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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
THE CURVE OF DISENCHANTMENT:
Factors that often lead to frustration in the processes of regional integration

by Félix Peña
January 2014

English translation: Isabel Romero Carranza


 

The high expectations that are often generated in the founding moments of the processes of integration between contiguous sovereign nations have many times resulted in trends towards frustration that are difficult to overcome.

This is reflected by what we have called 'the curve of disenchantment', a phenomenon that can be examined today through the experiences of both Mercosur and the European Union. These two are very different regional spaces, projects and processes which have experienced moments of fervor and enthusiasm as well as of frustration and disenchantment. The latter seems indeed to be the case of the stage that they have been going through in recent years. It is a disappointment that is reflected even in debates of the existential type -about why to work together in a common project- and not exclusively of the methodological kind -about how to carry it out.

The founding moments are those that typically generate higher expectations and illusions. And somewhere in the course of the project and the process that it embodies, in a moment not always easy to identify, the stage of disillusionment begins, usually driven by changes in the realities and by the dilemmas and hurries of the short-term agendas of the member countries. When the curve of disenchantment is evinced it does not necessarily lead to the abandonment of the corresponding integration project, but it can lead to a loss of its relevance.

Two questions will be addressed in this opportunity. Both are referred to voluntary integration processes between nations sharing a geographical space and who agree to work on a common long-term project through methodologies for which there are no predefined or mandatory models.

The questions are: what explains the frustrations, sometimes recurrent, which often arise when moving forward in the outlined path of deep and voluntary integration processes between sovereign nations? And, what are the factors that enable to sustain over time the political will of a group of sovereign nations that share a regional geographic space to work together within the scope of a multidimensional integration process intended to be permanent in time?


In our Newsletter of last June we referred to the enthusiasm that can be observed regarding the possible development of the so-called Pacific Alliance (see Mercosur and the alliance of the Pacific: their role in Latin American regional integration ¿Are they opposed or can they be complementary?). It is being viewed as a novel and intelligent project of deep integration. At times, it generates an enthusiasm which, however, would not always seem based on solid facts that transcend the realm of the media.

We noted then that the high expectations that are usually awakened by the various forms of integration processes have often resulted in trends towards frustration that are difficult to overcome. We used, in this respect, the idea of 'disenchantment curve' and we mentioned the case of the Latin America Free Trade Association (LAFTA) as one of the regional examples in order to illustrate this assertion. But a more interesting example is the original Andean Group, later transformed into the Andean Community of Nations. In both initiatives Chile, Colombia and Peru had an important participation. These countries, along with Mexico, are the current promoters and members of the Pacific Alliance.

The phenomenon of the curve of disenchantment, however, can be examined today through the current experiences of Mercosur and the European Union. These are regional spaces, projects and processes that are very different from each other. But in both cases we can observe times of fervor and enthusiasm followed by others of frustration and disappointment. This seems, indeed, to be what characterizes the stage that has been developing in recent years. It is a disappointment that tends to be reflected even in debates of the existential type -about why to work together in a common project- and not exclusively of the methodological kind- about how to carry it out.

We observed also that the curve of disenchantment, when it becomes evident, does not necessarily lead to the abandonment of the respective integration project. But it can lead to a growing irrelevance of it. The founding moments are those that typically generate higher expectations and illusions. And somewhere in the course of the project and the process that it embodies, in a moment not always easy to identify, the stage of disillusionment begins. This is usually driven by changes in the realities and by the dilemmas and the hurries of the short-term agendas of the member countries.

On this regard we have to remember that, beyond the will of the protagonists, the political pace in most countries tends to be dominated by short-term issues. Thus, in a strategic framework which is long-term by definition there are moments in which there is a predominance of short-term requirements, such as those determined, for example, by the effects and demands originated by a change in the global context, an economic crisis or any electoral process of uncertain results. It is in such moments when doubt begins regarding the rationality of the stated objectives, or at least about the possibility of achieving them in reasonable time. Such doubts result in the erosion, in general gradual, of the relevance attributed to the integration project in its founding stage. The willingness to comply with the commitments made with the partners is then weakened. And this is most acute in those cases when there is, simultaneously, a change in political staff as a result, for example, of a new government and a weakening of the impulse originated in companies with competitive interests resulting, for example, from their participation in trade and production networks of regional scope.

In order to move forward in the analysis of the phenomenon of the curve of disenchantment, it becomes relevant to clarify what we mean by 'integration' between nations in this opportunity. It is a concept that lends itself to many definitions based on different theories and historical realities. There is even some confusion about the difference between 'integration' and 'cooperation', which at times leads to semantic discussions, valuable to the academia but with little relevance for the management of realities.

In this opportunity, by integration we are referring to a deliberate, voluntary and institutionalized project and process between nations that share the same geographic space and whose objective is to attain, within some sort of common framework, increasing degrees of articulation between their political, economic and social systems, without necessarily resigning their national identity or sovereignty. In order to eventually achieve the desired aims, the goals and time limits that are set are usually long term; institutions and legal frameworks are created (for which there is no mandatory model) and in the area of trade preferences, some of the instruments that make them compatible with the requirements of the multilateral trading system are used (especially those of article XXIV, paragraph 8 of the GATT, the so-called 'Enabling Clause', and article V of GATS). These are sufficiently ambiguous in some of its key features so as to provide a more than reasonable margin of maneuver for a valid and intelligent legal engineering. These are processes and projects that can generate overlapping and not necessarily complementary spheres of action of the participating countries. Elaborating on the basis of what Luuk Van Middelaar proposes in his stimulating book, included in the Recommended Reading Section of this Newsletter, we could say that such spheres can be, at the same time, individual (each nation on its own), collective (nations acting together but only on certain issues) and common (the so-called, at least in the European case, 'community space').

What accounts for the frustrations that tend to show when moving forward in the settled path of this type of integration processes? Most commonly the curve of disenchantment results from having established very ambitious objectives and also from having generated high public expectations in relation to them. Highly ambitious goals are defined, either by specific commitments, either by the way they are promoted. There may also be a wrong assessment, either at the time of the launch or during the negotiation process, of the relative weight of the offensive and defensive interests within countries. The concepts and operational instruments that are then used are not always adapted to the specific realities nor to the needs of the participating countries, but tend to be associated with certain historical forms that are often based in theoretical and academic views of the economic, political or legal realities. As a result of this, the necessary, almost indispensable, balance between flexibility (to adapt to the continuous changes in the contextual realities and particular interests) and predictability (to become an incentive for productive investment decisions in relation to the extended markets and the articulation of productive networks) is not always achieved. When this balance is not achieved, an erosion of the effectiveness, efficiency and legitimacy of the agreed rules can be observed, often as in slow motion. If no adequate response exists, the relentless march of the common project and process towards irrelevance or, worse still, towards failure, is accentuated.

When Mercosur was created, for example, some of the protagonists at the time used to assert that the member countries would achieve in four years (the transition period established by the Treaty of Asuncion for the start of the customs union with the adoption of common external tariff, without defining what such an instrument should consist of) what had taken the European half a century to accomplish. There was an enthusiasm that time proved exaggerated, perhaps naïve. It was based on the prevalence of factors that later became diluted, such as the need to address together the FTAA negotiations, especially Argentina and Brazil; the relative coincidences in the economic cycles and in the respective macro-economic and trade policies, which started to show signs of exhaustion in the second half of the nineties; and the need to tackle a bi-regional negotiation with the EU that would diversify international economic relations in view of the obvious interest of the U.S. to gain preferential trade areas in South America.

In turn, the weight of the European 'model' was one of the factors that influenced the level of ambition of the Andean Group, at least in its initial stage. It was reflected, especially at the institutional level, in the driving role assumed by the Board of the Cartagena Agreement and then with the creation of the Andean Court of Justice. It is likely that the intense European technical cooperation finally tipped the formulation of this body towards the model of the Court of Justice in Luxembourg, despite alternative proposals that took into account the enormous distances existing between the European and Andean regions and their respective integration processes.

In other cases, the set objectives went beyond the interests of the countries, reflecting exogenous demands, as was the case with the creation in 1960 of LAFTA. The instrument of the free-trade zone, provided in article XXIV of GATT, with the freeing of substantially all the trade within a period of twelve years proved to be too rigid for the region. It conditioned the construction of a system of trade integration alien to the regional realities and needs. What was sought originally was a preferential trade area that would allow to pool and thus replace the network of bilateral preferential trade agreements threaded since the global economic crisis of the thirties. It was the U.S. pressure which introduced a figure difficult to implement. Hence it was then necessary to replace it with the creation of the Latin America Integration Association (LAIA), twenty years later. But the damage was done: the bitter taste of a first and notorious failure in achieving the goal of a greater integration of Latin American markets remained. And maybe we can find in this experience the origin of a trend that has endured to the present in regional integration. This consists of assigning more weight to appearances than realities and, in particular, of developing a culture of precariousness in the ground rules of inter-regional trade, which were many times conceived to be complied "only to the extent that is was possible". No doubt this trend may have affected, even strongly, the impact of the integration commitments on the adoption by business firms -especially small and medium-sized and of the relatively less developed countries- of productive investment decisions that counted as a true fact the access to the markets promised by governments and, in particular, by the countries with domestic markets of larger relative size.

The assimilation of the concept of integration with the creation of a new unit -be it a new nation or a new common economic space similar to those of pre-existing national spaces- has also contributed to the sense of frustration often produced by the attempts of different countries to move towards common goals. The idea of an end result that in one way or another involves overcoming the idea of sovereign nations prevails. Hence, the importance that was attributed, in the integration narrative, to the confusing and questionable concept of 'supra-nationality'. It was also understood that such end result could be reached in a period of time that was considered reasonable and therefore feasible.

What has been proposed assigns importance to a question that requires collective thinking: what are some of the factors that would enable to sustain over time the political will of a group of nations to work together within the scope of an integration process?

Notwithstanding the need for further elaboration we can argue that, as we pointed out in the aforementioned Newsletter of last June, there are three factors that would deserve more attention: a) the capacity of adaptation of the original project and its corresponding process to the continuous changes that operate in the realities of the participating countries, the regional environment and the global environment itself; b) the density and quality of connectivity at all levels, but especially in production, through networks developed as a result of the commitments made in the framework of the process of integration, and c) the institutional quality and, in particular, of the ground rules, measured by their effectiveness (the ability to penetrate reality), their efficacy (the ability to produce the results that gave rise to them) and their social legitimacy, (the capacity to contemplate, through the process of creation of rules, the social interests of all member countries, reflecting thus a dynamic picture of perceived mutual gains). Without the sum of these three factors it is difficult for a voluntary integration process -in the sense of systematic joint work between sovereign nations that aspire to remain so- to last in time, at least without undergoing profound changes.

What are the risks of the curve of disenchantment due to its possible effects on the factors that lead a group of countries to attempt to develop an integration process? We will return to this question in our upcoming February Newsletter.



Recommended Reading:


  • Altenberg, Per, "Global Value Chains and the Transatlantic Trade and Investment Partnership", Kommerskollegium, National Board of Trade, Stockholm, May 2013, on http://www.kommers.se/.
  • Chang, Jung, "Empress Dowager Cixi. The concubine who launched modern China", Alfred A. Knoff, New York 2013.
  • Evennet, Simon; Jara, Alejandro (edts.), "Building on Bali: A Work Programme for the WTO", CEPR, A Vox-Eu org. e-Book, London 2013, on http://www.voxeu.org/.
  • Gunnarsson Ljungkvist, Malin, "Global Value Chains and Developing Countries: An Introduction", Kommerskollegium, National Board of Trade, Stockholm, November 2013, on http://www.kommers.se/.
  • Jenks Andrew; Persson, Sofía, "Global Value Chains and Services: An Introduction", Kommerskollegium, National Board of Trade, Stockholm, February 2013, on http://www.kommers.se/.
  • Kasteng, Jonas; Prawitz, Camilla, "Eliminating Anti-Dumping Measures in Regional Trade Agreements. The European Union Example", Kommerskollegium, National Board of Trade, Stockholm, November 2013, on http://www.kommers.se/.
  • Kasteng, Jonas; Prawitz, Camilla, "Effects on Trade and Competition of Abolishing Anti-Dumping Measures. The European Union Experience", Kommerskollegium, National Board of Trade, Stockholm, November 2013, on http://www.kommers.se/.
  • Le Goff, Jacques, "La nascita del Purgatorio", Einaudi, Torino 1996.
  • Lehmann, Jean Pierre, "Bali Boost: WTO Lives, Snatched for Now from Jaws of Defeat", YaleGlobal Online, Lausanne, 10 December 2013, on http://yaleglobal.yale.edu/.
  • Primo Braga, Carlos, "The WTO Bali Package. The Doha Development Agenda (DDA) is (still) alive", IMD Challenges, Lausanne, December 2013, en: http://www.imd.org/.
  • Meller, Patricio (editor), "Recursos Naturales y Diversificación Exportadora. Una mirada de futuro para América Latina", CIEPLAN-CAF, Santiago de Chile 2013.
  • Morse, Hosea Ballou, "The Trade and Administration of the Chinese Empire", Longmans, Green and Co., London 1908 (Published by Forgotten Books, London 2012).
  • Morse, Hosea Ballou, "The International Relations of the Chinese Empire", vol. I, Longmans, Green and Co., London 1917 (Published by Forgotten Books, London 2012).
  • Morse, Hosea Ballou, "The International Relations of the Chinese Empire", Vol. III, Longmans, Green and Co., London 1918 (Published by Forgotten Books, London 2012).
  • Richelot, Henri, "L'Association Douaniére Allemande, Ou, Le Zollverein. Son histoire, son organization, ses relations avec l'Autriche, ses résultats, son avenir, avec des Annexes", 1859 (RareBooksClub, Memphis, USA 2013).
  • Van Middelaar, Luuk, "El paso hacia Europa. Historia de un comienzo", con Prólogo de Josep Ramoneda, Galaxia-Gutenberg, Barcelona 2013.
  • Worms, Émile, "L'Allemagne Économique: Ou, Histoire Du Zollverein Allemand", Paris, A.Marescq Ainé, Libraire-Éditeur, Paris 1874.

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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