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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
THE "DAY AFTER" A COMPLEX TRADE NEGOTIATION:
Reflections on the negotiations between MERCOSUR and the European Union

by Félix Peña
June 2010

English translation: Isabel Romero Carranza


 

The ability to negotiate with other countries and at the same time to be prepared to capitalize on the opportunities that arise from the resulting agreements are two inseparable elements of an effective foreign trade strategy. One aspect conditions the other as the results of an international trade negotiation need to take into account the degree of preparation that can be reasonably expected from a country and its productive sectors. This fact becomes more complex when a negotiation involves countries with different levels of development.

Assuming that the negotiations between Mercosur and the European Union were re-launched with the idea of being concluded in a relatively short period, preparing for the "day after" would seem to be a priority for our country today. This will require outlining a strategy of foreign trade insertion that considers the possibility of successfully concluding the current bi-regional negotiation. It would also imply an agenda of joint work between Mercosur members that is related both with the negotiation process and with the development of the capabilities needed to profit from the opportunities that are expected to arise from the resulting agreement.

A pessimistic outlook of the possibilities opened up by these negotiations, translated into a passive attitude particularly from the business sectors and reflected by a lack of preparation to sail successfully into the "day after", could later mean the loss of business opportunities that normally require considerable time to be fully availed.

Three courses of action are particularly relevant in the outline of a international trade of Argentina -or of any of its South American partners- within the new world scenario which also involves the preparation for the "day after" the negotiations with the EU. These courses of action refer to the different modalities and intensities of production clusters at a transnational scale; the quality of the connectivity between the different national spaces; and the creation of ground rules that affect global or regional economic competition.


If the negotiations between Mercosur and the European Union (EU) were to be concluded successfully, they would open up very attractive perspectives both for the renewal and diversification of the international trade strategy of Argentina and for the necessary adaptation of Mercosur - in its instruments and working methods - to realities that are quite different from those that originated it almost twenty years ago (on this subject refer to the November 2009 edition of this newsletter) .

Assuming that the negotiations between Mercosur and the European Union were re-launched with the idea of being concluded in a relatively short period, (see the May 2010 edition of this newsletter), preparing for the "day after" would seem to be a priority for our country today. It would also be a priority for other Mercosur countries, including Chile given the degree of the economic integration that currently exists between this country and Brazil and Argentina in particular and the fact that it has already concluded a partnership agreement with the EU.

As a result of this, the Mercosur partner countries will have much to explore in terms of the joint utilization by their businesses of the new economic space that would open up if an agreement between Mercosur and the EU were to be concluded. Any differences in the intensity and quality of the respective preparatory processes aimed at capitalizing on the opportunities resulting from a bi-regional agreement could contribute to emphasize the asymmetries in size and level of development of the involved countries on both sides of the Atlantic - both within Mercosur and the EU-.

Thus, a new agenda for the joint work between Mercosur members and associated countries has emerged. It involves their respective governments, businesses and social and academic sectors. This agenda is related with the process of bi-regional negotiation that has already been re-launched and with the preparation that will be required in order to take full advantage of the eventual agreement if such process were to be concluded successfully.

A pessimistic outlook of the possibilities opened up by these negotiations, translated into a passive attitude particularly from the business sectors and reflected by a lack of preparation to sail successfully into the "day after", could later mean the loss of business opportunities that normally require considerable time to be fully availed. Such preparation would entail decisions for productive investments and for the incorporation of technical advances that will demand a positive perception of the possibilities of concluding the agreement within a reasonable period and of the density and reliability of the commitments that are undertaken. Within this perspective, an excess of pessimism or skepticism could be the equivalent of a self-fulfilling prophecy. Many successful countries in the global economic competition have become so by developing an optimistic vision of what can be achieved both by negotiating and by carrying out aggressive penetration strategies in foreign markets. The case of Ireland is a good example, even in the way it has faced its current financial crisis

In any case, the mere fact that the bi-regional negotiations were re-launched constitutes in itself an additional factor that prompts us to reflect on some of the requirements that may arise when outlining and developing a strategy for Argentina's foreign trade insertion within the new world scenario.

On this regard, it should be noted that the current world scenario has multiple players with attractive markets - though differentiated in their size and level of complexity and development - and with enough capacity to influence both global economic competition and the ground rules that result from international trade negotiations. We are not referring exclusively to the so called BRIC countries. This fact generates a wide range of options for the insertion of any country that has the intention and potential to profit from them, including of course Argentina and the other Mercosur partners and associates.

The vast range of options has a strong influence in the scope and methods of the economic coalitions and associations - which will always carry a dose of strategic and political purport, either explicitly or implicitly - that may be formed between pairs and groups of countries. The trend towards the proliferation of cross-alliances and of variable geometry will influence the demand for flexibility of the operational instruments and mechanisms that will be increasingly present in the negotiations of new preferential trade agreements. On this respect, there is not a single model to follow but many variations that may be compatible in their preferential trade aspect with World Trade Organization (WTO) rules. It will be increasingly evident that, in spite of the importance of an association with a single country or group, every country that has the possibility to do so will attempt to preserve some room for maneuver, even an ample one, to craft its own network of simultaneous partnerships with as many countries as possible. In this sense the countries associated in Mercosur will be no exception, whatever their relative economic weight. In addition this is a trend that will increase the demand for the consolidation and reestablishment of the WTO as a space for the development of collective disciplines that are efficient and effective. The relative stagnation of the current Doha Round may even offer an incentive to start an in-depth debate on the future of the global multilateral system of world trade.

Three courses of action gain particular relevance in the outline of a strategy for the international commercial insertion of Argentina -or of any of its South American partners- within the new world scenario, that also involves being prepared for the "day after" the negotiations with the EU or of any other negotiations of similar importance that may be undertaken in the future with other relevant players of the global economic competition. The three courses of action are interrelated and could not be considered separately when confronting the task of outlining and developing an effective country strategy for foreign trade insertion. These three courses of action refer to the different modalities and intensities of the production clusters at a transnational scale; to the quality of the connectivity between the different national spaces; and to the creation of ground rules that affect global or regional economic competition.

The public-private synergies that result from the interaction between public policies and the strategies for productive investment may have the strongest influence on the modalities and intensities of the transnational productive clusters in which the producers of goods and services providers of a country may participate -or even encourage. Within the current global economic competition, the fragmentation of the value chains in multiple countries at a global or regional scale is one of the most profound changes that have taken place in the last decades - and one that will continue to accentuate in the future. Among other factors, this has been triggered by the impact of the multiple technological advances and the subsequent disappearance of physical and cultural distances between the diverse economic spaces. This has originated multiple mechanisms of cross-border articulation at the level of the production and distribution of goods and the provision of services.

Considering the wealth of natural and human resources in Argentina, it would be feasible to consider that the contribution of intellectual value (knowledge, innovation and technical progress) for external productive and marketing processes, as well as the insertion in transnational productive networks, will be the key factors at the moment of capitalizing on the competitive advantages that the country can develop within the new global scenario of economic competition..

The increasing urbanization, the growth of the middle classes, the sensitivity to the quality of goods and services, the "green" awareness and even the increase in the number of "older adults" in many countries, are other factors that need to be taken into account when outlining a country strategy that helps maximize what the country has to offer in terms of goods and services, recreational activities and talent.

This becomes evident for example in agrifood value chains, where the strategy of a country such as Argentina -or of any of its South American partners- should focus on "green" and "intelligent" products destined for aisles all around the world and on specialized services that incorporate cutting edge technologies for agricultural development.

The public-private synergies will also have an effect on the quality of the connectivity with other economic and cultural spaces. This refers not only to physical connections but also to the ability that the country may develop to fully grasp and understand the cultural diversity that impacts the tastes and preferences of consumers all over the world. Together with its Mercosur partners, Argentina is especially well prepared for this task due to the cultural crossbreeding that characterizes its population.

In reference to the creation of ground rules that affect global economic competition, they are the result of the rulemaking process in which the country participates - or sometimes of those rulemaking processes that only involve other relevant nations whose businesses and producers form part of the competition.

These rulemaking processes can be global and multilateral, such as the case of those originating within the WTO, or regional, as in the case of Mercosur and of its network of preferential trade agreements with other countries or economic blocks. The latter would be the case if a partnership agreement were to be concluded with the EU. However, these are also national rulemaking processes, either of one's own country or of those countries in which there are future plans to produce goods and provide competitive services.

On this regard, it should be noted that international trade negotiations -such as those between Mercosur and the EU- translate into ground rules that give shape to international legal instruments. They generate binding rights and obligations. Their quality determines their efficiency to promote productive investments in terms of the enlarged markets. Often this is the main reason behind an agreement. Additionally they may generate mechanisms for the creation of rules that make the development of the objectives of the partnership possible through time. They also enable the adaptation of the partnership and of its functional instruments and mechanisms to the new realities that result from the dynamic changes that can be observed in international trade and in the global economic competition (for example through "evolutionary clauses"), as well as to elude any unforeseen difficulties derived from the behavior of the respective markets (for example through contingency measures or "safety valves").

The ability to negotiate with other countries and, at the same time, to be prepared to take advantage of the opportunities that arise from any resulting agreements, are two inseparable elements of Argentina's foreign trade strategy. One aspect conditions the other as the results of an international trade negotiation need to take into account the degree of preparation that can be reasonably expected from the country and its productive sectors. The experience gathered by other countries that have already negotiated with the EU - such as Chile, Mexico, Peru, Colombia and Central America, within our region - or which are currently negotiating with it - such as India, Indonesia and Singapore, among others - can be of great service for Argentina and the Mercosur partners. On this plane, the academic sector could play a valuable role through the analysis of the experiences accumulated by these countries and, especially, of the interaction between the negotiations and the preparation of the respective country and businesses for taking advantage of the opportunities that may be generated by the enlarged markets.

However, this becomes more complex when an international trade negotiation involves countries with different levels of development. This is the case of the negotiations between Mercosur -with its own internal asymmetries- and the EU which, aside from the current crisis, still has a much higher level of organization and economic development. Nevertheless, the experience of many countries demonstrates that complex and difficult tasks are not necessarily impossible to accomplish.


Recommended Reading:

  • Arenal, Celestino del; Sanahuja, José Antonio (coords.), "América Latina y los Bicentenarios: una agenda de futuro", Fundación Carolina - Siglo XXI, Madrid 2010.
  • Arenal, Celestino del; Sanahuja, José Antonio, "La Cumbre ALC-UE de Madrid: Un nuevo impulso a las relaciones birregionales", Madrid 24 de mayo de 2010, en http://www.fundacioncarolina.es/ or click here.
  • Berlinski, Julio; Stancanelli, Néstor E. (eds.), "Los Acuerdos Comerciales. Reflexiones desde un enfoque argentino", CARI-CEI, Siglo XXI, Buenos Aires 2010.
  • Cabestan, Jean-Pierre, "La politique internationale de la Chine", SciencesPo, Les Presses, Paris 2010.
  • Carlin, John, "Invictus. Nelson Mandela and the Game that Made a Nation", Penguin Books, London 2009.
  • Chandra, Alexander C.; Alfaro Manurung, Anna; Pambudi, Daniel; Pakpahan, Beginda, "Hopes and Fears: Indonesia's prospects in an ASEAN-EU Free Trade Agreement", International Institute for Sustainable Development (IISD) - Trade Knowledge Network (TKN), Winnipeg, Manitoba - Canada 2010, en http://www.iisd.org.
  • Cohen, Stephen S.; De Long, J.Bradford, "The End of Influence. What happens when other countries have the money", Basic Books, New York 2010.
  • Dalle Mulle, Enmmanuel; Ruppaner, Violette, "Exploring the Global Food Supply Chain. Markets, Companies, Systems", 3D, THREAD Series, May 2010, en http://www.3dthree.org/ or click here.
  • European Commission, "Sixth Report on Potentially Trade Restrictive Measures", European Commission, Trade, May 2010 en http://trade.ec.europa.eu/ or click here.
  • Ifrah, Laurence, "L'Information et le Renseignement par Internet", PUF, Paris 2010.
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  • OECD, "Ministerial Report on the OECD Innovation Strategy: Fostering Innovation to Strengthen Growth and Address Global and Social Challenges - Key Findings", Organisation for Economic Co-operation and Development (OECD), C/MIN (2010)4, Paris 12 May 2010, en http://www.oecd.org.
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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.

http://www.felixpena.com.ar | info@felixpena.com.ar


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