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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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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
September 2016

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 WTO-plus scope.

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 scope.

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 and May 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 countries.

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.


Recommended Reading:


  • Bartesaghi, Ignacio, "Un poco de historia para comprender la crisis actual del Mercosur", Semanario Crónicas, Montevideo, 26 de agosto de 2016, en http://ucu.edu.uy/sites/
  • Blanning, Tim, "The Pursuit of Glory. Europe 1648 - 1815", Allen Lane - Penguin Books, London 2007.
  • II-CACI, "Os Mega-Acordos de Comércio e seus impactos na OMC e no Brasil", II Conferencia Anual de Comercio Internacional (II-CACI), 02 e 03 de Junho 2016, FGV-EECP-World Trade Chairs Programme-IRICE-FIESP-, Sao Paulo, E-book en http://ccgi.fgv.br/.
  • Castro, Thales, "Teoria das Relacoes Internacionais", 2da. Edicao revista e actualizada, Fundacao Alexandre de Gusmao, Brasilia 2016, en http://funag.gov.br/.
  • Crosby, Andres, "Barack's gift to Hillary on TPP and trade", E15 Initiative, ICTSD, Geneva, August 23, 2016, en http://www.ictsd.org/.
  • Denae Thrasher, Rachel; Gallagher, Kevin P., "21st Century Trade Agreements: Implications for Long-Run Development Policy", Boston University, The PARDEE PAPERS / No. 2 / September 2008, en http://www.bu.edu/
  • de Sá Pimentel, José Vicente (organizador), "Pensamiento Diplomático Brasileño. Formuladores y Agentes de la Política Exterior (1750-1964)", Fundacâo Alexandre de Gusmâo, Historia Diplomática, Volumen I, II y III, Brasilia 2016.
  • Duhalde, Eduardo Alberto, "Humanización o Megabarbarie", Universidad del Salvador (USAL), Buenos Aires 2011.
  • González Levaggi, Ariel, "Potencias (re) emergentes hacia un mundo policéntrico: Rusia y Turquía frente a América Latina", Revista del Instituto de Relaciones Internacionales (IRI) - Universidad Nacional de La Plata, Año 25, Nº 50, La Plata, Enero/Junio 2016. ps.13 a 18, ps.21 a 44.
  • Huizinga, Todd, "The New Totalitarian Temptation. Global Governance and the Crisis of Democracy in Europe", Encounter Books, New York - London 2016.
  • IRI,"Revista de Relaciones Internacionales", Instituto de Relaciones Internacionales (IRI) - Universidad Nacional de La Plata, Año 25, Nº 50, La Plata, Enero/Junio 2016.
  • Kaplan, Robert D., "How Islam Created Europe. In late antiquity, the religion split the Mediterranean world in two. Now it is remaking the Continent", The Atlantic, Washington DC., May 2016, en http://www.theatlantic.com/.
  • Kaukab, Rashid S., "Post-Nairobi: Perspectives on Potential New Issues in the WTO", Commonwealth Secretariat, International Trade Working Paper, 2016/20, London 2016, en http://www.oecd-ilibrary.org/.
  • Keog, Dermot, "La independencia de Irlanda: la conexión argentina", Ediciones Universidad del Salvador, Buenos Aires 2016
  • Le Monde Diplomatique, "Venezuela Explorador. Un país en pugna", Cuarta Serie, Editado por Pablo Stancanelli, Capital Intelectual, Buenos Aires 2016.
  • Mandelbaum, Michael, "Mission Failure. America and the World in the Post-Cold War Era", Oxford University Press, New York 2016.
  • Manuel, Anja, "This Brave New World. India, China and the United States", Simon & Schuster, New York 2016.
  • Marshall, Peter, "The Reformation. A Very Short Introduction", Oxford University Press, Oxford - New York, 2009.
  • Millward, James A., "The Silk Road. A Very Short Introduction", Oxford University Press, Oxford - New York, 2013.
  • Murrow, James D., "Order Within Anarchy. The Laws of War as an International Institution", Cambridge University Press, New York 2014.
  • Peixoto Batista, Juliana, "Armonización y fragmentación de las reglas en el sistema internacional: un acercamiento al caso de la OMC", Revista del Instituto de Relaciones Internacionales (IRI) - Universidad Nacional de La Plata, Año 25, Nº 50, La Plata, Enero/Junio 2016. ps.13 a 18, ps.45 a 74.
  • Peña, Félix, "Ninguém e obrigado a ficar no Mercosul", entrevista de Rodrigo Cavalehiro, en diario "O Estadao Internacional", 13 agosto 2016, en http://internacional.estadao.com.br/.
  • Peña, Félix, "Brasil-Argentina, una relación proyectada al futuro", Infobae, Buenos Aires 25 de agosto 2016, en http://www.infobae.com/politica/.
  • Peña, Félix, "Diálogos", Entrevista realizada por Laura M. Bono y Laura Bogado Bordazar, coordinadoras del Departamento de América Latina y el Caribe del IRI; Revista del Instituto de Relaciones Internacionales (IRI) - Universidad Nacional de La Plata, Año 25, Nº 50, La Plata, Enero/Junio 2016. ps.13 a 18.
  • Rapport, Mike, "The Napoleonic Wars. A Very Short Introduction", Oxford University Press, Oxford 2013.
  • Revista Pontes, "América Latina: a um clique do comércio digital?", PONTES, Bridges Network, ICSTD, Volume 12, Número 6, Agosto 2016, en http://www.ictsd.org/.
  • Schwarcz, Lilia M.; Starling, Heloisa M., "Brasil. Una biografía", Penguin Random House, Debate, Buenos Aires 2016.
  • SELA, "El Acuerdo Transpacífico de Cooperación Económica (TPP) y su incidencia en el comercio internacional de los países de América Latina y el Caribe", Sistema Económica Latinoamericano (SELA), documento presentado en el Seminario Regional el Acuerdo Transpacífico de Cooperación Económica (TPP) y su incidencia en el comercio internacional de los países de América Latina y el Caribe, organizado por el SELA y la FGV, Sao Paulo, 25 de agosto 2016, en http://www.sela.org/media/.
  • Sendagorta, Fidel, "La fuga del optimismo occidental", diario "El País", 30 de agosto 2016, p. 13, en http://elpais.com/.
  • Stedman Jones, Gareth, "Karl Marx. Greatness and Illusion. A Life", Penguin Random House UK, London 2016.
  • Thorstensen, Vera; Costa Veira, Andreia, "Regulatory Barriers to Trade: TBT, SPS, and Sustainability Standards", FGV-EESP, Centro de Estudos do Comércio Global e Investimento - WTO Chairs Progamme, Sao Paulo 2016, en http://ccgi.fgv.br/.
  • Wolf, Martin, "The tide of globalization is turning", diario "Financial Times", September 7, 2016, p.9.
    .

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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