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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
THE POLITICAL WILL TO BREAK AWAY FROM INERTIA:
A necessary condition to restore the construction dynamic of Mercosur?

by Félix Peña
August 2016

English translation: Isabel Romero Carranza


 

Three recommendations would seem appropriate in order to break away from the inertia in which the process of construction of the Mercosur seems to have fallen into, thereby restoring a reasonable dynamic and the trust, even the enthusiasm, of the citizenships with the common project.

The first recommendation would be to fully utilize the existing diversity of the different legal frameworks based on agreements that help build a space such as Mercosur while integrating it with the rest of the Latin American region. These agreements provide the legal foundation for one of the key elements of this construction, a space of economic preferences aimed at facilitating the productive articulation between the participating countries. Such distinct legal frameworks are: the Treaty of Asuncion, which created the Mercosur; the bilateral Treaty of 1988, which formalized the integration, cooperation and development program between Argentina and Brazil; and the 1980 Treaty of Montevideo, which created the LAIA.

The second recommendation would be to accentuate political leadership, improving management capacity and ensuring effective compliance with the agreed ground rules.

And the third recommendation has to do with the promotion of productive articulation, especially through business networks that span several countries and are facilitated by sectoral agreements. This is the backbone of the architecture of a process such as Mercosur.

Rescuing the figure of the sectoral agreement can be an effective way to restore the dynamic of the construction of Mercosur and, simultaneously, to carry out the strategy of convergence in diversity with the Pacific Alliance countries. These agreements are compatible with trade preferences of variable geometry and multiple speeds. This would also involve addressing other issues that are relevant for the development of regional value chains projected to the world, such as those involving trade facilitation, regulatory frameworks, intellectual property, government procurement, and services, among others.


It would be difficult to deny that Mercosur is experiencing a deep crisis. Differences of opinion between the governments of the member countries, regarding who should assume the Pro-Tempore Presidency of the Mercosur bodies during the second half of 2016, has accentuated the perception that the integration process confronts serious difficulties in articulating the different interests and points of view of its members. Such coordination appears to be almost impossible at times, especially in the current political and economic scenario.

The Presidency is not an organ of Mercosur and thus it is not included in the organigram (http://www.mercosur.int/). It is a function provided for in the Protocol of Ouro Preto for a collegiate body, which is the Mercosur Council. This function extends to the other collegiate bodies. It symbolizes the fact that for a six month period and in rotation, one of the member countries takes charge of the function of promoting the Mercosur. But this function has not altered the way in which the decisions related to the integration process are adopted. The country that holds the temporary presidency has no formal power to make binding decisions. In practice, the exercise of this function has not altered the tendency towards inertia and the loss of dynamism that has been observed over the past several years.

An advisory opinion -a figure also provided for in the Protocol of Ouro Preto-would perhaps help clarify the issue and thus channel the current debate on the subject through a more precise path.

In a way, what is happening reflects a governance deficit of the integration process, which dates back to a previous time, much before the current differences were made evident. The main problem is not so much that there are differences, even deep ones, in the visions of the integration process and on how to develop it. Of greater concern is the relative paralysis in the dynamic of Mercosur, which is supposed to be the result of a continuous process of construction of a common preferential space, as a way to facilitate joint productive transformation of the partners and consolidate democracy and economic and social development. Such paralysis makes the differences over the so-called Pro-Tempore Presidency even more relevant than what they should be.

Given the situation, it would seem relevant to try to answer the following questions: How to overcome the relative inertia that the construction of Mercosur is experiencing now? How to imprint it with a dynamic that befits the challenges faced by its member countries, both internally, within their own region and also globally? How to restore a certain trust among citizenships in the relevance and the future of the regional integration process?

These are some of the questions that seem to require a frank discussion between the leaders of the member countries and, in particular, between the political leadership. Indeed, they are not very different from the questions being faced by the rulers and political leaders in the European Union, especially since it has become clear that the "Brexit" is not necessarily an isolated and transient episode ( see the July 2016 issue of this Newsletter on www.felixpena.com.ar).

This is a debate that would need to take place in each of the member countries, in view of what are the real alternatives to the current Mercosur. If the hypothesis were that a country has other viable options with similar political, economic and social qualities -for example, in terms of creating conditions of peace and political stability in the region and, at the same time, facilitating productive transformation, economic and social development and competitive insertion in the world-a possible rational alternative would be either to resign membership altogether or to endeavor to agree with all the partners the end of the current experience of Mercosur. We have mentioned it on other occasions: nothing and no one forces a country to participate in a voluntary process of regional integration if it considers it is not convenient for its own interests and that there are other options available. Neither are all the partners obliged to go ahead with the project (see our interview published by O Estado de Sao Paulo, in its issue of August 14, 2016, on http://internacional.estadao.com.br/).

Notwithstanding others, three recommendations would seem appropriate in order to actually break the inertia in which the process of construction of the Mercosur finds itself today and reestablish a reasonable dynamic and the trust, even the enthusiasm, of citizenships with the common project.

By stating it in these terms we are suggesting to set aside the idea that integration can only be achieved through simple, straightforward and almost automatic steps -as would be, for example, establishing a free trade zone or customs union, or even an economic and monetary union-, the notion of a "one shot integration", in which the essential is defined in the founding moment and everything else happens almost automatically.

On the contrary, we are proposing the need to imagine a process of integration between sovereign nations willing to remain so, as a sometimes erratic sequence of winding steps aimed at objectives which, in their ideal form -as stated by theory- may never be achieved. That is, in contrast to what is suggested by the most dogmatic views, a construction process that has to be continuous and without an end point -if by this we understand a new autonomous unit of power in the international system such as, for example, the "United States of Europe" or the "United States of South America "-and that will recurrently face crisis, possibly existential and not only methodological. (In this regard, see the book by Luuk van Midderlaar, "The Passage to Europe", Yale University Press, 2013).
The first recommendation relates to fully utilizing the diversity of the different legal frameworks based on existing agreements, which enable to build a space such as Mercosur and simultaneously integrate it with the rest of Latin America and, at least, the South American region.

These agreements provide the legal foundations for one of the most essential elements of the construction: an area of economic preferences with a strong dose of exclusivity aimed at facilitating the productive articulation between the participating countries. In order to be effective, these preferences must be protected from a premature wearing out of their effects on the decisions of productive investment, as would happen if they were not guaranteed legally, or if they could easily be rendered irrelevant through successive preferential agreements that any of the partners acting "on their own" could sign with third countries.

Such distinct legal frameworks are: the Treaty of Asuncion, which created the Mercosur; the bilateral Treaty, which formalized the integration, cooperation and development program between Argentina and Brazil; and the Treaty of Montevideo, which created the LAIA (ALADI).

Today, the commitments made by the Mercosur partner countries and other Latin American countries are embedded in these different legal frameworks and, sometimes, in all three simultaneously. The set of these distinct legal frameworks is what enables to build an integration space between the member countries of the current Mercosur with variable geometry and multiple speeds. Nothing prevents, for example, to use the bilateral agreement between Argentina and Brazil to promote, in the framework of LAIA -for example, using the instrument of economic complementary agreements-, sectoral agreements in which other LAIA countries participate and not necessarily all who are members of Mercosur. The flexibility provided by the way in which Mercosur has interpreted the instrument of the common external tariff would facilitate such kind of approaches that, moreover, already have precedents in the experience of Mercosur.
The second recommendation involves accentuating political leadership, improving management capabilities and ensuring reasonable compliance with the agreed ground rules.

Political leadership, exercised primarily by the head of a state, characterized the founding moments of the agreements between Argentina and Brazil, thirty years ago, and of Mercosur itself, twenty five years ago. There have always been times of political leadership but they have not always preserved, with intensity and at presidential level, the necessary continuity and coordination with the management capacity.

Management capacity was manifested in the founding moments in the articulation between presidential leadership and the so-called Common Market Group, most notably through the crucial role of the respective coordinators. Being able to identify at each moment and in each specific country, who exercises such coordination and, therefore, is effectively in charge of the management of Mercosur, is fundamental to the effectiveness needed. This is not always possible, beyond the access to the names of those who formally hold office. A good test in this regard consists of asking businessmen, journalists or other actors -such as diplomats from other countries- who they believe has responsibility for coordinating the effective management of Mercosur in the corresponding country. It is also essential that such management capacity could be strengthened by the role assigned to the technical body, which is the Mercosur Secretariat. More than a so-called supranational body, its function is to facilitate the process of coordination of national interests. Except in exceptional moments, this function has not been evident in the history of Mercosur.

When building a regional space, as when playing soccer, compliance with the rules of the game is what provides a certain order in economic competition and in the relations between nations of unequal size, ensuring the respect for the interests of those who have less relative power.

As we have noted on other occasions, the quality of the rules and the effectiveness of the mechanisms that create them, as well as of those who can independently control their fulfillment, are, along with political leadership, key elements to ensure that the construction of integration respects the national interests of all the countries involved, both large and small. And it is, in our opinion, a key factor if the objective is to effectively overcome the current inertia that paralyzes the Mercosur.

And the third recommendation is related to the articulation of productive activity, especially through business networks that span several countries and that are facilitated precisely by sectoral agreements. This is probably the backbone of the architecture of a process such as Mercosur. Its roots are in the original proposals of Latin American integration of the late fifties. It again became a backbone in the founding moments of the bilateral agreements between Argentina and Brazil. It was likewise in the initial concept of Mercosur. Later on, sectoral agreements were drawn into a relative oblivion. Perhaps such forgetfulness is one of the factors that led to the subsequent inertia.

Recovering the figure of the sectoral agreements can then be an effective way to restore the dynamic of the construction of Mercosur and carry forward the strategy of convergence in diversity with the Pacific Alliance countries. For this purpose, and in addition to political leadership, it would also be necessary to have companies with offensive interests and the ability to link up with other companies.

Such agreements are compatible with trade preferences of variable geometry and multiple speeds. In order to be effective, they require adequate good quality physical connectivity. They also entail addressing other relevant issues for the development of value chains of regional scope and projected to the world, such as those relating to trade facilitation, regulatory frameworks, intellectual property, government procurement, and services, among others. This is an approach that allows developing the agreements in relation to the different sectors and, eventually, to specific sub-sectors, and among them, the industrials and agro-industrials stand out, as does, increasingly, the services sectors.


Recommended Reading:


  • Amaral Junior, Alberto do, "Is Trade Governance Changing?", UniCEUB, Brazilian Journal of International Law, Volume 12, N.2, Brasilia 2015, en www.brazilianjournal.org.
  • Bartesaghi, Ignacio, "Alianza del Pacífico y Mercosur frente al TPP", ICTSD, Revista Puentes, Volume 17, Number 5, Geneva, 11 August 2016, en http://www.ictsd.org/.
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  • Cheng, Shuaihua, "The EU and US should treat China fairly in international trade", ICTSD, Geneva, 5 August 2016, en http://www.ictsd.org/.
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  • Twining, Daniel; Kundnani, Hans; Sparding, Peter, "Trans-Pacific Partnership: geopolitical implications for EU-US relations", European Parliament, Directorate-General for External Policies, Policy Department, June 2016, en http://www.europarl.europa.eu/.
  • Ugarte, Manuel, "La Patria Grande", Estudio Preliminar de María Pía López, Biblioteca del Pensamiento Críticos Latinoamericano, Capital Intelectual, Buenos Aires2010.
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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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