| A WORLD OF MEGA-INTERREGIONAL PREFERENTIAL
Incentives for a more effective cooperation between Latin American countries.
by Félix Peña
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/.
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/),
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
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
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
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
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
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
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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