This month we commemorate the 50th Anniversary of the creation of the
Latin American Free Trade Association (LAFTA). It was an initiative strongly
promoted by the government of President Frondizi and came as an answer
to the changes that had developed in the trade and exchange policies of
Argentina and other countries that negotiated the agreement. However,
it was also a reaction to the new international realities such as, among
others, the enactment of the Treaty of Rome, which cleared the path for
the creation of the current European Union and, before this, the General
Agreement on Tariffs and Trade (GATT) to which our country also subscribed.
The initial objective, to create a Free Trade Zone in the term of twelve
years, was never accomplished. In 1980, the LAFTA became the Latin American
Integration Association (LAIA), which incorporated more flexibility to
the initial commitments and was supposed to facilitate the creation of
a Latin American Common Market. However, the fulfilment of this objective
is still pending. Subsequently, our country and Brazil promoted within
the LAIA the bilateral program of integration that later led to the creation
of Mercosur. For their part, the Andean countries had initiated in 1969
their own sub-regional integration process, the Andean Group, which later
turned into the Andean Community of Nations. Neither the Andean Community
nor Mercosur have been able to accomplish their initial objectives.
Several factors can explain the persistent distance between what is
agreed and what is achieved in terms of regional integration. One of them
has been to set ambitious goals that clash with reality. There are other
motives too, both political as well as economical. However, we would like
to focus on one circumstance in particular that has been present since
the inception of the LAFTA. This fact marks the difference with the European
experience and with that of other regions such as, for example, North
America with the initial free trade agreement signed between Canada and
the U.S. and later with NAFTA, which incorporated Mexico as well.
We are referring to the precariousness of the legal commitments entered
into, reflected by the idea that these are to be complied with in the
measure that is possible and which are cast aside if the economic realities
demand so. This factor weakens the essence of this type of agreements,
which is to provide an insurance against any discretional protectionism
that may be incurred by a partner when it considers that the circumstances
call for it. This "insurance against protectionism" enables
to translate what has been agreed into productive investments in terms
of the enlarged markets.
One way of supporting such insurance is the mechanism for the solution
of controversies that can be used as a resource by partners when they
consider that a non-fulfilment has affected their interests. It has proven
its efficiency within the World Trade Organization and NAFTA. It is available
in Mercosur, though not frequently used by its members. Another possibility
are the different safety valves that can be introduced into an agreement.
These are non-existent in Mercosur, except for a version called the Competitive
Adaptation Mechanism within the bilateral relation between Argentina and
Brazil, currently not in use.
Since the time of the LAFTA, in the event of any non-fulfilment the
partners have chosen to resort to a set of modalities that are indeed
practical but that contribute to undermine the agreements. One consists
of compensating non-fulfilments, the other of tolerating them when it
is considered that they do not affect any specific interests.
The problem is that both approaches can dilute the assumed commitments
and erode the economic effectiveness of the rules of play by creating
two concrete problems. Firstly, they discourage productive investments
in relation to the enlarged market. Secondly, they benefit the country
with the largest relative economic dimension and make it more attractive
for investors. This explains why Canada and Mexico have made of the insurance
against protectionism from the United States a central issue in their
strategy of regional integration.
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