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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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POST-BREXIT AND WHAT CAN BE LEARNED FROM JEAN MONNET AND THE KON-TIKI
When integration is in crisis it is useful to remember the founding moments.

by Félix Peña
July 2016

English translation: Isabel Romero Carranza


 

The Brexit and post-Brexit crises in the EU show the significant differences that exist between member countries on how to build integration in the European regional space. For different reasons, this is also becoming evident in Mercosur.

Three factors affect the ability of countries trying to undertake a process of regional integration and sustain it over time. They are: i) the voluntary nature of regional integration among sovereign nations based on the respect for common rules; ii) the absence of a single model on how to approach a voluntary integration process, but the existence of multilateral legal commitments that may affect the methodology used for granting trade preferences, and iii) the importance of the vision and political leadership, both at the founding moment and, later on, to deal with critical situations.

Vision and political leadership involve the ability of those related, from different positions, to design agreements and rules that are perceived as potential generators of mutual gains for the participating countries and that can produce a reconciliation of interests and wills in order to achieve approval and have significant potential to be effective and penetrate reality. Vision and political leadership are also required for the task of adapting the integration and its rules to the continuous changes in realities.

In the founding moment of European integration, Jean Monnet brought this vision and leadership. He was not the only one, but he played a key role in the reconciliation of wills that led to the Treaty of Paris, after the Schumann Declaration of May 9th 1950. Going over his memoirs is highly recommended for those who wonder how to continue the construction of the European Union.

Regional integration is a process that is built day by day. Roadmaps require constant adaptation. This involves a dynamic balance between flexibility and predictability resulting from its institutions and rules. In his Memoirs and almost at the end of his long life, Monnet stated: "we must make our way day after day; the essential is to have an objective that is clear enough so as not to lose sight of it".


It is noteworthy how two processes of regional integration, the European Union and Mercosur, which have some common elements but also notable differences, are going through times of crisis. Some observers even believe that they show the characteristics of a terminal crisis. Others, us included, more cautiously regard these characteristics as a display of methodological problems -how the partner nations can work together-, than of existential ones -why keep working together.
The fact is that the Brexit and post-Brexit crises in the EU show the significant differences between member countries on how to build integration in the European regional geographical space.

For various reasons, these differences are also evident in the Mercosur. The recent questioning of the fact that Venezuela could assume the pro tempore presidency, which would formally correspond in the second half of this year, is clear evidence that something has deteriorated among the partners. We can add to this the recurring questions on the instrument of the common external tariff, explicitly provided for by the Treaty of Asuncion and which, together with its Article 2 (reciprocity of rights and obligations), constitute the guarantee that the founding members gave to each other that the tariff preferences granted reciprocally would not be liquefy.

Three reflections can contribute to place both crises in a wider perspective.

The first relates to the fact that both cases are processes of integration between sovereign nations that have voluntarily decided to participate in them, accepting the common rules that were agreed. Some nations did so from the founding moment. Others adhered later of their own will, such the cases of the UK in the EU and Venezuela in Mercosur, among others. Moreover, the British experience suggests that the other member countries were not necessarily bound to accept the new additions (for example, in a first attempt, in 1963, the United Kingdom could not be incorporated to the EU because of the veto of the French government).

Just as no one can force a sovereign nation to form part of an integration process institutionalized in a founding treaty, no one can prevent a member country from withdrawing when the rules provide for this. By its sovereign will, Chile withdrew from the Andean Group and, years later, Venezuela withdrew from the Andean Community of Nations (CAN). The founding agreements provide for this right to withdrawal and the procedures for achieving them. Such is the case today of Article 50 of the Treaty of Lisbon, which is to regulate the post-Brexit stage of the yet uncertain process of the withdrawal of the United Kingdom from the EU.
The voluntary nature of the participation of a nation in a process of integration and its subsequent agreement to comply with common rules is not a minor detail at the moment of assessing the scope of decisions such as the one taken by the citizens of the United Kingdom in the Brexit referendum.

The voluntary withdrawal from an integration process is an option that would also be available to a member country of Mercosur that does not agree, for example, with the restrictions involving the instrument of the common external tariff. Of course, in relation to this issue, another option would be to obtain the necessary consensus to amend the Treaty of Asuncion. Even if Decision 32/00 CM were repealed, as in some cases has been suggested, a situation that arises from the provisions of its own founding treaty would not be fully resolved.

The second consideration refers to the fact that, once the political decision to undertake a process of regional integration has been made, the participating nations have the right to exercise the principle of freedom of organization, that is, to choose the most appropriate methodologies to achieve the common objectives (see Angelo Piero Seregni, "Le Organizzazioni Internazionali" Dott.A.Giuffré Editore, Milan 1959). There is no single model on how to build a process of integration between sovereign nations which is voluntary and subject to common rules. Incidentally, the methodologies used have to be related with the density of the commitments that the participating countries are willing to make, especially in the economic sphere and with the deadlines set to achieve the desired objectives.

But they should also take into account the legal commitments made by the participating countries with other nations, especially at the multilateral global level. In this regard, the main commitments are those arising from Article XXIV of the GATT. In relation to the trade of goods, paragraph 8 of this article -which is now part of the legal framework of the WTO- has definitions of the two main instruments, the free trade zone and the customs union, that allow to arrange trade preferences not extended to other countries of the multilateral global system due to the effects of the most-favored-nation clause (Article I, which is a cornerstone of the GATT legal system).

As we have stated on other occasions, these are definitions that lend themselves to relatively flexible interpretations and not necessarily conform to the more theoretical and dogmatic views of what a free trade area or customs union should be. These are examples of the "constructive ambiguities" that characterize the GATT, of a marked Anglo-Saxon legal nature. Moreover, for developing countries -such the case of Mercosur members- the enabling clause provides an even more flexible framework for the design of a regional integration agreement that includes tariff preferences.

And the third consideration relates to what John Carlin characterized as the "human factor" in international relations (see John Carlin, "Invictus: Nelson Mandela and the Game That Made a Nation", Penguin Books, London 2008, and his weekly column under the same name in the newspaper "El País" of Madrid, on http://elpais.com/autor/john_carlin/a). This involves the vision and leadership provided by those people who inspire or propel significant events in political life. In this case, in the negotiations leading to the founding pact of an integration process and, later on, in the different moments of its development, which often involve overcoming critical situations.

The voluntary nature of the regional integration between sovereign nations, based on the respect for common rules; the absence of a single model on how to carry out a voluntary integration process, but existence of multilateral legal commitments that may affect the methodology used for granting trade preferences, and the importance of the vision and political leadership, both at the founding moment and later on, to address critical situations, are then the three factors that can affect the ability of countries trying to undertake a process of regional integration and sustain it over time.

Of these factors, the third is perhaps the most relevant. Vision and political leadership are qualities that were present in the various founding moments of European integration. I also believe they were present thirty years ago, at the time of the initial integration agreements between Argentina and Brazil and then during the founding moments of Mercosur.

Vision and political leadership imply the ability of those involved, from their different perspectives, to design agreements and rules that are perceived as potential generators of mutual gains for the participating countries and that can produce a reconciliation of interests and wills to achieve approval and have a significant potential to be effective and penetrate reality. Moreover, vision and political leadership are also required for the task of adapting an integration project and its rules to the continuous changes in the realities.

In the founding moment of European integration, Jean Monnet brought this kind vision and leadership. He was not the only one, but he played a key role in the reconciliation of wills that led to the Treaty of Paris, after the Schumann Declaration of May 9th, 1950. Reviewing his memoirs today is highly recommended for those who are wondering how to continue building a space of European integration (Jean Monnet, "Memoires," Fayard, Paris 1976; in English, "Memoirs", Collins, London 1978, and, in Spanish, "Memorias", Encuentro - CEU, Madrid 2010).

Regional integration is a process that is built day by day. Roadmaps require constant adaptation. This involves a dynamic balance between flexibility and predictability resulting from its institutions and rules. Monnet says, in concluding his Memoirs and almost at the end of his long life (he died at 92): "We must make our way day after day; the essential is to have an objective that is clear enough so as not to lose sight of it "(in page 591 of the Spanish version).

A picture of the Kon-Tiki, the raft that in 1947 with a crew of five young men led by the Norwegian Thor Heyerdahl sailed for over one hundred days from Callao in Peru to Polynesia, occupied a prominent place in Jean Monnet's desk in Luxembourg, when he chaired the High Authority of the Coal and Steel European Community. "These young people" -told Monnet to his visitors, as he remembers on the last pages of his memoirs- "chose their course and set sail knowing that they could not turn around. However great their difficulties, they only had one recourse: to move forward". They were driven by a vision that was actually an obsession: to demonstrate that it was possible to sail on raft from South America to Polynesia. They were tenacious and succeeded (see the book on the Kon-Tiki by Thor Heyerdahl "Expedition Kon-Tiki". Simon and Schuster, New York - London, 1984, and also the film "Kon Tiki" (2012), on https://gloria.tv/).

In view of the difficulties that the processes of regional integration of the EU and Mercosur are undergoing today, the implicit advice to be drawn from Jean Monnet and the experience of Kon-Tiki is along this lines: be tenacious, go ahead, but adapt navigation courses to the changes in currents, winds and tides.

Backtracking could be the result of not remembering the vision that prompted us to set sail; this is, to begin the construction of a space of regional integration.

It may also involve going back to the scenarios of confrontation and fragmentation that both regions have experienced in the past. Indeed, these were more intense and dramatic in the European case, as illustrated in the book by Hans Magnus Enzensberger, "Europa en ruinas. Relatos de testigos oculares de los años 1944 a 1948", Captain Swing, 2013. But in the case of Mercosur, it could mean going back to scenarios such as those that were reversed by the agreements conceived by Raul Alfonsin together, first, with Tancredo Neves and, later, with Jose Sarney.


Recommended Reading:


  • Arguello, Jorge, "Diálogos sobre Europa. Crisis del euro y recuperación del pensamiento crítico", Prólogo de Aldo Ferrer, Clave Intelectual, Madrid 2015.
  • Ayral, Serra, "TST and Trade Facilitation Agreements: Leveraging Linkages to Reduce Trade Costs", WTO, Economic Research and Statistics Division, Working Paper ERSD-2016-02, Geneva, 01 June 2016, en https://www.wto.org/.
  • Ezensberger, Hans Magnus, "Europa en ruinas. Relatos de testigos oculares de los años 1944 a 1948", Capitán Swing, Madrid 2013.
  • Florensa, Luis Marcelo; Márquez-Ramos, Laura; Martinez-Zarzoso, Inmaculada; Recalde, María Luisa, "Regional versus global production networks: where does Latin America stand?", Applied Economics 2015. en https://www.researchgate.net/.
  • Freund, Caroline; Hufbauer, Gary; Jung, Euijin, "Enhancing Export Opportunities for Small and Medium-Sized Enterprises", PIIE, Policy Brief, Washington D.C. June 2016, en: https://piie.com/.
  • Khanindra, Das; Nilanjan, Banik, "What motivates Indian firms to invest abroad", Emerald Insight, International Journal of Commerce and Management, en http://www.nilanjanbanik.in/.
  • Kommerskollegium, "Protectionism in the 21st Century", Kommerskollegium, National Board of Trade, Stockholm, May 2016, en http://www.kommers.se/.
  • Schott, Jeffrey J., Understanding the Trans-Pacific Parnetship: An Overview", PIIE, Washington D.C., May 2016, en https://piie.com/.
  • Serbin, Andrés (Coordinador), "¿Fin de ciclo y reconfiguración regional? América Latina y las relaciones entre Cuba y los Estados Unidos", CRIES, Buenos Aires 2016.
  • Sharma, Ruchir, "The Rise and Fall of Nations. Forces of Change in the Post-Crisis World", W.W. Norton & Company, New York - London 2016.
  • Smart, Christopher, "US Election Note: Economic Policy After 2016", Chatham House, The Royal Institute of International Affairs, London, June 2016, en https://www.chathamhouse.org/.
  • Stephenson, Sherry, "Trade Governance Frameworks in a World of Global Value Chains", ICTSD-WEF, The E15 Initiative, Policy Options Paper, Geneva 2016, en http://www3.weforum.org/.
  • UNCTAD, "Delivering Aid for Trade", United Nations Inter-Agency Cluster on Trade and Productive Capacity Geneva, May 2016, en http://unctad.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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