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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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THE CONSTRUCTION OF LATIN AMERICA AS AN ORGANIZED REGION
A necessary task, with very long term objectives and uncertain results.


by Félix Peña
October 2020

English translation: Isabel Romero Carranza


 

The current global crisis requires that, at the Latin American regional level, steps be taken towards the development of government institutions adapted to the new realities. These are integration institutions that can find a major precedent in the construction of the EU. Of course, there are other experiences in Europe itself and in other regions. Some of them failed while others are just limited to economic and, mainly, commercial integration.

With different modalities in Latin America, the experiences of LAFTA and LAIA; the Andean Group and then the Andean Community of Nations; the Central American Common Market; the Caribbean Community; and the Pacific Alliance and Mercosur stand out.

In our region, the creation of LAIA defined an integration methodology based on the experience accumulated in the previous stage of LAFTA. The original vision of building a common Latin American market was maintained and the Treaty of 1980 includes concrete steps that can be taken to contribute to this long-term objective.

On different occasions we have referred to the convenience, for our country and for Mercosur, of taking advantage of the potential offered by LAIA in its strategies for productive transformation, development and international insertion. Its rules, if well interpreted, allow for the development of the desired objectives through the balance between the effects of predictability and flexibility, generated by preferential trade commitments, especially the tariff and non-tariff ones, which are agreed upon by a group of member countries, but not necessarily all of them.

In 2017, LAIA, ECLAC, INTAL and SIECA organized a regional meeting on the groundwork for a comprehensive Latin American trade agreement. Their contributions and conclusions continue to be valid for addressing future joint work among countries of the region.

The appointment of Sergio Abreu as ALADI's new Secretary General is a factor that may contribute to enhance a strategy to fully harness ALADI's potential.


The global COVID-19 crisis is demanding that, at the Latin American regional level, steps be taken to renew or build government institutions that allow the countries that are interested to work together on a permanent basis, and with goals adapted to the new realities.

These realities are characterized by several factors that set them apart from the world that emerged at the end of World War II (1945) and after the end of the Cold War (1989-91). These factors include: more protagonists, especially relevant ones (States and non-State actors); much more connection at all levels and increasingly in the cultural aspect, understood in a broad sense; and much more diversity, in all dimensions and not only in terms of values and ideas.

We are referring to regional or sub-regional government institutions, created with a desire for permanence and voluntary membership. Becoming a member country, if the requirements are met, depends not only on the political will of the country that wishes to join, but also on the acceptance of the other partner countries. The constituent agreement determines the objectives that lead the countries that aspire to be members to work together. They reflect the existential dimension of the institution being created, the "reason why to work together". It also determines the methodological dimension, that is, "how to work together".

The two dimensions -existential and methodological- respond to the principle of "freedom of organization" characteristic of the relations between independent states. That means that, although there are political, economic and legal factors that affect the definition of the why and the how, the joint work between sovereign nations that wish to remain so (despite accepting to limit the unrestricted exercise of their sovereignty) responds to what the associated countries understand to be their needs.

These types of institutions, usually called "association or integration", have an important precedent in the construction of what is today the European Union. Certainly, there are other valuable experiences in Europe itself and in other regions, especially in Southeast Asia, with the ASEAN. Some are failed attempts, others are more focused on economic and mainly commercial integration. In Latin America, we can mention the experiences of LAFTA and later LAIA; the Andean Group and later the Andean Community of Nations; the Central American Common Market; the Caribbean Community and, more recently, the Pacific Alliance and Mercosur, all different in nature and intensity.

The experiences mentioned differ more in their methodological aspects rather than in their existential ones. These are initiatives that, in their initial stages, have highlighted the importance of political leadership -usually at a high governmental level- and of those contributing ideas and management capacities for the concrete construction of the associative pact or, later on, to the development of the necessary steps for the effective implementation of what has been agreed upon.
In the European case, for example, the Frenchman Jean Monnet played a decisive role in the foundation of regional integration, both in defining its existential and its methodological dimensions. Like every builder, he had a vision, and his great skill was to adapt it to the visions of other key players in the construction of Europe. However, he was not the sole architect of this process. At the time of its foundation, in 1950, there were many others, including those who provided political leadership. The key, however, was that they all knew how to assemble the right teams to help with the joint work of all involved.

The dream that led to what is now the EU was, on the one hand, peace and, on the other, joint work between bordering nations, in order to generate de facto solidarity based on mutual gains in terms of development, economic growth and social progress, thus making violent confrontations and wars unlikely.

Some of the protagonists of the European integration experience imagined the creation of a new autonomous unit of power, that is, a national state. To a certain extent, this was a model that led to the development of other nation-states, such as the United States. But that was not the prevailing vision. It was not possible and perhaps not necessary in Europe, neither would it be in Latin America or Asia.

What resulted over time was the gradual construction of what has become, after seventy years, a comprehensive and diverse shared geographical space centered around the historical and cultural concept of Europe. Something perhaps in line with the diversity of this vision is outlined in a recent article by Janne Teller entitled "My Dream For Europe", in the book edited by Sophie Hughes and Sarah Cleave (Europe 28: Writing by Women on the Future of Europe, Comma Pres & Hay Festival, UK 2020). It is a very original work in which twenty eight women (one from each EU country, including Great Britain), give their diverse points of view on the meaning of the common project of European integration.

In our region, LAIA defined in 1980 an integration methodology based on the experience accumulated in the previous LAFTA stage. The original vision of building a common Latin American market was maintained, but the Treaty specifically refers to steps that can contribute to this long-term objective.

In other opportunities we have mentioned how convenient it would be for our country and for Mercosur to take full advantage of the potential offered by LAIA in the strategies for development and international insertion. If properly interpreted, its rules would help achieve the sought objectives through a balance between the effects of predictability and, at the same time, flexibility, produced by the preferential trade agreement, in particular the tariff and non-tariff commitments agreed within its framework between groups of member countries, but not necessarily including all.

Two contributions result from the Treaty that replaced the more rigid formulas included in the Treaty of Montevideo of 1960, which created LAFTA. The first was to set aside the failed attempt to create a free trade area, to be perfected within twelve years. This was an objective that the governments of the countries that negotiated and signed the Treaty had not originally imagined but which they had to include to adapt it to the prevailing interpretation of the GATT rules. The second contribution was to insert the new Treaty into the framework of the "enabling clause", which had been negotiated at the Tokyo Round of 1979. This implied a much more flexible formula for preferences, especially tariff-related ones, granted among developing countries.

One of the relevant effects of these two contributions is reflected in the opportunities offered by LAIA, with its rules referring to the partial scope agreements provided for in the 1980 Treaty of Montevideo Treaty and in Resolution No. 2 of the Council of Ministers. These are very practical and functional instruments for the development of joint strategies between two or more (but not necessarily all) participating countries, aimed at promoting multiple modes of preferential trade links and transnational productive chains and, above all, those that seek to have a regional scope and global projection. A simple reading of the above-mentioned regulations gives an idea of the wide range of options offered by LAIA's legal instruments. This was, perhaps, the main contribution to the methodologies of economic integration that resulted from the negotiating meeting of the Treaty, which took place in Acapulco, in June 1980.

LAIA's rules facilitate the development of strategies for "convergence in diversity" among its member countries. In 2014, this was the strategic approach promoted at the initiative of President Michelle Bachelet and her Foreign Affairs Minister, Heraldo Muñoz, following a meeting of the member countries held in Santiago de Chile.

Moreover, they contribute to the development of convergence policies between different regional integration processes, such as is the case between Mercosur and the Pacific Alliance, among others. As we have pointed out in other opportunities, it would be convenient to develop joint initiatives among this group of countries, in relation to relevant issues of their own international trade relations agendas.

A relevant issue for the joint action by this group of countries is that of the reforms that should be introduced in the WTO. What reforms could be of most interest to the Mercosur countries and those of the Pacific Alliance? What concrete proposals could be presented by this group of countries? What could be the position of the countries of the group in relation to proposals introduced by other countries or groups such as the US, the EU, China, India, Australia, Japan or South Africa, among others?

Another issue is the development of preferential trade agreements involving countries of the Pacific Alliance and Mercosur, with a bi-regional scope. The conclusion of the agreement between Mercosur and the EU, if it is ever signed and enters into force, could open the way to the connection with the agreements that the EU has concluded with countries of the Pacific Alliance, as proposed at the time by Ricardo Lagos and Osvaldo Rosales. A network of bi-regional agreements would then emerge that would be very functional to the promotion of joint investments involving companies from both regions. The same could result from a network of bi-regional agreements between countries of the Group of 8 (Mercosur and Pacific Alliance) and other large markets (such as China, India, Canada, Japan and the US, among others, including ASEAN).

In 2017, LAIA, together with ECLAC, INTAL and SIECA, organized a regional meeting on the basis of a comprehensive Latin American economic trade agreement. Their contributions and conclusions continue to be valid for addressing future joint work between countries of the region. (For the report on the meeting held at LAIA headquarters on April 21, 2017, refer to "Memorias del Conversatorio. Responder proponiendo. Bases para un acuerdo económico comercial integral latinoamericano", in ALADI's web page)

The recent appointment of Sergio Abreu as ALADI's new Secretary General (2020-2023) is a factor that can contribute to the full realization of the organization's potential, especially in the post-pandemic world. He will be able to continue and deepen the work done, especially by his two predecessors, as evinced through the meeting mentioned above..

Abreu has a solid academic and political background in his country, Uruguay. In his vast political and professional activity, he has been Chancellor (1993-95), Minister of Industry, Mining and Energy (2000-2002), Senator of the Republic, and President of the Uruguayan Council on International Relations (CURI). He has a thorough knowledge of the countries of the region and their economic integration processes. As a Uruguayan, he has gained valuable experience in the difficult and necessary task of trying to build consensus that are effective, efficient and socially legitimate, and there is no doubt that he will attempt to do likewise this time.


Recommended Reading:


  • Acharya, Amitav, "The End of American World Order", Second Edition, Polity Press, Cambridge - Medford, 2018.
  • Albertoni, Nicolás; Malamud , Andrés, "La Unión Europea y América Latina: De Sueño a Pesadilla", The New York Times, edición en español, 14 de septiembre 2020.
  • Auslin, Michael R. "Asia's New Geopolitics. Essays on Reshpingntxhe Indo-Pacific", Hoover Institutions Press, Stanford University, Stanford 2020.
  • Bush, Vannevar, "Science. The Endless Frontier", A report to the President on a Program for Postwar Scientific Research, National Science Foundation, Washington D.C., 1945.
  • Isaacson, Walter, "Los Innovadores. Los Genios que Inventaron el Futuro", Debate, Penguin Random House Grupo Editorial, Barcelona 2014.
  • Jacques, Martin, "When China Rules the World. The End of the Western World and the Birth of a New Global Order", Penguin Books, New York 2012.
  • Lake, David A., Hierarchy in International Relations", Cornell University Press Ithaca and London 2009.
  • Peña, Félix, "El futuro del Mercosur: solidaridad y cooperación en el mundo post-pandemia", en Suplemento Comercio Exterior, diario "La Nación", jueves 10 de septiembre 2020, página 3, en www.lanacion.com.ar.
  • Rieger, Bernhard, "El Auto del Pueblo. Una Historia Global del Volkswagen Beetle", Motor Libro de Lenguaje Claro Editora, Carapachay, Pcia de Buenos Aires, 2018
  • Zachary, G.Pascal, "Endless Frontier. Vannevar Bush, Engineer of the American Century", Free Press, New York 1997.
  • Zakaria, Fareed, "From Wealth to Power. The Unusual Origins of America's World Role", Princeton University Press, Princeton, New Jersey 1998.

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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