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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
A WORLD OF MEGA-INTERREGIONAL PREFERENTIAL SPACES?
Incentives for a more effective cooperation between Latin American countries.

by Félix Peña
May 2014

English translation: Isabel Romero Carranza


 

The trends towards the fragmentation of the international trading system, a result of the possible combined effect of the proliferation of mega interregional preferential agreements and the deadlock of the Doha Round as the ambit where to encourage multilateral trade negotiations, increase the importance for Latin American countries - and particularly for South American ones- of strengthening joint work in trade and mutual investment and the articulation of their national production systems. Or rather of those aspects associated with the objectives of the processes of cooperation and regional integration.

What are today some of the main incentives to seek greater productive articulation and coordination of the strategies for international trade negotiations between the countries of the region? This is one of the questions that should be the subject of intense debate in Latin America.

The other question is: How would it be feasible to articulate the various existing integration agreements to generate connecting vessels that facilitate production linkages, especially between the spaces of Mercosur and the Pacific Alliance? In this regard it would seem convenient to focus on the exploration of different mechanisms and instruments, including those of sectorial scope, so as to encourage production linkages between countries in the region, especially through various forms of value chains, joint ventures and transnational partnerships between companies, with emphasis on SMEs. These are mechanisms that should allow a denser connectivity, especially physical, between the respective markets; reasonable predictability, especially at the institutional level and the rules affecting the productive investments, and greater compatibility between the economic policies and the external marketing strategies of the participating countries.

In order to be effective and to develop proposals for action aimed at penetrating reality this debate should be trans-disciplinary and include negotiators and officials, as well as businessmen and trade unionists, academics and specialists, and institutions of the civil society, especially those that express the views of consumers and environmentalists. This can help avoid views and narratives of integration and cooperation processes that reflect mutually exclusive compartments.


Four recent meetings, with participants from different countries and sectors of activity, have addressed the question of what the mega-preferential agreements being negotiated at present -if concluded- could mean for the region and, in particular, for the convergence between the integration spaces of Mercosur and the Pacific Alliance (on this topic see the April issue of this Newsletter on http://www.felixpena.com.ar/.

These meetings were:

a) The International Seminar "Before and After the TTIP. The implications of the TTIP for regional integration", organized by the Jean Monnet Chair at the University of Miami in Miami, on February 28, 2014 (http://www.as.miami.edu/. and http://www.as.miami.edu/).

b) The International Seminar "Multilateralism or fracture: the WTO under the light of TTIP and TPP negotiations. Impacts on the region", organized by SEGIB and UNTREF, in Buenos Aires, on April 11, 2014 (http://segib.org/es/node/9561);

c) The International Seminar Workshop "Multilateral and Regional Trade Agreements: Challenges for Latin America", organized by the PUC of Peru in Lima, on 28 and 29 April 2014 (http://agenda.pucp.edu.pe/), and finally

d) The International Workshop "Mega Trade Agreements and the Future of Mercosur", held in Sao Paulo on May 8 2014, organized by the Centro do Comércio Global e Investimento - FGV (http://ccgi.fgv.br/pt-br), CINDES and with the support of Boletín Techint.

The reflections presented in this Newsletter take into account the presentations made at such meetings and the debates they originated. They are not intended, however, to summarize all that is being discussed -even at these meetings- on the issue of the implications for the region of the possible conclusion of mega agreements or the mere fact that such negotiations are taking place.

Beyond what is often noted by the respective governments and different political, business and academic representatives, among others, the fact is that the prospects of the ongoing negotiations to conclude the mega-interregional preferential trade agreements are still uncertain.

Everything indicates that it will take a certain time, probably longer than presumably expected by negotiators, to conclude these negotiations in the term originally anticipated. At least this is the case with some negotiations, such as those involving the Trans-Pacific Trade and Investment Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). Not being as ambitious in its objectives -at least in its first stage- would seem to help the negotiations for the Regional Comprehensive Economic Partnership (RCEP), scheduled for 2015, to conclude first.

The possibility that other scenarios of mega preferential trade negotiations acquire relevance and even overshadow some of the currently most publicized ones should not be ruled out. The latest developments in the field of geopolitics, especially in the Eurasian space, could contribute to it. In this sense, the results of the upcoming BRICS Summit to be held on July 15 in Fortaleza, Brazil -two days after the conclusion of the Soccer World Cup in the Maracana Stadium- with the first-time participation of the new Prime Minister of India, Narendra Modi, should be watched closely.

One such scenario could be that of the Free Trade Area Asia-Pacific (FTAPP) within the scope of Asia Pacific Economic Cooperation Forum (see http://es.wikipedia.org/). It is an idea that was raised years ago. At the recent meeting of Trade Ministers of APEC held in Qingdao in Shandong province, China, on 17 and 18 this May, Gao Hucheng, Minister of Commerce of China, pointed out the importance of moving forward with the negotiation of an Asia Pacific free trade area while upholding a firm support of the global multilateral trading system in the framework of the WTO. The meeting approved the development of roadmaps for achieving the goal of a free trade area. (On this matter see http://www.chinadaily.com.cn/; http://www.chinadaily.com.cn/, and http://news.xinhuanet.com/). It should be noted that in the last year the twenty-one APEC member countries accounted for approximately 57% of global GDP and 46% of international trade. It should also be remembered that Russia has formed part of APEC since 1998 (not a minor detail in the current global geopolitical picture) and that India has applied for membership and is currently an observer country.

The trends towards fragmentation of the international trading system, possibly a result of the combined effect of the proliferation of mega interregional preferential agreements and the deadlock of the WTO as an ambit to encourage trade negotiations of multilateral scope (see our Newsletter of the month of March 2014 on http://www.felixpena.com.ar/), increase the importance for countries in the Latin American region, and especially for those of South America, of strengthening their joint work in the field of trade and mutual investment, with the perspective of articulating their respective domestic production systems.

For a long time this idea has been associated, at least pragmatically and conceptually, with the objectives of several of the multiple processes of regional cooperation and integration. In this regard, ECLAC has played an important intellectual leading role since the times of Raúl Prebisch, Enrique Iglesias, Fernando Fajnzylber and Gert Rosenthal, to name a few of its most important protagonists. ECLAC as well as CAF and LAIA now have an opportunity to continue creating and supporting discussion forums for the debate of practical ideas that lead to facilitate production linkages in the region as a hub of convergence between Mercosur and the Pacific Alliance.

What are today some of the main incentives to seek greater productive articulation and coordination of the respective strategies for international trade negotiations between countries of the region?

This is one of the questions that should occupy an important place in the debate that must continue to develop in Latin America. It has to do with a fundamental issue for the relations between countries that share a geographical region, which is that of the factors that drive towards cooperation and integration. It also has to do, in particular, with the effects that might occur if the region, or at least several of its most relevant countries such as those who are members of the Mercosur, fails to have an active role in the design of the architecture of the international trading system of the future. Such a design is very likely to be influenced by the institutional developments that eventually result from the various mega-interregional preferential agreements being negotiated at present. Not having a relevant participation in the process of creating the new ground rules of world trade can have significant costs for the countries of the region, or at least for those who are marginalized.

The other relevant question is: How would it be feasible to articulate the various existing integration agreements to generate communicating vessels that facilitate strategies for production linkages, especially between the spaces of Mercosur and the Pacific Alliance?

In trying to answer this last question it would be advisable to keep in mind the following:

a) No single model exists on how to connect and integrate regional spaces, especially when they are contiguous, and there may always be ample possibilities to use reasonably heterodox approaches with variable geometries and multiple speeds;

b) It is often desirable to avoid the temptation of the refunding syndrome, which leads to starting anew and completely changing the existing mechanisms and instruments of a particular agreement, such as the customs union or the common external tariff in Mercosur, instead of practicing the art of metamorphosis, which allows to introduce gradual changes that do not have high political costs or wear the image of the corresponding process but that require a strong dose of imagination and flexibility and,

c) That the main focus should be the effect of regional preferential agreements on investment and production chains, with special emphasis on the participation of SMEs.

In view of this last question, it seems appropriate to emphasize the exploration of different mechanisms and instruments, including those of sectorial scope, that taking advantage of the existing integration schemes and long experience, provide incentives for productive coordination between the countries of the region, especially through multiple modalities of value chains, joint ventures and transnational business partnerships, with emphasis on SMEs. These are mechanisms that should then allow a denser connectivity, especially physical, between the respective markets; reasonable predictability, especially at the institutional level and the rules affecting the realization of productive investment, and greater compatibility between economic policies and external trade strategies of the participating countries.

It seems essential to deepen the necessary debate that has already begun seeking the participation of all stakeholders in the respective countries. In order to be effective and develop proposals for action aimed at penetrating reality, it is desirable that the debate has an interdisciplinary and multidimensional scope in its approaches and methodologies, and includes negotiators, officials and parliamentarians, businessmen, unionists, academics and experts, the media and the institutions representing civil society, particularly those that express the vision of consumers and environmentalists. This can help avoid views and narratives of the integration and cooperation processes that reflect mutually exclusive compartments.

In this regard, we should bear in mind that at least two narratives have dominated several instances of regional integration, preventing a creative dialogue of all the sectors involved. One is the government narrative, typical of officials and negotiators. The other is the academic narrative, typical of specialists from different disciplines -in turn often compartmentalized. Both share the defect of being reluctant to self-criticism. The problem with the former is that for many it seems to be losing credibility, especially among citizens and those who have to make productive investment decisions. The latter, in turn, is often beyond the comprehension of those who operate on reality as they consider it too theoretical and abstract.

The debate that is required should then lead to a new narrative of integration that gains in clarity and realism, that best interprets all sectors involved and that rouses enthusiasm and hence the support of the citizens of each country.



Recommended Reading:


  • Amorim, Celso, "Breves narrativas diplomáticas", TAEDA, Buenos Aires 2014.
  • Capannelli, Giovanni, "ASEAN's First 'Myanmar' Summit: moving beyond 2015", East Asian Forum, 11 May 2014, on http://www.eastasiaforum.org/.
  • Coyle, Diane, "GDP. A Brief but Affectionate History", Princeton University Press, Princeton and Oxford 2014.
  • Barbosa, Rubens, "Mercosul: retórica e realidade", Revista Política Externa, vol.22, n° 4, Sâo Paulo, April/May/June 2014, on http://politicaexterna.com.br/.
  • Bitar, Sergio, "Las tendencias mundiales y el futuro de América Latina", Serie Gestión Pública 78, CEPAL-Interamerican Dialogue, Santiago de Chile, January 2014, on http://www.cepal.org/
  • Briceño Ruiz, José, "Ejes y modelos en la etapa actual de la integración económica regional en América Latina", Instituto de Estudios Internacionales - Universidad de Chile, Revista Estudios Internacionales, n° 175, 2013, on http://www.revistaei.uchile.cl/.
  • Cooper, George, "Money, Blood and Revolution. How Darwin and the doctor of King Charles I could turn economics into a science", Harriman House, Petersfield, Hampshire 2014.
  • Draper, Peter; Lacey, Simon; Ramkolowan, Yash, "Mega-Regional Trade Agreements: Implications for the African, Caribbean and Pacific Countries", ECIPE Occasional Paper, n° 2/2014, on http://www.ecipe.org/.
  • Dugin, Alexander, "The Fourth Political Theory", Arktos, London 2012.
  • Gadelha, Regina María A.F. (organizadora), "Mercosul a Unasul. Avanços do Processo de Integraçâo", EDUC - FAPESP, Sâo Paulo 2013.
  • Huang, Yukon, "Can a Chinese 'maritime silk route' cool tensions in Asia?", East Asian Forum, 5 May 2014, on http://www.eastasiaforum.org/.
  • Hurtado, Diego, "El sueño de la Argentina atómica. Política, tecnología nuclear y desarrollo nacional (1945-2006)", Edhasa, Buenos Aires 2014.
  • Llenderrozas, Elsa (coordinadora), "Relaciones Internacionales: Teorías y Debates", Eudeba, Buenos Aires 2013.
  • Mehta, Pradeep S., "India: new trade policy for a new government", East Asian Forum, 2 May 2014, on http://www.eastasiaforum.org/.
  • Morris, Ian, "War! What is it Good For? Conflict and the Progress of Civilization from the Primates to Robots", Farrar, Straus and Giroux, New York 2014.
  • Neufeld, Nora, "The Long and Winding Road: How WTO Members Finally Reached a Trade Facilitation Agreement", WTO, Economic Research and Statistics Division, Staff Working Paper ERSD-2014-06, Geneva, 7 April 2014, on http://wto.org/.
  • Oropeza García, Arturo (coordinador), "TPP. El Acuerdo de Asociación Transpacífico ¿Bisagra o confrontación entre el Atlántico y el Pacífico?", UNAM, México 2013.
  • Palacios, Ana, "Reactivemos la Ruta de la Seda. Contra el aislamiento de Rusia, China propone reforzar los lazos comerciales", en diario El País, Madrid, 9 May 2014, on http://elpais.com/.
  • Palit, Amitendu, "Mega Trading Blocs and New Regional Trade Architectures: Implications for Small States and LDCs", The Commonwealth, Commonwealth Secretariat, Trade Hot Topics, Issue 107, 2014, on http://assets.thecommonwealth.org/
  • Pereira, Ruy, "O valor do Mercosul", Revista Política Externa, vol. 22, n° 3, Sâo Paulo, Jan/Feb/Mar 2014, on http://politicaexterna.com.br/
  • Piketty, Thomas, "Capital in the Twenty-First Century", The Belknap Press of Harvard University Press, Cambridge-London 2014.
  • Roy, Joaquin; Domínguez, Roberto (editors), "The TTIP. The Transatlantic Trade and Investment Partnership Between the European Union and the United States", Jean Monnet Chaire, University of Miami; Miami-Florida European Union Center; CARI, Miami 2014, on http://www.as.miami.edu/.
  • Sun,Yun, "Africa in China's Foreign Policy", Brookings, Washington D.C., April 2014, on http://www.brookings.edu/.
  • World Bank, "Connecting to Compete. Trade Logistics in the Global Economy - 2014. The Logistics Performance Index and Its Indicators", International Trade Unit, World Bank, Washington D.C. 2014, on http://www.worldbank.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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