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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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US AND THE WORLD AROUND US
Some lessons for the future that can be drawn from a year of pandemic


by Félix Peña
January 2021

English translation: Isabel Romero Carranza


 

Working together is a challenge for all of us, heightened by the experience of the COVID-19 pandemic. Argentina and the countries of the region would be in a position to develop, based on their accumulated experience and competitive advantages, more intense trade relations with all the countries of the world. Could this be so? And, if that were the case, what would be the steps that would allow us to have a more active and effective participation in the development of world trade that serves our own needs and interests? What contributions could we make to increase solidarity and effectiveness in the operation of trade agreements of global scope and especially of the WTO? How could the countries of the region, members of the WTO, increase the effectiveness and efficiency of the multilateral world trade system?


Today's world is more populated and connected than ever. As we have pointed out on other occasions, these are features that will tend to become more pronounced in the future. In a world with these characteristics Argentina can, if it so wishes, develop regular and eventually intense trade relations with all countries, especially those with which it shares specific interests. In this perspective, questioning ourselves (the Argentineans) and the world around has today a growing significance.

A strategy of active insertion in all areas of the international trade system -that is, of multiple alliances- requires a diagnosis of the factors that anticipate significant changes, both globally and in the different regions. In particular, it requires effective organization at the governmental level and of society as a whole, and an active policy of cooperation with other countries, especially those in the Latin American region. Technological, climatic and cultural changes, among others, will impact the shift of competitive advantages and, therefore, the development of trade in goods and services between countries and regions. There is also a great diversity of empowered consumers, resulting from the growth of the population in many countries, and a well-informed middle class that is aware of the array of options to procure the resources, goods and services of their preference

As with any international crisis of the magnitude of the 2020 pandemic, it is difficult to anticipate the future scope of its effects. Precisely, it has been characterized by precarious diagnoses and prognoses, which require constant updating. Thus, it is not easy at the outset of 2021 to predict the impacts on economic development, foreign trade and political stability of Latin American countries. These are times that demand great caution both in terms of the continuously changing diagnostics and in terms of the strategies and actions that are undertaken

At least in what can be assumed to be the post-pandemic period, three issues appear relevant for Argentina's foreign trade. They will not be the only ones, but in the current perspective, they are among the ones that will demand more attention from the protagonists that are interested in Argentina's future insertion in the world.

The first issue is to establish ambitious and flexible goals for the development of our foreign trade and to pursue them with a solid institutional organization, involving the national government, provincial and local governments, and all sectors of society, especially business, labor and the younger generation, that is, those most sensitive to creating reasonable and sustainable conditions for the future. These should be ambitious goals, both in a quantitative and qualitative sense, meaning that they involve substantial leaps in the quantity and quality of the goods and services that can be sold to the world but that, at the same time, they reflect a significant incorporation of intelligence and technology in the productive processes of the goods and services that are exported. They will demand good organization, which leads to increased efficiency and effectiveness in the management of all the layers involved in the execution of a strategy for Argentina's insertion in international trade.

The second issue refers to Argentina's contribution to strengthen the multilateral world trade system, including its capacity to facilitate innovative mechanisms in terms of regional cooperation, trade and integration initiatives in which the country might have an influence, especially in the Latin American region and among developing countries.

The third priority issue should be to contribute to the possibility that all Latin American countries members of the WTO have an active and relevant role in the continuous task of building an international trade system that is efficient and effective and, at the same time, functional to the interests of the region. This is linked to the need to promote different modalities of association agreements with relevant countries for Argentina's foreign trade, such as the one currently in its final phase of concretion between Mercosur and the EU, and those that are in the pending agenda for development with other countries and regions. At the same time, there is a need to ensure that the next Ministerial Conference of the WTO allows for the conclusion of viable and effective agreements in spite of the growing divergences between the interests of its member countries and, in particular, between its most relevant actors both in world trade and in global geopolitics

The bi-regional association agreement between Mercosur -conceived as a negotiating unit- and the EU, will require priority attention in the coming months, not only because of its magnitude and potential impact on the economies and foreign trade of both regions, but, above all, because it is an agreement whose negotiating phase, at least in its commercial component, was concluded more than a year ago and which should have already entered the signing and parliamentary ratification stages. From an Argentine perspective, as well as from that of its partners in Mercosur and those in the EU, after almost thirty years in which the idea of an agreement began to be explored and twenty years of negotiations, it would be difficult for the respective political leaders to explain to the public the consequences of an eventual failure. As we have pointed out on other occasions, the main phase of the bi-regional association agreement will begin after it enters into force. This "day after" stage is when governments and companies must do what is required to meet the commitments they have made within the established timeframes and what is necessary to harness the full potential of the expanded markets.

Accuracy in the diagnostics and effectiveness in the courses of action that are set, as well as its continuous renewal, are the conditions required to face the current global systemic crisis. They will be necessary for each of the countries affected by the crisis, which is likely to be all of them. They must be addressed, in turn, from the perspective of each stakeholder, whether it be, for example, a government, a company, or an institution or social actor. In addition to the national approaches, visions of a more global scope are also needed, for example, in the case of international organizations, and of each of the regions, for example, the EU, Mercosur, the Pacific Alliance, or ASEAN.

Understanding the factors that have led to the current global systemic crisis is essential when seeking to overcome it. It would be difficult to limit the genesis of the process to a single factor. In order to address it from a country specific perspective in a timely and successful manner, it would be necessary to have access to reliable and high-quality information on how other countries and regions are coping. It is also necessary to acknowledge that such information probably reflects different perspectives that result from the rich cultural, political and economic diversity that is today an inescapable feature of international reality. It implies having a great capacity for coordinating interests that can be displayed at all the levels involved in a crisis such as the current one, which are the global, regional and each country's own. Each one of them may require various approaches, if one aspires to understand the current developments of this systemic crisis and, in particular, the future ones.

It is not, therefore, a crisis that lends itself to simplistic, one-dimensional, static approaches. Its approach will require understanding the multiple and deep complexities, even when they involve setting aside concepts and theoretical frameworks from other historical moments. It implies, therefore, placing the analysis of the current global crisis and the courses of action that will eventually be favored, within the framework of a correct interpretation of the profound changes that are taking place in the international system.

It is possible that the current pandemic makes necessary certain changes in the functioning of institutions (decision-making systems, management and development of rules) of global and regional governance, the scope of which will be defined based on the accumulated experience. This is also valid in the case of integration processes. If something stands out of the integration methodology originally applied in Europe, is that it requires operating in three dimensions simultaneously: the political, the economic and the legal. To imagine a process of integration between sovereign nations which aspire to remain so, that are neighboring and diverse, and have unequal relative power, without the consent and support of the people (political dimension), without a sustainable articulation of their economic and productive systems (economic dimension), and without being based on common rules and institutions (legal dimension), would be to condemn it to failure, or just a circumstantial existence.

Integration processes such as the European or Mercosur are not necessarily centered on a predetermined end product, consisting of the transformation of autonomous units of power into a new "supranational" unit, although that has been an apparent objective at the initial stages. They are not based on the objective of overcoming pre-existing independent national spaces and their markets, through rigidly conceived formulas such as those of a"customs union" or a "free trade area". They do not suppose the disappearance of national identities. They do suppose greater connectivity, appreciation of cultural diversity and interests among partners and greater collective solidarity. In other words, their aim is to achieve conditions that favor prosperity and peace between neighboring nations. On the contrary, the pooling of resources and markets, with an intent for permanence; the collective disciplines resulting from the enforcement of common rules and institutions; ties that make it costly to withdraw from the joint work agreement and the enhanced power to operate effectively in the international system, are some of the positive effects that explain why this method of integration has had a prevalence that exceeds its original time and geography.

From this perspective, several issues stand out in the agenda of priorities for Argentina's foreign trade. These imply renewing the strategies for the projection to the world of high quality goods and services that the country can produce and provide efficiently, due to its natural resources, talents and creativity. It is a necessary renewal in view of the changes that are taking place at a global and Latin American level. These changes mirror an era in which a large number of players (countries, companies, consumers, workers and social organizations) are competing for world markets, with multiple options for buying and selling the goods and services they need and value. These are changes that make the interaction between the different cultures that characterize countries, and therefore international trade, more intense. Understanding the scope and effects of cultural diversity, with its impact on the priorities of consumers, is a crucial factor for the international competitiveness of our country and its businesses.

Economic integration between sovereign nations implies the development of a permanent construction of conditions and rules that allow and encourage joint work. These are the cases of the EU and Mercosur, despite their methodological differences. In this type of process, the semester in which a country holds the presidency of its governmental representative bodies provides an opportunity for leadership through relevant initiatives of a joint work agenda. This year, in the case of Mercosur, such an opportunity corresponds to the presidency that Argentina and then Brazil will exercise. It is a propitious moment then to reaffirm the idea that the two countries can play a relevant role in the construction of Mercosur, to the extent that they effectively share diagnoses and strategies on how to do it.

Among other factors, at least three provide an incentive to seek strategic leadership from Mercosur promoted by Argentina and Brazil (as was the understanding between Presidents Alfonsín and Sarney at the time of its founding), and with an even enthusiastic participation from Paraguay and Uruguay. These factors are the presidential renewal in the USA; the creation of the RCEP in the Asia-Pacific region, and the need that seems to be perceived in the EU to play a leading role in re-establishing a weakened international order.

The fact that Joe Biden will be the next occupant of the White House is not a minor fact. Perhaps it is the main factor. It may involve a profound change in the vision and style of Washington's international strategy. It is then possible to anticipate a more positive moment for the construction of a world order that will require much joint action, especially between large and medium powers. The Biden Presidency could facilitate a sustainable strategic agreement with Latin American countries, including those of Mercosur, to the extent that the idea of trying to build an international order based on solidarity and cooperation among all is affirmed.

At the same time, the recent signing of the RCEP, which involves developing a preferential trade and investment process compatible with WTO rules among 15 Asia-Pacific countries (the ten ASEAN countries and China, Japan, Korea, Australia and New Zealand, open to the incorporation of India), creates a precedent for joint work among countries with a common regional membership and also with enormous potential to develop value chains that affect trade and reciprocal investment.

And the third factor is the interest observed in the EU that perceives the potential for joint action that the aforementioned factors are opening up. In this perspective, the costs of a failure of the association agreement with Mercosur should be evaluated.

A common strategic approach of Mercosur, in order to face, in view of its interests, the new stage of international trade relations that the factors mentioned above would be anticipating, would require asking about the potential for joint action that could result from belonging to international institutional spheres such as LAIA and the WTO, among others.

Working together is a challenge for countries in the Latin American region, a challenge that has been compounded by the experience of the COVID-19 pandemic. In a more populated and connected world, Argentina and the countries of the region would be in a position to develop, based on accumulated experience and their competitive advantages, strategies of multiple alliances with all the countries of the world, especially with those that share specific interests. However, is this really so? And, if so, what would be the steps to take that would allow for a more active and effective participation in the development of world trade that works for their needs and interests? What contributions could we make to increase solidarity and efficiency in the operation of global trade agreements, especially the WTO? This organization is undergoing a crisis due to the current situation of its dispute settlement mechanism, among other factors. In what way could the countries of the region that are members of the WTO increase the effectiveness and efficiency of the multilateral world trading system?

Regionalism is viewed in the area of trade and economic development as a complement to global trade multilateralism, and also as a result of the efforts of the countries in a region to advance processes that are convergent with the global process. Is this a realistic view of regional integration? If so, how can it be made effective? How can the different Latin American integration processes be effectively coordinated, with a strategy of "convergence in diversity" that takes into account the different realities, visions and interests present in the countries of the region? What role can existing regional organizations such as LAIA, SELA and CELAC, among others, play in this regard?

Both from the point of view of the organization of production and trade (regional and global value chains), as well as from the point of view of strengthening the institutional spaces for commercial negotiation, there is a certain consensus that in the post-COVID-19 scenario, the "regional" will tend to become more profound. Is this a realistic view? If so, what are the steps that should be taken to strengthen, both from an existential point of view (why work together) and a methodological point of view (how to work together), the regional integration processes in Latin America, in a way that is compatible with the rules of the multilateral system of global trade, especially Article XXIV of the GATT and the WTO's Enabling Clause?

How can the necessary efforts to develop physical connectivity between the countries of the region and each of its sub-regions be strengthened, especially in terms of strategies to connect the different national markets and their respective productive systems? What role can international financing agencies in which Latin American countries participate continue to play?

A strategy of active insertion in the international trade system requires a permanently updated diagnostic of the factors that make it possible to anticipate changes that may be significant, both at the global level and at the multiple and diverse regional levels. How could more efficient cooperation be developed among the institutions in the region that are in a position to offer such diagnostics? What role can the different spaces of action-oriented thinking play?


Recommended Reading:


  • Actis, Esteban; Creus, Nicolás, "Un dilema chino para Joe Biden" , in "La Nación" newspaper, World section, December 8, 2020.
  • Buscaglia Marcos, "Emergiendo", Sudamericana, Buenos Aires 2020.
  • French, John D., "Lula and his politics of cunning. From Metalworker to President of Brazil ", The University of North Carolina Press, Chapel Hill 2020,
  • Guelar, Diego,"La Invasión Silenciosa. El Desembarco Chino en América del Sur", Foreword by Jorge Castro, Debate, Buenos Aires 2013.
  • Krueger, Anne,"International Trade. What Everyone Needs to Know ", Oxford University Press, New York 2020.
  • Ned Lebow, Richard, " The Rise and Fall of Political Orders ", Cambridge University Press, Cambridge 2018.
  • Ned Lebow, Richard, "Ethics and International Relations. A Tragic Perspective ", Cambridge University Press, Cambridge 2020.
  • Rosales, Osvaldo, " El RCEP: Desafíos globales en comercio y geopolítica para Europa y América Latina", Análisis Carolina 56/2020, Fundación Carolina, Madrid 2020.
  • Tanus Mafud, Abás, "Los Capitales Árabes en Argentina", Foreword by Jodos Jalit, Editorial Autores de Argentina, Buenos Aires 2020.
  • Wallerstein, Immanuel, "The Decline of American Power", The New Press, New York - London 2003.

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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