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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
A TIMELY INITIATIVE ORIGINATED IN THE LAIA
When materialized, it will revalue the region in a world where confusion prevails.

by Félix Peña
March 2017

English translation: Isabel Romero Carranza


 

The growing confusion that is observed today at the level of global governance and which is externalized with different intensities in the different regional spaces is being reflected in sometimes contradictory tendencies.

One of such tendencies indicates the idea of a predominance of national institutions and rules, without any constraints originated in the commitments assumed at the global multilateral level. Thus, a perception is being established that this idea may be the one guiding the vision on the international trading system of relevant government officials of President Trump's administration.

The second trend is reflected in initiatives aimed at deepening the development of regional cooperation spaces in order to empower nations belonging to a region so that they can more easily navigate a world in which confusion now prevails and where chaos may predominate in the future.

A recent initiative by the Secretary General of LAIA (ALADI), approved by the Committee of Representatives of the organization, to promote a technical study in collaboration with the ECLAC, the SIECA and the INTAL for a comprehensive Latin American trade economic agreement, moves precisely in the direction of revaluing the region within the perspective of the challenges that arise in an uncertain and volatile international environment, where the institutions and rules of the global multilateral trading system are being challenged.

What would be some of the conditions and qualities, that could grant effectiveness and sustainability to initiatives that the Latin American region promotes to increase its cooperation and economic and commercial integration to face the challenges and opportunities that arise in the new global scenario? This question should be present in the debates in which governments, businesses and social organizations of the region participate from now on, also taking into account the contributions that may come from action-oriented spaces of thought.


The institutions and ground rules, which currently have an impact on the international trade of goods and services as well as transnational investments, are manifest at three different but interconnected levels. These are often in tension and may even contradict each other.

The first is the national level, that is, the internal sphere of each sovereign nation or autonomous unit of power. It is, without doubt, the most relevant in the internal perspective of each country. The second is the global multilateral level, which is reflected in particular by the World Trade Organization (WTO) and, before that, in the General Agreement on Tariffs and Trade (GATT). Its degree of relevance is high if considered in the perspective of a commercial governance that contributes to ensure a reasonable world order. The third level is that of the multiple regional geographical spaces in which, in the last decades, different types of agreements and processes of cooperation and even economic integration have developed between the nations that share them. Among others, some relevant examples are the European Union (EU), the ASEAN in South East Asia and LAIA (ALADI) in the Latin American region. These agreements and processes do not respond to a single model, nor do they exclude other sub-regional versions, sometimes aspiring to the objectives of possibly deeper cooperation and integration, such as the Mercosur, the Central American Common Market, the Pacific Alliance, the Caribbean Community and even the ALBA, all in the Latin American region.

The growing confusion observed today at the level of global governance, expressed with different intensities in the regional spaces, is manifesting itself in tendencies that are, at times, contradictory. One of them reflects the idea of the predominance of national institutions and rules devoid of any constraints originating in commitments made at the global multilateral level. The second trend is reflected in initiatives aimed at deepening the development of spaces for cooperation and regional integration, in order to empower the nations of a given region to be able to navigate more easily in a world where confusion now prevails and where chaos may prevail in the future.

The first trend is observed today especially in the USA. It is a relevant trend given the role played by that country in the design of the current global commercial order, in particular of the GATT and the WTO rules. It is reflected in positions that could be indicating a disregard by the government of President Trump -or at least of sectors with responsibilities in the foreign trade policies of the new administration- for the commitments assumed within the global multilateral order and, in particular, in the WTO. The original version of the document on the trade policy agenda of the President of the US for 2017, published by the USTR, (http://im.ft-static.com/) stated that American citizens are subject only to laws and regulations made by the US government and not by rules made by other governments or by international organizations. The text reads: "American citizens are subject only to laws and regulations made by the US government - not rulings made by foreign governments or international bodies…Ever since the United States won its independence, it has been a basic principle of our country that American citizens are subject only to laws and regulations made by the US government- not rulings made by foreign governments or international bodies". Later on, this and other paragraphs from the original version that was published by the international media, such as the Financial Times of March 1st 2017, were changed. Another section stated that: "Congress has made clear that Americans are not directly subject to WTO decisions….In other words, even if a WTO dispute settlement panel - or the WTO Appellate Body- rules against the United States, such a ruling does not automatically lead to a change in US law or practice", (https://ustr.gov/). Even when from a strictly legal point of view this can be considered as technically correct, if viewed in the perspective of the approach that President Trump has indicated as essential and distinctive of his government, reflected in the expression "America First" (see the reference to the "America First Trade Policy" on https://ustr.gov/) it supports a vision that can contribute to a pronounced weakening of the global multilateral system of international trade, which the US itself promoted after the Second World War. In addition to this, Trump has expressed that the bilateral will be favored over the multilateral in trade negotiations. At any rate, these are views that can have an impact on the development of the path leading to the Eleventh WTO Ministerial Conference at Buenos Aires, next December.

The second trend is reflected in what was agreed by the LAIA Committee of Representatives at its meeting in Montevideo, on February 23rd, 2017, (see http://www.aladi.org/) in the sense of approving an initiative by the Secretary General, Carlos "Chacho" Alvarez, to carry out a technical study for a comprehensive Latin American commercial economic agreement. According to a statement issued by LAIA, such technical study will be carried out jointly with the ECLAC, the SIECA and the INTAL and with the participation of a group of experts on regional integration. (On the Secretary General's initiative, refer to his article, published on February 17, 2017, in El Cronista newspaper, included as recommended reading of this newsletter).

Three paragraphs of the ALADI communiqué include the objectives of the initiative (the English translation from the original Spanish version is ours):

  • "The objectives of the technical proposal involve the need to deepen integration, increase intraregional trade and contribute to the formation of sub regional and regional value chains. This exercise seeks to identify, through an in-depth analysis, the spaces that have generated bilateral and plurilateral advances in Latin America in terms of both tariff relief and regulations, as well as the spaces that still need to be advanced (which include bilateral relations not covered or partially covered), with a view to achieving convergence in the commercial and economic."

  • "In addition to the commercial component, the base proposal will contemplate a second aspect related to cooperation, taking advantage of the experience of the region in various areas such as trade facilitation, investment, services, public procurement, technological complementarity, and new topics such as the digital market, environmental issues, and Latin American citizenship."

  • "LAIA is the appropriate body for such an undertaking, as its founding treaty contains the fundamental principles of flexibility, pluralism, convergence and differential treatment. It should be noted that currently approximately half of the bilateral relations between Latin American countries are covered by broad-based trade agreements, which provide for preferential treatment for the trade of most products. "

It is worth bearing in mind that the Montevideo Treaty of 1980 provides the institutional framework needed to promote any variable geometry and multiple speed actions that may be recommended by the aforementioned technical study and in which all member countries not necessarily need to be involved. The instrument of partial scope agreements is more than adapted to a concerted strategy of actions involving only the countries concerned - at least at an early stage. Let us also recall that in the area of tariff preferences, the LAIA is inscribed within the framework of the GATT-WTO "Enabling Clause". In practical terms, this is not a minor fact today.

What would be the conditions and qualities that would grant efficiency and sustainability to initiatives such as that originated in the LAIA, and that the Latin American region promotes in order to increase its cooperation and economic and commercial integration to better face the challenges and opportunities that arise in the new global scenario?

This is a question that should be present in the debates that governments, businesses and social organizations of the region participate in henceforward, counting for this purpose with the ideas that may be contributed by action-oriented spaces of thought (think tanks).

As for the conditions that can help generate commitments that are effective - meaning that produce the expected results- and sustainable - that they endure in time- we can mention the following:

  • that the participating countries undertake their commitments in accordance with national strategies that are defined through broad social participation;

  • that they are commitments driven in each country by a firm and legitimate political leadership;

  • that the commitments assumed reflect the rich cultural, economic and political diversities of the participating countries;

  • that they are commitments which help generate "de facto solidarities" (meaning linking effects, in the sense proposed by Jean Monnet at the founding moments of the European integration) between the participating societies, and

  • that the entire process of generating the commitments has, in each country, a broad social participation, facilitated by an effective transparency of the decision-making mechanisms at the different stages.

As for the qualities of the commitments that are assumed and that can also contribute to their effectiveness and sustainability, the following should be mentioned:

  • that they are flexible in order to contemplate changing circumstances and emergencies that could make it difficult to fulfill, in certain occasions, the agreed commitments;

  • that they are foreseeable, meaning that, without affecting their flexibility, they also allow for sufficient legal certainty so that those who have to make productive investment decisions can do so with a reasonable expectation that the commitment will be fulfilled (for example, in terms of the opening of the markets for goods and services and for investments from countries participating in the process of economic cooperation and integration, irrespective of their economic size and relative power), and

  • that they are adaptable, as necessary, to the changes in the political and economic circumstances, both regional and global.

Finally, when it comes to international commitments that create institutions and ground rules of global scope, for example within the WTO, or a regional one, for example within the sphere of trade and integration agreements in Latin America, experience shows the importance of managing the negotiating process that originates them, and also the institutional architecture of the corresponding agreement.

Two recent books make valuable contributions in relation to both subjects. One, with respect to the management of the negotiating process, is that written by Kai Monheim, entitled "How Effective Negotiation Management Promotes Multilateral Cooperation, The Power of Process in Climate, Trade, and Biosafety Negotiations", Routledge Oxon, New York 2015. The other, which deals with the institutional architecture of agreements that generate international norms, especially in terms of the balance between the flexibility and predictability of the rules, is that written by Krzysztof Pelc and entitled "Making and Bending International Rules: The Design of Exceptions and Escape Clauses in Trade Law", Cambridge University Press, New York, 2016.

Both books deserve a careful read. They help understand the international experience in those aspects, which, undoubtedly, are very relevant to the new stage that is opening up in global and regional cooperation in Latin America.


Recommended Reading:


  • Álvarez, Carlos, "Latinoamérica: acelerando la marcha por un acuerdo económico commercial integral", en "El Cronista", Sección Opinión, Buenos Aires 17 de febrero de 2017, página 14, en http://www.cronista.com/.
  • Amine, Samir, "Octubre 2017", El Viejo Topo, Madrid-Barcelona, 2017.
  • Archivos del Presente, "La realidad Trump", Archivos del Presente, Fundación Foro del Sur, nº 65, Buenos Aires, Año 2017, en http://www.archivosdelpresente.com/.
  • Bouchoux, Jean-Charles, "Los perversos narcisistas", Arpa Editores, Barcelona 2016.
  • Brown, Chad P., "What is NAFTA, and What Would Happen to US Trade without it", PIIE, Washington Post, February 15, 2017 en https://piie.com/.
  • Duhalde, Eduardo, "México mira hacia el Sur: una gran oportunidad latinoamericana", en "El Cronista", Sección Opinión, Buenos Aires 22 de febrero de 2017, página 16, en http://www.cronista.com/.
  • Earle, Joe; Moran, Cahal; Ward-Perkins, Zach, "The Econocracy. The perils of leaving economics to the experts", Manchester University Press, Manchester 2017.
  • Ethier, Wilfred, "Escape and Entry Mechanisms in the Multilateral Trade System", PIER Working Paper 02-009, University of Pennsylvania, en https://economics.sas.upenn.edu/.
  • Freund, Caroline; Sidhu, Dario, "Global Competition and the Rise of China", PIIE, Working Paper, WP 17-3, Washington February 2017, en ? Freund, Caroline; Sidhu, Dario, "Global Competition and the Rise of China", PIIE, Working Paper, WP 17-3, Washington February 2017.
  • Gill, Stephen (ed.), "Critical Perspectives on the Crisis of Global Governance. Reimagining the Future", Palgrave Macmillan, New York 2015.
  • Gover, Ted, ""America First" is unlikely to shake up the Asia Pacific", en East-Asia Forum, 22 February 2017, en http://www.eastasiaforum.org/.
  • Herszing, Mathias, "Essays on uncertainty and escape in trade agreements", Institute for International Economics Studies, Stockholm University, Monograph Series Nº 50, 2005, en http://www.iies.su.se/.
  • Johnston, Eric, "With the TPP dead, Asia-Pacific eyes turn to Kobe meet for regional trade framework", The Japan Times News, February 24, 2017, en http://www.japantimes.co.jp/.
  • Kwak, James, "Economism. Bad Economics and the Rise of Inequality", Pantheon Books, New York 2017.
  • Lehmann, Jean-Pierre, "In search of an East Asia geopolitical miracle", East Asian Forum, 1 March 2017, en http://www.eastasiaforum.org/.
  • Le Monde Diplomatique, "La (des)integración de América Latina", Febrero 2017, en http://www.eldiplo.org/.
  • Li, Cheng; Xu, Lucy, "Chinese think tanks: a new "revolving door" for elite recruitment", en East Asian Forum, 24 February 2017, en http://www.eastasiaforum.org/.
  • Nye Jr., Joseph S., "El arte oscuro del tuit de Trump", en "El País", Sección Opinión, Madrid 17 de febrero de 2017, página 25, en http://elpais.com/.
  • OMC, "Consejo General: Nombramiento del Director General - Exposición del Director General" (sólo en inglés), OMC Noticias, Ginebra, 28 de febrero 2017, en https://www.wto.org/.
  • Pelc, Krzysztof,, "Making and Bending International Rules: The Design of Exceptions and Escape Clauses in Trade Law", Cambridge University Press, New York 2016.
  • Rapoport, Mario, "Historia Oral de la Política Exterior Argentina (1966-2016), Octubre Editorial, Buenos Aires 2016.
  • Rappaport, Helen, "Caught in the Revolution. Petrograd, Russia, 1917 - A World on the Edge", St. Martin's Press, New York 2016.
  • Riaboi, Jorge, "La Argentina le ladra al árbol equivocado", en diario "El Cronista", Sección Opinión, Buenos Aires 1º de marzo 2017, en http://www.cronista.com/.
  • Subramanian, Arvind, "The WTO Reborn?", Project Syndicate, February 22 2017, en https://www.project-syndicate.org/.
  • Tucci Carneiro, María Luiza, "Diez Mitos sobre los Judíos", Cátedra - Historia Menor, Madrid 2016.
  • Turkle, Sherry, "En defensa de la conversación. El poder de la conversación en la era digital", Ático de los Libros, Barcelona 2017.
  • USTR, "The President's 2017 Trade Policy Agenda", USTR, February 2017, en https://ustr.gov/.

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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