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According to a growing consensus the current global crisis will outlive
the upcoming London Summit (2nd and 3rd April). Furthermore, it is anticipated
that its full effects will only become evident in the medium and long
term. Such effects have not yet fully matured in any of the fields where
it has had an impact, that is, the financial, the political, and the real
economy and international trade.
An attempt to understand and interpret what is happening to the world
around us -given that predicting its evolution would be too daring- requires
a thorough knowledge of history as well as an interdisciplinary approach.
Such was the contribution of professor Gilberto Dupas, a sound Brazilian
and Mercosur scholar recently deceased. Among other relevant matters,
he helped us to understand the logic behind the fragmentation of production
chains -an essential factor to grasp the differences between the current
context and that of the 1930s-. The institutional fronts in which he developed
his intellectual work have been characterized by a multidisciplinary approach.
Among those, we can mention his roles as Coordinator of the area for the
monitoring and interpretation of international reality at the Multidisciplinary
Group for the Analysis of International Trends (GACIN), at Sao Paulo University
(http://www.usp.br/ccint/gacint);
as President of The Institute for Economic and International Studies (IEEI)
(http://www.ieei.com.br);
and as Editor of the magazine Política Externa (http://www.politicaexterna.com.br).
(For more on Gilberto Dupas' contributions and biography, refer to the
article by his friend and academic colleague, professor Celso Lafer, entitled
"Gilberto Dupas (1943-2009)", published in the newspaper "O
Estado de S. Paulo" on March 15th, 2009).
The three optimistic visions that were upheld at the beginning of 2008,
when the full potential of the current global crisis started to emerge,
have lost force with the passing of time (see our analysis on the February
2008 edition of this Newsletter). Those visions referred to the nature
of the crisis (it was basically considered a financial problem), its duration
(it was measured in terms of semesters) and its scope (it was limited
to certain countries with the possibility of "disengaging" from
the others). Today there is no doubt that the crisis exceeds the financial
and even the economic, that it may be prolonged in time and that it affects
all countries to a greater or lesser degree. Aside from this, the fear
of the deepening of its impact on the political level is strongly rooted
in the leaders and the public opinion of a growing number of countries
(see, for example, the article by Moisés Naim published in "El
País" newspaper, in Madrid, on Sunday, March 15th, and the
interview to José Miguel Insulza, published in "Clarín"
newspaper, in Buenos Aires, on the same date).
It is now difficult, even for those who are most optimistic, to find
arguments to support the forecast that the G20, in its London Summit,
will be able to generate a substantial turning point in the evolution
of the global crisis.
However the "Obama factor" may still bring in novel elements,
as long as it establishes a different diagnostic capability from Washington
of the problems being faced at a global scale, and that this translates
into an efficient leadership that arouses the willingness to cooperate
among all the participating countries. A difficult task, but still liable
to happen.
In any case, the results from the London meeting will be evaluated in
the light of the progress attained regarding the joint ability to stabilize
the financial system; to promote the reform and consolidation of international
financial institutions; to hold back the fall of global demand and world
trade; and to neutralize the protectionist tendencies. These need to be
perceived as effective progresses and not only announcements for immediate
impact on the media. Otherwise, it is the same G20 that will cease to
be considered as a forum for the exercise of a collective leadership in
the current global juncture. The creation of an alternative forum will
be no easy task, especially if it has to be undertaken as the consequence
of a previous failure.
Relevant news regarding the Doha Round should not be expected from the
London Summit either. An indicator of the caution that should be exercised
on the future approach of the multilateral trade negotiations -at least
in its more ambitious version- may well be what was pointed out by President
Obama on the press conference following the Washington meeting with President
Lula, last Saturday 14th March. According to the Bloomberg.com version,
Obama stated that the two countries are set on working together to revive
the halted global trade negotiations. However, he pointed out that "it
may be difficult for us to finalize a whole host of trade deals in the
midst of an economic crisis like this one…" and added later
"…although we have committed to sitting down with our Brazilian
counterparts to find ways that we can start closing the gap on the Doha
Round and other potential trade agreements". (As per the version
published in the newspaper Valor Econômico, on Monday, March 16th,
under the title "Meeting Lula-Obama reduces chances for Doha"),
for his part, President Lula, following the same path of caution, admitted
that "…during an economic crisis it is harder to conclude the
agreement").
The attention of protagonists and analysts -and much more so of the citizens
of the involved countries- is focusing as well on the impact of the global
crisis on their corresponding regional 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.
Attention to the adjacent contexts is especially relevant in those integration
processes whose aim is 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. As observed by Oliver Cattaneo on his article "The
political economy of PTA" (from the book edited by Simon Lester and
Bryan Mercurio, listed under the Recommended Readings Section of this
Newsletter), 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.
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 put to the test in at least three fronts. One of these fronts
is that of the protectionist trends in the mutual relations of participating
countries, the second is that 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.
On this opportunity, our analysis focus on the Mercosur, even though
there will be references to what can be observed within the ASEAN and
the European Union as well.
The issue of unilateral restrictions to mutual trade has risen again
within the Mercosur. It had happened previously, towards the end of the
1990s, as a result of the effects of three consecutive blows on the economies
of member countries and on trade within the region: the Asian crisis (1998),
the devaluation of the Real in Brazil (1999), and the collapse of Argentine
convertibility (2002).
Once again as before, the epicenter of the problem lies in the commercial
relation between Argentina and Brazil. Bilateral trade has fallen over
40 percent in the first two months of this year. This clearly reflects
the decrease in economic activity and foreign trade in both countries
and has originated reciprocal references regarding the application of
restrictive measures, especially through the use of non-automatic import
licensing. In fact, both countries apply them. In the case of Brazil,
the recent Trade Policy Review report by the WTO Secretariat points out
that its regulations contemplate the implementation of non-automatic import
licenses for approximately 3,500 tariff lines. (For the full text of the
chapter on "Trade policies and practices by measure" of the
document by the WTO Secretariat WT/TPR/S/212 dated February 2nd 2009,
go to http://www.wto.org/
or click
here. This document also presents a detailed analysis of the financing
programs for exports and investments, which contemplate subsidized interest
rates with the aim of making them equal to the international ones).
There is a controversy regarding the causes of the current trade imbalance
and the extent of the measures being applied. However, as it happened
on the previous occasion, all indicates that the reciprocal trade issue
is being approached from three angles. First, is the political interest
of both countries of preserving the climate of good mutual relations and
the working together idea, among other reasons for its strategic value
in the governance of the South American region. Second, the acknowledgment
of the limited impact of the trade problems that have been identified
(they involve roughly 5 percent of mutual exchanges). And third is the
attempt to solve each particular situation through agreements between
the business sectors, fostered by both governments. These have proved
successful in the past and there is no reason to believe that they will
prove otherwise now. It might have been wiser to contemplate some escape
clauses -flexible yet ruled by collective controls at the same time- as
a comprehensive component of the mechanisms and instruments of Mercosur.
However, this was not achieved on a previous opportunity. Only a bilateral
mechanism between Argentina and Brazil, not yet in force, was agreed upon
on that occasion.
Regarding the ability to articulate joint positions, even when there
have been some bilateral exchanges -such as the visit of the President
of Uruguay to Brazil and of the President of Argentina also to Brazil-
the Mercosur lacks a recent joint analysis of the impacts of the global
crisis and how to face them. Instead, there have been meetings at the
highest political level in the case of the European Union (several meetings
with the aim of agreeing a common position before the London Summit) and
of the ASEAN. (For example, the "Press Statement on the Global Economic
and Financial Crisis" from the 14th ASEAN Summit held in Cha-am Hua
Hin, Thailand, on 1st March 2009. In it, after reviewing the different
aspects of the impact of the global crisis on the region, it is stated
that the member countries "looked forward to working with other partners
to convey the above views at the forthcoming London Summit in April 2009.
In this connection, they asked ASEAN Finance Ministers to provide further
inputs for the ASEAN Chair and Indonesia, as a member of G20, to convey
to the London Summit". The full text of the press release by the
Summit can be read at http://www.14thaseansummit.org/
or click
here.
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. President Lula's visit to Washington and his interview with
the US President on Saturday 14th March may contribute to consolidate
this perception. 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. Mike Hammer,
the spokesman for the US National Security Council (NSC), reminds us of
this when he mentions that Brazil is a key regional leader (in the newspaper
"Folha de Sâo Paulo", from Saturday 14th March) and goes
on to affirm that other countries in the hemisphere have leadership aptitudes
as well, among which he mentions Mexico and Argentina.
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 for building consensus and coordinating positions in the face
of events such as the current global crisis.
The fact that this has yet to be achieved may rise some questions as
to the possibility that any individual country -as large as it may be
and above all if it is not relevant enough in terms of power resources
and critical mass- may really aspire to reflect a regional collective
point of view in places such as the London Summit.
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