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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
LATIN AMERICA IN AN UNCERTAIN AND TURBULENT WORLD:
Is an effective and sustainable regional economic cooperation possible?

by Félix Peña
February 2017

English translation: Isabel Romero Carranza


 

The growing tensions between international order and disorder and, in particular, the recent developments in the global scenario, are accentuating the need to reflect on the strategies for international insertion of Latin American countries, or at least of those who want their strategies to be effective.

Thus, it would seem advisable to consider the following three aspects:

  • the positioning of the countries of the region in the redesign of an international system, including its institutions and ground rules, which today show signs of being overwhelmed by the new realities;

  • the analysis of practical modalities to help each country of the region develop national strategies for their international insertion, including cooperative relations with the largest possible number of countries in the world, and especially with those that can have a relevant influence in world trade and transnational investment; and

  • the promotion of different modalities of economic cooperation, both in the Latin American space and in the many sub regional spaces, including South America and, among others, a Mercosur with renewed scope and methodologies.

Latin America has accumulated more than six decades of experiences of integration and regional cooperation, some of broad scope and others concentrated in groups of countries. The results have been diverse: sometimes these results have been frustrating, other times they have involved steps towards a greater convergence, despite the existing differences.

A question that must now be asked is: what do past experiences -whether successful failed -show us about some of the conditions that help build sustainable processes of cooperation and economic integration between nations sharing a regional space?

At least three conditions seem to be the most advisable for the present moment: political leadership at the highest level, generating "de facto solidarities", and accentuating the physical connectivity and that of the respective production systems and markets.


At the beginning of 2017, the factors that trigger the alarms in the evolution of the international system, including the potential impacts on global trade and on transnational flows of capital and technology, have heightened.

The growing tensions between international order and disarray and, in particular, the recent developments in the global scenario (including those resulting from the Brexit process in the EU and the new government in the US), are accentuating the need to reflect on strategies for the international insertion of Latin American countries, or at least of those that strive to have a strategy that is effective and functional to their own interests.

Among others, the main factors to consider would be the following:

  • the first refers to the positioning of the countries of the region in the redesign of the international system, including its institutions and ground rules, which today show evident signs of being overwhelmed by realities;

  • the second involves the analysis of practical modalities that allow each country in the region -if interested- to develop national strategies for international insertion, including cooperative relations with the largest number of countries in the world and especially with those that have the potential to impact world trade and transnational investment; and

  • The third aspect is linked to the objective of generating favorable conditions for a more intense regional economic cooperation in the different spaces formed by Latin American countries, including South America and, among others, a Mercosur with renewed scope and methodologies.

The first aspect -that of global governance- can have multiple unfoldings. The main one, of course, relates to policymaking, institutions and ground rules that can help preserve peace and stability in the relations between nations. The others relate to international economic, financial and commercial relations.

It should be noted that today there is a growing loss of effectiveness in the order that emerged at the end of the Second World War. There are multiple spaces where international disorder predominates. Moreover, the redistribution of world power, which has become more pronounced in recent years, makes it more difficult to agree on ground rules and institutions to replace those that have prevailed until now. As the concrete results of the G20 Summits seem to demonstrate, today it is not easy to replicate the experience of the Bretton Woods Conference of 1944. At that time, it was clearer who the rule-makers at global level were.

The same holds true for international trade relations. The institutionalized multilateral system, first in the GATT and then in the WTO, has been losing its effectiveness, especially to adapt to changes in global realities. Hence, the upcoming WTO Ministerial Conference, to be held in Buenos Aires next December, provides a window of opportunity, at least to initiate the process of redesigning the multilateral institutions and rules of global trade. (In this regard, see the January 2017 issue of this newsletter on http://www.felixpena.com.ar/).

The fact that President Trump has withdrawn the US from the Trans-Pacific Partnership (TPP) and that the Trans-Atlantic Trade and Investment Partnership (TATIP) seems unlikely now, perhaps makes it even more necessary to reflect on how to strengthen the multilateral trading system of the WTO. Achieving points of balance between the global multilateral space and the multiple preferential trading spaces, be they regional or interregional, could then be one of the priority objectives of the upcoming ministerial meeting of Buenos Aires.

This could imply that the redesign of the multilateral trading system would result in an adjustment of the rules currently in force, particularly in relation to the future scope of preferential agreements between groups of countries and, in particular, when developing countries participate in them. Since the earliest days of the GATT, more flexible mechanisms and rules to facilitate economic integration -for example, through sectoral agreements that do not conform to the more rigid interpretations of what is prescribed by Article XXIV of the GATT- were demanded by Latin American countries that had a strong participation in the multilateral negotiations of that time. Except perhaps when the Enabling Clause was approved in the Tokyo Round (1979), the Latin American approaches have not had much echo in the industrialized countries, especially in the USA.

The second aspect -the national strategies for the international insertion of each country of the region, including the relations with the most relevant countries of the global trading system- will require from now on a great organizational effort at the domestic level of each country in order to coordinate the interests of all social sectors. This is due, precisely, to the uncertainties that will continue to dominate, perhaps for a long time, in international relations that are increasingly dynamic and complex. (On the effects of the new international realities on the foreign strategies of Latin American countries see, among others, the recent opinions of leading experts such as Dante Sica from Argentina, Rubens Barbosa from Brazil, Osvaldo Rosales from Chile, and Ignacio Bartesaghi from Uruguay. Their respective articles are listed as recommended reading of this newsletter).

It is at the domestic level that a country, in principle and if it wishes to do so, can decide and put into practice what is most convenient and achievable in terms of its foreign relations. Nothing can substitute for the national decision and effort to reach a prominent role at the international level.

In turn, it is at the regional level that each country can develop joint actions with other countries from its immediate environment in order to strengthen its own national efforts for an assertive and intelligent insertion in the global space. This is where the regional institutions with the capacity to support the development strategies of the Latin American countries, such as the ALADI, the ECLAC and the Latin American Development Bank (CAF-Latin-American Development Bank), acquire practical importance.

The third aspect -the promotion of different modalities of economic cooperation, both in the regional space and in the many sub regional spaces, especially in South America and Mercosur- is probably the one that will require the most attention from Latin American countries in the coming years. In particular, from those countries who are interested in improving their conditions to navigate in a confusing, disorienting and, at times, inhospitable world. This aspect includes actions leading to an effective renewal of Mercosur, both in its scope and in its methodologies. (In this regard, see the August and December 2016 issues of this newsletter on http://www.felixpena.com.ar).

It should be remembered that Latin America accumulates more than six decades of experiences of integration and regional cooperation, sometimes of broad scope and others concentrated in groups of countries, such as the Mercosur, the Andean Group and now the Alliance of the Pacific, the Central American and the Caribbean countries. The results have been diverse, sometimes frustrating and other times they have involved steps towards a greater convergence, despite all the differences.

A question that must now be asked is: what do previous experiences -whether successful or failed- indicate about the conditions for building sustainable processes of cooperation and economic integration between nations sharing a regional space?

At least three conditions seem to be the most advisable for the present moment, that is, a moment characterized by obvious demands for updating, renovation and strengthening of the regional cooperation and integration efforts.

The first and indispensable condition is a strong and sustained political impulse. This condition implies a necessary involvement at the highest political level of each of the participating countries. It should not be a sporadic participation, typical of mediatic policy and diplomacy. On the contrary, it has to be a sustained capacity for presidential leadership of the actions aimed at materializing the will to achieve an effective economic cooperation -which for obvious reasons implies the political cooperation as well- between the countries participating in the corresponding process, whether bilateral, sub regional or regional.

In order to be effective and efficient, such condition requires that the energy and political impulse at the highest level be translated into continuous construction processes carried out by competent and full-time staff belonging to the countries involved and inserted in the respective high-level government areas. The actions that make possible, in a sustainable way, the strategies at the highest political level must arise from these processes. An experience to bear in mind in this respect was the role of the Common Market Group in translating into concrete actions the momentum generated by Presidents Alfonsin and Sarney at the beginning of the process of binational integration between Argentina and Brazil and which was later reflected in the foundation of Mercosur.

A second condition is to generate "de facto solidarities" -in the sense proposed by Jean Monnet at the founding moments of European integration - through concerted actions aimed at generating cooperative production and social networks of bilateral, sub regional or regional scope, with a strong social participation and that contribute to the productive integration between the involved countries. (In this regard, see Jean Monnet's book "Memoirs", Doubleday & Company, Inc, New York, 1978, in https://ia800208.us.archive.org/).

Finally, the third condition is to operate in three complementary levels to achieve greater connectivity of the involved geographic spaces and economic and social systems. Such levels are that of physical connectivity (infrastructure, transport and logistics); the connectivity of production, through multiple modalities of networks (for example among SMEs aimed at generating specialized or niche production chains); and that of the connectivity with consumers, that is, at the transnational level between those who produce goods or services and those who are potential consumers in other markets of the region or of the world.


Recommended Reading:


  • Amador, Joâo; Sónia, Cabral, "Networks of value-added trade", VOX, CEPR's Policy Portal, 23 December 2016, en http://voxeu.org/.
  • Auslin, Michael R., "The End of the Asian Century. War, Stagnation, and the Risks to the World's Most Dynamic Region", Yale University Press, New Haven & London 2017.
  • Barbosa, Rubens, "O Brasil em um mundo em transformaçâo", O Estado de Sâo Paulo, 24 Janeiro de 2017, en http://diplomatizzando.blogspot.com.ar/.
  • Barciela, Fernando, "Pymes que han hallado su nicho. Las mini-multinacionales españolas logran a través de la innovación y la eficiencia ser casi dominantes en su negocio a escala global", diario "El País", Negocios, 21 de enero 2017, en http://economia.elpais.com/.
  • Bartesaghi, Ignacio, "La presidencia de Donald Trump: un poco más de incertidumbre", Universidad Católica del Uruguay, Departamento de Negocios Internacionales e Integración, Montevideo, 18 de enero de 2017, en: http://ucu.edu.uy/.
  • Bértola, Luis; Williamson, Jeffrey (editors), "La fractura. Pasado y presente de la búsqueda de la equidad social en América Latina", INTAL-LAB - BID - Fondo de Cultura Económica, Buenos Aires 2016.
  • Dieter, Heribert, "Regional Investment Strategies: How can regional integration projects attract both foreign direct investment and facilitate domestic investment", SWP - Economic Policy Forum (EPF) - GIZ, November 2014, en https://www.economic-policy-forum.org/.
  • Evan Ellis, Robert, "China's Second Policy Paper on Latin America and the Caribbean: Indications of Chinese Intentions, and Recommendations for the U.S. Response", Econvue Pulse, December 13, 2016, en https://econvue.com/.
  • Fessehaie, Judith, "Regional Integration and High Potential Value Chains in West Africa", International Centre for Trade and Sustainable Development (ICTSD), Geneva, December 2016, en http://www.ictsd.org/.
  • Haass, Richard,"A World in Disarray. American Foreign Policy and the Crisis of the World Order", Penguin Press, New York 2017.
  • Hedges, Jill, "Evita. The Life of Eva Perón", I.B.Tauris, London - New York 2017.
  • ICTSD, "African Integration. Facing up to Emerging Challenges", International Centre for Trade and Sustainable Development (ICTSD), Geneva, December 2016, en http://www.ictsd.org/.
  • International Trade Centre (ITC), "Bringing SMES onto the E-Commerce Highway", ITC, Geneva 2016, en http://www.intracen.org/.
  • International Trade Centre (ITC), "E-Commerce in China: Opportunities for Asian Firms", ITC, Geneva 2016, en http://www.intracen.org/.
  • Kahneman, Daniel, "Pensar Rápido, Pensar Despacio", Debate, Buenos Aires 2016.
  • Kaplan, Robert D., "Earning the Rockies. How Geography Shapes America's Role in the World", Random House, New York 2017.
  • Kling, Arnold, "Specialization and Trade. Re-introduction to Economics", CATO Institute, Washington DC. 2016.
  • Levin, Daniel, "Nothing but a Circus. Misadventures among the Powerful, Penguin Random House, UK 2017.
  • Levitin, Daniel, "A Field Guide to Lies and Statistics. A Neuroscientis on How to Make Sense of a Complex World", Viking - Penguin Books, UK. 2016.
  • Lewis, Michael, "The Undoing Project. A Friendship that Changed the World", Penguin Random House, UK 2017.
  • Matthews, Alan; Salvatici, Luca, "Trade Impacts of Agricultural Support in the EU", IATRC, Commissioned Paper 19, January 2017, en http://ageconsearch.umn.edu/.
  • Mishra, Pankaj, "Age of Anger. A History of the Present", Farrar, Straus and Giroux, New York 2017.
  • Monheim, Kai, "How Effective Negotiation Management Promotes Multilateral Cooperation. The power of process in climate, trad, and biosafety negotiations", Routledge Oxon -New York 2015.
  • Padilla Perez, Ramón; Oddone, Nahuel, "Strengthening Value Chains: A Toolkit", ECLAC-IFAD 2017, en http://repositorio.cepal.org/.
  • Republic of China, "China's Policy Paper on Latin America and the Caribbean", Ministry of Foreign Affairs, 24/11/2016, en http://www.fmprc.gov.cn/.
  • Rosales, Osvaldo, "Trump abre oportunidades para la integración regional", Boletín 2 - Economía Regional, 24 de enero de 2017, en Boletín nº 2 "Economía global y comercio inclusive", osvaldorosales.cl.
  • Schlesinger, Jr., Arthur M., "Journals 1952 - 2000", The Penguin Press, New York 2007.
  • Sica, Dante, "Un país grande, no un país lider", diario "La Nación", Opinión, 30 de enero 2017, en http://www.lanacion.com.ar/.
  • Torreblanca, José Ignacio, "El suicidio anglosajón", diario "El País", 20 de enero 2017, en http://elpais.com/.
  • Trump, Donald, "The America we Deserve", with Dave Shiflett, Renaissance Books, Los Angeles 2000.
  • World Economic Forum (WEF), "President Xi's speech to Davos in full", WEF, Davos, 17 January 2017, en https://www.weforum.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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