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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2020 | 2019 | 2018 | 2017 | 2016 | 2015
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THE GROUND RULES OF INTERNATIONAL TRADE
The importance of the WTO and the regional agreements each country participates in


by Félix Peña
June 2020

English translation: Isabel Romero Carranza


 

The most recent reflections by Fernando Henrique Cardoso lead us to wonder about the contributions that our region can effectively make to a new post-pandemic international order. The idea of recreating an international order based on more participatory and, therefore, effective governance is one of the core aspects of a necessary global agenda that will have to be built with the active participation of Latin American countries.

On this opportunity, we will focus on two issues that are relevant for the construction of an agenda that leads to a post-pandemic world order and in which the Latin American region, if it has the resolve, may have some impact. Our region has accumulated experiences -positive and otherwise- with regards to these issues and, therefore, aside from having specific interests to promote, it can make relevant contributions.

The first issue refers to the necessary preservation of a multilateral system of international trade, which helps overcome the shortcomings that have been evinced in the ability of the WTO to play an effective role.

The second matter is related to the role of legal rules that ensure the effectiveness and thus the efficacy of regional agreements that provide the framework to make economic integration processes predictable, particularly those that pursue more ambitious objectives such as the case of Mercosur. A thorough knowledge and understanding of the role of such rules is today an important factor for competing and negotiating in the world.

Both issues will demand innovations in the institutional frameworks and in the ground rules that might be affected. In this perspective, the multilateral system of world trade now reflected in the WTO and the networks of regional and interregional agreements for preferential trade and economic integration, in which our country and other Latin American and Mercosur countries participate, become ever more relevant.


In a recent interview to Fernando Henrique Cardoso by Hugo Alconada Mon and published in "La Nación" newspaper, about the effects of the COVID-19 pandemic in our countries and in the world, the prominent Brazilian statesman, argued that "the moment has come to realize that this pandemic affects the entire planet and that the problems that are coming will do likewise. What kind of governance can be offered to a world that is in such bad shape due to the pandemic? This will change the balance of power ... whether we like it or not, there will be an open confrontation between China and the United States. Let's hope that it remains a peaceful one and that it is possible to recreate a more participatory international order that includes countries such as ours, with the main goal of preserving peace." (See the reference to the interview under Recommended Reading).

In particular, what can be inferred from the words of former President Cardoso is that the global and regional problems we face require modalities of governance that, in order to be effective, must be participatory. Moreover, these problems could eventually lead to situations that affect regional or world peace.

The reflections by Fernando Henrique Cardoso, prompt us to ask ourselves about the contributions that our region can effectively make to the design and implementation of a new international post-pandemic order, both globally and in the Latin American region. We are all aware that it will take time and that it will not be an easy task. However, it is also possible to imagine what would be the consequences of a failure to reach this goal.

Thus, we must recognize that the idea of recreating an international order, based on more participatory and supportive governance, is one of the core concepts of that necessary global agenda that will need to be devised. This task will call for effective leadership in all countries, especially those with the greatest capacity to influence the construction of the agreements that will be required.

On this opportunity, we will focus only on two issues that are relevant for the construction of an agenda that leads to a post-pandemic world order and in which the Latin American region, if it has the resolve, may have some impact. They are certainly not the only areas of concern, but our region has accumulated experiences -positive and otherwise- with regards to them and, therefore, aside from having specific interests to promote, it can make relevant contributions.

The first of these issues refers to the necessary preservation of a multilateral international trade system, which helps overcome the shortcomings that have been evinced in the ability of the WTO to continue playing an effective role.

The second issue is related to the role of the legal rules to ensure the effectiveness and, therefore, the efficacy of regional agreements that provide the framework to make economic integration processes predictable, particularly those that pursue more ambitious objectives, such as the case of Mercosur.

A third matter, which we will not discuss today for reasons of space, refers to the future impacts for the economic development of Latin American countries, of regional productive integration based on greater physical connectivity that facilitates the effectiveness of supply chains of regional scope with interregional and, eventually, global projection.

The two issues we will refer to, require innovations in the conception of institutions and ground rules that may affect them. In this perspective, a multilateral system of world trade, now reflected in the WTO, and the networks of regional and interregional agreements for preferential trade and economic integration, especially Mercosur and the Pacific Alliance, become more relevant.

The issue of the WTO has become quite current as a result of the resignation of Roberto de Azevedo, its Director General, which will become effective as of next August, one year before the end of his term. His early removal comes at a time when both international trade and the WTO itself are facing serious problems. The position of the current US government, especially with regard to its dispute settlement system, is one of the factors that is causing the gradual deterioration of the effectiveness of the main institution of the multilateral trading system. However, it is certainly not the only reason.

A certain consensus is building up in the direction that the WTO would require a regulatory and institutional redesign if it wants to become more effective. For this reason, the selection of who will be appointed at the General Directorate becomes one of the most relevant issues of global governance. Some names would appear to be moving forward, such as Arancha González (currently responsible for Spain's Foreign Relations, former Director of the International Trade Center, and who previously had advisory and management responsibilities at the WTO, together with Pascal Lamy, and before that in the European Commission). She is very competent and has a thorough knowledge of Latin America.

A group of Latin American specialists in international trade, with outstanding academic performance and much practical experience -at government level, in international organizations and even in business- in their respective countries, has recently published a paper, promoted by the Punta del Este Group, with visions and ideas aimed at strengthening the WTO, (on the Punta del Este Group, see its website at www.grupopuntadeleste.com).

The matter of the role of legal rules to ensure the effectiveness and efficacy of a regional agreement, as is the case of Mercosur, has become more relevant in recent times, given the ongoing debate on the scope of the commitments assumed by the member countries at the moment of founding, especially in the Treaty of Asunción and in the Ouro Preto Protocol. The bi-regional agreement that has been negotiated with the EU underscores the importance of this legal and institutional issue of clear political and economic implications.

We have addressed this issue on various occasions (see, among others, the February and March 2020 editions of this newsletter). In particular, we have done so from the perspective of the necessary interaction that the political, economic and legal dimensions have in a process of integration of the characteristics of Mercosur. (See, among other things, the August 2019 edition of this newsletter at www.felixpena.com.ar).

This is a debate that has been enriched as a result of the contribution of a very recent report that has been developed and published by the Confederation of Industries of Brazil (CNI), together with some of the main state industrial organizations, under the title "Legal Impacts of Brazil's withdrawal from Mercosur", (for the 77 page-long text which includes very detailed and precise information, you may visit www.portaldaindustria.com.br/). The report originated from the fact that, as indicated in its presentation, the hypothesis of an eventual withdrawal from Mercosur has been raised in government agencies in Brazil.

Given that the report was published at the end of May of 2020, we prefer to leave the more detailed analysis of its contents for a later date. It is easy to imagine that it will spark the preparation of similar reports on the topic by business institutions around Mercosur and, most especially, in Argentina.


Recommended Reading:


  • Albertoni Gómez, Nicolás, "Entre el Barrio y el Mundo. ¿Mercosur o Modelo Chileno? Dos alternativas para el Uruguay", Taurus, Montevideo 2011.
  • Albertoni, Nicolás, "Uruguay como Solución. Su inserción internacional: cuando lo importante se transforma en urgente", Taurus, Montevideo 2019
  • Alcaro, Riccardo (Editor), "The Liberal Order and its Contestation. Great Powers and Regions Transiting in a Multipolar Era", Routledge. London and New York 2019.
  • Andersen, Kurt, "Fantasyland. How America Went Haywire. A 500-Year History", Random House, New York 2017.
  • Barzun Jacques, "Del Amanecer a la Decadencia. Quinientos años de vida cultural en Occidente (de 1500 a nuestros días)", Taurus Historia, Barcelona 2017.
  • Beattie, Alan, "False Economy. A Surprising Economic History of the World", Viking- Penguin Books, London 2009.
  • Beattie, Alan, "Who's in Charge Here? How Governments are Failing the World Economy", Riverhead Books, New York 2012.
  • Cardoso, Fernando Henrique, "La deuda pública va a explotar, aquí, allá y en todos lados", interview by Hugo Alconada Mon, in newspaper "La Nación", May 27, 2020, pp. 1 and 17, www.lanacion.com.ar/.
  • Confederacao Nacional das Industrias (CNI), "Impactos jurídicos da saída do Brasil do Mercosul", Brasilia Mayo 2020, www.portaldaindustria.com.br/).
  • De Lima-Campos, Aluisio; Gaviria, Juan Antonio, "Introduction to Trade Policy", Routledge, London and New York 2018.
  • Douthat, Ross, "The Decadent Society. How We Became the Victims of Our Own Success", Avid Reader Press, New York 2020.
  • Gans, Joshua, "Economics in the Age of COVID-19", The MIT Press, Cambridge-London 2020.
  • Gordon Robert J., "The Rise and Fall of American Growth. The US Standard of Living Since the Civil War", Princeton University Press, Princeton and Oxford 2016.
  • Haass, Richard, "The World. A Brief Introduction", Penguin Press, New York 2020.
  • Hughes, Sophie & Cleave, Sarah (eds.), "Europa 28. Writing by Women on the Future of Europe", A Hay Festival Project, Comma Press, London 2020.
  • Judt , Toni, "A Grand Illusion? An essay on Europe", New York University Press, New York and London 2011.
  • Kissinger, Henry, "A World Restored: Metternich, Castlereagh, and the Problems of Peace, 1812-22", Friedland Books, 2017.
  • Kupchan, Charles A., "No One's World. The West, the Rising Rest, and the Coming Global Turns", Oxford University Press, Oxford - New York 2012.
  • Neustadt, Richard E; May, Ernest R., "Thinking in Time. The Uses of History for Decision Makers", The Free Press, New York 1986.
  • Neuwirth, Robert, "Stealth of Nations. The Global Rise of the Informal Economy", Pantheon Books, New York 2011.
  • Peña, Félix, "¿Una iniciativa oportuna para el futuro del Mercosur?", published in the Foreign Trade Supplement of newspaper "La Nación", May 14, 2020, Section The Expert, page 3.
  • Rosales, Osvaldo, Rosales, Osvaldo, "Después de la pandemia: tendencias globales probables", May 6, 2020.
  • Schroeter, John (ed.), "After Shock. The world's foremost futurists reflect on 50 years of Future Shock - and look ahead to the next 50 ", Abundant World Institute,
  • Segal, Adam, "The Hacked World Order. How nations fight, trade, maneuver, and manipulate in the digital age", BBS Public Affairs, New York 2016.
  • Shambaugh, David (Editor), "China & the World", Oxford University Press, New York 2020.
  • Simpfendorfer, Ben, "The New Silk Road. How a Rising Arab World is Turning Away from the West and Rediscovering China", Palgrave - Macmillan, New York 2011.
  • Simpfendorfer, Ben. "The Rise of the New East. Business Strategies for Success in a World of Increasing Complexity", Palgrave - Macmillan, New York 2014.
  • Struye de Swielande, Tanguy; Vandamme, Dorothée; Walton, David; Wilkins, Thomas (Editors), "Rethinking Middle Powers in the Asian Century, New theories and new cases", Routledge, London and New York 2019.
  • Teitelbaum, Benjamin R., "War for Eternity. Inside Bannon's Far-Right Circle of Global Power Brokers", Dey ST. - William Morrow, New York 2020.
  • Valles, Guillermo, "Facing the Acefalia at the WTO", May 15, 2020 www.grupopuntadeleste.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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