| MERCOSUR TRADE NEGOTIATIONS:
Recent events which could influence the future evolution of the negotiating
by Félix Peña
English translation: Isabel Romero Carranza
Whether by act or omission, international trade negotiations
remain an important issue on the agenda of Mercosur. It is probably one
of the most pressing issues together with institutional quality, and the
conditions to encourage productive linkages geared towards the regional
and global markets.
At least three recent events, with varying degrees of relevance, lead
to suppose that there will be some changes in the agenda of Mercosur trade
negotiations, including its protracted negotiations with the EU. These
could be regarded as belonging to the category of "future-bearing
events". It is possible to anticipate that their effects will become
more noticeable later this year. These events are interrelated and could
potentially impact on bi-regional negotiations between Mercosur and the
EU, even injecting a much needed dose of optimism.
The first of these is what was agreed at the bi-regional meeting in
Brussels during the CELAC-EU Summit, in June. It helps us imagine that
finally, during the last quarter of this year, the respective negotiating
offers will be exchanged.
A second important fact is reflected in the final communiqué of
the recent meeting between the presidents of Paraguay and Uruguay. These
two founding countries of Mercosur raised the need to agree, during the
second half of the year, in which the rotating presidency belongs to Paraguay,
an action plan for achieving the objectives of Mercosur and improving
the Free Trade Area, including specific roadmaps to ensure effective access
to the corresponding markets.
The third event is the approval by Congress of the authorization for
the President of the United States to negotiate international agreements
(the so called "Fast Track"). It is feasible now that the TPP
can be concluded even before the end of this year. If, finally, this agreement
is concluded and there is a general impression that the transatlantic
agreement between the EU and the US -the TTIP- is also feasible, it is
possible that the pressure mounts, especially in business sectors of Brazil,
Uruguay and Paraguay, to conclude an agreement with the EU that includes
multiple speeds for the different Mercosur partners. The other option
would be to directly seek some form of bilateral agreement, even without
tariff preferences but with strong commitments, for example, in terms
of regulatory frameworks, investment and even intellectual property. In
this case, the pressure would extend towards the outset of alternative
preferential trade negotiations, especially with the US and China.
Whether by act or omission, international trade negotiations remain
an important issue on the agenda of Mercosur. It is probably one of the
most pressing issues, along with institutional quality -especially of
the ground rules and of the rule-creating processes -and the conditions
to encourage production linkages geared towards the regional and global
markets. (On these issues refer to, among others, our articles in Boletín
Informativo Techint No 345, from November 2014, on http://iosapp.boletintechint.com/
and the June
2015 issue of this Newsletter, on http://www.felixpena.com.ar/.
It is an important issue for several reasons. The first of these is that,
since its inception, Mercosur was conceived -among other of its main objectives
and with a greater economic and political extent- as a platform to facilitate
the international projection of the capacity of its member countries to
offer competitive goods and services with a strong intellectual added
value. If possible, these should be the result of the transnational collaboration
of companies that are inserted in value chains of global or regional scope.
The idea of sectoral agreements, which is one of the most valuable contributions
from the period of bilateral integration between Argentina and Brazil,
although stated in the Treaty of Asuncion and in one of the first decisions
of the Mercosur Council -CMC No 3 / 91-, never quite materialized as a
key instrument in the strategy for the productive integration of the member
countries. Just by reading Decision CMC No. 3/91, one can appreciate its
potential and also raise questions about the fact that it did not produce
the results that were sought. We are under the impression that this is
still untapped potential. (On the subject, see the report by Miguel Izam,
"Review of the Sectoral Agreements signed by member countries of
Mercosur", ECLAC LC / R880, February 8, 1999, on http://repositorio.cepal.org/).
The other reason is related to the poor results in the development of
a strategy of international trade negotiations and, in particular, in
the idea of encouraging productive linkages between companies from the
various partner countries. The agreements concluded within the framework
of the LAIA with several Latin American countries, including those who
are members of the Pacific Alliance, have more potential for creating
conditions for the development of these linkages. But today the development
of preferential trade negotiations with any of the major economic areas
of the world (except for the EU) is absent from Mercosur's agenda. With
the US, the idea originally related to the development of the agreement
"4 + 1" (the "Rose Garden Agreement"), signed in 1991,
was stalled when the FTAA negotiations collapsed. In the case of China,
the proposal made in 2012 by then Prime Minister Wen Jiabao to explore
the possibility of a feasibility study for a preferential trade agreement
never received an answer from Mercosur countries.
And the third reason, and no less important, is that Mercosur's lack
of an external trade negotiating dynamic has generated significant differences
between member countries, with the ensuing economic and political effects.
In some of the member countries, especially among business sectors, it
is considered that Mercosur not only does not negotiate but prevents any
kind of negotiation by member countries. This comes at a time when the
stalemate of the Doha Round, among other factors, is encouraging the proliferation
of negotiations leading to mega-preferential trade agreements of interregional
scope. (On this topic, see the March
2015 issue of this Newsletter, on http://www.felixpena.com.ar/).
In what is the only relevant ongoing negotiation process, Mercosur and
the EU have been almost 15 years trying to realize a bi-regional preferential
agreement. It aims to cover a broad and balanced spectrum of trade preferences
for goods and services. It will include commitments on investment, public
procurement, regulatory frameworks, intellectual property and other relevant
issues in the bi-regional relations. It is also expected to include measures
that take into account the asymmetries in economic development, both between
and within the two regions.
When the agreement is concluded and enters into force -the achievement
of both objectives can still require some years, even if there is a strong
political commitment- more time will be needed, probably between ten and
fifteen years, depending on how it is negotiated, for all the duties and
restrictions to be eliminated and for the other agreed measures to be
fully enacted. And as is common in these preferential agreements, not
all goods and services will be included. Moreover, it is possible to foresee,
also depending on how this is finally negotiated, the inclusion of different
types of safety valves and funding commitments for the reconversion of
the most sensitive sectors. This is not a minor aspect when addressing
the major sensitivities in Mercosur countries.
Therefore, it is not a simple idea to achieve. Several factors have affected
the recurrent delays in the progress of the negotiations. These delays
are not just a thing of the past. Both regions have strong sensitivities
in sectors that are relevant, while different, from their respective economies.
Agriculture in the EU and some industrial sectors in the Mercosur have
been widely mentioned but are not the only examples. The fact is that
it is difficult to be credible if the responsibility for the repeated
delays in the progress of the negotiations is attributed only to a few
countries, on one side or the other of the Atlantic, or to some of their
Additionally, both regional processes show some significant differences
in the scope of their objectives, the methods for their economic integration
and, in particular, in their institutional frameworks.
In Mercosur, for example, there is almost no equivalent to the EU institutions.
The idea, inspired by Jean Monnet, of the function of coordinating the
different national interests, which is key to understanding European integration
since its inception, never materialized in these latitudes. The attempts
to create facilitating bodies, for the necessary harmonizing of the different
and often diverging interests between partners with notable asymmetries
in relative power, were hampered by an esoteric discussion on the "supranational"
scope that these would eventually have. The idea of an individual or collegiate
entity that could give orders to governments was what prevailed, in a
similar way to what happened during one of the first crisis of the European
Economic Community, when the President of France, General Charles De Gaulle,
called the European Commission a "technocratic, stateless and irresponsible
In turn, on the side of the EU we can find some difficulties to inject
these bi-regional negotiations with the necessary dose of political will
and technical creativity. It is often observed, not without a hint of
irony, that negotiating with Brussels evokes what a world led by robots
would be like. Flexibility and imagination have not always prevailed there,
at least in the negotiations with Mercosur. And this is something that
can also be heard among European citizens about their integration process,
especially since, in recent years, the word "crisis" has penetrated
deep into the collective imagination. This fact has been evinced most
recently with the evolution of the Greek crisis and its eventual departure
from the Euro zone, with all the economic, financial and even geopolitical
consequences that the so-called Grexit could bring.
In addition, this bi-regional negotiation lost political oxygen in Brussels
and the EU member countries, as the perception of an eventual agreement
on trade preferences between Mercosur and the US, within the FTAA, gradually
faded. In fact, during this period the EU has only concluded preferential
agreements with the same Latin American countries as the US.
Three recent events, with varying degrees of relevance, help us foresee
some changes in the negotiating agenda of Mercosur. They belong to the
category of "future- bearing events". The three are interrelated.
It is possible to anticipate that their effects will become more noticeable
later this year. They could have an impact on the bi-regional negotiations
with the EU, even contributing with a needed dose of optimism or, at the
very least, some realism.
The first of these events is related to what was agreed at the bi-regional
meeting on during the CELAC-EU Summit in Brussels, last June. This helps
us anticipate that the respective negotiating offers will be exchanged
during the last quarter of this year. However, what some officials and
media sought to achieve was not attained in Brussels. That is, the acceptance
of the idea of a multi-speed negotiation, following the example of what
happened with the Andean Community of Nations, which certainly was not
unrelated to the loss of relevance of the group some time later. Most
likely, the political sense prevailed among the relevant actors. According
to the statement issued at the end of the ministerial meeting in Brussels
"the Ministers exchanged general information on their respective
market access offers
(they) agreed that, provided conditions for
a successful exchange are met, the goal shall be to exchange market access
offers within the last quarter of 2015". (See the full text of the
joint communiqué from June 11, 2015, on http://trade.ec.europa.eu/;
for the history of this bi-regional negotiation, see the comprehensive
information available in the SICE-SEDI-OEA, http://www.sice.oas.org/).
If this goal is achieved, including sufficient transparency in the exchange
of offers -it would be hard to imagine it could be otherwise- the road
to the most complex stage would be open, which is to achieve a reasonable
(and thus sustainable) balance between the different regional interests.
However, even in such a case it is possible to estimate that the date
for the conclusion of the negotiations would still be far ahead.
A second important event was reflected in the final communiqué
of the meeting between the Presidents of Paraguay and Uruguay, on June
25. As noted there "the two Heads of State reaffirmed their commitment
to make a decision at the meeting of the Common Market Council, next July,
in Brasilia, to develop a plan of action for achieving the objectives
of Mercosur and for perfecting the Free Trade Area. This Plan, to be developed
during the presidency of Paraguay in Mercosur, will establish a schedule
with final deadlines for the elimination of non-tariff restrictions and
all measures of equivalent effect which impact intra-zone trade, and will
be submitted for approval of the other States Parties" (translation
is ours) (See the joint communiqué of the Presidents on http://medios.presidencia.gub.uy/).
The approach of these two founding partners of Mercosur is clear and aims
to open the door for a necessary negotiation. This is related with what,
in the opinion of Europeans, has been one of the reasons for the dwindling
interest in Mercosur: it is a process of integration with serious methodological
flaws that affect its credibility, diminishing the interest to move towards
an effective bi-regional agreement. One criterion for evaluating the effectiveness
of a process of regional economic integration is, precisely, the quality
of the rules that guarantee access to the respective markets, whatever
their relative size. This is so because it is assumed that there lies
one of the main incentives for productive investment based on the expanded
market. It is related with the idea of generating employment and thus
social development of the countries involved. It is a central factor for
the political and social legitimacy of an integration agreement and, therefore,
for its long-term sustainability.
The third event is the approval by Congress of the authorization granted
to the President of the United States to negotiate international agreements.
This is no guarantee that it will happen, but it means a step forward
towards the possible conclusion of one of the mega-preferential agreements
that Washington has been pushing, which is the Trans-Pacific Partnership,
known by its acronym TPP. If finally this agreement is closed and there
is, as a consequence, a general impression that the transatlantic agreement
between the EU and the US -the TTIP- is also feasible, then it is possible
that the pressure to conclude an agreement with the EU, including multiple
speeds for the different members of Mercosur, increases, especially among
business sectors of Brazil, Uruguay and Paraguay. Or it could build pressure
to negotiate some form of bilateral agreement, even without tariff preferences
but with strong commitments, for example, in terms of regulatory frameworks,
investment and even intellectual property. In this case, the pressure
would extend towards the goal of other possible preferential trade negotiations,
especially with the US and China. Beyond its political implications, it
is a scenario that our country should consider and anticipate due to its
possible economic effects and its impact on the projection of the export
of goods and services to the region and to the world.
- Almeida, Perpétua; Acioly, Luciana; Bojikian Calixtre, André,
"Os Desafios da Política Externa Brasileira em um Mundo
em Transição", IPEA, Rio de Janeiro 2014, http://www.ipea.gov.br/.
- Beckert, Sven, "Empire of Cotton. A Global History", Alfred
A. Knopf, New York 2014.
- Blyde, Juan S. (coordinador), "Fábricas Sincronizadas.
América Latina y el Caribe en la Era de las Cadenas Globales
de Valor", Banco Interamericano de Desarrollo, Informe Especial
sobre Integración y Comercio, BID, Washington 2014, http://publications.iadb.org/.
- Boone Barrera, Enrique, "Brazil's International Investment Woes",
Centre for International Governance Innovation, CIGI, Waterloo, Ca,
July 2015, https://www.cigionline.org/.
- Breznitz, Dan, "Innovation and the State. Political choice and
strategies for growth in Israel, Taiwan, and Ireland", Yale University
Press, New Haven - London 2007.
- Brynjolfsson, Erik; McAfee, Andrew, "The Second Machine Age.
Work, Progress, and Prosperity in a Time of Brilliant Technologies",
W.W.Norton & Company, New York - London 2014.
- Da Motta Veiga, Pedro; Polónia Rios, Sandra, "O Capitalismo
de Estado chinës, sua agenda de reformas e implicacoes para a América
do Sul", CINDES, Breves Cindes 87, Rio de Janeiro, Janeiro 2015,
- De Rosa, Peter, "Rebels. The Irish Rising of 1916", Ballantine
Books, A Fawcett Book, New York 1990.
- Elek, Andrew, "China takes the lead on economic integration",
East Asia Forum, 7 July 2015, http://www.eastasiaforum.org/
- Ellis, R. Evan, "China in Latin America. The Whats & Wherefores",
Lynne Rienner, Boulder - London 2009.
- Ellis, R. Evan, "China on the Ground in Latin America. Challenges
for the Chinese and Impacts on the Region", Palgrave Macmillan,
New York 2014.
- Fu, Xiaolan, "China's Path to Innovation", Cambridge University
Press, Cambridge UK 2015.
- Fukuyama, Francis, "The Origins of Political Order. From Prehuman
Times to the French Revolution", Farrar, Straus and Giroux, New
- Gilbert, Isidoro, "La FEDE. Alistándose para la revolución.
La Federación Juvenil Comunista 1921-2005, Sudamericana, Buenos
- Handy, Charles, "The Second Curve. Thoughts on Reinventing Society",
Random House Books, London 2015.
- Hanemann; Huotan, Mikko, "Chinese FDI in Europe and Germany.
Preparing for a New Era of Chinese Capital", A Report by the Mercator
Institute for China Studies and Rhodium Group, Berlin, June 2015, http://www.merics.org/.
- Hearn, Adrian; Myers, Margaret, "China and the TPP: Asia-Pacific
Integration or Disintegration?", The Dialogue, China and Latin
America Report, July 2015, https://www.thedialogue.org/uploads/.
- Lee, Seungjoo, "The Politics of Asian Integration", East
Asian Forum, 11 July 2015, http://www.eastasiaforum.org/.
- Macdonogh, Giles, "Después del Reich. Crimen y castigo
en la postguerra alemana", Galaxia-Gutenberg, Círculo de
Lectores, Barcelona 2011.
- Morse, Richard M., "El Espejo de Próspero. Un estudio
de la dialéctica del nuevo mundo", Siglo XXI Editores, México
- Myers, Margaret; Jie, Guo, "China's Agricultural Investment in
Latin America: A Critical Assessment", The Dialogue, China and
Latin America Report, June 2015, http://thedialogue.org/.
- OECD/WTO (2015), "Aid for Trade at a Glance 2015: Reducing Trade
Costs for Inclusive, Sustainable Growth", OECD Publishing, Paris
- Puente, Armando Rubén, "Yo, Argentino. Las raíces
argentinas del Papa Francisco", DISTAL, Buenos Aires 2015.
- Ricci, Mateo S.J., "Costumbre y Religiones de China", Ediciones
Universidad del Salvador, Buenos Aires 2014.
- Sisci, Francesco, "A Brave New China. The Big Change", goWare,
Firenze, Italy 2014.
- UNCTAD, "Tracing the Value Added in Global Value Chains: Product-level
Case Studies in China", UNCTAD, Geneva 2015, http://unctad.org/en/PublicationsLibrary/ditctncd2015d1_en.pdf.
- World Bank - WTO, "The Role of Trade in Ending Poverty",
A Joint Publication by the World Bank Group and the World Trade Organization,
Geneva 2015, https://www.wto.org/.
Félix Peña es Director
del Instituto de Comercio Internacional de la Fundación ICBC; Director
de la Maestría en Relaciones Comerciales Internacionales de la
Universidad Nacional de Tres de Febrero (UNTREF); Miembro del Comité
Ejecutivo del Consejo Argentino para las Relaciones Internacionales (CARI).
Miembro del Brains Trust del Evian Group. Ampliar