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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
THE UNTAPPED POTENTIAL OF THE LAIA:
Appropriate instruments for the convergence of Latin American diversity.

by Félix Peña
June 2018

English translation: Isabel Romero Carranza


 

The Latin American Integration Association (LAIA or ALADI for its initials in Spanish) constitutes an institutional framework that provides, on the one hand, legal coverage of preferential trade agreements developed between all or some of its member countries, eventually promoting them. On the other hand, it constitutes a space for interaction with other countries in order to promote and facilitate, among other objectives, the development of trade and economic complementation. This without prejudice that, over time, they might have a scope that encompasses more general and ambitious objectives (for example, a Latin American common market), which may be extended to all Latin American countries.

For companies interested in building or participating in transnational networks in the region covered by the LAIA, this institutional framework can serve as a source of information on the preferential actions carried out in the region, and also as an area to promote governmental agreements (of regional or partial scope) that are functional to business objectives in other countries of the region.

The instrument of the agreement of partial scope can then be functional to the web of sectoral networks of complementation and productive integration. For companies, especially SMEs, the partial scope agreements in their economic complementation modality, may prove useful for their sector complementation strategies with companies from other LAIA countries.

The agreements of partial scope help achieve reasonable balances between two sometimes contradictory demands, both of the companies and of the governments. One is the demand for flexibility in the ground rules that are applied to develop sectoral productive complementation strategies. The other is the demand for predictability regarding the application of the ground rules that are agreed in the corresponding partial scope agreement, especially with regard to the stability of the conditions for market access.


The potential of the Latin American Integration Association (LAIA) has not yet been fully harnessed (http://www.aladi.org/sitioAladi/index.html). Tapping into this potential does not necessarily depend on the collective action of its member countries.

The LAIA was created in 1980 to replace the Latin American Free Trade Association (LAFTA), which in turn had been created in 1960 in order to develop a free trade zone that had to be perfected within a period of twelve years. Both its format-free trade zone-and the stipulated deadlines could not be met. In fact, when the negotiation of the Montevideo Treaty of 1960 began, the original objective of the countries was to promote preferential trade agreements, especially of sectoral scope, in order to replace the bilateral agreements developed in the 1930s. This objective had to be adapted to the requirements derived from the participation in the General Agreement on Tariffs and Trade (GATT) and, in particular, the prevailing interpretation of Article XXIV. (On the LAFTA and its subsequent transformation into the LAIA see, among others, the publications by Félix Peña: "The LAFTA: Agenda for an anniversary", in La Nación newspaper, March 13, 1979, on http://www.felixpena.com.ar/; "Restructuring the LAFTA: New ground rules for intra-zone trade?" in the Review of Latin American Industrialists, April 1979, on http://www.felixpena.com.ar/; "Argentina and the process of restructuring the LAFTA", Working Group sponsored by the CARI, coordinated by Félix Peña, October 15, 1979, on http://www.felixpena.com.ar/; "A new LAFTA", in the Industrial Report Journal, April 1980, on http://www.felixpena.com.ar/; "Latin America in the perspective of a desired and possible Argentina", Notes for a Debate, June 1980, on http://www.felixpena.com.ar/; "Argentina in the Latin American context", Conference of a Colloquium held in June 1980, published in the FAPES Journal of International Economic Policy in February 1981, on http://www.felixpena.com.ar/; "Future prospects of the Brazil-Argentina relations", Brazilian Review of International Policy, January 1981, on http://www.felixpena.com.ar/; "A future outlook. Possible scenarios in international trade negotiations ", WTO Chair - FLACSO Buenos Aires, September 2015; "Latin America in an uncertain and turbulent world. Impacts on regional integration strategies ", Journal of International Studies, Santiago, Chile, July 2017. See also the publication by Vicente Garnelo in the book listed as recommended reading of this newsletter).

The LAIA has at least two functions in its objective of developing "an area of economic preferences". The negotiation of the Treaty of Montevideo of 1980 had its epicenter in the XIX Conference of the Contracting Parties, held in Acapulco, Mexico, in June 1980. (See the article by Vicente Garnelo, "The Debate on the Integration Model of LAIA and its evolution" in the book cited above. We participated in this conference and in the negotiating process of the Treaty which created the LAIA, as ad-hoc legal advisor to the LAFTA Secretariat).

One function of the LAIA is to provide a legal framework for the conclusion of agreements between all members (agreements of regional scope, Article 6), or at least between two or more of its member countries, but not all of them (agreements of partial scope, Articles 7 to 14). In this case, only the approval of the countries participating in the agreement is required. Such agreements (regional or partial) must contribute to the development of a common market (an objective without a definite deadline, to be achieved "in a gradual and progressive way") between its member countries, precisely because of the development of economic preferences.

The other function of the LAIA is to provide an institutional framework to move forward, gradually and progressively, in the fulfillment of the long-term goal, through the representative bodies of the States and the role played by its General Secretariat. The governing bodies of the LAIA are located in the city of Montevideo, Uruguay.

The first function helps to provide legal sustenance within and between countries and also in the multilateral system of world trade (initially the GATT and, since 1995, the WTO, either due to Article XXIV of the GATT-WTO rules, or the much more flexible Enabling Clause approved in the Tokyo Round, in 1979) to the trade preferences granted between member countries. In the agreements of partial scope, such preferences extend only to the participating countries, but eventually other or all members of the LAIA may request participation as well.

A general rule established by the Treaty is the most-favored-nation clause (Article 44), which states that all member countries should be granted any commercial advantage that is granted to non-member countries, or that has not been granted to member countries within the framework of a partial scope agreement. This rule was modified in June 1994 at the request of Mexico, after its negotiation of NAFTA with the US and Canada.

All member countries have a permanent representation in LAIA. Precisely another function that can be fulfilled by the LAIA is to help build a network of trade agreements and integration with other countries of the region, complementing the actions developed at the bilateral level with any of these countries. In this case, the General Secretariat can provide technical support for the negotiations that are carried out.

In short, the LAIA can serve as an institutional framework that allows, on the one hand, to provide legal coverage to agreements with elements of trade preferences that are developed with all or some member countries, eventually promoting them. On the other hand, it provides a space for the interaction with other countries in order to foster and facilitate, among other objectives, the development of trade and economic complementation. This without prejudice to the fact that, over time, they might reach a scope that encompasses more general and ambitious objectives (for example, the common market) extending to all member countries.

For those companies interested in building or participating in transnational networks in the area covered by the LAIA, the mentioned institutional framework can serve as a source of information on the preferential actions carried out in the region, and also as an ambit to promote governmental agreements (of regional or partial scope) that are functional to their objectives in other countries of the region.

In particular, and if well interpreted, the instrument of partial scope agreements can be functional to the web of sectoral networks of complementation and productive integration (see the previously mentioned articles of the Treaty of Montevideo of 1980 and Resolution CM2 of August 12, 1980). For companies, especially SMEs, partial scope agreements and the economic complementation modality can be useful instruments for a sectoral strategy of complementation with companies from other LAIA countries.

If well-conceived, the agreements of partial scope -especially of economic complementation and with sectorial or multisectorial reach- help achieve a reasonable balance between two sometimes contradictory demands, coming from the companies and the governments. The first one is the demand for flexibility in the ground rules that are applied to develop sectoral productive complementation strategies. The second is the demand for predictability regarding the application of the corresponding ground rules agreed in the agreements of partial scope, especially with regard to the stability of the conditions of access to markets. The latter can be the most required by the companies called to invest in view of the extended market generated by any agreement of partial scope.

The LAIA is, in this sense, an appropriate institutional framework to advance in the development of economic complementation agreements, with sectoral or multi-sectoral scope, for example, between Mercosur countries and the Pacific Alliance, or between Mercosur countries, the Pacific Alliance and Cuba. In this regard, the food and agriculture sector, including related technologies and agricultural machinery, could be interesting examples for countries and their business sectors.


Recommended Reading:


  • Albright, Madeleine, "Fascism. A Warning", Harper Collins Publisher, 2018.
  • Ayres, Alyssa, "Our Time Has Come. How India is Making its Place in the World", A Council on Foreign Relations Book, Oxford University Press, New York 2018.
  • Bacchus, James, "Was Buenos Aires the Beginning of the End or the End of the Beginnineg. The Future of the World Trade Organization", Policy Analysis, CATO Institute, May 8, 2018, en https://www.cato.org/.
  • Bassets, Marc, "La lucha por la supremacía del orden liberal", Sección Internacional, "El País", 31 de mayo 2018, página 5, en https://elpais.com/.
  • Boughton, James M., "Who´s in Charge? Ownership and Conditionality in IMF-Supported Programs", IMF - Working Paper, WP/03/191, Washingtin D.C. 2003, en https://www.imf.org/.
  • Doig, Will, "High-Speed Empire Chinese Expansion and the Future of SouthEast Asia", Columbia Global Reports, New York 2018.
  • Dressler, Andreas, "Investment Facilitation: A Practical Perspective", ICTSD - WEF, The E15 Initiative, E-15 Investment Theme, Think Piece, Geneva, May 2018, en http://e15initiative.org/.
  • Economy, Elizabeth, C. "The Third Revolution. XiJinping and the New Chinese State", A Council on Foreign Relations Book, Oxford University Press, New York 2018.
  • Edwards, Sebastián, "American Default. The Untold Story of FDR, the Supreme Court, and the Battler over Gold", Princeton University Press, Princeton and Oxford 2018.
  • Farrow, Ronan, "War on Peace. The End of Diplomacy and the Decline of American Influence", W.W.Norton & Company, New York - London 2018.
  • Fernández Saavedra, Gustavo; Chávez Álvarez, Gonzalo; Zegada Claure, María Teresa, "La Bolivia del Siglo XXI, nación y globalización. Enfoque internacionl y estudios de caso", Programa de Investigación Estratégica en Bolivia - PIEB, La Paz 2014.
  • Frieden, Jeffry, A., "Currency Politics. The Political Economy of Exchange Rate Policy", Princeton University Press, Princeton and Oxford, Princeton 2015.
  • Gao, Henry, "The WTO Dispute Settlement Mechanism: A Trade Court for the World", IDA - ICTSD, Think Piece, April 2018, en http://e15initiative.org/.
  • Garnelo, Vicente; Cruz e Creuz, Luis Rodolfo; Rojas Gómez, Miguel, "50 Años del Proceso de Integración Latinoamericana. Ensayos sobre la integración regional", ALADI, Montevideo 2011.
  • Garton Ash, Timothy, "El autoritarismo dentro de Europa", Sección Opinión, "El País", 17 de mayo 2018, página 17, en https://elpais.com/.
  • Gonzalez, Anabel, "Strengthening the Conditions for Global Cooperation on International Trade", ICTSD, Policy Brief, Geneva, April 2018, en https://www.ictsd.org/.
  • Hufbauer, Gary, "No Winners in a US-China Trade War", East Asian Forum, May 21, 2018, en http://www.eastasiaforum.org/.
  • International Trade Centre (ITC), "What Sells in E-Commerce. New Evidence from Asian LDCs", ITC in partnership with AliResearch, Geneva 2018.
  • Isaacson, Walter, "Kissinger. A Biography", Simon & Schuster Paperbacks, NewYork 2005.
  • Jahanbegloo, Ramin, "Tambores de Guerra", Sección Opinión, diario "El País", 11 de mayo 2018, página 18.
  • Kennedy, Andrew B., "The Conflicted Superpower. America's Collaboration with China and India in Global Innovation", Nancy Bernkopf Tucker and Warren I. Cohen Book on American-East Asian Relations, Columbia University Press, New York 2018.
  • Kennedy, Andrew B., "How Trump is losing the high-tech fight with China", East Asian Forum, May 27, 2018, en http://www.eastasiaforum.org/.
  • Lehmann, Jean-Pierre, "Why a Rules-Based Multilateral Trade Régime is Crucial for Growth and Peace", Forbes - Asia, May 4, 2015, en https://www.forbes.com/.
  • Le Thu,Huong, "Should Australia join ASEAN? Lessons from Vietnam", East Asian Forum, May 10, 2018, en http://www.eastasiaforum.org/.
  • López, Ociel Ali, "Un resultado multifuncional. Venezuela y el debate postelectoral", en Nueva Sociedad 2018, mayo 2018, en http://nuso.org/.
  • Mahbubani, Kishore, "Beyond the Age of Innocence", Public Affairs, New York 2005.
  • McBride, James, "What is the Trans-Pacific Partenership (TPP)", Council on Foreign Relations, May 15, 2018, en https://www.cfr.org/.
  • Marschik, Quinn; Min hee Jo, "China's integral role in Korean War peace talks", East Asian Forum, May 27, 2018, en http://www.eastasiaforum.org/.
  • Nasanovsky, Nadia, "Los servicios basados en el conocimiento, en el podio exportador", Suplemento Pyme, "El Cronista", 24 de mayo 2018.
  • Neuwirth, Robert, "Stealth of Nations. The Global Rise of the Informal Economy", Pantheon Books, New York 2011.
  • Nolte, Detlef; Mijares, Victor M., "La crisis de Unasur y la deonstrucción de Sudamérica", diario "El Espectador", Bogotá 23 de abril 2018, en https://www.elespectador.com/.
  • Nun, José, "La reforma impositiva, una alternativa para evitar el ajuste", Sección Opinión, "La Nación", 23 de mayo 2018, página 20, en https://www.lanacion.com.ar/.
  • Oz, Amos, "Queridos Fanáticos. Tres Reflexiones", Ediciones Siruela, Biblioteca Amos Oz, 2018.
  • Oz, Amos, "No he visto nunca un fanático con sentido del humor", entrevista de 9J.C.Sanz a Amos Oz ,en Babelia, "El País", 12 de mayo de 2018, en https://elpais.com/.
  • Peña, Félix, "Requerimientos para navegar el nuevo entorno regional", Suplemento Comercio Exterior, diario "La Nación", 10 de mayo 2018, en https://www.lanacion.com.ar/.
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  • Rozemberg, Ricardo; Gaya, Romina, "La relación Argentina-Chile. Nuevos y viejos compromisos en un contexto diferente", CERA, Instituto de Estrategia Internacional - IEI -, Buenos Aires, Abril 218.
  • Tenembaum, Ernesto, "Tierra de Locos. Porqué sufre tanto la Argentina", Sección Internacional, diario "El País", 10 de mayo de 2018, página 10, en https://elpais.com/.
  • Vieira Posada, Edgar, "Los actuales desafíos del proceso de globalización", Colección de Bolsillo Acontecer Mundial, CEPEG - Ediciones Universidad Cooperativa de Colombia, Bogotá 2016.
  • Weick, Karl E.; Sutcliffe, Kathleen M., "Managing the Unexpected. Sustained Performance in a Complex World", Wiley & Sons, New Jersey 2015.

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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