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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
A COMPLEX AND INEVITABLE TRANSITION:
Towards a new stage in international commercial relations?

by Félix Peña
December 2017

English translation: Isabel Romero Carranza


 

The fact that the Buenos Aires Conference was unable to achieve significant decisions to address some of the main problems that are affecting the development of world trade, confirms the widespread impression that the current stage of the international trading system is coming to an end. This started at the end of the Second World War and gave rise, with the creation of the GATT and later the WTO, to the current multilateral institutions and ground rules of global scope.

At least three factors explain the transition to a new stage in the international system of world trade. One is related to demographics. Another is the connectivity between nations and markets. And a third factor is that all the protagonists - nations and regions, consumers and producers, companies and citizens - have multiple options to achieve the objectives that are set in their strategies for insertion in world trade.

It is possible to foresee that the world of the coming years will be dynamic, complex and unpredictable. This will have an impact on international trade relations. All countries will need to have the ability to identify and assess all feasible options for their international trade strategies.

The year 2018 poses at least three challenges for Argentina's international trade strategy. They will require improving the efficiency and quality of the diagnoses on the profound changes, and not only the conjuncture ones, that are operating in the different countries that participate in global economic competition.

The first challenge is at the level of the multilateral system of world trade. The existing institutions and rules - which come from initiatives promoted at the time by the US and that some consider outdated- will require a redesign effort that will not be easy to achieve. This difficulty was evident at the XI WTO Ministerial Conference of Buenos Aires. Another challenge appears at the inter-regional level. In the stage that has started to develop, the assertive insertion in the growing network of inter-regional agreements will be fundamental for the projection to the world of what Argentina can offer to other markets. Finally, the third challenge is at the Latin American regional level. After sixty years of attempts at economic integration, physical connection and productive articulation between the countries of the region, it has become evident that different work approaches and methods than those used until now will be needed in the future.


The WTO Ministerial Conference held in December 2017 in Buenos Aires has confirmed the impression that we are moving into a new stage of the international system of world trade. It is difficult today to predict how much time this transition will require or what its results will be. The fact that the Buenos Aires Conference was not able to adopt significant decisions to address some of the main problems that are affecting the development of world trade, confirms the already widespread impression that the current stage of the international trading system is coming to an end.

This stage started at the end of the Second World War and gave rise, with the creation of the GATT and later the WTO, to the current multilateral institutions and ground rules of global scope. This stage also began with different modalities of regional experiences that had an impact on transnational trade and investment, such as those of European and Latin American integration, among others.

At least three factors explain the current transition towards a new stage in the international system of world trade. One is related to demographics. Not only has population increased, but also demographic growth and the age pyramids have generated a population mapping quite different from that of the past.

This is clear in the case of Asia, but also of Africa and Latin America. These three regions tend to acquire a growing role in international commercial relations. They stand out due to a phenomenon with incidence in social behaviors, life expectancies, and levels of consumption. We are referring to the growth of the urban middle classes, with a consumption capacity, a level of information about their options and, therefore, a relative empowerment that are impossible to ignore in the strategies for world insertion of any country, whatever their size and degree of development.

Another factor is the connectivity between nations and markets. Due to technological changes the world is more connected. This connection is physical and digital, but also economic and cultural. Goods and services, ideas and values, customs and consumption patterns, tend to assimilate but, at the same time, to differentiate. The present is a world that has become more similar in many aspects and more differentiated in priorities and expectations. Understanding it has become a growing need for those attempting to compete for world markets.

A third factor is that all the protagonists -nations and regions, consumers and producers, companies and citizens-have multiple options to achieve the objectives that are set in their strategies for insertion in world trade.

Understanding the dynamics of such options will henceforth be a necessary condition to compete and negotiate successfully. It implies knowing what a country wants to achieve in its commercial insertion in the world but, above all, knowing what it can obtain. This will depend on the knowledge that a country has of its relative value for those with whom it intends to interact.

It is possible to foresee that the world of the upcoming years will be dynamic, complex and unpredictable. Maybe much more so than in recent years. This will have an impact on international trade relations. All countries, including Argentina, will need to have the ability to identify and assess all feasible options for their international trade insertion strategy. It will require something that has not always abounded in our way of imagining the country's international insertion. That is, the need to reconcile, simultaneously, short-term visions and interests with those of the very long term.

Moreover, it will require the ability to foresee and grasp in time what will probably be continuous displacements of competitive advantages between nations and companies, originated in technological changes, in shifts of relative power of the protagonists, or in cultural transformations that affect the values and priorities of consumers.

The year 2018 poses at least three challenges for Argentina's international trade strategy. These challenges will require improving the efficiency and quality of the diagnoses on the profound changes, and not only the conjuncture ones, that operate in the different countries that participate in global economic competition.

One of these challenges is at the level of the multilateral system of world trade. The existing institutions and rules -which originated from initiatives promoted at the time by the US and that some consider outdated-will require a redesign effort that will not be easy to achieve.

That this is not an easy task was made clear precisely at the XI WTO Ministerial Conference of Buenos Aires. Since Argentina will preside the G20 as of December of this year-with its Summit scheduled for November of 2018- it will have the opportunity and the responsibility to facilitate the coordination of interests and visions, at times divergent, among those countries capable of influencing the design of the rules of global trade governance that seek to have effectiveness and legitimacy.

A second challenge can be found at the inter-regional level. In the stage that has started to develop in the trade relations between nations, the assertive insertion in the growing network of inter-regional agreements will be fundamental for the projection to the world of what Argentina can offer to other markets.

What has been observed this year in some of the main nodes of this network indicates the need to address, with an assertive and effective strategy, the issue of inter-regional negotiations that, starting with Mercosur, can be developed with other countries and with other regional agreements. In this regard, it should be borne in mind that both NAFTA and the EU -especially as a consequence of Brexit- face methodological crises, which at times would appear to be existential. They are thus undergoing a transition to something new that will probably be different from what has existed until now.

The third challenge is at the Latin American regional level. After sixty years of diverse initiatives aimed at achieving economic integration, physical connection and productive articulation between the countries of the region, it has become evident that different work approaches and methods than those that have been used until now will be required in the future.

Mercosur itself is in need of updating, which may involve significant methodological changes, without prejudice to preserving the fundamental reasons that led its founding members to choose to work together towards their economic and social development objectives, in a context of peace and political stability within the "neighborhood".

Relations with the countries of the Pacific Alliance, which in some cases are intense and in all very necessary, and with the other countries of the region will require, in 2018, to continue promoting the initiative of the previous Secretary General, Chacho Álvarez, to gain the maximum benefit from the mostly untapped institutional framework of LAIA (ALADI), in order to increase commercial and economic connectivity among its member countries, or at least among the most interested ones. Cuba and Panama are already members of LAIA and other Central American and Caribbean countries may have the opportunity to join in the future. This fact enhances the value that LAIA may have in order to fulfill the dreams that Latin American leaders, such as Arturo Frondizi, had in the past about joint work between the countries of the region.

A recent event that helps envision the future illustrates the changes that are taking place in the trade of goods and services. We are referring to what happened in the celebration of "Singles' Day" in China. Last November 11, in just 24 hours, the online purchases of Chinese consumers amounted to roughly 23 billion dollars. Digital commerce, strategies of "niche internationalization", generalization of "simple exports", direct cross-border connection between producers and consumers, are all concepts that this event shows are feasible and that an intelligent Argentine strategy for international insertion should take into account in 2018.

This will imply accentuating the efforts to renew the concepts, paradigms, diagnoses and instruments with which Argentina can strive to increase and diversify the projection to the world of what it can offer, among other things, due to its creativity, endowment of resources and regional environment.


Recommended Reading:


  • Archivos del Presente, "¿Adiós a la Democracia?, Revista Latinoamericana de Temas Internacionales, Año 21, Número 66, Fundación Foro del Sur, Buenos Aires 2017.
  • Australian Government, "2017 Foreign Policy White Paper. Opportunity - Security - Strength", November 2017, en: https://protorp.org/
  • Basco, Ana Inés, "La tecno-integración de América Latina. Instituciones, comercio exponencial y equidad en la era de los algoritmos", INTAL -BIB, Nota Técnica Nº IDB-TN-1340, Buenos Aires, Noviembre 2017, en https://publications.iadb.org/.
  • Belini, Claudio, "Historia de la Industria en la Argentina. De la Independencia a la Crisis de 2001", Sudamericana, Buenos Aires 2017.
  • Destéfano, Roberto, "Logística del Comercio Internacional. Teoría y Práctica. Concepto-Estructura-Gestión", Osmar D. Buyatti, Librería Editorial, Buenos Aires 2016.
  • Estenssoro, María Eugenia; Naishtat, Silvia, "Argentina Innovadora. Quienes son los emprendedores, científicos y artistas que están cambiando el país". Sudamericana, Buenos Aires 2017.
  • Jaskoski, Maiah; Sotomayor, Arturo C.; Trinkunas, Harold A., "American Crossings. Border Politics in the Western Hemisphere", Johns Hopkins University Press, Baltimore 2015.
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  • Vargas Llosa, Mario, "Conversación en Princeton con Rubén Gallo", Alfaguara, Barcelona 2017.
  • White, Hugh, "The China Choice. Why we should share power", Oxford University Press, Oxford 2012.
  • White, Hugh, "Without America. Australia in the New Asia", Quarterly Essay, Issue 68 - Carlton 2017.
  • Wu, Mark, "Digital Trade-Related Provisions in Regional Trade Agreements: Existing Models and Lessons for the Multilateral Trade System", IDB - ICTSD - Overview Paper - RTA Exchange, Geneva - Washington 2017.
  • Youngs, Richard. "Europe's Decline and Fall. The Struggle Against Global Irrelevance", Profile Books, London 2010.
  • Youngs, Richard, "Europe Reset. New Directions for the EU", L.B.Tauris, London - New York 2018.
  • Yuan Sun, Irene, "The Next Factory of the World. How Chinese Investment is Reshaping Africa", Harvard Business Review Press, Boston Massachusetts 2017.

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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