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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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HOW TO CAPITALIZE ON A BI-REGIONAL NEGOTIATING EXPERIENCE:
Reflections on the construction of a preferential relation between Mercosur and the European Union.

by Félix Peña
April 2018

English translation: Isabel Romero Carranza


 

A long road has been traveled in the difficult task of building a special relation between Mercosur and the European Union (EU). Today, almost thirty years after its outset, it is assumed that the original goal remains unaltered. It is a path whose journey began at a particular point in time worth noting, which was the end of the eighties and the beginning of the nineties last century.

The negotiation and subsequent signing of the Treaty of Asunción prompted in the EU countries the decision to try to promote the strategic idea of what was supposed to be a bi-regional agreement, conceived from the beginning as quite ambitious and of a preferential nature, but of gradual construction.

Several factors influenced the initial momentum of the bi-regional process. Among others, we can point out the deep historical roots of the relations between both regions, nourished by European migrations and investments and by the shared history between our region and Spain and Portugal. The convergence of cultural, social and political values, especially since the affirmation of democracy in the Mercosur countries, can be mentioned as well.

On the European side, another relevant factor was the launch of the so-called Initiative of the Americas, which implied getting the message that the US was planning to build a preferential trade relationship with Latin American countries, inserted in the context of the historic triangular relationship between Europe the US and Latin America.

After almost thirty years, how real has been the interest of both parties in advancing the bi-regional negotiations? It is quite difficult to explain why neither side capitalized on the acquired experiences, proposing and agreeing on changes in the methodologies used to build the preferential bi-regional space.

The importance of this bi-regional relation deserves a deep debate on the way forward. It would have to be a pluralistic, multidimensional and multidisciplinary debate, not focused on theoretical or academic approaches but aimed at making practical recommendations oriented to the necessary and possible course of action.


A long road has been traveled in the difficult task of building a special relation between Mercosur and the European Union (EU). Today, thirty years after the outset, it is assumed that the original goal remains unaltered. This is, to take steps towards the institutionalization of a permanent relation, with a political and strategic purpose, economic and social content, and preferential commitments for goods, services, investments and other issues relevant to bi-regional relations, in accordance with the concrete interests and the multilateral legal rules accepted by both parties, especially within the scope of the GATT and the WTO.

It is worthwhile noting that this path began at a very particular point in time, at the end of the eighties and the beginning of the nineties last century. This was, on the one hand, the moment in which the EU began to adapt to the new international and regional reality resulting, among other factors, from the collapse of the Soviet Union. On the other hand, the Mercosur founding countries began to follow their own path to build gradually a regional space of economic integration and preferential trade, thus deepening the bilateral experience formally initiated by Argentina and Brazil, in 1986.

The negotiations and subsequent signing of the Treaty of Asuncion prompted in the EU countries -led by Portugal and Spain- the decision to promote the strategic idea of what was supposed to be a bi-regional agreement, imagined in the beginning as quite ambitious and preferential in nature, but of gradual construction. The visit to Brussels of the Mercosur Foreign Ministers in 1991, a few days after the signing of the Treaty of Asunción, and the bi-regional meeting in Guimarães, Portugal, in 1992, were the first steps taken in the direction of the bi-regional path.

At the same time, the Mercosur countries saw a precedent in the EU -a "model" according to some enthusiasts-for the existential dimension of their strategic vision (i.e.: why work together) and also in many aspects for the methodological dimension of their project of regional integration (i.e.: how to work together). Even some optimists believed that Mercosur would achieve in a short time what the Europeans had taken more than thirty years to accomplish. They were referring, in their youthful enthusiasm, to the time that they supposed would demand to build the common market enunciated in the Treaty of Asunción.

During this initial momentum of the bi-regional process, various factors had a relevant influence, as is often the case in international relations. Among others, we can point out the deep roots of the relations between both regions, nourished by European migrations and investments and by the deeply rooted shared history between our region and Spain and Portugal. Another factor was the confluence of cultural, social and political values, especially since the consolidation of democracy in the Mercosur countries. This was not a minor fact since the EU was incorporating Eastern European countries at the time.

However, there was another key factor. The launch of the so-called Initiative of the Americas implied getting the message, on the European side that the US was planning to build a preferential trade relationship with Latin American countries. Inserted in the context of a historical triangular relationship between Europe, the US and Latin America, it is an important issue when trying to understand the European interest and behavior -including its fluctuations- in relation to the Mercosur countries. For the most part, this factor still holds a certain degree of validity today.

This last factor seems to have had a marked impact on the erratic European enthusiasm for promoting bi-regional negotiations, formally initiated in 1999. It can even be hypothesized that only by inserting the bi-regional negotiating process in the context of a triangular relation it is possible to understand some milestones that marked the cycle of advances, setbacks and standstills that have characterized the negotiations. A fundamental example in this respect was when the bi-regional negotiations stalled in 2004, almost simultaneously with the final collapse of the FTAA negotiations. Moreover, this hypothesis is supported by the fact that some thirty years after the simultaneous start of the process that would have led to the FTAA, the EU and the US have concluded free trade agreements with almost the same Latin American countries.

This would allow advancing another hypothesis that may have special validity on the European side. Specifically, that a bi-regional agreement could only be politically feasible for the EU if Mercosur simultaneously concluded a preferential trade agreement with the US-as was supposed to happen with the FTAA. In other words, from a political perspective, it would be difficult for the EU to face a situation in which its companies and investors had preferential treatment, especially in the markets of Argentina and Brazil, which would place them in a more advantageous situation than those of American origin. Such a situation would not be compatible with the strategic value that the Atlantic Alliance has had for the European countries -especially belonging to Western Europe-at least up to now. This should not be overlooked when imagining the process after the signing of the eventual bi-regional agreement, where the possible reaction of American economic interests could play a relevant role.

How real is and has been the interest of both parties in advancing the bi-regional negotiations for the so-called free trade agreement? It is difficult today to answer this question with certainty. The answer should not be based only on what the respective protagonists point out in public. On both sides we can find elements that would support the idea of a "bluff game" (pretending to have the predisposition to negotiate), that would later be followed by a typical "blame game" (blaming the other side for the eventual standstill of the negotiation process).

The causes leading to the successive standstills are well known. However, the only thing that is difficult to explain is why the acquired experiences have not been capitalized by either side, proposing and agreeing on changes in the methodologies used to build the preferential bi-regional space. On many occasions, options have been identified to make the methodologies used more flexible, compatible with a reasonable and feasible interpretation of multilateral regulations -Article XXIV of the GATT-and the use of the potential offered by the framework agreement signed by both regions in 1995 and which is still valid. The focus on a free trade agreement, conceived with an almost dogmatic interpretation of its concrete scope, has continued to prevail.

After the last negotiating meetings, everything would seem to indicate a will to move forward, but at the same time, a difficulty to imagine alternatives in the development of the road undertaken almost thirty years ago. Even if the agreement were finally signed in the upcoming months, as has been announced, the process for its entry into full force could demand a period estimated in at least three years. The precedents of other preferential trade agreements indicate that accidents -even fatal ones-usually occur after the signature of the corresponding text. The recent case of the TPP is illustrative in this respect.

The fact that the option offered by the framework agreement of 1995 to use a methodology of advancing, simultaneously, through multiple lanes in the construction of the bi-regional association has not been utilized is quite telling. In this regard, a report from both parties on how much progress has been made in the application of the mentioned framework agreement would be a very useful instrument. Such report may exist, and if that were the case, it would be very useful if it were published online.

The importance of this bi-regional relation, accentuated in view of the current complex and uncertain international context, transcends the economic and commercial and delves into the political and strategic. It would merit a deeper debate on the way to move forward. This would have to be a pluralistic, multidimensional and multidisciplinary debate, not focused on theoretical or academic approaches but aimed at proposing practical recommendations for a necessary and possible action.

The precedent of the methodology used in the meetings of the Evian Group, under the leadership of Jean-Pierre Lehmann, recently deceased, could be very useful in this regard.

Some of our previous work on the subject of the bi-regional negotiations between Mercosur and the EU can be found on:


Recommended Reading:


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  • Durán Barba, Jaime; Nieto, Santiago, "La Política en el Siglo XXI. Arte, Mito o Ciencia", Debate - Penguin Random House, Buenos Aires 2017.
  • East Asia Forum, "Why ASEAN Matters", Quarterly Vol 10, Nro 1, January - March 2018, en http://press-files.anu.edu.au/.
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  • Hufbauer, Gary Clyde, "Success ensures ASEAN's long-term importance to the United States", en East Asia Forum, 27 March 2018, en http://www.eastasiaforum.org/.
  • Hui, Wang, "China from Empire to Nation-State", Translated by Michael Gibbs-Hill, Harvard University Press, Cambridge - London 2014.
  • Johnson, Steve, "Pan-African trade bloc faces lengthy obstacle course", "Financial Times", London, March 28, 2018.
  • Lawrence, Robert Z., "Five Reasons Why thr Focus on Trade Deficits is Misleading", Peterson Institute for International Economics - PIIE, Policy Brief, WASHINGTON dc, March 2018, en https://piie.com/.
  • Mahbubani, Kishore; Sng, Jeffery, "The ASEAN Miracle. A Catalyst for Peace", Ridge Books, Singapore 2017.
  • Manzoni, Carlos, "Quienes ganan y quienes pierden con un acuerdo entre el Mercosur y la Unión Europea", diario "La Nación", 25 de marzo 2018, en https://www.lanacion.com.ar/.
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  • Mills, Greg; Obasanjo, Olusegun; Herbst, Jeffrey; Davis, Dickie, "Making Africa Work. A Handbook for economic success", Tafelberg. Cape Town 2017.
  • Natanson, José, "¿Por qué? La rápida agonía de la Argentina kirchnerista y la brutal eficacia de una nueva derecha", Siglo Veintiuno, Buenos Aires 2018.
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  • Van Vechten, Carl, "El Tigre en la casa. Una historia cultural del gato", Editorial Sigilo y Hueders, Buenos Aires 2018.

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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