| TRUST, FLEXIBILITY AND PREDICTABILITY:
Conditions for Mercosur rejuvenation and for its agreement with the EU.
by Félix Peña
English translation: Isabel Romero Carranza
Three conditions are necessary for the construction
of regional integration, especially between neighboring nations with a
strong interdependence: mutual trust, methodological flexibility and predictability.
These help achieve and preserve three of the essential qualities for
the permanence of an integration agreement: the effectiveness as a result
of the capacity of the ground rules to penetrate reality; the efficacy
due to the quality of the results produced, and social legitimacy, due
to the identification of the citizens of each member country with the
rules, networks and jointly produced symbols.
The three mentioned conditions become present in the current debate
on the future of Mercosur, its rejuvenation and its adaptation to the
new economic and political realities of the member countries, the region
and at a global scale.
They also become current in the ongoing debate within Mercosur countries
-particularly in some business sectors- on how to address international
trade negotiations, especially with the EU. It is reflected in the idea
that is currently being held that it would be sufficient to achieve an
"umbrella agreement" as a result of the negotiations including
bilateral trade preferences of each individual Mercosur member country
with the EU.
Such a formula could eventually erode the scope of trade and economic
preferences agreed in Mercosur. It could also imply an irreversible deterioration
of a key instrument such as the common external tariff, that was conceived
not only for economic reasons but, above all, for its function as mutual
guarantee of the loyalty of the partners when negotiating economic preferences
with other countries or blocs.
There are options for that formula. Depending on the density of the
European strategic interest and of the companies with investments in Mercosur
it would be possible to introduce within the common umbrella elements
of flexibility that address the most sensitive interests on both sides.
If there is political will, it seems possible to reconcile mutual
trust, flexibility and predictability, even in a negotiation with an EU
that is going through its own period of economic and political uncertainties,
as well as possible internal transformations and complex inter-regional
negotiations, particularly with the U.S.
The relationship between Argentina and Brazil has always been at the
center of what, in1990, became known as Mercosur. Without prejudice to
the relative importance of the participation of the other member countries,
this preferential bilateral relationship has been the core of a regional
construction with clear implications for the governance of the South American
regional space. As noted at the time by the then Foreign Minister Celso
Amorim (WEF, Davos 2008), for Brazil Mercosur is synonymous with peace
and political stability in South America. The same could be said in Argentina.
It will probably continue to be a solid core. However, there is always
the possibility -though not necessarily likely to happen- that such preferential
relationship deteriorates beyond what is convenient. This does not imply
that there are currently any risks of returning to a not so distant past
where the bilateral relationship was marked by mutual distrust and, sometimes,
even by a sordid rivalry. It does imply, though, that it would not seem
advisable to ignore that such risks can always emerge.
Historical experience shows that when they appear between neighboring
nations with a strong interdependence it can be difficult -although not
impossible- to reverse the gradual trend -by dripping- towards a relationship
of conflict and fragmentation, with the resulting repercussions in the
governance of the regional space in which the two countries are inserted
-be it South America or the broader Latin American space-. And perhaps
because of this, in our regional history the word 'integration' has evoked
precisely the opposite of the possible scenarios of 'fragmentation'.
In an era where there is a certain decrease of the attractiveness of
the acronym Mercosur -a true regional brand as expressed at the moment
by Fernando Henrique Cardoso when he was President of Brazil- it would
seem useful to reflect on the three conditions that enable a consensual
integration between contiguous nations that aspire to remain sovereign,
even when they accept to restrict the free use of such sovereignty -and
that is precisely the issue in the case of Mercosur- to have a chance
of lasting in time.
It is known that irreversibility is not compatible with the characteristics
of this kind of processes among neighboring nations. But the perception
that the process and its ensuing economic preferences have the potential
to last over time depends on three essential qualities: the effectiveness
as a result of its ground rules penetrating reality; the efficiency, due
to the quality of the results produced, and social legitimacy, as a result
of the identification of the citizens of each member country with the
jointly produced rules, networks and symbols.
The three conditions to which we are referring are: reciprocal trust,
methodological flexibility and predictability.
Reciprocal trust was at the essence of what led to the bi-national strategic
understanding between Argentina and Brazil which would then give origin
to Mercosur. It is worth remembering today some foundational milestones
of what later led to what is today known as Mercosur. With the passing
of time sometimes they are not always present nor the circumstances in
which they occurred well remembered. They are reflected in the agreements
reached by the Presidents Raúl Alfonsín and José
Sarney, first in the Iguazú Declaration of November 30, 1985 (http://www.abacc.org.br/)
and later in the founding instrument contained in the Argentine-Brazilian
Integration Act of July 29, 1986 (http://es.wikisource.org/).
All this resulted in the Program for Integration and Economic Cooperation
(PICE) between the two countries and the Bilateral Treaty of Integration,
Cooperation and Development of 1988, which took effect in 1989 and is
still in force (http://es.wikisource.org/).
The Act of Buenos Aires of July 6, 1990, agreed by Presidents Fernando
Collor de Mello and Carlos Saúl Menem (http://es.wikisource.org/)
is, in turn, the foundational stone of the stage initiated in March 1991
with the formal creation of Mercosur. In its recitals are the shared goals
of both countries that reflected the perception of a new international
environment and, at the same time, the will to capitalize on the assets
accumulated in the process initiated in 1985.
That mutual trust was not what had prevailed in all the long previous
period. Opposing views of the world and the region had even led to the
failure of initiatives such as the 'Agreement to Promote a Free Trade
Commercial Regime' signed in Buenos Aires by Argentina and Brazil on November
21, 1941. An idea of the climate of mistrust existing during the period
before the start of the current bilateral integration can be glimpsed
from the information published on August 11, 2013, on the website of the
newspaper 'O Estado de Sao Paulo' (http://www.estadao.com.br/),
according to which, based on secret documents declassified this year,
the then President of Brazil, General Geisel, warned in 1974 about the
implications of the alleged development of the atomic bomb in Argentina.
Precisely that climate of mutual mistrust led us to publish, forty years
ago, together with Celso Lafer a short book entitled 'Argentina y Brazil
en el sistema de relaciones internacionales" (Argentina and Brazil
in the system of international relations) with a prolog by professor Helio
Jaguaribe, a great believer and promoter of a dense strategic relationship
between our two countries as the support basis for a most comprehensive
and ambitious Latin American integration (see
the text of the Spanish version published by Nueva Visión, Buenos
Aires 1973). The Portuguese edition was published in the same year
by Livraria Duas Cidades (Sâo Paulo 1973). In it, we identified
what we believed were possible common perspectives between the two countries
and that could result from an analysis of the trends that in those years
were emerging in the international system. We proposed, along with Helio
Jaguaribe, a shared vision on the world insertion of our respective countries
which was not common in those days.
The period initiated in 1985 not only shows that mutual trust is essential
to address a sustainable strategic relation but that it requires vision
and political leadership; dialogue at every level; shared views of the
global and regional realities -which does not mean they should be identical
or similar- and, above all, mutual knowledge and the ability to understand
the interests and restrictions which the neighbor country and strategic
partner may occasionally have.
But in the case of Mercosur the need for mutual trust is not limited
to Argentina and Brazil. It also enabled to support the participation
of other partners such as Uruguay and Paraguay in the foundational stage,
and more recently Venezuela and also Bolivia and Ecuador. What mattered
in the cases of Paraguay and Uruguay -besides the respect towards their
condition as nations with their own identities- was confidence in what
they perceived as essential for their economic development: unrestricted
market access to larger economies as a platform to enhance their production
systems and their integration into the world.
Reciprocal trust requires, in particular, the reasonable expectation
that the idea of 'mutual gains' becomes a reality. This does not imply
that the gains of all the partners are equal. It requires that at least
in the medium and long term everyone understands that they will gain more
by being in the 'club' than by being outside. And it also requires keeping
in mind the difficulties and inadequacies of possible options for the
respective international insertion strategies. But when a country believes
that it has a 'B plan' that is more attractive than that offered by the
'club', it is predictable that it will abandon it in the end.
Methodological flexibility is a condition that has been present from
the beginning in the construction of Mercosur and its precedent, the bilateral
agreement between Argentina and Brazil. It involves taking full advantage
of the principle of 'freedom of organization' raised at the time by the
Italian professor Angelo Piero Sereni as an essential element for the
organization of joint work between a group of nations (on this regard
see his book "Le Organizzazioni Internazionali", Giuffré,
Milan 1959, page 260 et seq.). In the case of an agreement containing
trade preferences it also implies a correct and non-dogmatic interpretation
of the rules of Article XXIV, par. 8 of GATT and a good knowledge of its
Such flexibility is essential in European integration as shown by, among
other specialists, Alexander Stubb in his book 'Negotiating Flexibility
in the European Union', Palgrave, London 2002 (the subject has been analyzed
by Mario Filadoro in a paper that can be consulted on http://www.ies.be/files/Filadoro-A2.pdf).
And it is a condition, as we shall see later, that can be essential in
the unfinished negotiations between Mercosur and the European Union. Variable
geometries, multiple speeds and 'a la carte menu' conform, as pointed
out by Stubb, a typology of formulas that enable to reach reasonable degrees
of flexibility. These are compatible with the idea of building a preferential
space between sovereign nations seeking to work together according to
their respective national interests and in a manner that is compatible
with international principles and rules.
And the third condition is predictability. It contributes to the idea
of joint work between nations that seek that their ground rules, even
when flexible, enable to direct productive investment decisions that create
jobs for people and that generate a climate of mutual trust that can be
maintained over time. In other words, predictability means that even when
it is necessary to introduce flexibilities, these are achieved by applying
the agreed rules and not through breaking or violating them, that is to
say that they are rule oriented and not the result of discretionary acts.
It is the opposite of what has happened in Latin American integration,
where it has often been interpreted that the rules should only be followed
'when it is possible'. The path of LAFTA first and of LAIA later provide
numerous examples on this regard.
The three mentioned conditions become current in the ongoing debate on
the future of Mercosur, its rejuvenation and its adaptation to the new
political and economic realities, in the member countries, in the region
and at global scale.
Also current in the debate that is taking place in Mercosur countries
-and especially in some business sectors- is the debate on how to address
international trade negotiations, especially with the European Union.
It is reflected by the idea being held that, as happened with the Andean
Community of Nations, it would be sufficient to achieve an 'umbrella agreement'
that is the result of bilateral negotiations and trade preferential agreements
of each Mercosur member country with the EU.
Such a formula could eventually erode the scope of trade and economic
preferences agreed in Mercosur. It could also involve an irreversible
deterioration of a key instrument such as the common external tariff,
that has been conceived not only for economic reasons but, above all,
as a mutual guarantee of the loyalty of the partners when negotiating
economic preferences with other countries or economic blocs.
Perhaps in the context of its founding moment, when the United States
promoted what would later become the failed FTAA negotiations, such mutual
guarantee was for Argentina and Brazil a key factor in promoting the construction
of a process based on mutual trust. Aware of their respective histories,
both countries needed an instrument that ensured the behavior of the other
in the face of a temptation such as a special preferential relationship
with the U.S.
Thus, its value transcends the economic and commercial. It is essentially
political, as has been evinced each time that one of the two countries
was perceived by the other as seeking that preferential and exclusive
relation with the U.S -and previously with Great Britain-. It was also
the case of the two attempts by Uruguay to negotiate individually a preferential
agreement with the U.S., as narrated by Roberto Porzecanski in his fascinating
book 'No voy en tren. Uruguay y las perspectivas de un TLC con Estados
Unidos (2000-2010)' (Debate-Editorial Sudamericana Uruguay, Montevideo,
There are other reasonable options to this formula. It would involve
maintaining the idea of a joint negotiation, placing it in the context
of a proper appreciation of the balance of interests of both regions in
attaining the corresponding agreement. In the case of the EU, it implies
questioning whether they would prefer to conclude it before or after the
current negotiation with the U.S. of the so called transatlantic trade
and investments partnership agreement (TATIP). Moreover, it should also
be considered that for a long time a powerful driving force behind the
European interest was to offset a preferential access of the U.S. to Latin
American countries, including of course those of Mercosur, as a result
of the Initiative for the Americas by President Bush in 1989. In fact,
the agreements that the EU has already concluded in the region are with
those countries that have, in turn, an FTA with the U.S.
Depending on the density of the European strategic interest and of its
companies with investments in Mercosur -especially in sectors such as
the automotive, capital goods, government procurement and the construction
of large public works, among others, which are more exposed to competition
from new players operating in the region, such as China and India- it
is likely to introduce elements of flexibility that take into account
the more sensitive interests on both sides.
It should be noted in this regard that a bi-regional agreement conceived
with practicality, negotiated with strategic criteria and with a good
dose of political intelligence can include multiple variants of flexibilities,
especially in the mechanisms of tariff reliefs and regulatory frameworks.
It also requires a good use of evolutionary clauses and of escape mechanisms.
In addition, the time for maturity of the respective commitments that
are made -without considering the exceptions that are agreed and the safety
valves that could be applied during the development of the agreement-
may involve between twenty and twenty five years. This from the moment
of concluding the negotiation, with the initialization of the eventual
agreement, then considering the time needed for translating the initialed
text into the EU languages, its parliamentary ratification and later the
time of the tariff reduction period, that can take a minimum of ten years
and a maximum to be agreed depending on the interest of both parties to
finalize the agreement. This provides more than sufficient time to protect
sensitive sectors, without prejudice to the possibility of including in
the agreement the access to funding mechanisms for industrial reconversion.
This being so, it would seem possible to reconcile mutual trust, methodological
flexibility and predictability, even in a negotiation of Mercosur with
an European Union that is going through its own period of economic and
political uncertainties, as well as possible internal transformations.
- Acharya, Amitav, "The Making of Southeast Asia. International
Relations of a Region", Cornell University Press, Ithaca and London;
Institute of Southeast Asian Studies, Singapore, 2012.
- Akhtar, Shayerah Ilias; Jones, Vivian C., "Proposed Transatlantic
Trade and Investment Partnership: In Brief", Congressional Research
Service, 7-5700, Washington July 23, 2013, on http://www.fas.org.
- Álvarez, Isabel; Fischer, Bruno B.; Natera, José Miguel,
"Mercosur: tendencias de internacionalización y capacidades
tecnológicas", Revista CEPAL, n° 109, Santiago de Chile,
April 2013, pgs. 43 to 60, on http://www.eclac.org/.
- Balassa, Bela, "The Theory of Economic Integration", Routledge
Revivals, New York 2011.
- Bekerman, Marta; Dulcich, Federico, "La inserción internacional
de la Argentina: ¿Hacia un proceso de diversificación
exportadora", Revista CEPAL, n° 110, Santiago de Chile, August
2013, pgs. 157 to 182, on http://www.eclac.org/.
- Clulow, Germán, "El Debate sobre la Inserción Internacional
del Uruguay: ¿Mucho ruido y pocas nueces?". Part I and II,
in Letras Internacionales, Montevideo, Year 7, n° 168, 22 July,
2013, on http://www.ort.edu.uy/
and n° 170, 15 August, 2013, on http://www.ort.edu.uy/.
- Coatz, Diego; Dragún, Pablo; Sarabia, Marianela, "La industria
argentina frente a los cambios globales: de la política comercial
a la integración regional", Boletín Informativo Techint,
n° 341, Buenos Aires, May/August 2013, pgs. 37 to 62, on http://www.boletintechint.com/.
- Dussel Peters, Enrique; Gallagher, Kevin P., "El huésped
no invitado del TLCAN: China y la desintegración del comercio
en América del Norte", Revista CEPAL, n° 110, Santiago
de Chile, August 2013, pgs. 85 to 111, on http://www.eclac.org/.
- Emmerson, Charles, "The Future History of the Arctic. How climate,
resources and geopolitics are reshaping the North, and why it matters
to the world", Vintage Books, London 2011.
- George, Rose, "Ninety Percent of Everything. Inside Shipping,
the invisible industry that put clothes on your back, gas in your car,
and food on your plate", Metropolitan Books, Henry Holt and Company,
New York 2013.
- Henry, Ken; Shuli, Hu; Feigenbaum, Evan A.; Acharya, Amitav, "Multiplex
world: steps toward a new global order", East Asia Forum, ANU,
Canberra, August 14, 2013, on http://www.eastasiaforum.org/.
- Hoffman, Jan, "El potencial de puertos pivotes en la costa del
Pacífico sudamericano", Revista CEPAL, n° 71, Santiago
de Chile, August 2000, pgs 121 to 143, on http://www.eclac.org/.
- Howse, Robert, "El momento de Azevedo", ICTSD, Puentes,
Volume 14, Number 5, August de 2013, on http://ictsd.org/.
- Magi, Gianluca (in charge of), "Las 36 Estratagemas. El arte
secreto de la estrategia china para triunfar en cualquier campo de la
vida cotidiana", Ediciones Obelisco, Barcelona-Buenos Aires 2009.
- Makuc, Adrián; Vega, Carolina; Scarpanti, Luciano, "La
quimera del oro: ¿Quo vadis OMC?", Boletín Informativo
Techint, n° 341, Buenos Aires, May/August 2013, pgs. 79 to 109,
- Niang, Alioune, "Acuerdo sobre facilitación de comercio:
¿a quién beneficiará?, ICTSD, Puentes, Volume 14,
Number 5, August 2013, on http://ictsd.org/.
- Reed, John, "México insurgente", Gandhi Ediciones
- Océano, México 2011.
- Saggia, Aura, "Paraguay ante la Triple Alianza del Mercosur",
ICTSD, Puentes, Volume 14, Number 5, August 2013, on http://ictsd.org/i/news/puentes/174384/.
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