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As with individuals, companies or institutions, a group of countries
that are linked together in an integration process, especially if it includes
a common external tariff as a central element of its collective disciplines,
must have an agenda of external trade relations. Or at least this would
be convenient. This agenda usually defines priorities, fronts of action,
steps to be taken and, when possible, a timetable. In modern times it
should be possible for such agenda to be consulted by citizens online
through the corresponding websites. This is not always the case. If it
is an association of countries, as in the case of Mercosur, the external
agenda defines the roadmap for its possible, necessary or desired trade
insertion in the world and its region.
With whom, how, to what extent and within what timeframe to aspire to
when entering external trade negotiations are some of the central elements
of the foreign trade agenda of a group of countries that share a process
of integration, as is precisely the case of Mercosur, among others. This
implies sending signals to other countries regarding its preferences and
priorities, especially to those with which it desires to negotiate. And
it means, above all, to provide a guide for local and foreign investors
on the future that it envisions for the trade of its goods and services
and for productive investments that create jobs and prosperity. It is
a factor of predictability.
Therefore, it is more than desirable that such external trade agenda
is the result, in each member country, of intensive consultations with
the sectors of production, labor and consumption. Even of initiatives
that come from each of the different sectors. And it is usually best if
the agenda to be set has been discussed in the respective parliaments.
Transcending the bureaucratic level makes for its social legitimacy.
This is even more important in a world that has become more complex,
diverse and dynamic (on this regard see the April 2013 issue of this newsletter
on http://www.felixpena.com.ar/).
And this is so as well when one observes that many current and potential
partners or competitors of Mercosur and its member countries tend to rethink
their own agendas of external trade negotiations, especially as a result
of international changes taking place at three closely interrelated levels.
The first of these three levels is the multilateral trading system institutionalized
by the WTO. On this regard, the standstill of the Doha Round is a clear
evidence of the difficulties in relation to one of its main roles, which
is precisely to facilitate trade negotiations comprising all member countries.
These difficulties are feeding the trends in some of its key member countries
-due to their level of economic development and their impact on trade
and investment flows at a global level- to flee to other arenas of negotiations
that allow them to deepen the commitments made so far in the context of
the WTO. In some cases it would serve as an excuse to justify such flights.
If these trends were to materialize in firm agreements they could lead
to the fragmentation and eventual breakdown of the multilateral trading
system, or at least to the erosion of the efficacy of some of its other
functions, such as the settlement of commercial disputes.
The second level is that of the negotiations of mega preferential trade
agreements including those of inter-regional scope (see the February 2013
edition of this newsletter on http://www.felixpena.com.ar/).
The three main ongoing negotiations are the Trans-Pacific Partnership
(TPP), the Transatlantic Trade and Investment Partnership (TATIP), and
the Regional Comprehensive Economic Partnership (RECEP). Due to their
size and commercial importance we should also include those being developed
by the European Union (EU) with India and with Mercosur, assuming that
in both cases the current uncertainties are eventually overcome. These
are trade negotiations which altogether would cover with preferential
rules -not necessarily extending to other countries- a substantial part
of the population, the gross product and world trade.
It is still difficult to predict if such negotiations will culminate
in agreements signed and ratified by the participating countries. The
precedent of the failed negotiations between the countries of the Inter
American system -those of the FTAA- proves that beyond the expectations
that may be generated, even resorting to a good dose of 'media diplomacy'
with all kinds of 'special effects', they will not always conclude in
the signing of an agreement. And the precedent of the Havana Charter in
1948, which originated the International Trade Organization (ITO), is
also a reminder that even when negotiations conclude successfully they
may later fail to pass the test of parliamentary approval and thus of
ratification and entry into force.
But if the respective agreements were finally concluded and took effect,
they could produce two types of results that could even be sequential.
One result would be the emptying of the multilateral system, with the
possible consequences that this could have in terms of the erosion of
a relevant institution for global governance such as the WTO. In this
case the impact would transcend the more limited level of world trade.
The other possible result would be that these agreements generate commitment
standards in terms of the regulation of the global trade of goods and
services as well as, among others, investments, intellectual property
and government procurement, which could later be extended to the multilateral
level. In practice, it would imply excluding those countries not participating
in such agreements from the process of defining rules and institutions
which in the future would govern world trade. And it is hard to imagine
that the excluded countries, especially if they have or aspire to have
a relevant participation in world trade, will passively accept such marginalization
And the third level is that of the multiple forms of transnational production
chains of global, regional or inter-regional scope. In the glossary of
current commercial diplomacy they are encompassed under the concept of
global value chains. Sometimes they are the result of the fragmentation
in different countries of the production of large transnational corporations,
with the ensuing impact on investment flows and distribution services,
transportation and logistics. But they are also the result of the cross-border
linkages of groups of enterprises -many times small and medium sized-
with specialization niches and strong complementation potential. In this
case, they can be the result of productive integration strategies developed
by a group of countries, such as has been attempted in Mercosur and, before
that, in the Andean group.
Recent developments in these three levels have had repercussions in Latin
America and especially in the South American regional space. On the one
hand, due to the difficulty in determining the real practical extent of
the progress -i.e.: transcending the short term effects of the 'media
game'- that would be taking place in the development of the Pacific Alliance.
On the other hand, in the debate that is being installed in Mercosur countries
on how to address the new realities of trade and international trade negotiations.
In this regard and due to their relevance we should mention the recent
reports of three Brazilian business entities that address, from the perspective
of their country, the challenges being faced. Because of their content
and scope these reports should draw the attention of Argentine businessmen
and corresponding entities. Two of the reports are from the Instituto
de Estudos para o Desenvolvimento Industrial (IEDI) which gathers together
a significant group of leading Brazilian businesses. One of them deals
with the impact that the new mega preferential agreements under negotiation
would have on the business strategies of Brazil http://retaguarda.iedi.org.br/).
The other IEDI report refers to Brazilian participation in global value
chains (http://www.iedi.org.br/).
The third report is by the Federaçâo das Indústrias
do Estado de S.Paulo (FIESP) and it introduces an external integration
agenda (http://www.fiesp.com.br/).
From these three reports we can sense the risk of isolation of the Brazilian
economy in the new global context. Mercosur is not questioned. This was
made clear by Benjamin Steinbruch, the First Vice-President of FIESP in
an article in the press (see his note in Folha de S. Paulo, on June 18
on http://www.fiesp.com.br/).
In addition, they remind us that 84% of the goods sent by Brazil to South
America are manufactures. In 2012 Brazilian exports to this region doubled
those to the European, American and Chinese markets combined. But the
need to adapt to current realities is also mentioned. The President of
Uruguay, José Mujica, in previous statements at the recent Mercosur
Summit held in Montevideo (see http://www.eltribuno.info/)
has also reaffirmed his support of the strategic concept that nourishes
Mercosur. But he has done so while noting the need to negotiate jointly
with third parties and to envision it as a great transnational production
chain.
The fact that Mercosur as a joint strategic project of a group of South
American countries is not being questioned becomes much more relevant
when we note the frequency with which different analysts and protagonists
suggest that countries like Brazil should rethink their relation in view
of other approaches considered more appropriate. In particular, the model
that is in contrast with that of Mercosur is that of the Pacific Alliance.
In doing so, it is assumed that the partnership has already produced the
results announced by its four member countries (in this respect refer
to, among others, Arturo Porzecanski in his article "A oportunidade
bate a porta", published in Valor Econômico on July 11, 2013).
We can also find the approach of the requirement of flexibility in the
agreements to be negotiated. Specifically, it is proposed with regard
to the ongoing negotiations between Mercosur and the EU (see the statements
by the Minister of Foreign Trade of Brazil, Lazerda Tatiana Prazeres,
from 18 June, on http://www.fiesp.com.br/).
It is an approach that would be based on the assumption that not all Mercosur
member countries would be willing to move forward at the same pace in
terms of tariff reductions, at least in all sectors. Beyond how sustainable
this assumption may be, it would be convenient to ponder on the different
forms that the proposals for flexibility of the commitments could have.
The idea would be to achieve flexibility in the context of an "umbrella"
agreement that contemplates multiple speeds on the tariff reduction commitments
of each Mercosur country, but also variable geometries in the commitments
made in other non-tariff issues and in particular in the regulatory frameworks
of trade and investments. It is an alternative that could erode the preferential
treatments agreed within Mercosur and that, in practice and due to the
economic dimension of the EU, could lead to the same results that the
signing of free trade bilateral agreements between the EU and each one
of the Mercosur countries. In other words, it could be tantamount to the
end of Mercosur as a relevant economic integration process for its members.
However, a section of the IEDI report on the impact of the negotiations
of mega- preferential trade agreements (page 43) provides more interesting
options that would be convenient to explore in the debate that has actually
been installed by the Brazilian business institutions. Such options are
three: the gradual implementation of the negotiated measures; the use
of temporary general, special and sector safeguards; and the implementation
of training and professional relocation mechanisms (in line with common
measures applied in developed countries, such as the US and the EU, within
the framework for example of the Trade Adjustment Assistance Program).
Including such measures in the architecture of the respective bi-regional
agreement would enable to contemplate any eventual situations of disparity
resulting from the existing asymmetries in economic development, both
within Mercosur and with regards to EU countries.
Other proposals included in the IEDI report (pages 42 and 43) deserve
special attention. They refer to preferential rules of origin, mechanisms
of mutual recognition or harmonization of non-tariff measures, protection
of investments originating in Brazil or in other Mercosur countries and
a gradual liberalization of services to aid regional economic integration,
structuring value chains and enabling market access for domestic companies.
All these are measures that should be analyzed and discussed, at least
in the business arenas of the Mercosur countries.
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