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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
BUILDING THE REGION FROM THE BOTTOM-UP:
A methodological approach to the sustainability of joint work between nations.

by Félix Peña
June 2016

English translation: Isabel Romero Carranza


 

The integration methodology developed in Latin America has been characterized for being driven from the top down. It has usually originated in government decisions with political and economic objectives. Policy changes, sometimes the product of those observed in the international context of the region, coupled with the fact that institutional quality has not always been strong, help to explain the discontinuities in the development of the different economic integration processes.

The experiences of Southeast Asia and Europe highlight the importance of what Jean Monnet called "de facto solidarities" for the long-term sustainability of integration processes. This means the development of a weave of social interests between countries in the same region that, being so strong and complex, make it difficult- although not impossible- to go back to scenarios characterized by fragmentation or, even less, confrontation.

Such weave develops in the measure that physical and cultural connectivity between the different countries grows, facilitating, among other things, the creation of transnational production networks and affinities and reciprocal knowledge resulting from trade and the exchange of people, including professionals and students.

Hence, the growing importance that this may have for the future development of stronger integration and cooperation ties between countries in the region, especially in terms of production, innovation and creativity. Its effects transcend the economic. It contributes to render less reversible the will for joint work between nations driven by governments.

In its international insertion, Argentina faces great challenges in order to develop strategies aimed at a sustained projection of its ability to produce competitive goods and services for the markets of the region and of the world. As a federal country, such strategies should strengthen the institutional structure of the productive sectors in the different provinces. This would involve intensifying academic-private-public synergies, both in terms of diagnostic capabilities and of the presence in the different markets where it aims to have a sustained participation, as well as in the production of goods and services and the necessary efforts of innovation and creativity. It would involve developing capabilities for creating partnerships between local companies and those in other countries and the ability to influence trade negotiations in which the country participates together with its partners.


How to make the partnership between sovereign nations that share the same regional space sustainable over time? Today this question acquires validity when we perceive the recurring trend towards the deterioration of the realities and expectations generated by the processes of economic integration.

These processes have begun with ambitious objectives and have therefore generated great expectations in the citizens. They have opened positive future horizons and a projection in the long term. In addition to achieving the support of citizenships, they have been aimed at influencing potential investors and third countries due to their capacity to impact the development of the participating nations. All this has partly been magnified by the media effort that is often employed to prove the future strength of the commitments made by the partners.

However, sooner or later, the illusions and expectations fade away. This has been so for various reasons, among which we can mention the changes in circumstances - both external and internal - that led to the intention and the commitment to undertake joint work between the participating countries, and the many shortcomings in the approaches and work methods employed in each specific case. (We have addressed these topics in other opportunities, especially in the January 2014 and February 2014 issues of this Newsletter, on http ://www.felixpena.com.ar/).

The above can be observed in the path towards economic integration in Latin America. It should be noted here that a first effort of regional integration was made through the Latin American Free Trade Association (LAFTA), created in 1960. Its gradual deterioration started the moment it became clear that the ambitious goals for tariff reduction resulting from the founding pact of the Treaty of Montevideo could not be fulfilled. Due to external pressures, especially from the United States, it was necessary to adopt the formula of a free trade zone of which there was no previous experience in the region. It was considered that such formula was the only one that would allow the compatibility of an area of sectoral trade preferences of regional scope- which was the real objective- with the provisions of the GATT. Later, it was necessary to transform LAFTA into the Latin American Integration Association (LAIA), introducing more flexible mechanisms and terms. Such flexibility -which has not always been fully exploited- was legitimized in the GATT by the Enabling Clause, specifically negotiated by Latin American countries who were Contracting Parties in the Tokyo Round, completed almost simultaneously with the signing of the Treaty of Montevideo of 1980

The sub-regional process called the Andean Group, which later became the Andean Community of Nations, could not survive either. At its inception both processes generated high expectations and had the leadership of some of the countries that would later promote the current Pacific Alliance.

Today there is a growing debate on the sustainability of Mercosur over time, at least with its current scope and methodologies. (Regarding this topic see, among others, the January 2016 and March 2016 issues of this newsletter on http://www.felixpena.com.ar/).

This is a debate not only present in Latin America, as evidenced by the latest developments in the European Union and the dilemmas posed, among others, by the so-called "Brexit" and the growing "euro-skepticism" of the European citizenship.

Even in our region it is too early to anticipate if the Pacific Alliance will be an exception to the "curve of disenchantment". It has much political drive and a strong business presence. But its main trading instrument, the Additional Protocol to the Pacific Alliance Framework Agreement, signed on 10 February 2014, has just entered into force in May of this year (for the full text go to http://www.sice.oas.org/).

The methodology of economic integration developed in Latin America has been thus characterized by being driven from the top-down. Usually it has originated in government decisions with political and economic objectives. Changes in government policies, sometimes the product of the changes observed in the international context of the region, coupled with the fact that institutional quality has not always been strong, help explain the frequent discontinuities in the development of the different economic integration processes in the region.

The experiences of other regions, and especially of Southeast Asia and Europe, highlight the importance of what, at the time, Jean Monnet called "de facto solidarities" for the long-term sustainability of integration processes. This means the development of a weave of social interests between countries of the same region that, being deeply rooted and not easy to unravel, make it difficult - although never impossible - to go back to a scenario characterized by fragmentation or, much less, confrontation.

This weave develops in the measure that the physical and cultural connectivity between the countries grows and facilitates, among other things, the development of transnational production networks, trade and a greater reciprocal knowledge derived from the exchange of goods and people, mainly professionals and students. Hence, its growing importance for the future development of integration and for an enhanced cooperation between the countries of the region, especially in terms of production, innovation and creativity. Its effects go beyond the economic. It contributes to render less reversible the will for joint work driven by governments.

Strategies aimed at intensifying the effects of "de facto solidarities" between the economic and social systems of Latin American countries can be advanced in at least three areas.
The first is that of the diagnostic capabilities of the changes that are taking place globally and which affect the relative competitiveness of the various productive sectors of each country. This involves developing networks for action-oriented thought. Their function is to generate a steady stream of prospective analysis that helps understand the dynamics of change in the world -political and economic as well as technological and cultural- and to identify the opportunities and challenges that may result from such changes. (See the December 2015 issue of this newsletter on http://www.felixpena.com.ar/).

The second is the coordination and joint action of the institutions representing the productive sectors of the different countries. This has been an important factor in the presence of offensive business interests -and not just defensive ones, as has often been the case of Latin American experiences, for example, in the negotiation of exception lists to the programs of tariff liberalization-in the case of European integration and particularly of the ASEAN. The networks of business institutions, especially when they represent the offensive interests of its members, are a positive factor in the development of sustainable regional integration processes.

And the third area is that of academic exchanges. Remarkable examples of this are the various versions of the Erasmus program in the European Union. This is still in its budding stage in Latin America.

In relation to its international insertion, Argentina has strong challenges ahead in order to develop strategies for a sustained projection of its ability to produce competitive goods and services in world markets and especially in the markets of the region. In order to be effective, these strategies should involve the active participation of the institutions that represent productive interests and, in particular, of the SMEs.

As a federal country, in order to be fully effective, such strategies should strengthen the institutional structure available in each province or that can be developed at governmental level and at the level of the productive sectors. It is the country as a whole that must set into motion in order to project to the world the talent of Argentines, translated into the capability to produce smart goods and services that are competitive and valued in the rest of the world.

This will involve intensifying academic-private-public synergies across the country, both in terms of diagnostic capabilities and in the sustained and long-term presence of its companies in the various markets it aspires to reach with goods and services that are the result of its innovation and creativity efforts.

It would also involve developing capabilities for partnering with local and foreign companies and, moreover, the ability to influence international trade negotiations in which the country participates together with its Mercosur partners. (In this regard, see the January 2015 issue of this newsletter on http://www.felixpena.com.ar/).


Recommended Reading:


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  • Axelrod, Robert, "The Evolution of Cooperation", Revised Edition, Basic Books, New York 1984.
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  • Barr, James, "A Line in the Sand. The Anglo-French Struggle for the Middle East 1914 - 1948", W.W.Norton & Company, New York - London, New York 2012.
  • Bauman, Zygmunt; Bordoni, Carlo, "Estado de crisis", Paidós, Buenos Aires 2016.
  • Bickerton, Chris, "The European Union: A Citizen's Guide", Pelican, Penguin Books, 2016.
  • Bloch, Roberto (Director), "Cuadernos de Geopolítica", n° 1, Buenos Aires 2013.
  • Brynjolfsson, Erik; McAfee, Andrew, "The Second Machine Age. Work, Progress, and Prosperity in a Time of Brilliant Technologies", W.W.Norton & Company, New York and London, 2014.
  • Bureau, Jean-Christophe; Guimbard, Houssein; Jean, Sebastien, "Competing Liberalizations: Tariffs and Trade in the 21st Century", CEPII, Working Paper, nº 2016-12 - May, en: http://www.cepii.fr/.
  • Duckworth, Angela, "Grit. The Power of Passion and Perseverance", Vermillon, London 2016
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  • Greengard, Samuel, "The Internet of Things", The MIT Essential Knowledge Series, Cambridge - London 2015.
  • Hanson, Robin, "The Age of EM. Work, Love, and Life when Robots Rule the Earth", Oxford University Press, Oxford UK, 2016.
  • IEERI, "EE.UU - China. La arquitectura del próximo escenario global y su impacto sobre la Argentina", Círculo de Legisladores de la Nación Argentina - Instituto de Estudios Estratégicos y de Relaciones Internacionales, Buenos Aires 2015.
  • INTAL -LAB, "Made in CHI - LAT. Claves para renovar la convergencia entre Latinoamérica y China", BID - INTAL/LAB - Planeta, Revista Integración & Comercio, nº 40, Buenos Aires, Mayo 2016, en: https://publications.iadb.org/.
  • IRI, "Revista Relaciones Internacionales", Instituto de Relaciones Internacionales de la Universidad de La Plata - Nuevo Hacer, Grupo Editor Latinoamericano, Año 24, nº 49, La Plata, Junio-Diciembre 2015.
  • Kaplan Thaler, Linda; Koval, Robin, "Grit to Great. How Perseverance, Passion and Pluck Take You from Ordinary to Extraordinary", Crown Business Books, New York 2015.
  • Koremenos, Barbara, "The Continent of International Law. Explaining Agreement Design", Cambridge University Press, Cambridge 2016.
  • Lafer, Celso, "Direito Internacional. Um Percurso no Direito no Século XXI", Vol. 2, Gen/Atlas, Sao Paulo 2015.
  • Malmgren, Pippa, "Geopolitics for Investors", CFA Institute Research Foundation, 2015.
  • Merrit, Giles, "Slippery Slope. Europe's Troubled Future", Oxford University Press, Oxford UK 2016.
  • Oatley, Thomas, "International Political Economy", Routledge, London and New York, 2016.
  • Pomfret, Richard, "International Trade. Theory, Evidence and Policy", World Scientific, Singapore 2016.
  • Silveyra, Jesús María, "Diálogo con el Islam. Martirio, búsqueda y hallazgo de don Andrea Santoro", Lumen, Buenos Aires-México 2008.
  • Stone, Randall W., "Controlling Institutions. International Organizations and the Global Economy", Cambridge University Press, Cambridge 2011.
  • Tokatlian, Juan, "Contra una política exterior binaria", diario "La Nación", viernes 10 de junio de 2016, en http://www.lanacion.com.ar/.
  • Wolf, Alan, "The WTO Appellate Body at 30: Exploring the Limits of WTO Dispute Settlement in the Next Decade", ICTSD - World Economic Forum, The E15 Initiative Geneva, May 2016, en: http://e15initiative.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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