| COUNTRY STRATEGY, QUALITY RULES AND PRODUCTION
NETWORKS: Three conditions for the construction of a regional space for
by Félix Peña
English translation: Isabel Romero Carranza
Currently Mercosur is experiencing the end of a stage
and the transition to a new stage not yet precisely defined. There are
three conditions that will be needed in order to make the leap to a more
solid and efficient construction, with the potential to grasp the interest
of citizens due to its ability to generate mutual gains for each of the
countries involved while taking into account the diversities that characterize
Such conditions are: the national strategy for the
development and international insertion of each participating country;
the quality of the ground rules and institutions; and the production chains
of transnational scope. It would seem advisable that these issues are
present in the necessary national debate agendas that each country interested
in continuing to be a member, or willing to become one, should stimulate
in order to define the strategies and methodologies of Mercosur's new
The three conditions are interrelated and when combined
they enable to face realistic and flexible trade negotiation strategies
with other countries and regions. Without a national strategy it will
be difficult for a country to benefit from the decisions that are taken
to guide the integration process and to generate its ground rules. Without
ground rules that are effectively enforced it will be hard to gain flexibility
and, at the same time, make companies invest in terms of the enlarged
market. Without productive investments, especially within the context
of cross-border value chains, it will be difficult for the benefits expected
from the process of integration to be present in a stable manner, especially
those of strongest social impact due to their incidence in job creation
and in the citizens' identification with the idea of a shared region.
It will be harder still to establish international trade relations that
are favorable for the development and productive transformation of each
country in the region.
Reflecting on the conditions that enable the development of integration
processes in regional geographic areas in a way that they generate a predictable
picture of mutual gains for the participating countries has a strong practical
This is certainly true for Europe and especially true for South America.
Mercosur's transition to a new stage with still uncertain institutional
profiles and work methods increases the need to think how to design, based
on the acquired experience and capitalizing on the accumulated assets,
integration strategies and methods to generate benefits that are perceived
as advantageous by the different countries and, in particular, by their
This task will not be easy. Since its creation in 1991 the gained experiences
and assets have value, for example, in terms of relatively guaranteed
preferential access to the respective markets and of a budding productive
integration. At times Mercosur was even perceived as being successful
and enthusiasm could be noticed.
However, many frustrations have also added up. These have their origin
in the difficulties of a joint undertaking that requires combining very
different national interests within a context of multiple asymmetries,
particularly in the relative economic dimension. It is mandatory to acknowledge,
however, that such frustrations can also be explained by a relative tendency
to produce media events -at the moment deemed as "historic"
by the respective protagonists- that have ended up generating an image
of a "showcase integration" (making parallelism with the expression
"showcase modernization" used by the well-remembered Fernando
Fanjzylber), in which appearances would seem to prevail over reality.
These frustrations may account for the indifference and even the rejection
of the idea of regional integration by sometimes quite large sectors of
some of the involved countries. This phenomenon also manifests itself
with different intensities -though not always for the same reasons- in
countries who are members of the European Union.
The context of deep changes that are taking place at a global scale should
be taken into account when making the suggested analysis. (Newsletter,
May 2012). It also requires that Mercosur be viewed within the framework
of the institutional architecture of the South American region (UNASUR),
the Latin American regional space (ALADI and SELA), and within the broader
Latin American and Caribbean context (CELAC). To articulate the regional
cooperation actions that may be developed through the array of existing
institutions is today one of the priorities recognized by the countries
that form part of them. An idealized view of this articulation cold evoke
the Russian matrioskas due to the fact that one fits into the other and,
at the same time, each reflects a different reality of nuances and dimensions.
Many are the conditions needed for the construction of a regional space
ruled by the ideas of integration and co-operation, that is, of the joint
work of the nations that form part of it. These are conditions that result,
in particular, from certain main aspects of this kind of multinational
undertaking, such as the voluntary nature of the participation of each
nation -nobody is forced to be a member of a determined integration agreement-;
the gradual nature of the whole process, in the sense that achieving any
goals, especially the most ambitious ones, can require some time and maybe
never fully realized; and the adaptation to the continuous changes in
the circumstances that led to the founding moment.
However, in the case of Mercosur as it stands now, at the end of one
stage and transitioning into a new not yet precisely defined stage, (Newsletter,
July 2012, and the article by the author mentioned bellow in the Recommended
Reading section), there are three conditions that would seem necessary
in order to make a leap towards a more flexible but solid and efficient
construction, with the potential to grasp citizen interest due to its
ability to generate mutual gains for each one of the participating countries
while taking into account the diversities that characterize them.
These conditions are: the national strategies for development and international
insertion of each participating country; the quality of institutions and
ground rules; and the productive articulation of trans-national scope.
It would seem advisable that these three conditions are present in the
necessary national debate agendas that each country interested in continuing
to be a member, or willing to become one, should stimulate in order to
define the strategies and methodologies of Mercosur's new stage.
The joint work between nations that share a regional geographic space,
especially if it is expressed through agreements and institutions with
ambitious and long terms goals such as is the case of Mercosur, presupposes
that each participating country knows what it needs and what it can obtain
by associating with others. This means, that it has a strategy for development
and international insertion designed according to its own domestic characteristics
and of the objectives valued by its own society. This strategy will not
be limited only to the region. Today more than ever and given the multiplicity
of options that any country has, whatever its dimension, the objectives
set on the regional plane should be based on those of global scope.
How such a strategy is crafted and expressed depends on each country.
What is true though is that the consensual construction of a multinational
region, whatever its objectives, modalities and scope, is based on the
national aspect, that is, of the interests of each participating country.
In this sense it has been rightly noted that countries associate at the
regional plane not based on hypothetical supranational rationalities but
on concrete and sometimes even pathetic national rationalities.
Hence, it is required to be honest in the sense that if a country does
not have such a strategy or if it was not realistic (for example, if it
overestimates its worth and its negotiation capacity with the rest of
the world and more concretely with its partners), it will be difficult
to imagine that the other countries will fully contemplate its interests
-beyond rhetoric-. This is what Ian Bremmer crudely expresses in the title
of his recent book on the current world situation: "every nation
for itself". He adds even more crudely that there will be "winners
and losers" (in "Every Nation for Itself. Winners and Losers
in G-Zero World", Portfolio-Penguin, New York 2012). The message
to be drawn is thus clear: in a global context without a central power
-and without a directory of credible central powers (G-0)- each nation
must defend its own interests and, in order to do so, it must know what
it needs and what can be obtained. In the transition to the world of the
future there will be winners and losers. It is a valid message for each
one of the regional geographic spaces and certainly also for South America.
In the case of Mercosur in its current crossroads, it would be convenient
for each member country to wonder about their real, not theoretical, options.
If a large or small country were not satisfied with Mercosur and visualized
other reasonable options that would enable it to have a better outlook
of its insertion in the region and in the world, meaning that it thought
it had an alternative plan, it could then be reasonable to abandon the
joint undertaking. Chile did it at the time with the Andean Group and
after that by not accepting the invitation to form part of Mercosur as
a full member. Venezuela did it too when it decided to renounce its membership
to the Andean Community of Nations. If, on the contrary, such country
were unable to visualize a reasonable alternative plan from a political
or economic perspective it would be convenient for it to ponder, from
its own perspective, what should be the scope of the future Mercosur stage
in the light of the constituent pacts and of the methodological options
that could be imagined. However, such consideration would be stronger
in the measure that it reflected the objectives defined in the corresponding
strategy for national development (the "home grown plan" as
per the well-known work of Professor Dani Rodrik), that would seem reasonable
to imagine would include an appraisal of what the country needs and may
obtain form its global and regional context.
A second condition is related to the quality of the institutions and
the ground rules. This includes the process of decision-making and the
rules that are approved and the mechanisms for their implementation and
for the settlement of the disputes that may arise between the member countries
in relation to the compliance of the agreements. It includes both the
national and multinational level of Mercosur institutions. Again, it can
be argued that institutional quality begins at the national level and
is later expressed in the multinational level -whatever the composition
of the respective organ and its voting system-, and is later re-expressed
at a national level when what has been agreed is implemented or not.
The intensity of the participation of the civil society in the internal
front of each member country is a key factor to ensure the institutional
quality of an integration process. It requires, in turn, of a culture
of transparency that is reflected both at the national and the multinational
planes, in the quality of Web pages filled with useful information for
the management of the competitive intelligence on the part of all players.
Precarious rules with a low capacity to become effective and efficient,
especially if they are a result of deficiencies in their process of creation,
tend to erode the efficacy and legitimacy of the very same integration
process. They do not favor the member countries of smaller relative dimension
and are not taken seriously by those who make the decisions for productive
investment. In Mercosur, the precariousness of the institutions and of
the ground rules, even the insufficient transparency and weak participation
of civil society -shown by multiple examples-, are a major cause for the
deterioration experienced by the integration process. Perhaps it is a
kind of virus that comes from the integration experience first in LAFTA
and then in LAIA, where we often observed a prevalence of the culture
of anomie, in the sense that the rules were met only to the extent that
it was feasible and that the information necessary to make decisions was
not readily available. The history of the exception lists on this regard
would deserve to be reviewed. It is a culture that at the local level,
in a society, and at the international level tends to favor those who
have more relative power, accentuating inequalities and promoting all
kinds of imbalances.
Reconciling flexibility with predictability seems to be crucial if the
next stage of Mercosur aims to include other South American countries,
increasing thus the asymmetries and the diversity of interests. This will
require the use of variable geometry and multi-speed methodologies. Without
quality ground rules these methodologies could accentuate tendencies towards
the dispersion of efforts and lead Mercosur to new frustrations.
The third condition is related to regional productive integration. The
idea of productive integration has today an important place in Mercosur's
agenda. Actually, it comes from its founding moment, when the concept
of sector agreements was incorporated to the Treaty of Asuncion and Decision
CMC 03/91 was approved (on http://www.mercosur.int/).
It is based on the experience gained during the period of bilateral integration
between Argentina and Brazil. Its precedents are manifold. They can be
traced back to the founding moments of European integration and also of
what constituted the Andean Group.
The productive integration through transnational value chains also allows
participating countries to generate a picture of mutual benefits in developing
what Jean Monnet, in his foundational layout of European integration,
called de facto solidarities. They can be, in this sense, a strong factor
to reduce the risks of reversibility of the commitments made by member
countries. This is so because they contribute to link the different national
productive systems and its players, generating strong incentives to preserve
and expand a process of multinational integration. It requires, in each
of the countries, business firms with aggressive pursuits and capacity
for international projection.
The three abovementioned conditions are closely linked with each other.
Added together they help us imagine a realistic strategy of trade negotiations
with other countries and regions. Without a national strategy, it will
be difficult for a country to benefit from the decisions that are made
to guide an integration process and to generate its ground rules. Without
ground rules that are effectively enforced, it will be difficult to gain
flexibility and encourage companies to make productive investments based
on the expanded market. Without such productive investments, especially
in the context of cross-border value chains, it will be difficult to generate
the stable benefits that can be expected from an integration process,
especially those of greater social impact due to their effects on job
creation and on the identification of citizens with the idea of a shared
region. It will be harder still to enable international trade negotiations
that are favorable to the development and productive transformation of
each country in the region.
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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