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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
PHYSICAL, PRODUCTIVE AND CULTURAL CONNECTIVITY:
Conditions for a sustainable insertion in global economic competition.

by Félix Peña
May 2018

English translation: Isabel Romero Carranza


 

At the recent Conference on Infrastructure for the Development of Latin America, organized by the CAF in Buenos Aires, on April 25 and 26 of this year, one of its panels analyzed the topic "Infrastructure for Integration".

One of the comments referred to the context of profound changes that are taking place in global economic competition and which any ideas on the future of regional integration should take into account. Looking forward, operating on the national, regional and interregional realities will require a great effort of innovation and creativity from all the protagonists involved, in order to understand the dynamics and complexity of global economic competition and to succeed in the respective markets.

In these comments, the following points were highlighted:

  • The need to reinforce the value of the region in global economic competition. Its endowment of natural resources and creativity, product of the miscegenation that characterizes it, are -among others- factors that enhance what its countries can contribute to a more populated and connected world with patterns of consumption typical of the urban middle class.

  • The incidence of greater connectivity between the countries of the region and of these with the world on the relative competitiveness of their goods and services. There are three closely linked aspects in which there is a need to accentuate the connectivity between Latin American countries and, especially, with those of other emerging regions. We are referring to the physical, the productive and the cultural connectivity.

  • To capitalize on the accumulated experiences in the shared development between Latin American companies and countries. An assessment of the integration attempts developed in Latin America, and in its different sub-regions, would help project more effectively the future actions for the joint work with other nations of the same region and of other regions. In addition, it would help identify existing institutional ambits in the region and that have not always been fully exploited.

An institutional ambit that could be better used to advance in the three points mentioned above is the LAIA. It presents all the qualities that help reconcile flexibility and predictability as necessary conditions to encourage productive investments in spaces sometimes characterized by marked diversity.


With a provocative phrase in the introductory chapter of his recent book, Kishore Mahbubani reminds us "in the early twenty-first century, history has turned a corner, perhaps the most significant corner the humanity has ever turned…" He adds, "A brief comparison of the past 200 years with the previous 1.800 years will provide the answer. From Ad 1 to 1820, the two largest economies were always those of China and India. Only after that period did Europe take off, followed by America. Viewed against the backdrop of the past 1.800 years, the recent period of Western relative over performance against other civilizations is a major historical aberration. All such aberrations come to an end, and that is happening now" ("Has the West Lost It. A provocation?" Penguin Random House UK 2018).

The above quote illustrates the depth of the changes that Argentina and its Latin American partners will have to face for their insertion in the world. These changes will require examining the displacement of the axes of global economic competition. Countries in Asia, Africa and Latin America itself will gain increasing relative importance, among other factors due to the growth of their population and their gross product and, in particular, the purchasing power of their urban middle class consumers. To imagine the possible impact of such growth on the eventual future demand for goods and services, which Argentina and its regional partners might be in a position to offer, is then a highly recommended exercise.

The recent meeting of the CAF-Latin American Development Bank in Buenos Aires allowed, among other contributions, to explore some ideas about the impact that the changes in global economic competition will have on the development strategies of the region and, in particular, on that of its physical infrastructure (see Infrastructure Conference for the Development of Latin America, April 25 and 26, 2018 on https://www.caf.com/).

These ideas were addressed especially in Panel 4, which dealt with "Infrastructure for Integration". The discussions focused on issues such as how to accelerate the infrastructure agenda for regional integration and how to go from the traditional agenda to a productive agenda, among others. The panel was moderated by Victor Rico, Secretary General of the CAF.

The participants referred to three specific questions: Which are the most relevant challenges to speed up the process of integration in Latin America? What complementary actions are advisable in order to accelerate the implementation of the infrastructure agenda for regional integration? What are the recommendations to improve the quantity and quality of investments in infrastructure for physical and functional integration in the Regional Integration Corridors?

In a document designed to guide the presentations, Rafael Farromeque, senior specialist of the Infrastructure vice Presidency, pointed out that the integration process in Latin America faces multiple challenges. One of the most relevant of these challenges is to develop suitable mechanisms to speed up the implementation of infrastructure projects with high potential to:

i) boost productive complementarity between countries,

ii) favor the reduction of logistics costs in trade,

iii) promote convergence of public and private actors around the challenge of increasing productivity and

iv) improve the competitiveness of the value chains associated with trade within the region and with the rest of the world.

He added that, in this context, it is inevitable to improve the quantity and quality of investments in infrastructure for physical integration and, at the same time, strengthen the governance of the process; to improve the management of the cycle of projects and to facilitate the financing and execution of investments, promoting the convergence of public and private actors around the challenge of increasing productivity and strengthening functional integration.

The document adds that this will require an evolutionary leap in the understanding of the infrastructure agenda of regional integration, moving from a "one-dimensional paradigm", focused on physical integration, to a "multidimensional paradigm" of physical and functional integration. He concludes by pointing out that this functional approach should encompass systemic interventions -infrastructure, services, governance-on the Logistics Integration Corridors, which articulate different development areas (productive clusters, interconnection points, border crossings, metropolitan areas, ports, etc.) through the establishment of stable and reliable relationships. This would imply as an objective the implementation of joint projects and simultaneous actions on very specific development areas.

We had to contribute one of the comments in the abovementioned panel. The central point of these comments referred to the context of profound changes that are taking place in global economic competition, which must include the reflection on the future of regional integration. Changes such as those mentioned at the beginning of this newsletter, imply acknowledging that many approaches, paradigms and concepts applied in past decades to the process of economic integration between sovereign, developing and contiguous nations are becoming obsolete. In the future, operating on the national, regional and interregional realities will require a great effort of innovation and creativity from all the protagonists, in order to understand the dynamics and complexity of the global economic competition and to succeed in the respective markets.

We framed the comments around the following three points:

  • The need to reinforce the value of the region in global economic competition. Notwithstanding their well-known social, political and economic problems, the fact that Latin American countries are relatively far from the main lines of tension in the international system-in the sense proposed at the time by Raymond Aron-gives them a clear competitive advantage with respect to other regions, where the word "war" does not necessarily evoke something obsolete. Additionally, their endowment of natural resources and their creativity, product of the miscegenation that characterizes the region, are-among others-factors that add value to what these countries can offer to a more populated and connected world with patterns of consumption typical of the urban middle class.
  • The impact of the greater connectivity between the countries of the region and with the rest of the world on the relative competitiveness of their goods and services. In three closely linked aspects, there is a need to promote the connectivity between Latin American countries and, especially, with those of other emerging regions. We are referring to the physical, the productive and the cultural connectivity. A good example is the insertion of companies providing goods and services from one Latin American country in productive linkages that involve companies from other countries of the region, and that aspire to insert themselves into broader productive networks that reach consumers from other regions with their products and services. The physical connection and that of the respective productive systems would be, in such a case, a determining factor. So would be the cultural, in the sense of having the ability to understand and appreciate the values and preferences-often very diverse-of the partners and, above all, of the consumers from other countries and cultures.

  • To capitalize on the accumulated experiences -not always successful-in the shared development between Latin American companies and countries. A thorough evaluation of the integration attempts developed in Latin America and in its different sub-regions, would help project more efficiently the future actions for joint work with other nations of the same region and of other regions. It would also help identify existing institutional ambits in the Latin American region that have not been fully exploited.

An institutional ambit that could be better used to advance in the three points just mentioned is that of the Latin American Integration Association (LAIA/ALADI). A simple reading of the Treaty of Montevideo of 1980, in particular of its provisions referring to the different types of "agreements of partial scope", helps to appreciate all the untapped potential of this institutional framework. It has all the qualities that allow reconciling flexibility and predictability as necessary conditions to encourage productive investments in spaces sometimes characterized by marked diversities.

The LAIA is an appropriate institutional framework to carry forward the strategic idea of "convergence in diversity", as promoted at the time by the countries of the Pacific Alliance and Mercosur, among others. Moreover, in the last paragraph of the preamble to the Montevideo Treaty of 1980, and not coincidentally, explicit reference is made to the "Enabling Clause", which was approved by a Latin American initiative in the Tokyo Round just one year before its signature. This clause is still valid among developing countries and allows to design, with flexibility, multinational productive agreements compatible with the "principle of non-discrimination", which continues to be to this day a central rule of the multilateral trading system.


Recommended Reading:


  • Bejar, María Dolores, "Historia del siglo XX. Europa, América, Asia, África y Oceanía", Siglo XXI, Buenos Aires 2015.
  • Bremmer, Ian, "US vs. Them. The Failure of Globalism", Portfolio - Penguin, Random House, New York 2018.
  • Carter Hett, Benjamin, "The Death of Democracy. Hitler's Rise to Power and the Downfall of the Weimar Republic", Henry Holt and Company, New York 2018.
  • Comey, James, "A Higher Loyalty. Truth, Lies, and Leadership", Flatiron Books, New York 2018.
  • Costa, Olivier, "A Uniao Europeia e sua Política Exterior (História; Institucoes e Processo de Tomada de Decisao", Fundacao Alexandre de Gusmao, Brasilia 2017, en http://funag.gov.br/.
  • Evans, Richard J., "The Pursuit of Power - Europe 1814 - 1914", Allen Lane - Penguin, Random House, UK 2016.
  • Gomez Pérez-Cuadrado, Esther, "Plan Made in China - 2015", ICEX-España, Exportación e Inversiones, Octubre 2016, en https://www.icex.es/.
  • Hamilton, Clyve, "Silent Invasion. China's Influence in Australia", Hardie Grant Books, London 2018.
  • Hastings, Max, "Catastrophe 1914: Europe goes to War", Alfred A. Knops, New York 2013.
  • ICTSD, "Promoting Capability Enhancing Development", Policy Brief, Geneva, March 2018, en https://www.ictsd.org/.
  • Jaskoski, Maiah; Sotomayor, Arturo; Trinkunas, Harold A., (eds), "American Crossings. Border Politics in the Western Hemisphere", John Hopkins University Press, Baltimore 2015.
  • Krastev, Ivan, "Democracy Disrupted. The Politics of Global Protest", PENN - University of Pennsylvania Press, Philadelphia 2014.
  • Lester, Simon; Manak, Inu, "Reparando el déficit institucional del NAFTA", ICTSD, Puentes, Volume 19, Number 1, Geneva 22 March 2018, en https://es.ictsd.org/.
  • McDougall, Robert, "Regional Trade Agreement Dispute Settlement Mechanisms: Modes, Challenges and Options for Effective Dispute Resolution", Issue Paper, IDB - ICTSD, RTA Exchange Org., Geneva - Washington D.C. April 2018, en https://www.ictsd.org/.
  • Muñoz, Heraldo, "Liderazgo mundial ausente", diario "El País", 20 de abril de 2018, en https://elpais.com/.
  • Payosova, Tetyana; Hufbauer, Gary Clyde; Jung, Euijin, "NAFTA Termination: Legal Process in Canada and Mexico", PIIE - Peterson Institute for International Economics, Policy Brief, Washington D.C. April 2018, en https://piie.com/.
  • Reinsch, William A., "The NAFTA Endgame Strategy", Commentary, produce by the Center for Strategic and International Studies (CSIS), Washington D.C. 2018, en https://www.csis.org/.
  • Rosling, Hans, with Rosling Ola and Rosling Rönnlund, Anna, "Fact Fullness. Ten reasons we're wrong about the world - and why things are better than you think", Sceptre, UK 2018.
  • Schill, Stephan W.; Vidigal, Geraldo, "Reforming Dispute Settlement in Trade: The Contribution of Mega-Regionals", Think Piece, IDB - ICTSD, RTA Exchange Org., Geneva - Washington D.C. April 2018, en https://www.ictsd.org/.
  • Shriver, Mark K., "Pilgrimage. My Search for the Real Pope Francis", Random House, New York, 2016.
  • Snyder, Timothy, "The Road to Unfreedom. Rusia - Europe - America", The Duggan Books, New York 2018.
  • Stiglitz, Joseph E, "La confusión comercial de Trump", diario "El País", Sección Negocios, Domingo 24 de abril de 2018, en https://elpais.com/.
  • Tenner, Edward, "The Efficiency Paradox. What Bid Data Can't Do", Alfred A. Knopf, New York 2018.
  • Trump, Donald with Tony Schwartz, "Trump. The Art of the Deal", Arrow Books The Penguin Random House, London 2016.
  • Trump, Donald, "Great Again. How to Fix Our Crippled America", Threshold Editions, New York, 2016.
  • Weisbrot, Mark, "Failed. What the "Experts" Got Wrong About the Global Economy", Oxford University Press, New York 2015.
  • Wübbeke, Jost; Meissner, Mirjam; Zenglein, Max J.; Ives, Jacqueline; Conrad, Björn, "Made in China 2025. The making of a high-tech superpower and consequences for industrial countries", Mercis - Mercator Institute for China Studies, Papers on China, N| 2 - Berlin - December 2016, en http://merics.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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