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Multilateralism and regionalism: Two key dimensions of Argentina's
international trade and development strategy
As a medium size country - in terms of its economic dimension, relative
power and participation in world trade of goods and services - for Argentina
the emerging international reality could be perceived as an opportunity
window. Its regional role -both in South America and in the South Atlantic
-, and its potential in relation with some of the most critical issues
of the future global agenda - i.e. food, energy, environment, water -
are some of the reasons that could explain why it is possible to have
a reasonable optimistic view about the future of Argentina as a relevant
actor in the global arena.
A strong and effective multilateral trade system is one of the key dimensions
of its international strategy. That's one of the reasons why Argentina
has been an active protagonist in the World Trade Organization (WTO) negotiations,
including the Doha Round. It has a strong interest in a successful conclusion
of the actual trade negotiations, provided the results are balanced and
ambitious, especially in its agriculture issues and its main development
goals.
Another main dimension is the implementation of a sustainable framework
for social and economic development and integration at the regional level.
That is the reason why Argentina is engaged in working together with its
neighbors especially at Mercosur and also at LAIA and UNASUR, both conceived
as long term and development oriented processes.
In order to build a friendly environment for its own social and economic
development, multilateralism and regionalism are two complementary levels
of Argentina's commercial policy strategy. For that reason, we can assume
then that Argentina will continue to engage in an active policy to support
in the future the necessary complementary of those key dimensions of its
international relations [1].
WTO and some possible impacts of the new international realities
As Fareed Zakaria [2] has noted, tectonic power shifts - the third one
in five hundred years - indicates that more countries are now emerging
as key players at the global arena changing the conditions of power relations
and international economic competition.
What is becoming increasingly evident is the emerging of a global systemic
transformation, with deep roots and long term impacts, which will have
also its effects on the way multilateral international institutions are
conducted.
It is difficult to imagine that these new international realities will
not have an impact in the WTO as the main institutional framework of global
trade. Most probably it will have a strong effect in the way future global
multilateral trade negotiations are conducted and in the ability to achieve
equilibrium among the national interests of its main member countries.
And it will also have an impact on its capacity to achieve those Doha
goals concerning the development dimension of international trade.
One of the most notorious aspects of the new international realities
is the actual global economic and financial crisis. Its full effects are
yet uncertain. The first signs of contagion to the political arena can
be perceived already in some countries. History indicates that this is
what happens in moments of deep crisis.
The impact on world trade has already become evident, both at the exchange
level and in the trends towards protectionism. Even the term "de-globalization"
has been frequently mentioned in some of the analysis. There is still
a long road ahead before we can observe a sustainable recovery of the
world economy and for the main elements of a new global reality can become
clear.
As a matter of course, unforeseen situations bring about bewilderment
together with conflicting expectations. The positive expectations focus
on the impact of the new American leadership and on the survival incentives
that emerge when at the brink of a precipice. The negative ones feed on
the fear of the proliferation of unexpected events [3]; a possible inadequacy
of what may be called the "Obama factor" -that is, the ability
of the new US President to sustain those initiatives necessary to recover
the economy - and, in particular, the future evolution of China's economy.
The effects of the crisis on world trade and on the trade policies of
the leading countries will take time to become clearer as well. But the
fact is that the crisis has had already a strong impact on international
trade and that protectionism has returned as a relevant problem to the
world trade agenda.
Differences with the 30's and some lessons for today
On a deep crisis, bewilderment leads to elicit historic precedents either
to provide an understanding of the situation or to undertake possible
solutions. One of such precedents may be found in the recurring image
of a scenario with similar elements to those of the 1930's, that is, of
a chain reaction of structural protectionist policies. However, the differences
with the current situation are quite evident and the following three should
be highlighted.
The first one of these differences is that, at the time there were no
multilateral trade institutions such as the WTO. Its rules and joint regulations
entail a limitation to the discretionary power of the countries to restrict
or distort commercial flows. As stated by Pascal Lamy, they constitute
a safety net against protectionism [4].
Today there would be no place for such thing as the Smoot-Hawley Tariff
Act. Yet the problem is that, in many cases, the multilateral system establishes
such steep ceilings that several modalities of protectionism could find
a cover. In particular, those subtle and difficult to detect new-generation
modalities, which result from a wide range of restrictions unrelated to
tariffs. Some of them even originate in the very same business sectors
in alliance with consumers -private rules that have a bearing, for example,
in the commercialization of food products. Others may be a direct effect
of the measures being applied by countries in their attempts to offset
the impacts of the crisis on the level of economic activity and employment.
The second difference results from the internationalization of production
that has increasingly developed during the last decades. Many companies
in several countries -and not just from the most industrialized ones-
function within the scope of global and regional value chains. An uncontrolled
protectionism would mean a costly complication in the production processes
spanning several countries and regions. The orchestration of transnational
production networks (for example, in the sense referred to by Victor Fung
in his recent book [5]) would be strongly affected in the case of an endemic
protectionism and even in the case of the filibustering that may result
from apparently harmless measures. To undo the global production web by
returning to a scenario of fragmented markets does not seem to be an effective
contribution to overcome the current global crisis; not even to preserve
the sources of employment, least to prevent the effects on peace and political
stability given the chain reactions that might follow.
The third difference is that it is presumed that nations learn from their
errors. Those of the 1930's were dramatic enough to overlook the lessons
gained for present times. One of these important lessons is related to
the cost that entails the absence of institutions that enable some order
among nations and help face collective problems as a whole. It was this
lesson that led to the creation of the current multilateral trade system
within a wider network of international cooperation institutions. Despite
their current lacks, they constitute a dense network of global and regional
public goods that should be preserved and strengthened.
Precisely, other frequently cited historic precedent for the actual international
situation are the agreements reached at the United Nations Monetary and
Financial Conference, held in Bretton Woods on July of 1944. These agreements
marked the origin of the process that led, after the Havana Conference,
to the creation of the GATT. The ideal situation would be that nations
- i.e. at the current G20 - could agree on actions focused on renewing
the present institutions of international cooperation by adapting them
to the challenges of the 21st Century. However, it is unlikely that this
will happen, at least in the short or even the medium term. The reason
is quite simple: Bretton Woods was possible because, at that time, it
was clear where world power resided. It was the outcome of a war which,
even before it ended, clearly prepared the ground for an undisputable
USA leadership.
Nothing similar exists today. All signs indicate that the new realities
of world power will take time to settle. Only then it will be possible
to know for certain which number to append to the letter G, in order to
gage a global institutional environment with sufficient critical mass
to translate decisions into actions. This is no an easy task. The only
certainty is that the numbers 2, 7 or 8 no longer suffice. What criteria
should be used to determine which are the nations that working together
can generate a power cluster considerable enough to guarantee that their
decisions permeate into reality? This poses an efficacy challenge but,
above all, a legitimacy one.
To begin with, only two types of countries meet the requirements needed
to become the engines of the new global governance: those large enough
and those that have the influence to haul along other nations and especially
their neighbors. The larger nations stand out due to their current or
potential indicators, especially those related to their population, gross
product, and participation in world trade (they are the monsters countries
in the sense of the well known term coined by George Kennan). United States,
China, India and Russia are the main examples. And those countries that
have the power to haul along others are those that have shown the ability
to group, for example neighboring countries in permanent and sustainable
alliances. Commonly, they reflect collective leaderships with a determined
degree of institutionalization in a regional geographic area. Such is
the case of the larger European nations that lead and are part of the
European Union. There may be some cases of countries that aspire to become
leaders in other regions. But they still lack the characteristics of nations
such as Germany, France or Great Britain.
Looking forward to the development of conditions for a possible Bretton
Woods II, in regards to world trade it is still advisable to keep on doing
whatever is necessary to strengthen the WTO. This involves concluding
the Doha Round, even the less ambitious version of it. It requires, above
all, a working agenda that enables to provide urgent and efficient responses
to the effects of the global crisis on world trade and development.
Some main future challenges for the WTO
Monitoring the impact of the global crisis on world trade and the drift
towards protectionism, as well as the conclusion of the Doha Round, are
still some of the main points on the G20 agenda as was observed both at
the recent Washington and London Summits. As already mentioned the problem
in relation to these issues, however, is to know if the G20 will be able
to agree in the future on actions that will effectively permeate into
reality.
As a result of the new international realities and of the actual global
crisis the WTO faces three major challenges. They should be faced simultaneously.
The first one is to preserve the system against the impacts of the global
economic and financial crisis and, at the same time, to become the institutional
space in which member countries examine the impact of the current economic
crisis on world trade, particularly of the protectionists measures adopted
to face it and that could greatly affect trade flows.
A second major challenge is to bring the Doha Round to its conclusion.
The Doha Round continues to be a priority for the WTO. Last December,
negotiators were unable to comply with the G20 Washington Summit mandate,
which had been very clear. In some way this fact undermines the credibility
of other commitments assumed on both occasions.
The forecasts predicting that such goal may be attained in 2010 - as
proposed at the L'Aquila Summit, July 2009 (http://www.g8italia2009.it)
- are cautious. The new USA government is expected to provide believable
signals for a more precise outlook on this issue. However, it is obvious
that a successful conclusion of the Doha Round will not depend only on
the position adopted by the USA or even by India, the two main protagonists
of last year's collapse of the multilateral trade negotiations.
What is becoming clear enough is that in the arena of international trade,
as with the current economic crisis in general, a collective leadership
is require. This leadership may even transcend the actual G20. Perhaps
it will be the result of effective collective leaderships at each of the
main regional levels. Is this possible? This is probably one of the question
marks about the future of the world trade system and, even, of the stability
and peace at the global level.
Concluding the current trade negotiations would send positive signals
to governments, citizens and businessmen of the efficiency of the system,
even when the actual results fail to bring together all the ambitious
goals imagined in Doha in 2001. In any case, it would be advisable that,
without weakening such goals, countries enhance the WTO future agenda.
Emphasizing the emphasis on measures to facilitate and aid trade, even
when necessary, may prove insufficient if the world economic situation
continues to deteriorate.
And the third challenge for the WTO is to launch the process of adaptation
of its working methods and some of its rules to the new realities of power
distribution among nations and of the global economic competition.
The need for a debate about the future of the global trade system
and of the WTO
As mentioned before, the WTO agenda including that related with the Doha
Round, will be strongly conditioned by the evolution of global trade in
the following months. If the idea of recession and deflation scenarios
prevails in the main economies, there could be a tendency towards an increase
of certain forms of protectionism that have already become manifest. These
would complicate the current global situation even further.
It is in such a context that the warning signals regarding different
forms of protectionism tend to emerge. Some of these protectionist modalities
would take advantage of the margin of action offered by the limitations
to discretionary commercial policies assumed by countries in the WTO.
In many cases, the current ceilings are too high as a result of the difference
between consolidated and applied tariffs, and between current agricultural
subsidies and those that may be granted without violating existing commitments.
The most negative effect of the successive failures in concluding the
Doha Round is, perhaps, that the opportunities to lower such ceilings
were lost. Other forms of protectionism may result as a consequence -not
necessarily a desired one- of the measures that are being applied in many
countries to counteract the recessive effects of the current economic
crisis. They originate in public policies but also in the defensive strategies
applied by those companies with simultaneous production in different countries.
The automotive sector is a clear example, but it is not the only one.
If recession deepens, the effects of a "run for your life" outlook
may have, as it was in the past, dangerous consequences for world trade.
These may even result in unsettling political impacts on countries and
even whole regions.
The mere fact that such a scenario may be feasible makes it altogether
more important to preserve and strengthen the WTO system. Since its creation,
together with the GATT, seventy years ago, one of its main contributions
has been to add a certain degree of discipline to the trade policies of
member countries. It bestows predictability to the rules that influence
the global exchange of services and goods. It benefits those countries
with the greatest real economic power, as well as those with a small relative
share in world trade, such as Argentina and other members of Mercosur.
The combined effects of a probable and complex scenario in which the
Doha Round is unable to reach its conclusion; where, at the same time,
the trends towards new and existing forms of protectionism are deepened;
and where preferential commercial agreements -which are discriminating
due to their potential impact on the rest of the countries- tend to multiply,
should be analyzed and discussed by member countries in an active forum
within the WTO.
For that purpose, two existing work mechanisms should be fully engaged.
These would enable to harness the potential for collective action that
results from the current legal and institutional system of the WTO, without
the need of any formal innovation.
The first of these mechanisms is the Ministerial Conference, which will
meet next December. It was held for the last time in 2005, even though
it was scheduled to take place every two years. Although not explicitly
including the Doha Round, its agenda should not be too comprehensive either.
However, it should enable to approach the general picture of the impacts
of the actual crisis on world trade, including those originated by member
countries public policies. Eventually its preparation should be channeled
through different types of informal ministerial meetings. The active participation
of those countries with greatest incidence on the global exchange of services
and goods would be essential, especially considering that thirty countries
represent approximately 90 percent of world trade.
One of the main points on the Ministerial Conference agenda should focus
on how to reconcile, within the commitments that are assumed, the elements
of flexibility with the much needed collective discipline, particularly
in the responses given to the current crisis and to the special requirements
of the least developed countries.
One modality that could be implemented at the Conference could be to
organize a set of parallel seminars to examine the core issues that will
determine the future functioning of the multilateral global commercial
system. These seminars might be prepared by regional multi-stake holders
meetings.
The other existing work mechanism is the general review of the evolution
of the international trade environment, foreseen in item G, Annex III,
of the Marrakesh Agreement. Three monitoring reports were already published
by the WTO DG, the last one on July 1st of this year [6].
But however the monitoring of protectionist tendencies by the WTO is
stinted by the fact that governments not always provide the official information
- at least not on time - and by the particular characteristics of the
measures once they are effectively applied. The fact that the new protectionism
sometimes results from business decisions -eventually fostered by public
policies- complicates the monitoring task by the WTO even further.
An effective monitoring mechanism should keep an eye over protectionist
tendencies. This would include measures that are compatible with the current
WTO regulations. Given the limitations of the Secretariat to accomplish
the monitoring task, it might be convenient to explore ideas that might
allow for the new system to use information provided by non-governmental
sources. This system could eventually be parallel to the official one.
This capacity could be strengthen through a non-governmental online database
that could be freely created and edited with the active participation
of all interested parties, a kind of Wiki-trade surveillance facility.
The combination of both mentioned work mechanisms may offer a framework
within the scope of the WTO that would help search for systemic answers
to those issues of world trade that have become collective problems.
In any case, it would be important for future G20 Summits to recognize
that effective cooperation on trade-related issues can only be achieved
through the collective capacity and mobilization of as many countries
as possible. As is true for the EU members of the G20, it should be assumed
that other participating emerging countries are, at least to some degree,
expressing points of view that stem from consultations with non-participating
developing countries from the same region. This would contribute to the
international legitimacy of the G20 and strengthen its capacity to impact
global realities.
Relevance of regional governance for stability at the global level
The attention of protagonists and analysts -and increasingly the citizens
of the involved countries- is focusing as well on the impact of the global
crisis on their corresponding geographic areas. History reminds us that
the scenarios for political collapse, and even for its most negative consequences
in terms of armed confrontations, have, in general, started out as regional
conflicts [7].
Attention to the adjacent contexts is especially relevant in those integration
processes aiming to ensure reasonable governance conditions -such as peace
and stability- for the respective region. They also offer the potential
for strengthening the ability of each of the member countries to achieve
their own goals in terms of productive transformation and insertion in
the global economy. This is the case of the European Union, the ASEAN
and the Mercosur. These processes normally have a political origin which,
if its fundamental motivations are preserved or renewed, may account for
the long term vitality of its economic content [8].
It is well known that regional integration processes are constantly submitted
to the dialectic tension between factors that drive towards fragmentation
and those required as conditions for greater cooperation and integration,
at least of the respective economic systems.
It is also a known fact that there is not one unique model that preserves
and strengthens the political will of working together among sovereign
states. This means that each regional geographic space needs to develop
its own methods to articulate national interests. This task is often a
complex one when trying to reconcile the sometimes very deep differences
in relative power, economic dimensions and level of development, among
participating countries.
As a result of the current global crisis, such methods of regional integration
are now being tested in at least three fronts. One of these is the protectionist
trends in the mutual relations of participating countries, the second
is related to the ability to articulate common positions in response to
the effects of the crisis, and the third one is that of the exercise of
an effective collective leadership in the corresponding regional space.
Ultimately, the issue of an effective collective leadership within Mercosur
or South America is reflected in the foreign perception of the role of
Brazil. Due to its economic dimensions, the President Lula's image and
its institutional strength, Brazil is perceived as a country that is able
to assume the leadership of the South American region as well as of the
Mercosur. It had been previously evinced in the strategic partnership
that was agreed between Brazil and the European Union.
However, the experiences of other regional geographic spaces indicate
that efficient leaderships are those which result in the creation of shared
positions among different countries that have the capacity, at the same
time, to be relevant protagonists and leaders themselves.
Looking into the future, the challenge for the Mercosur countries and
for the South American region is still to achieve what other regions,
in particular Europe, have already accomplished: to provide an institutional
framework for collective leaderships based on mechanisms that may prove
efficient to build consensus and coordinate positions in times as such
as the current global economic crisis.
Considering this was not achieved yet, we might question about the existence
of other countries -perhaps not relevant enough in terms of economic or
political power- aiming to bear regional positions to forums such as the
G20 Summits.
Some requirements for improving the participation of developing countries
in the multilateral global trade system
Reforms in the governance of global trade and the multilateral trading
system will be a long term and non-lineal process. They will largely depend
on the future power distribution among nations. This will take some time
to stabilize. The G20 Summits could be, in the best scenario, a driving
force towards the development of a more friendly multilateral trade system.
But, being in the eye of the storm, perhaps it is yet too soon to have
an idea of what kind of results could be obtained by for example 2015.
Meanwhile, the following could be some of the more immediate steps that
could be adopted at the multilateral global trade system and that could
be relevant for developing countries:
1. To obtain from developed nations concrete and certain compromises
concerning market access and the reduction of the negative impact of
those economic and trade policies (i.e. agriculture subsidies) that
could introduce distortions on global trade.
2. To promote greater flexibility in the interpretation of WTO rules,
that would allow developing countries with long term national development
strategies to temporarily adopt limited emergency trade measures, on
the lines of the opt-out schemes suggested by Professor Dani Rodrik
[9].
3. To develop an aid for trade strategy - understanding aid as an instrument
to promote through international cooperation the systemic up-grade of
developing countries ability to compete at the global level -, with
a significant allowance of financial resources, and that could be managed,
for example, through aid for trade consortia's with the participation
of the main development oriented agencies (i.e. UNIDO, UNCTAD, ITC and
multilateral development financial institutions) through WTO leadership.
Also, some specific institutional reforms could contribute to strengthen
the multilateral trade system and the WTO and to improve the conditions
for an active participation of developing countries. G20 Summits and the
2009 WTO Ministerial Conference could be functional to launch a debate
that could later lead to concrete action towards those reforms.
Some of those reforms could be the following:
1. To promote the evaluation and proposal capacity of the WTO Secretariat,
concerning the evolution of global trade and its relation with development
goals (eventually through joint reports with other relevant development
international institutions and agencies).
2. To strengthen the WTO capacity to evaluate all kind of trade preferential
agreements, protectionist and trade distortion measures and practices
(including those originated at the business sector). The idea of a body
integrated by high level independent experts, on the lines of the DSU,
could eventually be explored. A kind of global trade and development
Ombudsman within the WTO structure could be an idea to explore.
3. To develop mechanisms - jointly with other relevant development
international institutions and agencies -, to enhance the capacity of
interested least developed countries to take full advantage of all the
instruments provided by the multilateral global trade system, particularly
of its DSU. Those mechanisms could include the idea of trilateral cooperation
programs with the participation of emerging economies, for example of
those in the same region of the beneficiary country.
And finally, from the developing countries points of view, the following
are some of the most critical requirements related to their participation
in the multilateral trade system and with their views about global governance
goals that could be convenient for their development interests:
1. To have reliable and up-to-date diagnosis on the evolution of global
economic competition, and about its impact on their actual or potential
competitive advantages. This could require the development of "competitive
intelligence" networks with the participation of academic and business
institutions of groups of like-minded developing countries.
2. To mobilize, through national social cohesion, all the energies
and capacities of their societies to compete at the global level and
to attract productive investments - both national and foreign from as
many sources as possible - and to improve the participation of their
small and medium size firms in global and regional industrial networks.
3. To draw national strategies based on their own particular conditions
and allowing them to take as much advantages as possible, both from
the multilateral trade system and from the opportunities presented by
the global and regional markets.
4. To promote at the regional and sub-regional level, flexible, sustainable
and WTO consistent economic integration processes. They should contribute
to the improvement of their conditions to promote productive investments,
to have better access to technical progress and to increase their capacity
to negotiate at the international level, and to have an influence on
the definition of global governance goals and mechanisms.
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