| TOWARDS A NEW DESIGN OF SOUTH AMERICAN INTEGRATION?
Factors that affect its layout and criteria to judge its sustainability
by Félix Peña
English translation: Isabel Romero Carranza
The design of South American integration is becoming
different. This has been quite common in the trajectory of over six decades
of initiatives aimed at generating institutional frameworks to facilitate
regional integration. However, even when it has become apparent that the
previous design is undergoing a new process of change, it would be difficult
to predict for how long the one that is beginning to take shape will remain
in effect. The experience of recent decades suggests great caution in
forecasts that are optimistic about any eventual longevity.
Several factors are contributing to this redesign.
Some are external to the region while others are endogenous. The combination
of these factors will influence the future design of South American integration.
If past lessons are correctly capitalized and certain advantage is derived
from the leeway provided by a decentralized international system with
multiple options, we can anticipate that what will predominate in the
region will be multidimensional integration agreements (with political
and economic objectives at the same time) and with cross-memberships and
If this were the case, the actual impact on regional
governance, social and productive integration and the competitive insertion
at a global scale will depend largely on the following factors: the quality
and sustainability of the strategy for development and global and regional
insertion of each country; the combination of a reasonable degree of flexibility
and predictability in the commitments made and their corresponding ground
rule, and the density of the network of cross-interests that can be achieved
as a result of the respective regional integration agreements, reflected
in multiple transnational social and production networks.
On the occasion of the recent Mercosur summit held in Brasilia on December
7 (see the text of the Joint Statement of the Presidents on http://www.itamaraty.gov.br/),
the Protocol for the incorporation of Bolivia to the sub regional integration
scheme originated in the Treaty of Asuncion of 1991 was signed (see the
text of the Protocol on http://www.itamaraty.gov.br/;
see a review in the Journal of INAI mentioned in the Recommended Reading
section of this Newsletter).
Since 1997 Bolivia has been linked to Mercosur by an Economic Complementation
Agreement (ACE n° 36), (see its text on http://www.aladi.org/).
In 2011, the value of its exports to Mercosur countries was 4,120 million
dollars. However, if natural gas is excluded, the value was just $ 232
million (see Biweekly Electronic Newsletter No 178 of 29 November 2012,
issued by the IBCE on http://www.ibce.org.bo/).
Also at the Brasilia Summit it was announced that ongoing talks with Ecuador
continue to explore the possibility of its incorporation as a full member.
It is currently linked with Mercosur by ACE No 59 (see the text and the
additional protocols on http://www.aladi.org/).
Upon entry into force of the Protocol signed with Bolivia in Brasilia
and if negotiations culminated in the incorporation of Ecuador, Mercosur
would then have seven members.
In turn, Colombia (linked to Mercosur by the abovementioned ACE No 59),
Chile (with significant trade and investment flows, especially to Argentina
and Brazil and with preferential trade ties with Mercosur through ACE
No 35 (see the text and that of the 56 additional protocols on http://www.aladi.org/)
and Peru (with preferential trade links to Mercosur countries through
ACE No 58 (see the text and that of the additional protocols on http://www.aladi.org/),
have a strong economic relationship with Mercosur countries and share
with them both the membership in ALADI and UNASUR.
In any case, the incorporation of Bolivia to Mercosur -as was the case
before with Venezuela- shows that the design of South American integration
is changing gradually. The fact that Bolivia believes it can maintain
both its membership in the Andean Community and Mercosur, although it
anticipates complex technical problems given the nature of both agreements,
could also be regarded as a preview of future times.
To this we must add the progress -still difficult to appreciate in the
density of real commitments- in the development of the Pacific Alliance.
The participation of Mexico, Chile, Colombia and Peru, gives it a Latin
American scope that maximizes its unquestionable projection to Asia and
the Pacific through the membership of this four countries to the trade
agreement being negotiated under American leadership (the TPP).
The aforementioned modifications appear to be deep and will probably
continue in the future. However they have not yet acquired a stable profile.
This has been common in the history of more than six decades of initiatives
aimed at creating institutional frameworks with the objective of facilitating
regional integration. Integration understood as something more complex
than the increase in reciprocal trade. Integration understood, therefore,
as a possible result -at least a desirable one- of a voluntary process
developed between sovereign nations with multidimensional objectives.
These are objectives related to securing peace and political stability
among participating nations -as a necessary condition for the governance
of the regional geographic space-, as well as to connecting its markets
through different types of preferential measures, compatible first with
the rules of GATT and then the WTO and, in particular, with the rules
of LAIA (ALADI), the main framework of preferential trade in the Latin
American region. They are also designed to stimulate, aside from reciprocal
trade, productive investments in each country in relation with the expanded
markets generated by the respective agreements and, in particular, to
encourage transnational networks of productive integration.
Some of these institutional frameworks have had a Latin American scope,
such as the Latin American Free Trade Association (LAFTA-ALALC) and later
the Latin American Integration Association, still in force. Others have
had a sub-regional scope, such as the Central American Common Market (MCCA)
and later the Central American Integration System (SICA) in Central America,
the Caribbean Community (CARICOM) in the Caribbean, and the Andean Community
of Nations (CAN) and later Mercosur in the South American space.
Precisely the gradual dilution of the CAN -that had previously been the
Andean Group- and now the metamorphosis of Mercosur, are helping to delineate
what will likely be the new design of regional integration in the South
American space. To both schemes we should add, of course, UNASUR, which
together with ALADI and the Community of Latin American States (CELAC)
will help boost integration agreements as well as contain any eventual
fragmentation effects that may arise in the region.
But while it seems certain that the previous design of South American
integration is undergoing a process of change, it will be difficult to
predict how long the one that is beginning to take shape will remain in
effect. The experience of recent decades suggests great caution in any
optimistic forecasts regarding its eventual longevity.
Several factors are contributing to the redesign of South American integration.
Some are external to the region, while others are endogenous.
As for the external factors, three are worth mentioning, although not
the only ones:
- The paralysis suffered for quite some time by the multilateral trade
negotiations of the Doha Round within the scope of the World Trade Organization
(WTO). Even when in Geneva the fire is being kept alive, there is marked
skepticism about the possibility of restoring this multilateral negotiation
process of global scope. There is no evidence of a sufficient political
will to relaunch such negotiations in relevant countries due to their
impact on world trade. Such is the case in particular of the United
- The increasing proliferation of negotiations aimed at creating "private
clubs" in international trade that are the result of various forms
of preferential agreements, all of them with a discriminatory scope
for countries that are not members, even when they belong to the WTO.
Recent examples include the Trans-Pacific Partnership (TPP), led by
the United States and that gathers together eleven countries including
Chile, Colombia, Peru and Mexico in Latin America. Japan and Thailand
have anticipated their intention to join in as well (negotiations are
expected to conclude in October 2013). Another example is the Regional
Comprehensive Economic Partnership (RCEP). On November 20, 2012 was
announced the start of the negotiations between ASEAN member countries
and the six countries which already linked through different types of
free trade agreements, which are China, Japan, South Korea, India, Australia
and New Zealand and whose aim is to conclude negotiations in 2015. A
third example is the free trade agreement between China, Japan and South
Korea, whose negotiations would begin at the start of 2013. To this
we must add, among others, the free trade agreements being negotiated
by the European Union with Canada, India and now Japan, as well as the
eventual delayed association agreement with Mercosur. Moreover, in recent
months the idea of a possible free trade agreement between the European
Union and the United States has been reinstalled on both sides.
- The fact that the growing trend towards the development of transnational
value chains generates a greater demand for the facilitation of trade
and investments -in all the possible derivations of this concept- and
of ground rules that are favorable for the development of transnational
business strategies involving productive investments in many countries.
The perception that it might be difficult to imagine any rapid progress
on the Doha Round negotiations would encourage the development of new
forms of agreements between groups of countries, all of them aimed at
reaching objectives in terms of trade and investments that go beyond
what has been achieved -or could be achieved- in the framework of the
WTO. As we have stated on other occasions, the problem is that this
could intensify the fragmentation of the multilateral world trade system
and that the subsequent erosion may also have systemic geopolitical
connotations that would not help in securing global governance, understood
as the prevalence of conditions conductive to peace and political stability
in international relations. (On this regard, refer to the December 2011
edition of this Newsletter on http://www.felixpena.com.ar/).
As for the endogenous factors to the South American region, the following
are the most relevant:
- The accumulation of frustrated experiences, richer in their expectations
and even in their rhetoric that in the actual fulfillment of the agreed
commitments. Perhaps the fact that it is difficult for citizens of a
South American country - the same applies for the wider Latin American
space- to relate their level of well-being and, in particular, their
jobs with the effects derived from an integration process, be it the
CAN or Mercosur, may be the more noteworthy fact when seeking an explanation
for the low credibility that the idea of economic integration between
countries of the region awakens today. The fragility of the ground rules
related with the opening of the respective markets to reciprocal trade
-especially of the countries of largest economic dimension- may be a
factor that helps explain the weak impact that the major agreements
have had on the productive integration of the region. This results in
the differences observed in the development of transnational value chains
between the countries of Asia and those of South America.
- The greater freedom to develop joint actions between countries of
the region with the aim of ensuring at the same time reasonable governance
of the South American space -in terms of peace and political stability-
and the strengthening of the linkages of the productive systems through
cross-investments aimed at projecting to the world the existing capacity
of each country to develop competitive goods and services. It is a freedom
which is nurtured by the erosion of rigid models of economic integration
and a more informed appreciation of the real scope of one of the only
international legal constraints when selecting methods of integration,
which is derived from Article XXIV, paragraph 8, of the GATT.
- The fact that all countries in the region, regardless of their economic
size, level of development or relative power, have in today's world
many choices as to their economic -and even political- insertion in
the international system. This favors a strategy of multiple alliances
with commitments and memberships that can even be superimposed, as is
the case today with the mentioned agreements that are being negotiated
between the Asian and the Pacific countries. At the same time, it becomes
difficult to imagine a South American regional construction focused
on the hypothetical hegemonic leadership of one single country. This
tips the balance towards collective regional leadership patterns, which
will probably be of variable geometry, as will be the regional agreements
that are devised. Both the European experience and the present Asian
experience have much to illustrate on the dynamics of such types of
collective regional leaderships.
The combination of exogenous and endogenous factors will influence the
future design of South American integration. If past lessons are correctly
capitalized and certain advantage is derived from the leeway provided
by a decentralized international system with multiple options, we can
anticipate that what will predominate in the region will be multidimensional
integration agreements (with political and economic objectives at the
same time) and with cross-memberships and commitments. In the perspective
of the dominant regional integration orthodoxy of the past six decades,
with all its variations and "closed" or "open" forms,
it is possible to anticipate the predominance of heterodox models in the
What criteria would be possible to assess the sustainability of the new
map of South American integration that is now emerging? How can citizens
and those who must make decisions for productive investment in order to
take advantage of the benefits offered by the integration agreements trust
that the promises will be fulfilled effectively? How to prevent citizens
and investors, when analyzing the announcements made on agreements often
described as "historic", from concluding that these are actually
"more of the same" (i.e., a "déjà vu")?
In light of the experience gained in the South American region, but also
in other regions including the European, it is possible to consider that
the real impact of the regional agreements that are being developed on
regional governance, productive and social integration and competitive
insertion at a global scale -three goals that seem to be among the most
important- will depend largely on three factors: the quality and sustainability
of the strategy for development and global and regional insertion of each
country; the combination of reasonable degrees of flexibility and predictability
in the commitments made and their corresponding ground rules; and the
density of the network of cross-interests that can be achieved as a result
of the respective regional integration agreements, reflected by transnational
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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