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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
SOME CONTRIBUTIONS FOR A NECESSARY NATIONAL DEBATE:
Trade negotiations and strategy for the international insertion of Argentina.

by Félix Peña
March 2018

English translation: Isabel Romero Carranza


 

In practice, trade negotiations-from their conception, formal beginning, conclusion and implementation- reflect the vision of a country and not just of its government on the most convenient strategy for international insertion that is possible to be developed. Such strategy can be explicit or, as is more often the case, an implicit one.

In order to understand the development of the trade negotiations of a country, without disregarding economic factors that may affect the decision to negotiate with other countries or institutionalized regions, other factors such as the political and geo-political must be taken into account. These other factors are often more important than the mere economic ones. They involve power relations but, above all, they have to do with the vision of the political leadership on the construction of an external environment that is favorable for the political, economic and social development of a nation. In addition, there are ground rules that condition, to a greater or lesser degree, the room for maneuver of a country in its interaction with others.

This accounts for the importance that a country assigns to those factors that may impact positively or negatively the development of a trade negotiation agenda linked to its international insertion strategy, that is, with its way of relating to neighboring countries or of the same geographic region and with those of other regions. Such factors are the quality of the diagnosis, the effectiveness of the organization for negotiating, and the preparation for "the day after the negotiation".

This year and probably in the upcoming years as well, as it has been for a long time, the trade negotiations of Argentina and their connection with the country's strategy of international insertion, will have one of its main epicenters in the Latin American region and, in particular, in the South American space.

The other epicenters will be the interregional and trans-regional spaces and the multilateral global space institutionalized in the WTO. There is a tendency to shift the relative importance that some of the countries with greater prominence in global economic competition assign to the WTO sphere. In this regard, the future evolution of the CPTPP and its effects on the global multilateral system will have to be closely monitored, especially if the US and other large global competitors decide to join in.

In its trade negotiations, our country should not rule out the possibility of a fragmentation scenario of the multilateral trading system resulting from the proliferation of agreements without an explicit global scope.


In a world scenario characterized by a strong dynamic of changes, complexities and uncertainties, the agenda of trade negotiations of Argentina -like that of its Latin American partners-would tend to develop on three interconnected fronts: i) the Latin American regional; ii) the interregional and trans-regional, and iii) the global multilateral. (This newsletter takes up and aims to expand on topics that were addressed in the December 2017, January and February 2018 editions, available on http://www.felixpena.com.ar/).

In all three cases, the development of the respective negotiating processes- from the conception and formal beginning to the conclusion and implementation- would reflect the vision of the country and not just of its government on the most convenient international insertion strategy that can effectively be carried out.

In order to fully understand the development of trade negotiations, the political and geopolitical factors are as or even more important than the economic factors, such as for example those related to production, the trade of goods and services, and technological advances. The former have to do with power relations, either with the country or countries participating in the negotiations as well as with third countries that are taken into account when deciding to undertake a certain negotiation. However, above all, they have to do with the vision of the political leadership on the value of building an external environment that is sustainable and favorable for the political, economic and social development of a nation.

Additionally, the impact of ground rules conditions, to a greater or lesser degree, the leeway for action of a country in its interaction with others. These rules are those that the country, in exercise of its sovereignty, has voluntarily accepted for its international relations, such as the case of the multilateral global trading system first institutionalized in the GATT and then in the WTO, or those that have been established by regional agreements, such as the case of LAIA and Mercosur. The principle of non-discrimination and most-favored-nation treatment are, among others, examples of this (see the April 2017 edition of our newsletter on http://www.felixpena.com.ar/).

The abovementioned accounts for the importance that a country assigns to factors that may impact in a positive or negative way the development of a trade negotiation agenda linked to its international insertion strategy, that is, with its way of relating to countries of its close environment and of other regions of the world. Such factors are the quality of the diagnosis, the effectiveness of the negotiating organization, and the preparation for "the day after the negotiation".

With regard to the quality of the diagnosis, its importance increases in times such as the current ones in which the international environment of a country, both regional and global, is exposed to marked volatility and uncertainties. As Alberto van Klaveren, a prestigious academic expert with vast practical experience, aptly points out, today's world requires navigating in the fog (see the reference to his recent article in the recommended reading section below). Understanding the deep forces at work in the international context and their direction is today a key factor for successful negotiating.

This implies not only an accurate analysis of the factors that may affect, for example, the ability of a country to project its talent to the world, its capacity to produce goods and services, and its appeal for productive investments, but that such analysis is also constantly updated, to avoid the ever present risk of obsolescence. This aspect shows if a country has really put into practice what is known as the "Sábato triangle". This means the articulation of the government, production and research sectors to formulate concrete proposals on how to operate on the realities, both in the case of technological innovation as in the design of effective strategies for intelligent insertion in the world, of the country as a whole or of its provinces and regions. (On the "triangle" see Jorge Sábato and Natalio Botana, "Science and technology in the future development of Latin America", published in 1968, on http://purace.unicauca.edu.co/, and the recent article by Daniel E. Alonso, on http://www.lavoz.com.ar/, among others).

The increasing density and complexity of the trade negotiations agenda that Argentina will have to face in the coming years will require the articulation and mobilization of all the actors with the capacity to participate in the collective effort to diagnose international reality, global and regional, with a country perspective. A strategy of intelligent insertion in the world and in the region requires a serious effort to diagnose the external environment and its dynamics. An intelligent diagnosis should not be limited to economic factors. A concrete aspect in which we can imagine a national effort and which in other countries, including those with which we compete and cooperate, is also carried out, is the drawing up of periodic reports on the external environment and the demands that arise for our country, its sectors and its regions. The 2017 White Paper on the international insertion of Australia provides a recent example in this regard (see https://www.fpwhitepaper.gov.au/). An example is also provided by the periodic reports on the strategy of international insertion that are often prepared by business institutions, for example from Brazil (see the report "Agenda Internacional da Industria 2017" from the Confederaçâo Nacional da Industria - CNI, on http://www.sistemaindustria.org.br/). These are, among others, examples that should be followed in Argentina and in other countries of the region.

In the perspective outlined above, the efforts of business and academic institutions to promote the contribution of Argentineans living abroad to the competitive intelligence of the country and its companies, as well as the experience of travelling, especially of the younger generations, whether to study, visit or work in other countries, acquire a practical importance. All this can prove a valuable source of information and analysis to understand the strategies for international insertion of other countries.

With regard to the effectiveness of the organization for negotiating, it is essential to bear in mind that the agenda of trade negotiations is closely linked to the strategy of international insertion of a country. It is not something that is limited to economic issues or foreign trade. On the contrary, only by inserting a negotiation in a broader context of factors that have an impact on its development, in particular the political and even geopolitical, can the efficiency required to succeed be achieved. This is the reason why it is of great importance that the Head of State exercises in reality, and not only formally, the leadership of a country in each concrete negotiation. There are many examples today in this regard.

Only by inserting a commercial negotiation in the broader context of the country's strategy of international insertion, is it possible to achieve results that are perceived as sustainable and convenient to the national interests. In the experience of Argentina, there were at least three moments in which such vision were put into practice. This happened when Presidents Arturo Frondizi, Raúl Alfonsin and Carlos Menem launched initiatives that led to the creation of LAFTA (1960), the bi-national integration between Argentina and Brazil (1986), and Mercosur (1991.) respectively. In all three cases, the political leadership was presidential and shared with the presidents of Brazil. Also in all three cases, the conditions observed at the beginning were later diluted by political, economic and human factors (on the latter, see John Carlin, "El factor humano", Seix Barral 2010).

Regarding the factor "the day after the negotiation", is the one that requires the most political leadership and a follow-up resulting from the articulation recommended by Jorge Sábato, between the government, production, and research sectors. It involves developing simultaneously with the negotiation process that of the preparation, especially of the production sectors, to take full advantage of the results of a negotiation. This becomes even more necessary in federal countries such as Argentina and Brazil. (This issue was addressed in the June 2010 edition of our newsletter "The day after a complex commercial negotiation: Reflections on the occasion of the negotiations between Mercosur and the European Union", on http://www.felixpena.com.ar/). What was stated there continues to be valid today).

Throughout 2018-and probably in the following years too-the trade negotiations of Argentina and their connection with the country's strategy of international insertion will have one of its main epicenters in the Latin American region, in particular in the South American space. (On the perspective of the current Argentine government, see the recent article by Chancellor Jorge Faurie listed as recommended reading of this newsletter).

Three institutional milieus stand out. The first is that of LAIA. As was the LAFTA in the sixties, the incorporation of Mexico to the original idea of preferential trade in the southernmost space of South America, conferred a very special geopolitical projection to the institution that would later become the LAIA (1980). It implied the acknowledgement of a Latin American space with its own identity, both at the hemispheric level and the global multilateral level, at that time institutionalized in the GATT. The fact that the current U.S. stance with regard to WTO ground rules is diminishing its effectiveness to promote new multilateral global trade commitments -the failure to overcome the stalemate of the Doha Round makes this clear- is also reflected in the questioning of the principle of non-discrimination as the central tenet of the system. Among other effects, this can lead to a growing deterioration of the effectiveness of this rule, embodied in Article XXIV of the GATT 1994, which was supposed to restrict the tendencies to the fragmentation of the multilateral global system through multiple preferential trade agreements or true "private clubs" of international trade.

The LAIA tends to be re-empowered, as was expressed in 2016 by its then General Secretary, Carlos Chacho Álvarez. It provides the institutional framework to address, especially through the instrument of partial scope agreements, different modalities of actions for commercial and productive articulation, for example between Mercosur countries and the Pacific Alliance and also with Cuba, among other member countries.

The other epicenters will be interregional and trans-regional spaces. In the perspective of the trade negotiations agenda of Argentina and Mercosur, the fact that the long-delayed bi-regional agreement with the European Union could eventually be signed this year, opens the door to the creation of an ambitious interregional preferential network of Latin American countries -those of Mercosur and the ones that already have free trade agreements with the EU-and the European Union. Eventually, such a network could also result from the post-Brexit negotiations of Latin American countries with the United Kingdom.

The preferential networks could be extended to other regions with which Latin American countries already have or seek agreements of interregional scope. Among others, it could be the case of the Southeast Asian region through the connectivity established between preferential trade agreements that have already been concluded, or that could be concluded in the near future, between countries of the LAIA and the ASEAN, and China as well. A preferential trade agreement between Mercosur and China, in any of the possible and recommended modalities, would greatly enhance the eventual interregional preferential trade network between Latin America and Southeast Asia.

In the future, these interregional preferential networks would allow commercial negotiations with the CPTPP, especially if it finally enters into force and if it were to include, as is sometimes pointed out, the United States, China and the United Kingdom. (See the February 2018 edition of this newsletter).

Finally, the global multilateral space institutionalized in the WTO is fundamental today in the perspective of Argentina, the Mercosur countries and the Pacific Alliance. Preserving this space, as a central axis of the international trade system, based on its fundamental rule embodied in the principle of non-discrimination, must be a central priority for our country and its Latin American partners, as was opportunely expressed last December in the Buenos Aires Declaration. (See the January 2018 edition of this newsletter).

However, in this regard there is a significant tendency to shift the relative importance that some of the countries with greater prominence in global economic competition attribute to the space of the WTO. Therefore, the future evolution of the CPTPP and its effects on the global multilateral system should be followed closely, especially if the United States and other big global competitors are incorporated.

Applying a good dose of realism, it would seem advisable that in future trade negotiations our country, while reaffirming the value of a global multilateral system guided by rules, does not discard possible scenarios of its fragmentation. Such scenarios would be the result of a proliferation of regional, interregional, and even trans-regional agreements of global scope that are not framed within a multilateral and global institutional framework.

This would reinforce the strategic idea of addressing the international trade negotiations of our country based on Mercosur and shared action with the Pacific Alliance and also with as many countries and regions as possible. Although this would require a significant effort of organization, if the simultaneity of negotiating fronts were properly managed, it would increase the negotiating power of our countries.

All this would involve a great effort of organization, both by the government sector (at the national and provincial levels) and by the different productive and social sectors with interests in the corresponding negotiations. It is an organizational effort that must also have an active participation of the many think tanks and academic institutions that exist in the country.


Recommended Reading:


  • Ablin, Eduardo R., "¿Hacia el fin del esquema multilateral de post-guerra?", en diario "El Economista", Buenos Aires, 31 de enero de 2018, en http://www.eleconomista.com.ar/.
  • Bacchus, James, "Triggering the Trade Transition: The G20's Role in Reconciling Rules for Trade and Climate Change", ICTSD, White Paper, February 2018, en https://www.ictsd.org/.
  • Correa, Carlos, "UE-Mercosur: las divergencias no sólo abarcan la producción agropecuaria", en diario "El Cronista", 2 de febrero de 2018, en https://www.cronista.com/.
  • De Brouwer, Gordon, "Achieving balance in Australia's strategic thinking", East Asia Forum, 25 February 2018, en http://www.eastasiaforum.org/.
  • Faurie, Jorge, ·"La inserción inteligente", diario "Clarìn", 26 de febrero 2018, en https://www.clarin.com/.
  • Hellmann, Donald C.; Pyle, Kenneth B. (eds). "From APEC to XANADU. Creating a Viable Community in the Post-Cold War Pacific", Routledge, London-NY, 1997.
  • Hui, Wang, "The Politics of Imagining Asia", Edited by Theodore Huters, Harvard University Press, Cambridge-London 2011.
  • Kenderdine, Tristan, "Caucasus Trans-Caspian trade route to open China import markets", East Asia Forum, 23 February 2018, en http://www.eastasiaforum.org/.
  • Lyall, Nicholas, "People-powering Chinese cyber power", East Asia Forum, 24 February 2018, en http://www.eastasiaforum.org/.
  • Pomeranz, Kenneth, "The Great Divergence. China, Europe, and the Making of the Modern World Economy", Princeton University Press, Princeton and Oxford, 2000.
  • Pomeranz, Kenneth; Topik, Steven, "The World That Trade Created. Society, Culture, and the World Economy, 1400 to the Present", Fourth Edition, Routledge, New York-London 2018.
  • Schmidt, Brian P, "Campus Connection Matter for Australia-China Relations", East Asia Forum, 19 February 2018, en http://www.eastasiaforum.org/ .
  • Steil, Benn, "The Battle of Bretton Woods. John Maynard Keynes, Harry Dexter White, and the Making of a New World Order", a Council on foreign Relations Book, Princeton University Press, Princeton and Oxford, 2013.
  • Steil, Benn, "The Marshall Plan. Dawn of the Cold War", Simon & Schuster, New York 2018.
  • Van Klaveren, Alberto, "Regionalism in Latin America. Navigating in the Fog", World Trade Institute - Bern, Working Paper No. 25/2017| December 2017, en https://www.wti.org/.
  • Wizenberg, Daniel; Varsavsky, Julián, "Corea. Dos caras extremas de una misma nación", Peña Lillo, Ediciones Continente, Buenos Aires 2016.
  • Womack, Brantly, "International Crises and China's Rise: Comparing the 2008 Global Financial Crisis and the 2017 Global Political Crisis", en The Chinese Journal of International Politics, Volume 10, Issue 4, 1 December 2017, Oxford Academic, en https://academic.oup.com/.
  • Yoong Yoong, Lee (editor), "ASEAN Matters! Reflecting on the Association of Southeast Asian Nations", iPS Institute of Policy Studies, World Scientific Publishing Co, Singapore 2011, en http://www.worldscientific.com/.

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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