An initiative such as that announced by Pascal Lamy on April 13th creating a WTO Panel to analyze the future of global trade could also make sense in the case of Mercosur. Perhaps the next Summit, to be held in June under the temporary presidency of Argentina, proves and opportunity to launch the idea of a top-level think tank that could present a report at the December Summit, during the temporary presidency of Brazil. Said report could include concrete proposals on how to adapt Mercosur to the new global and regional realities, ensuring in this way the continuation of a construction that will require -so as not to become watered-down- an update of its work methods and a precise definition of its future vision.

A work of such scope could include an assessment and proposals referred to methodology issues that are relevant for the preservation of the validity of the existential dimension of Mercosur. This means that they would deal with the issue of how to continue the joint work among the nations that have decided to combine their efforts in a common project, in such a way that would prevent the tendency to question the same existence of Mercosur as a viable regional undertaking from surfacing.
However, there are three concepts that will need to be reviewed in order to avoid counterproductive rigidities at the moment of tuning the national interests at stake with the future construction of Mercosur, particularly taking into account the asymmetries in relative power and economic dimension between the member countries. These are the concepts of integration itself, of supranationality and of the customs union.

Gains in flexibility without losses in predictability that can affect productive investment decisions in terms of the markets expanded by an integration agreement; efficiency of the mechanisms for the coordination of national interests starting from what each country defines as a realistic strategy for the international insertion in a world with multiple options; a high degree of transparency and social participation in the development of the integration process. These would seem to be three recommendations to consider when those attempting to work together are countries that share a contiguous geographical space and value the idea of coexisting in a high-quality regional environment, meaning that it is propitious for peace, political stability, democracy and the economic and social development of each one of the adjoining nations.

Such as he had anticipated in the Eighth Ministerial Conference last December, on April 13th the Director General of the World Trade Organization announced the creation of a WTO Panel to analyze the future of global trade. At the announcement he pointed out that this panel will be formed by experts from all over the world and almost every field of endeavor. Their task will be completed by the beginning of next year, after having periodic work meetings. (On this regard see the press release number 659 from April 13th, 2012 on http://www.wto.org/).

When making this announcement, Pascal Lamy noted that "The difficulties we, and many other multilateral institutions, have encountered in recent years is indisputable proof that yesterday's solutions simply cannot be applied to the problems we face today". He added that the analysis entrusted to the group "will spark debate and open new channels of thinking on how we can best confront the stumbling blocks that today's rapidly evolving world has strewn in our collective path".

It is thus a timely and necessary initiative, especially considering that there is the risk that, in the future, the WTO -and its rules- might become too distant from the real functioning of the international trading system. Some of the factors that could eventually contribute to this separation are the subtle and innovative modalities for the protection of the national markets and a strong trend towards the proliferation of preferential trade agreements with discriminatory effects -also innovative and subtle- for the non-member countries. This might be so especially taking into account the ambiguity in the phrasing of some of the rules (such as, for example, those in article XXIV, 8 from GATT-1994) that were conceived for a radically different world to that which is emerging now.

In this sense, on a previous opportunity we have pointed out that "One of the most important conditions required for the validity, effectiveness and social legitimacy of an institutionalized international system, either of regional or global scope, is its ability to adapt to the new realities that have an impact on its objectives, functions and rationale. This implies the timely adaptation of its regulations, instruments and rule-making processes to the continuous changes that are taking place in the context where they operate and, particularly, in the distribution of power among the countries that form part of it. This becomes much more necessary if, as is currently happening, such changes are deep structural ones, meaning, in historical terms, that they deserve the qualification of "revolutionary". They mark a clear "before and after" in the evolution of the international system. In doing so, they might render obsolete concepts, paradigms, and, above all, institutions and ground rules" (refer to the October 2011 edition of this newsletter on http://www.felixpena.com.ar/).

Additionally, we stated that in the case of the WTO a joint evaluation by the member countries of which are the most relevant deficiencies or inadequacies of the system of rules, collective disciplines and negotiation mechanisms of the WTO was needed. However and most importantly, there is a need for realistic proposals on how to overcome these shortcomings through gradual changes, that is, through some sort of systemic metamorphosis. Thence, for such purpose we suggested that as a result of the Eighth Ministerial Meeting -that was going to take place in December of 2012- a step in the right direction would be to "commission a report to a group of experts at the highest level and of notorious practical experience in international trade relations".
However, something that we alerted then is still valid after Pascal Lamy's announcement: such initiative will be positive only "under the condition that it meets a different fate than that of the Sutherland Report which, in spite of the wealth of its contents, never had a proper follow-up and ended up being archived." (For the full text of the report of the commission presided by Peter Sutherland entitled "The future of the WTO: Addressing institutional challenges in the new millennium" published in Geneva in 2004 go to http://www.wto.org/).

In our opinion, an initiative such as that announced by Pascal Lamy for the WTO could also make perfect sense in the case of Mercosur (on this respect see our analysis in the February 2012 edition of this newsletter). Perhaps the next Mercosur Summit, to be held in June under the temporary presidency of Argentina, could prove an opportunity to launch the idea of a task force at the highest level -led, for example, by a former President of one of the member countries- that could present, in the following December Summit during the period of the temporary presidency of Brazil, a report with concrete and realistic proposals on how to adapt Mercosur to the new global and regional realities, ensuring in this way the continuity of a construction that requires the updating of its work methods and especially a precise definition of its future vision.
An exercise of such scope could contain assessments and proposals related with methodology that are relevant for the preservation of the validity of the existential dimension of Mercosur. This means that they are related with the issue of how to continue the joint work among the nations that have decided to combine their efforts in a common project in a manner that prevents the tendency to question the existence of Mercosur as a viable regional undertaking from surfacing. The debate that can be observed on this regard, for example in Uruguay, is indicating that this tendency is indeed real.

The acronym Mercosur allows for a division of the necessary diagnostic into three levels that are susceptible of a separate but, at the same time, simultaneous analysis. The first level refers to a common space, the second to a strategic idea and the third, to a process.

As a common space (geographical, political, economic or cultural) Mercosur shows a picture of variable geometry in its respective spaces. This can even be traced back to the origin of the name. In fact until the last moment of the drafting of the text that would be subscribed by the negotiators, the first article referred to a Common Market of the Southern Cone. At the request of the Brazilian negotiator, the word "cone" was dropped. It was left open to the possibility of a potential South American scope, which was further on recaptured by UNASUR. Sometimes it has even been noted that, as an economic space, Mercosur is a network of just about twenty large cities that spans from Belo Horizonte, Sâo Paulo and Rio de Janeiro, in the north, to Montevideo, Buenos Aires and Santiago de Chile, in the south. At least, some years ago it was understood that this network concentrated more than 70% of the population with the highest income level as well as of the production of goods and services of the region. Due to its radiation effects, it may be considered that the political space of Mercosur projects itself to the whole of South America as a hard core of peace and democratic stability for the region.

As a strategic idea, Mercosur reflects the will to work together of nations sharing a geographical space. It succeeds in making cooperation counteract any trends towards fragmentation. It reflects as well the willingness to place the aims of the economic and social development of democratic countries in a common regional governance matrix that facilitates productive integration and maximizes the negotiation capability in international trade relations, with other nations or economic blocks.

At the same time, as a process, Mercosur is the name given to a system of objectives, institutions and ground rules aimed, precisely, at materializing, with time, the strategic idea between nations that share spaces of variable geometry.

The experience accumulated since its creation in 1991 -and even before if we consider the period of bilateral integration between Argentina and Brazil, triggered between 1985 and 1986 by the vision of presidents Alfonsín and Sarney- proves that as a common space and strategic idea Mercosur has maintained its validity. It is difficult to question the membership of its countries to a "neighborhood", or to doubt the advantages of the prevalence of peace and political stability and the will to work in a cooperative manner.

In turn, it would seem that the greatest inadequacies arise when we evaluate the quality of Mercosur as a process aimed at achieving common goals that are functional to the national interests of each member country. The deficiencies in the mechanisms for the agreement of national interests, the precariousness of the ground rules and the discordances in the respective economic policies are some of the traits that influence the appraisal that citizens, businessmen, workers, analysts and third countries, among others, make of the quality of the process named Mercosur.

Such appraisals are more complex when those making them are summoned to materialize productive investments in relation to the market expanded by the rules of the process. Within a context of marked differences between the relative economic potential of the four partners, the effect of productive investments of a low quality Mercosur has a relevant political connotation in that fewer citizens in the respective countries can correlate the common project with their sources of employment, their level of wellbeing and their outlook for the future.

In the adaptation of Mercosur to the new regional and global realities -similar to that being made today by the EU member countries and to that which the WTO countries will have to undertake, probably urged by the G20- there are some advantages. One of them is the experience of over twenty years in the institutional construction and joint work. The other is that many paradigms, models and formulas for the integration of countries in a common space, sometimes conceived almost as religious dogmas, are becoming outdated due to the speed and depth of the changes taking place in the international system and in particular in the global economic competition.

This facilitates the work for Mercosur's adaptation, maximizing the principle of "freedom of organization" -that, among others, was advocated by the Italian internationalist Angelo Piero Seregni - in the definition of the aims and mechanisms to be used for the joint work of nations sharing a given physical space and strategic objectives. The limitations to said principle derive from the prevailing interpretation of the national interests and of the respective legal systems of each country; from other international commitments -for example within the WTO-, and from the conjoint goals and the times allotted for the development of the strategic idea of joint work. It is clear that the assets accumulated in the years of validity of the Treaty of Asuncion have a bearing as well. This is certainly ample enough so as to allow many adaptation modalities for the fulfillment of its foundational goals.

However, there are three notions that will need to be re-examined in order to avoid any counterproductive rigidities at the moment of harmonizing the national interests at stake in connection with the future construction of Mercosur, taking into account in particular the existing asymmetries in relative power and economic dimension between the member countries.

The first notion is the very same concept of integration. At times a monist vision seems to prevail, which leads to envision the result of the process as the creation of a new political or economic unit in the international system. On the contrary, it would seem more advisable a perspective that emphasizes integration as a plurality of States that share common goals and institutions without resigning their respective sovereignties. In this case, the key elements of the integration concept will refer to the density of connectedness (physical and economic), to the degree of compatibility between the respective political and economic systems and to the predictability in the behavior of the countries, especially in the compliance of what is agreed.

The second concept is that of supranationality. It is often associated with yielding sovereignty to common institutions. In such case it is the result of the monist vision of the integration between nations. Somewhat, the implicit model is often the conformation of a federal state or confederation, something like a new nation. However, even in the experience of the European Union, the concept of supranationalism is further referred to the idea of sharing the exercise of the respective sovereignties -in the sense of accepting the restrictions on its discretionary exercise- with institutions aimed at facilitating the dynamic coordination of national interests for mutual gain. This is why by forming part of this kind of process no country resigns the sovereign right to eventually leave the common undertaking.

Finally, the third concept is that of the customs union. What has been learnt form theory usually prevails in its definition, especially when related to international trade. It corresponds then to the monist view of integration that can trace its precedent back to processes such as those that led, for example, to the emergence of Germany as a federal state. Nevertheless, if the principle of freedom of organization is applied those countries that decide to articulate their economies -with a pluralist outlook and not necessarily a monist one- may take the greatest advantage of the ambiguities that characterize the only legal international instrument limiting the creation of a customs union, the abovementioned Article XXIV, paragraph 8, of GATT-1994.

Gains in flexibility without losses in predictability that can affect productive investment decisions in terms of the markets expanded by an integration agreement; efficiency of the mechanisms for the coordination of national interests starting from what each country defines as a realistic strategy for the international insertion in a world with multiple options; a high degree of transparency and social participation in the development of the integration process. These would seem to be three recommendations to consider when those attempting to work together are countries that share a contiguous geographical space and value the idea of coexisting in a high-quality regional environment, meaning that it is propitious for peace, political stability, democracy and the economic and social development of each one of the adjoining nations.

Recommended Reading:

• Abreu, Sergio, "La relación bilateral con Argentina: una visión objetiva", Consejo Uruguayo de Relaciones Internacionales, Análisis del CURI, N° 01/12, Montevideo, 16 de marzo 2012, en: http://curi.org.uy/.
  
• Baumann, Renato; Ng, Francis, "Integraçâo Produtiva. Complementaridade produtiva regional e competitividade", en RBCE (FUNCEX), janeiro/março de 2012, ps. 22 a 43.
  
• Ferrantino, Michael, "Using Supply Chain Analysis to Examine the Costs of Non-Tariff Measures (NTMs) and the Benefits of Trade Facilitation", WTO, Research and Analysis, Geneva, 15/02/2012, en: http://www.wto.org/.
  
• Freeman, Lawrence; Gamba, Virginia, "Señales de Guerra. El conflicto de las Malvinas - 1982", Editorial El Ateneo, Buenos Aires 2012.
  
• FUNCEX, "Revista Brasileira de Comércio Exterior", Fundaçâo Centro de Estudos do Comercio Exterior (FUNCEX), RBCE, Rio de Janeiro, Ano XXV, janeiro/março de 2012 (http://www.funcex.org.br/).
  
• Huchet-Bourdon, Marilyne; Korinek, Jane, "Trade Effects of Exchange Rates and their Volatility: Chile and New Zealand", OECD Trade Policy Working Papers, N° 136, Paris, March 2012, en: http://www.oecd-ilibrary.org/.
  
• Kassum, Julian, "The G20. What it is. What it does. A business guide", International Chamber of Commerce (ICC), Paris 2012.
  
• Lamy, Pascal, "The Changing WTO Landscape: changes in trade challenges how we manage trade policies", WTO, DG Speeches, Speech at the Japan Institute of International Affairs, Tokio 16 March 2012, en: http://www.wto.org/.
  
• McLinden,Gerard, "Collaborative Border Management: A New Approach to an Old Problem", World Bank, Economic Premise, Number 78, Washington DC, April 2012, en: http://siteresources.worldbank.org/.
  
• McLinden, Gerard; Fanta, G.E.; Winddowson, D.; Doyle, T, "Border Management Modernization Handbook", World Bank, Washington DC., 2011, en: http://issuu.com/.
  
• Nkuepo, Henri, J., "African Countries and the New Generation of Non-Tariff Barriers: "Standard-takers", "Standard-Compliers" and "Standard-Victims"", WTO, Research and Analysis, Geneva, 15/03/2012, en: http://www.wto.org/.
  
• Parlamento Europeo, "Una nueva política de cooperación para el desarrollo de la Unión Europea con América Latina", Dirección General de Políticas Exteriores, Departamento Temático, Bruselas, diciembre 2011.
  
• Preston, Félix, "A Global Redesign? Shaping the Circular Economy", Chatham House, Briefing Paper, EERG BP 2012/02, March 2012, en: http://www.chathamhouse.org/.
  
• Ruta, Michele; Venables, Anthony, "International Trade in Natural Resources: practice and policy", WTO, Economic Research and Statistics Division, Staff Working Paper ERSD-2012-07, Geneva, March 2012, en: http://www.wto.org/.
  
• Torres, Raúl A., "Use of the WTO trade dispute settlement mechanism by the Latin American countries - dispelling myths and breaking down barriers", WTO, Economic Research and Statistics Division, Staff Working Paper ERSD-2012-03, Geneva, February 2012, en: http://www.wto.org/.
  
• Wise, Timothy A.; Gallagher, Kevin P., "US.Trade Policy: Still Waiting for a "21st Century Trade Agreement"", LATN, Red Latinoamericana de Política Comercial, SerieBrief 67 - Buenos Aires, Agosto 2011, en: http://www.latn.org.ar/.