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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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THE AGREEMENT WITH THE EU AND ITS RE-FOUNDING EFFECT ON MERCOSUR
The necessary preparation for the day after its entry into force


by Félix Peña
August 2020

English translation: Isabel Romero Carranza


 

The bi-regional agreement between Mercosur and the EU –conceived as a negotiating unit– is entering its final phase of realization.

Due to its scale and its potential impact on the economies and foreign trade of both regions, it will require priority attention in the coming months, above all because it is an agreement whose negotiating phase, at least in its commercial component, concluded a year ago and is now ready for signing and subsequent parliamentary ratification.

If it is carried out as planned, it will provide an opportunity to highlight the ability of Mercosur countries to translate into concrete action the ambitious goals set in their strategies for international commercial insertion and to demonstrate, to this end, that they are able to meet such goals using effective organization methods.

At the moment of its formal conclusion and its entry into force, the main stage of this bi-regional agreement will begin. This stage could be called the “day after". During this period, it will be necessary for governments and businesses to do what is required in order to fulfill the commitments agreed in the established time frame and to take advantage of the assured expansion of the markets. Therefore it is a stage that must be prepared in advance.

In practice, the preparation of the “day after" stage will begin when the final text of the full agreement is actually disclosed, including its main pillars in the political, cooperation and commercial aspects and the organizational and temporary provisions.

The publication of the bi-regional agreement that is signed will be a key step towards the conclusion of the negotiations, since it will facilitate the development of the necessary social debate, including those that should take place during the corresponding legislative approval processes.

After almost thirty years since the idea of ??the bi-regional agreement began to be explored and twenty years of negotiations, it would be difficult for political leaders to explain to their citizens the economic and political consequences of a possible failure. On the contrary, it would be more convenient for them to take advantage of the re-founding effect on Mercosur itself.


Setting ambitious goals appears as one of the priorities for the future development of Argentine and Mercosur foreign trade after the pandemic. It could be a way of overcoming the brooding effects observed in the citizens of our countries and in Argentina in particular as a consequence of the Covid-19 pandemic.

In order to be perceived as realistic, this must be attained through the development of the right institutional organization. Thus, in the case of Argentina, it must effectively and simultaneously involve the national government, the provincial and local governments, and all sectors of society, including business, labor, and the new generations, as these are the most sensitive to the development of reasonable and sustainable conditions for the future.

They have to be ambitious goals, both in a quantitative and qualitative perspective. That means that they involve significant and sustainable leaps in the quantity and quality of the goods and services that are offered to the world and that also showcase the know-how and technology used in their production processes.

At the same time, a proper organization would contribute to such goals being perceived as realistic, in the sense that they may lead to improved efficiency and effectiveness in the management of all levels involved in the implementation of an insertion strategy of Argentina and Mercosur in world trade.

The agreement between Mercosur and the European Union, which is now entering its final phase, provides an opportunity to highlight the ability of our country and its Mercosur partners to translate into concrete action the ambitious goals that are set in their strategies for international commercial insertion, as well as to demonstrate, to this end, that they are in a position to carry them out using the necessary organizational methodologies at every level involved.

On the other hand, the realization of this ambitious bi-regional agreement is linked to the need of Argentina and Mercosur to promote different types of cooperation agreements with other relevant countries of the international trading system, such as those in the agenda currently pending development.

All of them are supposedly agreements that are not only compatible with the principles and rules of the multilateral system of international trade, but would also mean a contribution to its strengthening, both from an economic and political perspective.

The bi-regional agreement between Mercosur and the EU –conceived as a negotiating unit, as was the founding idea– will therefore require priority attention in the upcoming months. This is so not only because of its scope and its potential impact on the economies and foreign trade of both regions, but also because it is an agreement whose negotiation phase, at least the commercial component, was concluded a year ago and is already entering the stage of its signing and subsequent parliamentary ratification.

From the Argentine perspective, as well as from that of the Mercosur and EU partners, after almost thirty years since the idea of ??a bi-regional agreement started to be explored and twenty years of negotiations that spanned different governments, it would be hard for political leaders to explain to their citizens the economic and political consequences of an eventual failure. Even more so if such consequences could have an impact on the survival of Mercosur itself. On the contrary, it would be more convenient for them to take advantage of their re-foundational effects on Mercosur itself.

As of its formal conclusion and its subsequent entry into force, the main stage of this bi-regional association will begin. This could be dubbed the “day after” stage (on this topic, see the September 2019 edition of this newsletter).

In this stage, governments and businesses need to do what is required to comply with the agreed commitments and established deadlines and also do what is necessary to take full advantage, in an effective and therefore measurable way, of the assured expansion of the markets.

In practice, the preparation of the "day after" begins when the final text of the entire agreement is made known, including its main pillars in the political, cooperation and commercial aspects and all its organizational and temporary provisions.

The publication of the full text, which has not been made until this date, will then be viewed as a fundamental step towards the conclusion of the negotiating process. Among other things, it will facilitate the development of the necessary social debates on the agreement, including those that should take place during the corresponding legislative approval processes.

To a great extent, the success that each country and its companies achieve in their strategies to take advantage of the agreement, will depend on what they do, from now on, in relation with the opportunities and challenges that open up once it enters into force.

In preparing for the "day after", particularly from an Argentine perspective, three issues deserve special attention:

  • the first is the special attention that should be paid to the development, in practice, of the provisions included in the bi-regional agreement for the support of the participation and internationalization of small and medium-sized enterprises;

  • the second refers to the active participation of the different local governments in harnessing, together with the productive sectors, the opportunities that will arise from the bi-regional agreement;

  • and the third is to analyze the multiple ramifications that the bi-regional agreement may give rise to, as soon as it is inserted, with its rules of origin, within the network of preferential trade agreements that Mercosur and the EU have with other countries and regions, especially with those of the Pacific Alliance.

Due to their relevance, at least in the Argentine case, we will continue to analyze these three issues in our next newsletter.


Recommended Reading:


  • Applebaum, Anne, “Twilight of Democracy. The Seductive Lure of Authoritarianism ”, Doubleday, New York 2020.
  • Bradley, James,“The China Mirage. The Hidden History of American Disaster in Asia ”, Little, Brown and Company, New York-Boston-London 2015.
  • Carmody, Patricio, “Una Estrategia de Horizontes Diversos”, newspaper La Nación, July 29, 2020, Opinion Section, p. 27.
  • Cooley, Alexander; Nexon, Daniel, “Exit From Hegemony. The Unraveling of the American World Order ”, Oxford University Press, New York 202
  • Elizondo, Marcelo, “Por qué es más relevante la empresa exportadora que el producto exportado”, Foreign Trade Supplement of newspaper La Nación, July 16, 2020, p. 3.
  • Gerwarth, Robert, "November 1998. The German Revolution", Oxford University Press. Oxford 2020.
  • Gessen, Masha, "Surviving Autocracy", Riverhead Books, New York 2020.
    Gueniffey, Patrice, "Napoleon & De Gaulle. Heroes and History ”, The Belknap Press of Harvard University Press, Cambridge - London 2020.
  • Hurtado Briceño, Alberto José; Vieira Posada, Edgar, “Pertinencia y convergencia de la integración latinoamericana en un contexto de cambios mundiales”, Colección Gridale, Centro de Pensamiento Global (CEPEG), Universidad Cooperativa de Colombia, Bogotá 2020.
  • Jankowski, Paul, “Al Against All. The Long Winter of 1933 and the Origins of the Second World War ”, Harper Collins Publisher, New York 2020.
  • Kagan, Robert, “ The Jungle Growths Back. America and our Imperiled World ”, Alfred A. Knopf, New York 2018.
  • Kroenig, Matthew, “ The Return of Great Power Rivalry. Democracy Versus Autocracy from the Ancient World to the US and China ”, Oxford University Press, New York 2020.
  • Naím, Moisés,”Illicit. Hoe Smugglers, Traffickers, and Copycats are Hijacking the Global Economy ”, Anchor Books, New York 2005.
  • Nun, José, “Tucídides y el Coronavirus”, newspaper La Nación, Juñy 27, 2020, Opinion Section, p. 25.
  • Peña, Félix, “Tres metas para posicionar a la Argentina en el comercio internacional luego de la pandemia”, Foreign Trade supplement of newspaper “La Nación”, July 30, 2020, p. 3.
  • Rufin, Jean-Christophe, “The Fortune of the Great Jacques Coeur”, Ediciones BSA, Barcelona 2013.
  • Singer, PW; Brooking, Emerson T., “Like War. The Weaponization of Social Media ”, An Eamon Dolan Book - Mariner Books - Houghton Mifflin Harcourt. Boston-New York 2019.
  • Singer, PW; Cole, August, “Burn-In. A Novel of the Real Robotic Revolution ”, Houghton Mifflin Harcourt, Boston-New York 2020.
  • Shelley, Louise I., “ Dark Commerce. How a New Illicit Economy is Threatening our Future ”, Princeton University Press, Princeton and Oxford, 2018.
  • Tamames, Ramón, “Hernán Cortés, gigante de la historia”, Prologue by Josep Borrell, Erasmus Pensamiento del Presente, Barcelona 2019.

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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