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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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THE EXTERNAL ENVIRONMENT OF A COUNTRY AND ITS REGION:
Understanding its dynamics in order to facilitate its productive integration into the world

by Félix Peña
August 2014

English translation: Isabel Romero Carranza


 

In a "multiplex" world, as has been rightly called by Professor Amitav Acharya, in which each country, large or small, has multiple options for its international insertion, it is also necessary to have a clear national strategy based on a proper assessment of what a country needs and what it can obtain from its external environment.

Understanding the international context and its changing dynamics is thus a key factor when defending each country's specific national interests. This is not an easy task given the dynamics of change that can be observed and the complexity resulting from the global economic competition in an increasingly interconnected world with a significant number of relevant actors, who are aware of the relative power they are acquiring.
The international system is undergoing a period of transition to a new phase whose characteristics are still undefined. It is possible that, for a long time, strong uncertainties regarding the procedures and institutions of global governance will prevail. These will also affect the effectiveness of the multilateral global trading system institutionalized in the WTO.

Understanding the dynamics of international change and its impact on the challenges and opportunities that the countries of the region face in their international integration is, precisely, one of the aspects that can benefit from joint action among countries of the same region, i.e. South America, aimed at projecting to the world the ability to produce competitive goods and services with intellectual added value. But this involves joining the efforts of each country in their ability to diagnose the dynamics of the external environment and the shifts of competitive advantages -favorable or not- that are continuously taking place.

The concertation in terms of competitive intelligence will be then one of the priorities to address in relation to those areas in which the South American region may benefit from joint action, in particular, those related with energy, food and other natural resources as well as those involving production linkages, technological innovation and trade negotiations with other countries and regions.


The international system is undergoing a period of transition to a new phase whose future characteristics are still undefined. In this regard, it is possible for uncertainties to prevail for a long time and, above all, for unforeseen events to take place frequently. These will affect global governance, with the ensuing impact on the effectiveness of the multilateral global trading system institutionalized in the WTO. In this regard, the recent standstill at the Ministerial Conference held in Bali (see the December 2013 Newsletter), on one of the most important decisions referred to trade facilitation, has shown once again the difficulties that exist today to agree on multilateral trade rules that are effective, efficient and legitimate. (See the news item on the website of the WTO http://wto.org/).
In a "multiplex" world, such as has been rightly called by professor Amitav Acharya, (see the issue of this Newsletter from last July), in which each country, large or small, is aware of the multiple options available for its integration in the world and in international trade, it is also necessary to have a clear national strategy based on a proper assessment of what it needs and what it can obtain from the external environment.

Understanding the international context and its ongoing evolution will then be a key factor for each country at the moment of defending their national interests before other countries. And it will not be easy given the dynamics of change observed in international relations and the complexity resulting from a global economic competition with a significant number of relevant actors, many of them emerging and well aware of the relative power they are acquiring.

Three recent examples of such dynamics of change are worth mentioning, especially due to their impact on the strategies for productive integration of the countries of the South American region and of Latin America in general. These are examples of "facts loaded with future" that signal trends that will probably be accentuated over time. They can have significant effects on the external economic relations of the countries of the region and in their own development and integration processes.

A first example is that of the agreements adopted in the financial field by the VI Summit of the BRICS group held in Fortaleza, Brazil, last July, including the creation of the New Development Bank. They signal the potential of the BRICS group, beyond its own limitations, to play a relevant role in reshaping world order, especially in the economic and financial field. (See the texts of the corresponding agreements on http://brics6.itamaraty.gov.br/; regarding the BRICS meeting see also "The BRICS are back, with a bank", by Geethanjali Nataraj and Richa Sekhani, at the EastAsianForum, from August 2, 2014, on http://www.eastasiaforum.org/ and "The new BRICS Bank" by Parag Khanna, in El País newspaper from August 17, 1014, on http://economia.elpais.com/).

Another example is the also recent visit to several countries of the region, including Argentina, of the President of China, Xi Jinping, and, in particular, the agreements concluded with each one of them in relation to various aspects in the sphere of investments and finance. (See the article in Xinhuanet, from July 27, 2014, entitled "Cooperation with China brings new opportunity to Latin America", on http://news.xinhuanet.com/).

A third example is that of Russia's reaction to the recent sanctions imposed on this country by the US and the European Union and their potential effects on the redirection of the demand for agricultural products to South American countries. This comes just days after President Vladimir Putin's visit to Argentina and Brazil (as well as Cuba and Nicaragua). Due to the magnitude of the trade flows involved, it is an issue that can have an impact on economic relations between South American countries and Russia. But due to the reaction that this potential diversion in the trade of foodstuffs seems to have caused in European countries and, in particular, in their agricultural sectors, it is not possible to rule out that it might also generate effects in the relations between the EU and the South American countries involved. In any case, it is an event that takes place at a time when Mercosur countries have expressed to be able to present a joint list of offers in order to move forward in the bi-regional negotiations with the EU. In this regard, it should be noted that President Dilma Rousseff, speaking at the National Confederation of Agriculture of Brazil, made reference to the difficulties observed in some European countries to complete the list of offers of the EU itself. (In this regard see http://www.canaldoprodutor.com.br/). We should also take into account the fact, that in the "blame game" typical of all international trade negotiations that confront noticeable difficulties, there is always a tendency to attribute responsibility to the other party. This is what has often been observed in some actors in European countries, in the sense that they signal Argentina as responsible for the difficulties in making the exchange of offers and being able to conclude negotiations with a mutually beneficial agreement. But, is it true that the EU really wants to negotiate with Mercosur? Could it also be true that significant actors in the EU have imagined that the negotiations could be limited to Brazil? In this regard, the public statements by the outgoing president of the European Commission during his recent visit to Brazil are of great interest.

To understand the dynamics of international change and their impact on the challenges and opportunities posed by an international integration of a concrete nation, aimed at projecting to the world its ability to generate competitive goods and services with intellectual added value is, precisely, one of the aspects that can benefit from the joint action of the countries in the region. As noted by Luis Maira (see his article, cited in the Recommended Reading Section of this Newsletter) "we can have, in the expanded market of the South American space, better placement opportunities of industrial products for which we can specialize production. We can also round this out with a lucid decision on how to exploit our energy resources, our minerals or our food-producing capacity to achieve as a result, a more equitable and humane development in each of our countries". But this involves combining the efforts that could be developed in each South American country, in terms of diagnostic capabilities on the dynamics of the external environment and on the shifts of competitive advantages that are constantly taking place.
Also, in the discussions on Mercosur and how to give it a new dynamic, the need for joint strategies based on prospective analysis has been stressed. As rightly pointed out by Gerardo Caetano: "if prospective and strategic thinking are scarce goods at the level of national policies, it would be fitting to point out a much larger omission in relation to the efforts for prospective thinking at regional level" (see the article by Gerardo Caetano mentioned in the Recommended Reading Section). In this regard, we should note that in a recent report, Sergio Bitar raises the need for joint efforts in the region in the field of forecasting and the analysis of trends that anticipate the future (see Sergio Bitar, "Global trends and the future of Latin America", Public Management Series - CEPAL, No. 78, 2014, on http://www.cepal.org/).

The concertation in terms of competitive intelligence will be, then, one of the priorities to address in relation to those other areas in which the region may benefit from a sustained joint action effort, in particular, those related with energy, food and other natural resources as well as those involving production linkages, technological innovation and trade negotiations with other countries and regions.

In this regard, we noted in our Newsletter of last July that this concerted effort could be precisely one of the benefits of a strategy for convergence in diversity, as has been proposed by the government of Chile (see http://www.felixpena.com.ar/). In that sense, the fact that the ministerial working meeting between Mercosur and the Pacific Alliance countries has not taken place yet (such as was advanced by the Pacific Alliance Summit of Punta Mita in Mexico last July) and that there were no references to this initiative at the recent Mercosur Summit in Caracas -at least in the official documentation that has been published (see http://www.mercosur.int/) - could be reflecting differences in criteria, whether between the countries of the Alliance or of Mercosur, on how to address the convergence between the two integration spaces. In any case, it would be indicating the need to further the initiative of Punta Mita or to adapt it to what the members of both spaces are willing and able to do.



Recommended Reading:


  • Adlung, Rudolf, "Export Policies and the General Agreement on Trade in Services", WTO, Economic Research and Statistics Division, WTO Working Paper ERSD-2014-09, Geneva, 21 July 2014, on http://www.wto.org/.
  • Alvarez, Carlos, "La reconfiguración del Mercosur, una construcción comunitaria", in CEFIR, "Mercosur. Prospectiva 20 años", CEFIR-GIZ-FES, Montevideo 2012, pp. 95- 98.
  • Bayly, C.A., "The Birth of the Modern World 1780-1914. Global Connections and Comparisons", Blackwell Publishing, Malden-Oxford-Carlton 2004.
  • Caetano, Gerardo, "El futuro de la integración regional: entre la administración de conflictos y la necesidad de pensamiento estratégico", in CEFIR, "Mercosur. Prospectiva 20 años", CEFIR-GIZ-FES, Montevideo 2012, pp. 19- 27.
  • CEFIR, "Mercosur. Prospectiva 20 años", CEFIR-GIZ-FES, Montevideo 2012.
  • CNI, "Acordos comerciais: uma agenda para a industria brasileira", Confederacao Nacional da Industria, Caderno 30, Brasilia 2014, on http://arquivos.portaldaindustria.com.br/.
  • Conde, Roberto, "Un pacto integracionista para el desarrollo", in CEFIR, "Mercosur. Prospectiva 20 años", CEFIR-GIZ-FES, Montevideo 2012, pp. 101-105.
  • Fernández de Soto, Guillermo; Pérez Herrero, Pedro (editores), "América Latina: sociedad, economía y seguridad en un mundo global", CAF - Universidad de Alcalá-IELAT, Marcial Pons, Madrid-Barcelona 2013.
  • FUNCEX, "Revista Brasileira de Comércio Exterior: Propostas de política comercial para o próximo governo", RBCE-FUNCEX, Ano XXVIII - 119, Rio de Janeiro, April/June 2014 (www.funcex.org.br).
  • IRI, "Revista Relaciones Internacionales", Publicación del Instituto de Relaciones Internacionales de la Universidad Nacional de La Plata - Nuevohacer, Grupo Editor Latinoamericano, Year 23 - N° 46, La Plata, January/June 2014, on http://revistas.unlp.edu.ar/.
  • Jones, Bruce, "Still Ours to Lead. America, Rising Powers, and the Tension Between Rivalry and Restraint", Brookings Institution Press, Washington D.C. 2014.
  • Legler, Thomas; Santa Cruz, Arturo; Zamudio González, Laura (editores), Introducción a las Relaciones Internacionales: América Latina y la Política Global", Colección Ciencias Sociales, Oxford University Press, Mexico 2013.
  • Magnaghi, Emilio Luis, "El ABC de la Defensa Nacional en el Siglo XXI. Bases y puntos de partida para la conformación de una política de Estado", Antucura Editorial - Centro de Estudios Estratégicos para la Defensa Nacional, Mendoza 2013.
  • Maira, Luis, "América del Sur y las perspectivas de la integración en la post-guerra fría", CEFIR, "Mercosur. Prospectiva 20 años", CEFIR-GIZ-FES, Montevideo 2012, pp. 29-35.
  • OECD-WTO-The World Bank, "Global Value Chains: Challenges, Opportunities, and Implications for Policy", Report prepared for submission to the G20 Trade Meeting, Sidney, Australia, 19 July 2014, on http://www.oecd.org/.
  • Rodriguez Larreta, Enrique, "El Mercosur en la ecuneme global. Pensar el mundo desde el Mercosur y pensar el Mercosur desde el mundo", en CEFIR, "Mercosur. Prospectiva 20 años", CEFIR-GIZ-FES, Montevideo 2012, pp. 37- 41.

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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