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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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THE OPINION OF MERCOSUR INDUSTRIAL BUSINESS LEADERS
Their pronouncements on relevant issues of the current agenda.


by Félix Peña
July 2021

English translation: Isabel Romero Carranza


 

In the perspective of any developing country, generating conditions that make a market more attractive to those who plan and are capable of making productive investments is a complex task that tends to be a priority.

The task is more of a priority and more complex if the aim is to attract investments to a group of developing countries, which have also made a formal commitment to integrate their economies in conditions that are attractive for new productive investments. Moreover, this commitment will normally require a long period of time to be effectively accredited and consolidated. This is the case of Mercosur. After thirty years since the formal beginning of its integration process, it may still take some time, perhaps even a considerable amount of time, for it to be perceived as fully credible, even by the citizens and investors of its member countries.

The current uncertainties regarding Mercosur as an attractive environment for new productive investments are many and varied. Several relevant issues are on Mercosur's agenda today and will require, sooner rather than later, an approach at the highest political level.

The institutions representing the industrialists of the Mercosur countries have recently expressed their opinions on some of these issues. This is not the first time they have done so. In the thirty years of Mercosur's evolution, the business community has had an active presence, often translated into concrete proposals on how to move forward and overcome difficulties.

Several opinions and proposals have referred to the development of policies that help complete the transition from primary economies to the manufacturing of value-added products. The issue of trade negotiations of Mercosur countries is included in this perspective.


In today's world, those who have to decide where and how to invest to produce goods or provide services may have several options. At the same time, many countries are interested in attracting productive investments to their own markets. Hence, from the perspective of any developing country, generating conditions that make a market more attractive to those who plan and are capable of making productive investments is a complex task that tends to be a priority.

The task is more complex and of higher priority if the aim is to attract investments to a group of developing countries which have also made a formal commitment to integrate their economies under conditions that make them attractive for new productive investments. This commitment, moreover, will normally require a long period of time to be effectively credited and consolidated. Such is the case of Mercosur. After thirty years since the formal inception of its integration process, it may still take some time, possibly even a considerable amount of time, for it to be perceived as fully credible, even by the citizens and investors of its own member countries.

The uncertainties currently observed with relation to Mercosur as an attractive area for new productive investments are many and varied. That they are numerous is not surprising, since the new international environment -not only as a result of the impact of the current pandemic-has increased the degree of uncertainty with respect to many developing economies and not just those of Mercosur or Latin America. That they are diverse is not surprising either, since they are often rooted in political, economic, and even legal factors and sometimes even all three at the same time.

As we have pointed out in our June newsletter, several relevant issues are on Mercosur's agenda today and will, sooner rather than later, require an approach at the highest political level.

Mercosur countries have recently expressed their views on some of these issues. This is not the first time they have done so. In the thirty years of Mercosur's development, the business community has had an active presence, often translated into concrete proposals on how to move forward and overcome difficulties. Several of their views and recommendations have referred to the development of policies that would allow Mercosur to complete the transition from a primary economy to a value-added manufacturing economy. The issue of trade negotiations of Mercosur countries is considered in this perspective.

On the one hand, at the last meeting of the Mercosur Chamber of Industry (CIM), the presidents of the industrial business organizations of the four countries outlined their position (see the communiqué of the CIM on March 25, 2021 http://www.ciu.conj.uy/). Their approach is aimed, among other priority objectives, at making Mercosur more attractive for the adoption of productive investment decisions by their companies. Among other conclusions, the business leaders pointed out that "without a strong and competitive industrial sector that exports to the region and the world, Mercosur will not create the quantity and quality of jobs it needs".

For its part, the Brazilian-Argentinean Business Council (CEMBRAR) met on 10 June last, in accordance with its objective of being an institutional sphere to articulate the tasks of common interest of the industrial business community of the two countries and, at the same time, to "make joint action with our respective governments a reality and contribute to the bilateral linkage over time" (see http://www.mercosur.abc.com.ar/se-afianza-la-alianza-industrial-entre-argentina-y-brasil).

At this meeting, the business leaders of the two countries began by noting that, in view of the adverse effects of the Covid-19 pandemic and the uncertain outlook that has arisen, "bilateral cooperation must be a priority". Faced with this reality, they pledged to develop actions "to strengthen the bilateral trade relationship and develop the Mercosur integration process in the future".

The actions proposed to be carried out jointly include two priority areas: trade relations between the two countries and the development of Mercosur. In the field of trade relations between the two countries, those issues related to trade facilitation, regulatory cooperation and electronic documents for foreign trade processes were mentioned.

At the same time, with regard to Mercosur, it is worth highlighting the agreement between the industrialists of the two countries on the issues that currently have the greatest impact on the region and on trade relations with third countries. These issues refer to the initiatives that have already been advanced and that would imply, if materialized, achieving the goal of reducing the common external tariff. Also, the so-called "flexibilization" in trade negotiations with other countries, especially in the idea that member countries could negotiate bilateral free trade agreements with third countries on an individual basis. A third issue referrs to another important topic, which is the effective entry into force of agreements already adopted by Mercosur, such as the Protocol on Government Procurement, the Trade Facilitation Agreement, and the Agreement on Electronic Commerce.

With regard to the reduction of the common external tariff, what had already been pointed out at the above mentioned meeting of the Mercosur Industrial Council (CIM) was reaffirmed. Specifically, it was stated that "from the private industrial sector we consider it untimely to propose its unilateral reduction in such a complex and uncertain global scenario, which also creates the difficulty of measuring its competitive impact for the productive activity of the region, in the face of the impending unfair competition from surplus world production of goods under non-competitive conditions". The industrialists of both countries express their opinion on the basis of realistic criteria for opportunity and without invoking arguments to which ideological or theoretical connotations could be attributed. What they meant is that this is not the right time for unilateral liberalization.

Regarding trade negotiations with third countries, it was considered fundamental "the obligation to act jointly, as a bloc, in order to preserve and strengthen the negotiating capacity of our region". Additionally, in order to address issues of interest to a member country in the negotiation of trade agreements with others, "differential modalities can be implemented in the rights and obligations they undertake, as has been done in some Mercosur trade agreements negotiated to date".

Rather than closing doors in negotiating strategies, what CEMBRAR business leaders are "sowing" is a shared idea: the need to pursue joint positions that adapt to the requirements of a complex and unpredictable international scenario, applying flexible approaches and formulas based on actual experiences that have already been put into practice in agreements negotiated by Mercosur with third countries.

From a legal standpoint and with its subsequent political derivations, the issue of "flexibilization", depending on its actual scope, could require some modification of the founding pact. To this effect, the advisability of convening the Diplomatic Conference as stipulated in article 47 of the Ouro Preto Protocol with the aim of reviewing the institutional structure of Mercosur, which refers to the competencies of the governance bodies of the joint project, has been raised by some specialists, including those from Brazil.


Recommended Reading:


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  • Cardoso, Fernando Henrique, "Perspectivas: Fernando Henrique Cardoso: idéias e atuacao política", Organizacao: Eduardo P. Graeff, Centro Edelstein de Pesquisas Sociais, Rio de Janeiro 2008.
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  • Xuetong, Yan, "Becoming Strong. The New Chinese Foreign Policy", Foreign Affairs, July-August 2021, Vol.100 Number 4, ps 40-47.

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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