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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
REFLECTIONS ON THE OCCASION OF AN ANNIVERSARY:
25 years of Mercosur and the options for its future evolution

by Félix Peña
March 2016

English translation: Isabel Romero Carranza


 

Celebrating a quarter century of existence is a good opportunity to reflect on the experience gained in the past and on the options for the future. It is more than necessary because it is difficult to deny that Mercosur faces today a serious crisis of credibility. But it is also necessary due to the fact that Mercosur countries must face, simultaneously and in the first half of the year, at least three fronts of negotiation and complex decision-making.

Mercosur is not the only process of construction of a common political and economic space between neighboring countries that is at a crossroads. Decades after its inception, the EU is experiencing an even more complex situation.

The different moments that Mercosur has experienced in a quarter century of evolution prompt us to identify at least three conditions that are necessary to move towards the agreed objectives of a voluntary integration process between sovereign nations that aspire to remain so. A first condition is that of political drive. This means that political will, which can be just apparent, translates into a continuous and intense flow of stimuli from the highest political level, at least from some of the member countries with greater relative power. A second condition is the technical competency. This means that the working methods and instruments used to impact reality reflect analysis and content that meet sound technical criteria to make sound decisions that aspire to be viable. A third condition is the quality of management, both internally in each member country -at government level and in the business and other social actors- and in the common bodies that are established.

The experience gained after the first twenty-five years of Mercosur enables us to reflect on what needs to be achieved in the negotiations leading to integration agreements, in which the sough objectives are set and the main mechanisms and instruments that are supposed to help achieve them are established. Three seem to be the key points in these negotiations. These points result from finding a balance between requirements that may be conflicting and difficult to reconcile. These are the requirements of the short and the long term; between the offensive and defensive economic interests; and between the demands of flexibility and predictability with regard to the ground rules, especially those that affect productive investment decisions.


Mercosur celebrates 25 years. The Treaty of Asuncion was signed on March 26, 1991, with four member countries that were continuing the foundational process initiated in 1986 with the bilateral agreements between Argentina and Brazil. These agreements were, in turn, the culmination of a preparatory stage which had begun after the tripartite agreement on water resources of October 1979 between Argentina, Brazil and Paraguay.

What led to the founding moments of Mercosur was, among other factors, a shared understanding of the requirements that resulted from the changes that were taking place in the global scenario after the end of the Cold War and in the inter-American region following the launch by President Bush of the idea of a hemispheric free trade area. Thanks to the abovementioned tripartite agreement, there were no longer reasons for concern that there could be a confrontation in the American south, with the ensuing economic and political costs for each of the protagonists that could have resulted from the collision course that had previously dominated the relationship between Argentina and Brazil. Also, the challenges and opportunities coming from the new economic and political global and regional environment could be perceived. The context of those years was, therefore, one that compelled towards joint action of complex and profound political and economic dimensions and which aspired to have a wider geographic projection. A testimony of this was the frustrated attempt for Chile to join in as a member country and also the text of Article 20 of the Treaty of Asuncion.

Celebrating a quarter century of existence is a good opportunity to reflect on the experience gained and on the options that open up for the future. This seems to be more than necessary due to the fact that it is difficult to deny that Mercosur faces a serious crisis of credibility. Mercosur is, in this sense, at a crossroads that could lead to different and even opposite destinations. Among them certainly is the possibility of its disappearance as a relevant framework for the development and the international economic integration of its member countries or, at least, of some of them. (See the May 2015 issue of this newsletter on http://www.felixpena.com.ar).

But it is also a necessary reflection because Mercosur countries must deal, simultaneously and in the first half of the year, with at least three fronts of negotiation and complex decision-making. One is precisely on the adaptation of the methodology used for the integration of Mercosur to the new global, regional and domestic realities of its different member countries. This implies continuing with the momentum originated in the recent Summit of Asuncion, thanks especially to the initiatives of Paraguay and Uruguay. The other is related to the strategy of convergence in diversity as a means to address economic integration in the broader context of Latin America, especially through effective communicating vessels established between the members of Mercosur and those of the Pacific Alliance. And the third front is the conclusion of the bi-regional agreement that has been negotiated in recent years between Mercosur and the EU. This front will be linked necessarily to other preferential bi-regional trade negotiations -in the various possible modalities consistent with an intelligent interpretation of the scope of action allowed by the rules of GATT and the WTO- that are undertaken in the future with other major blocks and countries, and even the hemisphere. (On this topic, see the January and February issues of this newsletter on and on www.felixpena.com.ar).

But Mercosur is not the only voluntary process of construction of a common political and economic space between neighboring countries that is at a crossroads. Several decades after its inception, the EU is going through an even more complex and uncertain stage. This is reflected, among other things, in the multiple effects of the migration flows from neighboring environments and, most notably, in the debate on the "Brexit" and even about a possible "Grexit". The recent European Council meeting in Brussels (18 and 19 February 2016) revealed the complexities of the situation posed by the eventual withdrawal of Britain, and, at the same time, the creative imagination and relative heterodoxy needed to address the methodological crises on how to work together for the construction of a region where peace, political stability and social progress prevail, that threaten to turn into existential crises (why work together). (See http://www.consilium.europa.eu/).

The different moments observed in a quarter century of evolution of Mercosur help us identify at least three conditions that are necessary in order to advance the goals agreed in a voluntary integration process between sovereign nations that aspire to remain so.

A first condition is that of political drive. This means that political will, which can be just apparent or circumstantial, translates into a continuous and intense flow of effective stimuli from the highest political level, at least in some of the member countries with greater relative power. Without such flow, it is possible that much of what is decided at the regular meetings of the key decision-making bodies, even with the participation of the Heads of State, remains just an expression of "media diplomacy". Such diplomacy has abounded in the integration processes in Latin America and translates into decisions that may have repercussions in the press the following day, but that seldom achieve the legal standing required to produce real effects, for example, in decisions aimed at encouraging productive transformation and investment. They are then formal decisions that lack the three characteristics consistent with the common quality rules of a multinational integration process which are effectiveness, efficiency and social legitimacy.

A second condition is the technical competence. This means that the working methods and instruments used to operate on realities reflect analysis and content that meet solid technical criteria, especially in the economic and the legal, to support decisions that are viable. These criteria need not necessarily adapt to theoretical models from other realities and historical moments.

A third condition is management quality, internally in each member country -in government, business and other social actors- and in the common bodies that are established. Management quality is closely related with the degree of coordination among those involved, at different levels, in the corresponding decision-making processes, and with the degree of transparency that helps facilitate the access to relevant information so that the multiple players involved can influence, in one way or another, the content of the decisions that are taken.

The experience gained also allows us to reflect on what needs to be accomplished in the negotiations leading to agreements in which the sought objectives are set and the main mechanisms and instruments for achieving them are established.

There are three key points in these negotiations. They are not the only ones but they largely determine the sustainability of an integration agreement and its main objectives over time. These three points are the result of achieving a balance between requirements that may be contradictory and difficult to reconcile. They are: the balance between short and long term needs; between offensive and defensive interests, and between the demands for flexibility and predictability, especially with regards to the ground rules which affect productive investment decisions.

Reconciling sometimes contradictory demands such as the three mentioned in the preceding paragraph requires that the conditions of political drive, technical competence and management quality are not only present but also find sustainability in the support of the citizenry to the idea of joint work between nations that share a same regional geographic space. Such support will be easier to gain and maintain over time if there is a meaningful degree of transparency and public participation; if the integration process can be correlated with credible future horizons for each of the societies involved, and if citizens can relate their employment and welfare to the effectiveness of the objectives and commitments made together with the other countries participating in the process.


Recommended Reading:


  • Bew, John, "Realpolitik. A History", Oxford University Press, Oxford and New York, 2016.
  • Bostrom, Nick, "Superintelligence. Paths, Danger, Strategies", Oxford University Press, Oxford 2014.
  • CERA, "China. La gira latinoamericana del Primier Li Keqiang", Instituto de Estrategia Internacional de la Cámara de Exportadores de la República Argentina (CERA), N° 82, Buenos Aires, Mayo de 2015.
  • Fundación INAI, "ERAMA 2024. Escenario de Referencia Agroinustrial Mundial y argentino al 2014", Funación INAI, Buenos Aires, Diciembre de 2015, en http://www.inai.org.ar/.
  • INTrade-BID, "Latin America and the Caribbean Facing the Contraction of World Trade", Coordinated by Paolo Giordano, Trade and Integration Monitor 2015, en https://publications.iadb.org/.
  • Jeffery, Keith, "1916. A Global History", Bloomsbury, New York 2016.
  • Meltzer, Joshua T., "Maximizing the Opportunities of the Internet for International Trade", ICTS - WEF, The E15 Initiative, Policy Option Paper, Geneva, January 2016, en http://www3.weforum.org/.
  • Mijares, Víctor M.; Comini, Nicolás M., "Venezuela, Argentina y el Mercosur: mejor dentro que fuera", Revista Mundorama, n° 101, 17-02-2016, en http://www.mundorama.net/.
  • Oatley, Thomas, "International Political Economy", Routledge, London and New York, 2016.
  • Pangestu, Mari, "The importance of ASEAN centrality in Sunnylands", East Asia Forum, 14 February 2016, en http://www.eastasiaforum.org/.
  • Papendieck, Sabine; Idigoras, Gustavo, "Oportunidades para Relanzar las Negociaciones Económicas Internacionales del Mercosur. Hacia una agenda agresiva de relacionamiento externo", Grupo de Países Productores del Sur (GPS), Buenos Aires, marzo 2016.
  • Peña, Félix, "Política Comercial e integración regional de Argentina: ¿hacia una nueva etapa", Revista Puentes, ICTSD, volumen 17, número 1, Ginebra 24 de febrero de 2016, ps 22 a 25, en http://www.ictsd.org/.
  • PUENTES, "¿Nuevos actores y paradigmas en la gobernanza internacional?, Volumen 17, n° 1, Ginebra 24 de febrero de 2016, en http://www.ictsd.org/.
  • Rosales, Osvaldo, "Mercosur-UE. La relevancia del acuerdo", Suplemento Comercio Exterior, diario "La Nación", ps 4 y 5, 23 de febrero 2016, en http://www.lanacion.com.ar/.
  • Schenk, Catherine R., "International Economic Relations since 1945", Making of the Contemporary World, Routledge, New York 2011.
  • Walter, Andrew; Sen, Gautam, "Analyzing the Global Political Economy", Foreworded by Benjamin J. Cohen, Princeton University Press, Princeton and Oxford, 2009.
  • World Economic Forum, "Geo-economics with Chinese Characteristics: How China's economic might is reshaping world politics", WEF, Regional Agenda, Geneva, January 2016:
  • Zucman, Gabriel, "The Hidden Wealth of Nations. The Scourge of Tax Havens", with a forword by Thomas Piketty, The University of Chicago Press, Chicago and London 2015.

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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