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    | FOREIGN TRADE IN A WORLD OF MULTIPLE OPTIONS: The importance of the diversity of trade and transport corridors.
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    | by Félix PeñaApril 2015
 
 English translation: Isabel Romero Carranza
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    |    | Demographic growth, the greater number of countries 
        and regions with a leading role in international trade and the shortening 
        of physical and cultural distances between the different markets are some 
        of the factors that accentuate the multiplex character of today's world. 
        Of these, the factor that will probably have the greatest influence in 
        the design of the map of world trade will be the strong future growth 
        of world population, with its consequent impact on the demand, for example, 
        of food. 
       Three consequences can be drawn regarding the commercial insertion 
        of Argentina in a world that offers multiple options. The first is whether 
        to devise strategies with multiple simultaneous directions. This would 
        involve a great national effort of organization and coordination with 
        other countries with similar interests and competitive advantages. The 
        second consequence relates to the agenda of multilateral trade negotiations. 
        Strengthening the WTO is a valued objective for Argentina and its regional 
        partners. If the current efforts to achieve progress in the negotiations 
        of the Doha Round did not produce the results sought by the Director General 
        of the WTO, it would be advisable for our country and its regional partners 
        to contribute, through their leadership, to find other modalities in order 
        to move forward. The third consequence relates to preferential trade negotiations. 
        The main negotiation in which Argentina participates together with its 
        Mercosur partners is that with the EU. Nothing prevents the country from 
        opening other negotiating fronts with the major regions of world trade. 
         A strategy of active integration into world trade scenarios will require 
        increasing the density of the physical connection of the country and its 
        Mercosur partners with the large markets of the future. The fact of not 
        being situated in the Pacific Ocean does not limit the possibilities of 
        developing multiple corridors of transport and preferential trade with 
        other regional spaces, which in the future will be active protagonists 
        in agrifood production and trade, including services and technologies. 
        We are referring to Asian countries, in particular China and India, and 
        the Arab and sub-Saharan African countries. It will imply harnessing and 
        increasing the connectivity of the ports of the South American Atlantic 
        with the main ports of Asia, Africa and the Persian Gulf, especially through 
        the routes across the Atlantic. |  
   
    |  As we have stated in other occasions, (see the July 
        2014 issue of this newsletter). Amitav Acharya (in his book "The 
        End of the American World", Polity Press, Cambridge-Malden 2014), 
        with his idea that the world today has become "multiplex", helps 
        us understand the dynamics of the international environment in which the 
        foreign trade of every country is inserted.  Acharya makes an analogy in which he likens the world to a multiplex 
        theatre with an offering of multiple and differentiated shows. In an environment 
        with these characteristics, you can choose what suits you best and adapts 
        to your preferences. It is the same situation of someone who goes to a 
        modern shopping mall in a city, or of those who in the past went to the 
        fairs of a large village. The key in each of these cases is that those 
        on the demand side could have a specific idea of what they want to obtain 
        and of what they can purchase in a context with a variety of offerings. 
        Hence the importance of the contribution by Ian Bremmer (in his book "Every 
        nation for itself. Winners and Losers in a G-Zero World", Portfolio-Penguin, 
        New York 2012), in the sense that in today's world, which he describes 
        as Ground Zero, each country is on its own. The problem in this case would 
        be if a country does not know what it wants and, in particular, what it 
        can achieve in its relations with other countries and in its insertion 
        in the world.  Population growth, the larger number of countries and regions that have 
        become protagonists of international trade and, in particular, the shortening 
        of physical and cultural distances between the different markets are, 
        among others, some of the factors that are accentuating the multiplex 
        characteristics of today's world  Of these factors, the one that will probably have the greatest influence 
        on the design of the future map of world trade will be population growth, 
        with its consequent impact on the demand, for example of food. By 2050 
        the FAO has estimated that, with a world population of over nine billion, 
        it will be necessary to increase food production by approximately seventy 
        percent in relation to the current level. Additionally, we must also consider 
        the fact that an estimated two billion people will have been added to 
        the urban middle classes (in this regard see the report by Carlos Pérez 
        del Castillo, included as recommended reading of this Newsletter).  But the difficulty of international trade in a multiplex world -though 
        it may seem a paradox- will be to have an accurate idea of what options 
        are available, both for those who offer as well as for those who demand 
        goods, services or technologies. Information will become of great importance 
        for the various protagonists of a commercial environment with multiple 
        options. Hence the growing relevance that competitive intelligence will 
        acquire as a key factor for the external trade integration of firms and 
        countries (see the 
        February 2011 issue of this Newsletter).  What we have mentioned becomes still more relevant when we take into 
        account the strong dynamics that characterizes international trade today 
        due, among other factors, to the shifts in competitive advantages caused 
        by the constant changes in production, transport and information technologies; 
        in national and international trade rules (for example, as a result of 
        the proliferation of preferential trade agreements), and in consumer preferences, 
        especially of the growing urban middle classes, that have become aware 
        of the power of their purchasing decisions.  At least three consequences can be drawn regarding the commercial insertion 
        of a country such as Argentina in a world that offers a set of multiple 
        options. The first has to do with the convenience of planning and executing strategies 
        with multiple simultaneous directions ("tout azimout"). It involves 
        an effort of organization at the national level and of coordination with 
        other countries (see the January 
        2015 issue of this Newsletter). This has been an ongoing aim in the 
        agrifood industry through the Group of Producing Countries from the Southern 
        Cone (GPS), which seeks to contribute specifically towards sustainable 
        global food production. It has been promoted by the CARI and is formed 
        by specialists from Argentina, Brazil, Paraguay and Uruguay (ABPU). The second relates to the agenda of multilateral trade negotiations. 
        The strengthening of the multilateral trading system, institutionalized 
        in the World Trade Organization (WTO), is a goal that has been valued 
        by Argentina and its Mercosur partners (see the 
        February 2015 issue of this Newsletter). If the current efforts to 
        make progress in the negotiations of the Doha Round did not yield the 
        result sought by Roberto Azevêdo, Director General of the WTO, it 
        would be advisable for our country and its regional partners to contribute, 
        through their leadership, to seek other modalities to move forward with 
        multilateral trade negotiations. The 10th WTO Ministerial Conference to 
        be held in Nairobi, Kenya, from 15 to 18 December provides, in this sense, 
        an opportunity to attempt to open, if necessary, other negotiating options.
 The third practical consequence is related to the front of preferential 
        trade negotiations (see the March 
        2015 issue of this Newsletter). The main preferential negotiation 
        in which Argentina participates, together with its Mercosur partners, 
        is that with the European Union (EU). It is difficult to visualize a quick 
        end on this negotiating front. The exchange of offers is still delayed 
        and it is true, at least this time that the ball is now in the European 
        playing field. Currently, the only activity that can be observed is related 
        with the "blame game" that has become common practice when international 
        trade negotiations are stalled. At least for the moment, there are no 
        other initiatives aimed at making the negotiation between the two regions 
        more feasible through the relaxation of the objectives in terms of timing 
        and of the coverage of trade subject to tariff reductions. As was noted 
        on other occasions, this is not a flexibilization that may be hindered 
        by a possible interpretation of the provisions of Article XXIV of GATT. 
        However, it seems clear that this would involve a dose of political initiative 
        that is not present at the moment (see the February 
        2013 issue of this Newsletter).
 Today, there are no deterrents that would prevent opening other negotiating 
        fronts with the main regions involved in world trade. For example, in 
        2012 China made a proposal to address a feasibility study for the negotiation 
        of a free trade agreement with Mercosur countries (see the March 2015 
        issue of this Newsletter). As with the EU and, eventually, the US, the 
        concept of preferential trade agreement and its modalities allows for 
        multiple derivations that can be compatible with WTO rules. It seems worthwhile 
        to explore such alternatives in view of what we have termed as the "metamorphosis" 
        of Mercosur, which implies reconciling predictability with flexibility 
        in order to advance productive integration strategies and competitive 
        integration at global level and in the multiple interregional scenarios 
        (See also the Techint 
        Bulletin, November 2014, on www.felixpena.com.ar).  A strategy for insertion in multiple international trade scenarios will 
        also require furthering the density of the physical connection of the 
        country and its Mercosur partners with larger markets. The multiplicity 
        of trade and transport corridors, known in a way as the new "Silk 
        Road", will be a key factor for the future development of international 
        trade in the region (see the January 
        2013 issue of this Newsletter).  The fact that Argentina is not located in the Pacific Ocean does not 
        necessarily limit the chances of developing multiple transport and trade 
        corridors with other regional spaces that, in the future, will be active 
        players in agrifood production and trade, including related services and 
        technologies. We are referring to those in Asia and particularly China 
        and India, and the Arab and sub-Saharan African countries. Among others, 
        the reports carried out by Jan Hoffman during his time at the ECLAC and 
        later at the UNCTAD (see, among others, his article "El 
        potencial de puertos pivotes en la costa del Pacífico Sudamericano"), 
        help appreciate the degree of connectivity of the ports of the South American 
        Atlantic with the most important ports of Asia, especially across the 
        Atlantic-Indian route. In nautical miles, the ports of Buenos Aires and 
        Santos, for example, are closer to ports such as Hong Kong and Singapore 
        than ports of Chile and Peru located in the South American west coast. 
        Moreover, the physical connectivity index plays to their advantage. |  
   
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    | 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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