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It is not always an easy task to grasp the real scope of the initiatives
related with trade and economic negotiations between nations. Sometimes
concepts that have a high media impact but that are hard to pinpoint in
a concrete manner are used. One of such concepts is that of "strategic
partnership". It is commonplace in the relations between companies
and in the area of security. However, it is in the plane of international
economic relations where it becomes harder to understand its practical
implications, or where there is a propensity to use it as a means of granting
significance before the public eye to meetings at the highest political
level where what is agreed eventually never materializes (on the definition
of strategic partnerships and the problems they pose, see Bobo Lo, "Axis
of Convenience. Moscow, Beijing and the new geopolitics", Royal Institute
of International Affairs, London 2008, Chapter 3, page 40 "defining
strategic partnership").
The strategic partnership agreements not always involve trade preferences
in the sense established by article XXIV of the GATT-1994 or article V
of the GATS. Those can even result from agreements that do not imply a
framework of strategic association.
However, a strategic partnership can become relevant when it signals
the will of the involved countries - whether at the government or the
business level - to create cooperation networks in diverse fields. These
can be related with innovation, scientific and technological development,
productive investments, and the joint approach of sensitive issues of
the global agenda, such as food, energy, and climate change. What is relevant
in such cases is the appraisal that can be made through time of the density
of the connectedness that such association can generate between the corresponding
economic and productive systems.
In practice, a strategic partnership agreement may have a purport and
economic impact that can even be greater than that of a preferential trade
agreement in any of its forms. This is the case when it translates into
an increase of the physical and economic connectedness between the corresponding
countries and, especially, in the cross-investments between its businesses,
or the cooperation of its research and development centers. This is something
that not necessarily results from a simple preferential trade agreement,
which in practice can eventually be limited to increasing the existing
trade flows, as is usually the case.
A recent example of the simultaneous use of both concepts - strategic
partnership and preferential trade agreement - is the way in which the
news of the alleged intention of the Brazilian and Mexican governments
to sign a trade agreement was covered by the media. According to it, this
would be a free trade agreement (FTA) in the sense established by WTO
regulations.
Such news fits into a global context where, perhaps due to the perception
that it will be difficult to conclude the WTO Doha Round within a reasonable
timeframe (on this subject, see Bridges Weekly Trade News Digest, Volume
14, number 9, March 10, 2010, pages one and two, published by ICTSD, on
http://ictsd.org/),
the announcements of new free trade agreements have multiplied. Examples
of this are the FTA signed between Peru and China, which came into force
on February 2010 (see the text on http://www.mincetur.gob.pe);
the conclusion of the negotiations for the agreements between the European
Union and Peru and Colombia respectively; or the interest to resume halted
negotiations such as the bi-regional between Mercosur and the European
Union (on this issue, refer to the December 2009 and February 2010 editions
of this Newsletter on www.felixpena.com.ar). All these are agreements
or negotiations that have a significant direct or indirect impact on the
foreign trade of Argentina and of its Mercosur partners.
Actually, the joint declaration resulting from the work meeting of Presidents
Lula da Silva and Calderón on February 23 referred to the establishment
of a strategic agreement of economic integration between Mexico and Brazil.
The term "free trade agreement" was never employed. However,
it was an expression that was used by the news media and in a previous
presidential meeting. Specifically the declarations stated that the Presidents
"announced the beginning of a formal process of joint work to evaluate
and determine the areas for opportunities and the scope, benefits and
sensitivities of a Strategic Economic Integration Agreement between Brazil
and Mexico, with the aim of strengthening the bilateral exchange of goods
and services and promoting investments, as well as guaranteeing market
access by dealing in an effective and responsive manner with specific
issues such as regulations, agricultural subsidies and non-tariff barriers.
They agreed that the participation of the private sectors of both countries
would be essential during the formal process of joint work between governments.
They acknowledged that a long-term vision would contribute to deepen the
bilateral relations and would encourage the integration of Latin America
and the Caribbean so as to promote competitiveness and the regional presence
in international markets." (For the full original Portuguese version
of the Declaration, see the press release Number 66 of 23 February 2010,
on http://www.mre.gov.br/).
In order to interpret the scope of this announcement it is important
to view it within the perspective of the current regulatory framework
of both countries and of the Latin American Integration Association (LAIA)
and Mercosur. On this regard, it should be noted that preferential trade
agreements have already been signed between Brazil and Mexico and that,
together with the remaining three partners of Mercosur, there is an agreement
that explicitly contemplates the establishment of a free trade area. We
are referring to the economic complementarity agreement (ECA number 54),
signed within the scope of the LAIA on July 5, 2002 and which came into
force on January 5, 2006 (see http://www.aladi.org/).
The ECA number 54 establishes a framework for the creation of a free
trade area between the countries of Mercosur and Mexico. The aim of this
legal framework is to offer transparency and certainty to the economic
agents of each part, as well as to promote and encourage reciprocal investments.
Specifically, Article 1 establishes that one of its objectives is to "create
a Free Trade Area through the elimination of tariffs, restrictions and
other obstacles that may affect reciprocal trade in order to achieve the
expansion and diversification of commercial exchanges".
The framework agreement format is expressed in Article 2. In the first
place, this article establishes that those agreements already formalized
or to be formalized by Mexico with each one of Mercosur's members within
the scope of the Treaty of Montevideo of 1980 also form part of ECA number
54. These are agreements that establish reciprocal tariff preferences,
except for the one signed between Mexico and Uruguay, which establishes
a free trade area between both countries as per WTO regulations.
To the present day, such agreements are: ECA number 6, signed between
Argentina and Mexico on August 24, 2006 and which comprises 15 additional
protocols, the last of which includes an orderly text of the ECA (for
the full text go to http://www.aladi.org/);
ECA number 53, signed between Brazil and Mexico on July 3, 2002 and which
includes three additional protocols (view the text on http://www.aladi.org/);
ECA number 2, signed between Uruguay and Mexico, containing sixty-eight
additional protocols (view the texts on http://www.aladi.org/),
and ECA number 60, signed on November 15, 2003 -it came into force on
June 15, 2004 - which establishes a free trade area between the two countries
(for the text go to http://www.aladi.org/).
It should be noted that ECA number 60 was signed after ECA number 54 but
before the latter had come into force.
Secondly, the abovementioned Article 2 includes in ECA number 54 the
Agreement for the automotive sector between the countries of Mercosur
and Mexico. It is the case of ECA number 55 signed on September 22, 2002
and which lays the foundations for the implementation of free trade in
the automotive sector and for the promotion of the integration and productive
complementation of the sector. Some time later, it was updated by several
additional instruments (for the full text go to http://www.aladi.org/).
Thirdly, it comprises those agreements that are signed between Mercosur
and Mexico within the frameworks of the Treaty of Montevideo and of ECA
number 54 itself. This would be precisely the free trade agreement mentioned
in Article 1 and which has not been negotiated yet.
Next, the abovementioned Article 2 anticipates that periodical negotiations
will take place in order to gradually expand on and strengthen any of
the agreements mentioned before. Finally, it determines that these agreements
will be ruled in conformity with the provisions established by them, which
will be in effect until the implementation of the free trade agreement
takes place. (For the complete information on the free trade agreements
and other modalities of preferential trade agreements signed by Mexico,
view the 2008 Mexico WTO Trade Policy Review, Report by the WTO Secretariat,
on: http://docsonline.wto.org/).
From the abovementioned texts it can be assumed that, in principle, there
would be no legal obstacle to prevent Mexico and Brazil from creating
their own free trade area as per WTO regulations within the scope of the
framework agreement present in ECA number 54 and as long as a free trade
area between Mercosur and Mexico is not previously created. For such purpose,
they could even invoke the free trade agreement between Uruguay and Mexico
as a precedent.
However, several questions arise if the matter is viewed from a perspective
that transcends the legal plane. These would originate in the precedent
that it would be setting regarding the commitment of Mercosur partners
to jointly negotiate agreements that include trade preferences with third
parties and which was invoked by Brazil when Uruguay attempted to move
forward in a FTA with the US. (Decision CMC 32/00. See the text on http://www.mercosur.org.uy/show?contentid=576).
Yet, the questions arise mainly from the economic dimension of both countries,
which together represent 70% of the GDP of Latin America and 50% of its
population. Thus, its impact on investment and trade would be much greater
than in the case of the agreement between Uruguay and Mexico.
We may presume that an eventual decision to include a FTA in a bilateral
strategic partnership between Brazil and Mexico - in the sense established
by WTO regulations - would have a significant political and economic impact
on the future of Mercosur.
Given the strategic importance that Brazil assigns to Mercosur and to
its preferential relation with Argentina, it would seem reasonable to
imagine that, if a bilateral strategic partnership were to be formed with
Mexico, on the trade plane it would be the result of a significant extension
of the preferences already granted by ECA number 53 and not necessarily
take the form of a FTA.
Considering the fact that Brazil already has a strategic partnership
agreement with the EU - which presently is not of a preferential nature
in the sense established by the WTO - it is to be expected that Mercosur
partners follow the evolution of the future negotiations with Mexico with
close attention.
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