Latin American space has also experienced deep transformations during the last two decades. These can be seen at a local level in the respective political and economic systems where, even when democracy seems more consolidated, the expectations regarding the economic and social development of each country and the options for their insertion in the world economy show differences in many cases. There are also different approaches as to how to face the respective strategies for Latin American integration. There has been some progress in the construction of regional institutional frameworks, such as the cases of the Community of Latin American and Caribbean States (CELAC) and the Union of South American Nations (UNASUR) in the South American regional space (http://www.unasursg.org/). At the same time, in terms of the deep integration processes, there is a more diverse patchwork with a network of preferential trade agreements within the framework of the Latin American Integration Association (ALADI) (http://www.aladi.org/) and sub-regional agreements with different degrees of compliance and effectiveness -such the cases of Mercosur (http://www.mercosur.int/), the Andean Community (http://www.comunidadandina.org/), the Central American Integration System (SICA) (http://www.sica.int/), the Caribbean Community (CARICOM) (http://www.caricom.org/), and of the recently announced Pacific Alliance. We could also add the Bolivarian Alliance (ALBA) (http://www.alianzabolivariana.org) and the Latin American Economic System (SELA) (http://www.sela.org/).

However, in this opportunity, the possibility of manifesting the strength and efficacy of the respective systems of interregional summits will depend greatly on the interest expressed by the political leaders from Spain and Portugal, on one case, and of the European Union, on the other, in reaffirming the idea and updating the goals of the corresponding interregional association (existential dimension) and in renewing the modalities of joint work (methodological dimension).

This seems to be so given that, unlike during the two decades elapsed since the beginning of the interregional summit system, today many of the relevant players of the global economic competition are interested in building closer relations with Latin American countries. The growing and active presence of Asia -China in particular- in Latin America is evidence of a deep structural change in the international insertion of each one of the Latin American countries. (On this regard, see the recent book by Rosales and Kuwayama listed as recommended reading of this newsletter). Today these countries have multiple options regarding their international insertion strategies, even when there is also an evident interest in ensuring the right counterbalance to each one of the existing options.

The abovementioned change is also expressed through various trends that anticipate the future and which go beyond trade, made manifest through direct investments -particularly of Chinese origin- in several sectors such as hydrocarbons, energy, food, construction, and finance and automotive, among others. In this last sector, the long term trend is beginning to show in investments aimed at installing production facilities, especially in Brazil due to its relative weight, such as the case of the company Chery. These are facts that anticipate a trend that would seem to be strong and irreversible and that might be signaling -at least in South America- the end of a long era of direct investments originating mainly in Europe and the U.S.

Maybe for the first time since the start of the interregional summits the countries of Latin America are beginning to show a more assertive attitude and seek to promote multiple options in the range of their international economic relations. Also for the first time, several countries of the European region are undergoing deep crises and probably have more immediate priorities than those related with renewing or deepening their alliances with other regions. On the other hand, the crisis of European integration has strengthened Latin America's idea that there are no single models on how to approach the joint work of nations that share a same regional geographic space. On the contrary, it is increasingly being considered that even Europe might have something to learn from the apparent unorthodox methods used by Latin American countries to guarantee a reasonable governance of their own regional space and integrate their markets.

What would then be reasonable to expect from the two upcoming interregional summits? What would be their most valuable results?

In the case of the Cadiz Summit, there are three outcomes that could contribute to its success. Working for their fulfillment is one of the priorities that will require a great attention from the political leadership on both sides of the Atlantic.

The first of the successful outcomes would be that Spain is able to demonstrate that it still preserves its convening power. This would mean that the representatives at the highest political level of a great number of countries attend the Summit. In this sense, many Heads of State were absent at the past Asuncion Summit.

The second relevant result would be to reaffirm the reasons that justify the existence of a differentiated Ibero-American space in the international system. These are reasons that are directly related to the Ibero-American cultural identity and its significance as an input for political coexistence in a growingly global international system increasingly characterized by diversity.

Finally, the third result would be related to the renewal of the work methods within the Ibero-American community of nations. This would include a significant strengthening of the Ibero-American General Secretariat as a key factor of the system and certain changes in the modalities of preparation and periodicity of the summits, which have had an annual frequency since their start.

In turn, in the case of the Santiago de Chile Summit, one significant result would be that the usefulness of CELAC is made manifest in order to enable Latin America to express itself under one voice, if possible, or at least with a certain degree of coordination. However, the most relevant result would probably be the conclusion -or at least some substantial advances towards it- of the postponed association agreement between the European Union and Mercosur.

This would be feasible but would greatly depend on three factors, which would be viable under the condition that the negotiation clearly evinces the sufficient political will. The strategic purport of the agreement that is achieved should permeate every aspect of the negotiation including, most certainly, trade.

The first factor is that the EU countries -or at least those that are more relevant for this transatlantic relation, for example due to the size of their direct investments in Mercosur countries- reaffirm their political will to conclude a bi-regional agreement, setting aside any temptation to fall back into bilateral agreement modalities with some of the Mercosur member countries. There are many reasons that would advise against this latter option. However the main ones are related to the political aspects. Any attempt to divide Mercosur countries may stir trends towards the fragmentation of the South American space. This would not seem convenient for any of the parties involved.

A second factor is that the dogmatic idea of an agreement that includes, from the start, an ambitious coverage in terms of trade liberalization of goods and services is cast aside. A gradual progress towards a broader coverage, that eventually includes the more sensitive sectors, could be made by including evolutionary clauses and ingenious safeguard mechanisms. These would be compatible with a possible interpretation of article XXIV, paragraph 8 of the GATT, in which the legal rigor could be combined with the flexibilities derived from political savvy.

Finally, the third factor is that creativity and the learning experiences accumulated in all these years are used in the approach of other sensitive issues of the negotiating agenda, such as direct investments. On this regard, an idea based on experience would be to link the access to the protection system for direct foreign investments that is eventually included in the bi-regional agreement with the compliance, on the side of the investors, of a code of conduct that includes strong elements of transparency and social responsibility, understood in a broad sense. In this way, a precedent could be created that would lead to a renewal of the current and obsolete system for the protection of investments -centered in a vast network of bilateral agreement signed in other circumstances and in the role that has been attributed to the ICSID-, facilitating to overcome the credibility and legitimacy gap that can be observed in many countries and social sectors.


Recommended Reading:


  • Brill, Alex M; Glassman, James K., "Who Should the Twenty Be? A New Membership System to Boost the Legitimacy of the G20 at a
    Critical Time for the Global Economy", National Tax Payer Union, June 14, 2012, on http://www.ntu.org/.
  • Doctoroff, Tom, "What Chinese Want. Culture, Communism, and China's Modern Consumer", Palgrave McMillan, New York 2012.
  • Evenett, Simon J.(ed.), "Débâcle: The 11th GTA Report on Protectionism", Global Trade Alert, Centre for Economic Policy Research (CEPR), London, June 2012, on http://www.globaltradealert.org/.
  • Ferguson, Niall, "Civilización. Occidente y el resto", Debate, Buenos Aires 2012.
  • Gardini, Gian Luca, "The Origins of Mercosur. Democracy and Regionalization in South America", Studies of the Americas, Palgrave McMillan, New York 2010.
  • Kicillof, Axel, "de Smith a Keynes. Siete Lecciones de Historia del Pensamiento Económico. Un análisis de los textos originales", Eudeba, Buenos Aires 2011.
  • Lamy, Pascal, "Rise in trade restrictions now alarming", WTO Director-General Speech, Informal Meeting of Heads of Delegations, June 7, 2012, on http://www.wto.org/. See also Pascal Lamy Speech about protectionism, Bangkok, Mai 30, 2012, on http://www.wto.org/.
  • Le Fur, Bertrand, "Miradas sobre el Mercosur. A 20 años de la firma del Tratado de Asunción", Documental producido por Fundación Polo Mercosur e Institut des Amériques, Montevideo 2011, on http://www.polomercosur.org.
  • Lewis, Robin; Dart, Michael, "The New Rules of Retail. Competing in the World's Toughest Marketplace", Palgrave McMillan, New York 2010.
  • Ortega, Andrés; Pascual-Ramsay, Angel, "¿Qué nos ha pasado" El fallo de un país", Galaxia Gutenberg, Círculo de Lectores, Barcelona 2012.
  • Parent, Joseph M., "Uniting States. Voluntary Union in World Politics", Oxford University Press, Oxford - New York 2011.
  • Rosales, Osvaldo; Kuwayama, Mikio, "China y América Latina y el Caribe. Hacia una relación económica estratégica", CEPAL, Santiago de Chile 2012.
  • Rufin, Jean-Christophe, "Le Grand Coeur", Roman, Éditions Gallimard, Paris 2012.
  • Sánchez Adalid, Jesús, "Alcazaba", Novela Histórica, Ediciones Martínez Roca, Madrid 2012.
  • Schweller, Randall L., "Unanswered Threats. Political Constraints on the Balance of Power", Princeton University Press, Princeton and Oxford 2008.
  • WTO-OECD-UNCTAD, "Reports on G20 Trade and Investment Measures (Mid-October 2011 to Mid-May 2012", 31 May 2012, on http://www.wto.org/.
  • WTO, "Trade Policy Review: China", Geneva, 12 and 14th June 2012, on http://www.wto.org/.
  • WTO, "WTO Annual Report 2012", Geneva 2012, on 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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