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  Félix Peña

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  Seminar: Realizing the True Potential of South Africa-Argentina Relations | Pretoria, 16-17 July, 2009



Presentation at the Seminar "Realizing the True Potential of South Africa-Argentina Relations: Bilateral and Multilateral Engagement for a Global Impact", organized by the Embassy of the Argentina Republic, the Department of Foreign Affairs of the Republic of South Africa and the Institute for Global Dialogue. Pretoria, 16-17 July, 2009.

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 ( - 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.


[1]. See Peña, Félix, "The three levels of the World Trade System A dynamic, complex and inevitable interaction", Monthly Newsletter, May 2009:

[2]. See Zakaria, Fareed, "The Post-American World", W.W.Norton & Company, New York-London 2008 and also Khanna, Parag, "The Second World", Random House, New York 2009.

[3]. Cf. Taleb, Nassim Nicholas, "The Black Swan: The Impact of the Highly Improbable", Random House, New York 2007.

[4]. See Pascal Lamy recent speeches at

[5]. See Fung, Victor, Fung, Victor; Fung, William K.; Wind, Yoram, "Competing in a Flat World. Building Enterprises for a Borderless World", Wharton School Publishing, Wharton, University of Pennsylvania-Pearson Education, New Jersey 2008.

[6]. See "Report to the TPRB from the Director-General on the Financial and Economic Crisis and Trade-Related Developments", WTO JOB(09)/62 - 1 July 2009.

[7]. See, among others, Findlay, Ronald and O'Rourke, Kevin, "Power and Plenty. Trade War, and the World Economy in the Second Millenium", Princeton University Press, Princeton 2007, and Bernstein, William J, "A Splendid Exchange. How Trade Shaped the World", Atlantic Monthly Press, New York 2008.

[8]. See, Cattaneo, Olivier, "The political economy of PTA's", in "Bilateral and Regional Trade Agreements. Commentary and Analysis", Edited by Simon Lester and Bryan Mercurio, Cambridge University Press 2009, ps. 28 to 51.

[9]. See Rodrik, Dani, "One Economics Many Recipes. Globalization, Institutions, and Economic Growth", Princeton University Press, Princeton and Oxford 2007.

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. |

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