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The future of the bi-regional association agreement between Mercosur
and the European Union remains uncertain. Formally, the negotiations have
concluded. It is possible that the agreement is signed and enters into
force, but there is also a possibility that this does not happen at all.
What does this mean for those who are wondering -especially SMEs in Argentina
and Mercosur- about how to prepare themselves to operate in the future
with their goods and services in the broad bi-regional economic sphere?
The first thing that can be pointed out is that it would be a mistake
to take for granted any scenario (depending on whether the agreement is
signed or not), as well as their different and multiple consequences.
In any event, the two scenarios may be very different in scope from the
one has predominated in the last three decades, at least for companies
in the Mercosur countries.
On the contrary, it is advisable at this moment, to ask ourselves what
would it mean for a company to prepare itself to compete, both in the
market of the Mercosur countries and in the bi-regional one, either in
the case that the association agreement comes into force, or in the case
that it does not. The fact is that the ability to compete in either scenario
will require for many companies strong adjustments in their strategies
and operational modalities. This is what we like to refer to as the "day-after-agenda".
The time available to adapt to one or the other scenario (or to the multiple
possibilities imaginable) can still be ample, that is, at least two or
three years. Moreover, even in the event that the agreement enters into
force, such period may be extended for more years if those expected for
the completion of, for example the tariff reduction processes, are taken
into account.
However, it is also necessary to take into account the periods of time
that may be required to adapt a company to competitive conditions that
could be very different from the current ones, depending on the scenario
contemplated, and the country and the sector to which the company belongs,
among other factors.
Therefore, it seems advisable for a company to start exploring the impact
that either scenario may have on its capacity to compete in its own country,
in Mercosur or in the bi-regional space. It may be natural for a company
to consider it unnecessary to prepare itself for such uncertain scenarios,
but some of its current or potential competitors may have already started
doing so.
Without detriment to others, two recently published and very insightful
reports provide elements for a diagnosis of the scenario upon the entry
into force of the agreement, that can prove very useful for businesspeople
and those collaborating and advising them. Both reports are highly recommended
for those who wish to gain knowledge and understand the possible scope
of the different measures incorporated into the agreement.
The first one of these is the 56-page report, made by three prestigious
specialists from Argentina. It was published by CIPPEC, and prepared by
Ricardo Carciofi, Rosario Campos and Romina Gayá in July 2020 (see
text on www.cippec.org/).
The second one is the 80-page report written by three also prestigious
Brazilian experts. It was published by IDB-INTAL, and prepared by Lucia
Maduro, Pedro Da Motta Veiga and Sandra Polónia Rios, in August
2020 (see the text on www.iadb.org/es/intal/home).
An additional factor of uncertainty may result from the eventual bilateral
entry into force of the association agreement. From the texts of the Agreement
that have already been published, no explicit reference to such a possibility
arises. It was always understood that Mercosur was negotiating as a whole,
since it is formally a customs union. More than "imperfect",
which implies a sort of value judgment made from an economic perspective,
the customs union resulting from the application of the Treaty of Asunción,
can be defined as "incomplete", in the sense that all its explicitly
established elements have not been developed, for example, the one referring
to the common external tariff.
Even a superficial reading of the Treaty of Asunción, especially
its Article 2 on "reciprocity of rights and obligations", leads
us to conclude that the signatory countries have undertaken the commitment
to build a complete customs union. To argue the contrary could mean proposing
the need for an eventual renegotiation of the Treaty, in order to limit
Mercosur to the more flexible figure of a free trade zone.
The idea of the simultaneous entry into force of the international rules
that make Mercosur work is also supported by another founding text, which
is the Ouro Preto Protocol. In its article 40, it explicitly provides
that the norms produced by the agencies of Mercosur (article 2° of
the same Protocol), which need to be incorporated into the internal legal
system of a member country, enter into force simultaneously in each of
the countries. Could it be different in the case of the incorporation
of norms resulting from an international agreement?
In fact, the idea of bilateralism in the sense that the agreement enters
into force for the country that has ratified it, even if others have not,
is mentioned in official documents and pronouncements of Mercosur member
countries. This is even noted in the report published by the IDB-INTAL,
but without specifying the official document that would allow for the
legal endorsement of such fact.
Because of its possible legal and political implications, this is a matter
that deserves attention. If there were a political consensus among the
four Mercosur member countries, it would be legally possible to agree
on some formula that would allow for the solution of the problem, eventually
without having to modify the founding Treaty.
Finally, at the end of our newsletter of last August, we briefly mentioned
three issues that will demand special attention, at least in the case
of SMEs, in order to prepare for "the day after" the entry into
force of the agreement. We will analyze such issues on this occasion.
A first issue relates to the development, in practice, of the provisions
foreseen in the bi-regional agreement between Mercosur and the EU, for
the support of the effective participation of SMEs.
We refer in particular to the technical cooperation programs and to the
financing of productive transformation that may be developed with the
EU, with the aim of facilitating the adaptation of SMEs to the new conditions
of competitiveness that will arise when the agreement effectively enters
into force.
In addition to the experience that the EU has developed over the years
in its policies to support productive transformation, more recently it
has gained more experience as a result of the incorporation of the countries
of Eastern Europe, many of them inspired by the effects of the Marshall
Plan for post-war Europe itself. These are all experiences that can serve
as a guide for cooperation policies with SMEs in the Mercosur countries
that are preparing to compete in the bi-regional space.
A second issue refers to the active participation of the different local
governments so that the respective productive sectors can take full advantage
of the opportunities that will be generated by the bi-regional agreement.
Some already have programs related to trade and investment with the EU.
In this sense, the agreement opens up opportunities to promote the development
of technical and financial cooperation programs aimed at facilitating
the participation of regions, provinces and cities of Mercosur countries
in the bi-regional economic space, and also to stimulate cooperation and
joint actions, especially with the participation of SMEs from both sides
of the Atlantic.
And the third issue is to analyze the multiple unfoldings that the bi-regional
agreement can give rise to, as soon as it is inserted with its corresponding
rules of origin, in the networks of preferential trade agreements, which
Mercosur and the EU have concluded or may conclude with other countries
and regions, especially with those of the Pacific Alliance.
The link between the "rules of origin", "regional preferential
agreements" and "value chains", could nurture bi-regional
cooperation policies that facilitate and promote joint action among SMEs
on both sides of the Atlantic, with those in other regions with which
different modalities of preferential agreements already exist, for example
in Latin America itself, Africa and Asia-Pacific.
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