| DESIGNING THE FUTURE: THE CHALLENGES FACED
BY THE REGION
How to adapt the system of international trade to the new global realities?
by Félix Peña
English translation: Isabel Romero Carranza
The entry into force of the Transpacific Economic
Partnership Agreement (TPP) is still uncertain. The time it will take
for this to happen might still be long. The fact that in some countries
there is a growing discontent caused by the effects of globalization on
the expectations of welfare and employment-and this seems to be more evident
in European countries but it is also so in the US-should not be overlooked
when assessing the feasibility of mega preferential trade agreements.
The growing uncertainty about the future of the negotiation of the
TTIP, the Transatlantic Trade and Investment Agreement between the US
and the EU, contributes to a pessimistic climate with regard to this type
of preferential agreements. This is, of agreements that, for a significant
number of countries not necessarily limited to a geographical region,
would have, due to their contents and geopolitical objectives, a so-called
As for the anticipated effects of the TPP with respect to the signing
countries and non-members, especially those in Latin America who are not
part of it, studies indicate that the effects would be positive with regard
to employment, trade and investment in the former. Logically, the effects
would differ from country to country. As for the Latin American countries
that are not members, none could assume that the entry into force of the
TPP would have no effect on their foreign trade and on their integration
into the world economy. It would be a logical consequence of the relative
importance of the TPP member countries in trade, international investment
and global product.
One issue that deserves special attention is the possible effects
that the TPP and other mega-preferential trade agreements could have on
the design and operation of the global trading system. The question of
the design of the future international trade order is becoming increasingly
important. This is so largely because it is becoming clear that the institutional
system of world trade is going through a critical period. This is reflected
in the standstill of the Doha Round, not necessarily overcome at the last
WTO Ministerial Conference in Nairobi.
Adapting the rules and institutions of the global trading system to
the new realities of trade and investment, on the one hand, and to the
current distribution of world power, on the other hand, will then be a
dominant theme of the global agenda in the coming years and, therefore,
also of the agenda of Latin American integration.
On August 25, an event jointly organized by the Center for Global Trade
and Investment at Getulio Vargas Foundation (FGV-EECP-CCGI) and the Latin
American Economic System (SELA) took place in Sao Paulo. (See:http://eesp.fgv.br/eventos/).
Specialists from different member countries of SELA and representatives
of business and social institutions, especially from Brazil, participated
in this event.
It should be noted that the FGV-EESP-IGCC is today one of the epicenters
of the much needed regional debate on the international trading system
and, in particular, on any possible effects that the negotiation of mega-trade
agreements could have, both in the countries of the region and in the
WTO system itself.
Professor Vera Thorstensen, who directs the Center for Global Trade and
Investment, was charged with the main academic responsibility of the event.
Its development was focused on the analysis of the Trans-Pacific Economic
Cooperation Agreement, known by its acronym, TPP, and the effects it might
have in global international trade and in Latin American countries if
it actually came into force. The TPP was signed in February of this year
in Auckland, New Zealand. (See: https://www.direcon.gob.cl/).
A paper prepared by SELA, with the collaboration of Professor Carlos
Moneta, from UNTREF University, provided the conceptual framework and
the main information of said event. (See: http://www.sela.org/media/2304093/el-acuerdo-transpacifico-de-cooperacion-tpp.pdf.).
Three conclusions can be drawn from what was discussed at this event.
The first is that the entry into force of the TPP is still uncertain.
The time required for this to happen can still be long. Perhaps this would
not be the case if President Obama got the approval from the US Congress
before the end of his presidential term, next January. It is a possible
scenario, however still unlikely.
The fact that, in some countries, there is a growing discontent caused
by the effects of globalization on the expectations of welfare and employment
of people-and this seems to be more evident in European countries, but
it is also so in the US-should not be underestimated when assessing the
feasibility of mega-preferential trade agreements such as the TPP.
The growing uncertainty about the future of the negotiations of the TTIP
-the mega- transatlantic agreement on trade and investment between the
US and the EU-contributes to a pessimistic climate towards such agreements,
or at least those with the scope and characteristics of the TPP. This
means agreements that, for a significant number of countries, not necessarily
limited to a particular geographic region, would have, whether due to
their contents or their geopolitical objectives, a so-called WTO-plus
In this regard, it should be noted that recent articles like those by
Martin Wolf in the Financial Times and Fidel Sendagorta in El País,
(see the respective references in the recommended reading section of this
newsletter), have made interesting contributions to the necessary reflection
on the public discontent regarding the impact of globalization and its
future development, from the perspective of the experiences gathered in
recent years. It is a discontent that raises doubts about the future of
the mega-international trade agreements, at least in their intent to go
beyond the original commitments established in the GATT and then the WTO.
(In this regard, see the April
2016 editions of this newsletter on http://www.felixpena.com.ar/).
This public unrest was one of the matters that garnered the most attention
at the 20th Annual CAF Conference, held in Washington DC., on 7 and 8
September 2016, jointly organized by the CAF-Latin American Development
Bank, the OAS and the Inter-American Dialogue. (See the information on
the Conference and its development on https://www.caf.com/xx-conferencia-caf).
The Conference was opened by Joe Biden, the Vice-President of the US.
(For the text of his presentation, go to https://www.whitehouse.gov/).
Enrique Iglesias explicitly mentioned the subject of the public unrest.
Moreover, it is an issue that will most likely remain, probably for a
very long time, at the heart of the discussions about the international
trading system and its future.
The second conclusion refers to the foreseeable effects of the TPP for
signatory countries and non-members, especially Latin American countries
who are not part of the agreement. Studies indicate that is would have
a positive impact on employment, trade and investment in the participating
countries. The effects would differ, as is logical, from country to country.
If not deemed positive, it would be hard to imagine that the agreement
could obtain parliamentary ratification in any of them.
The effects would be different in the case of those countries that are
not members of the TPP. An interesting contribution was that of Lucas
Ferraz, an economist at FGV-EECP and Coordinator of the Economic Modeling
at the Center of Global Trade and Investment. He announced the results
of a study of the impact of the TPP on the economies of Argentina and
Brazil, including the assumption of their eventual incorporation as member
The debates showed that no Latin American country can assume that the
entry into force of the TPP would have no effect on foreign trade and,
in general, their integration into world economy. This would be a consequence
of the relative importance of the TPP member countries in trade, international
investment and global product. Hence the importance of considering different
alternative scenarios that may result from the entry into force of this
mega-agreement, including an eventual incorporation as a member country.
How to adapt the strategy for international integration of each of the
countries in the region, including that of their companies, to these possible
alternative scenarios would then be one of the requirements resulting
from the entry into force of the TPP. This would have an interesting effect
on how countries and their companies, whatever their relative economic
dimension, prepare to navigate an increasingly complex world trade and
under continuous change.
And the third conclusion refers precisely to the effect that the TPP
and other mega-preferential trade agreements could have on the design
and effectiveness of the institutional architecture of world trade. Would
it emphasize the trends towards fragmentation of the global trading system?
What might be the geopolitical effects in such a case?
The question of the design of the future international trade order is
acquiring great importance largely because it has become increasingly
clear that the institutional order currently governing world trade is
going through a critical period. This is reflected in the standstill of
the Doha Round within the scope of the WTO, which was not necessarily
overcome at the last Ministerial Conference of Nairobi.
How to adapt the rules and the institutions of the global trading system
to the realities of trade and investment, on the one hand, and to the
current distribution of world power, on the other? This will be a dominant
theme of the global agenda for the coming years.
In such a perspective it is necessary to place the agenda of the preparatory
period of the WTO Ministerial Conference, to be held in December next
year. Argentina and Uruguay have proposed to host this event. This should
also be the perspective for the next two G20 summits, the first to be
held in Germany and the second in Argentina. These two countries will
form part of the G20 Troika next year, along with China, which chaired
the Summit this September. (On the Haingzhou Summit, see http://www.g20.org/English/index.html).
These will be relevant events for the Latin American countries in their
joint effort to assert their international role in pursuit of their own
economic and political interests.
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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