| A DENSE YEAR OF INTERNATIONAL TRADE NEGOTIATIONS
The three main fronts that can affect Argentina and Latin America
by Félix Peña
English translation: Isabel Romero Carranza
The year 2018 presents a dense agenda of international
trade negotiations. Many of these negotiations will have an impact on
the redesign of the institutional architecture of world trade. Their essence
is to define ground rules that help achieve economic and even political
objectives for those countries that participate in them. Moreover, they
will help establish institutional mechanisms to ensure that such rules
penetrate reality. However, these negotiations have a most uncertain future
due mainly to the accumulation of past frustrations and the rarefied climate
in the international coexistence of nations.
The agenda unfolds on three linked fronts. One of them is the multilateral
global. The central issue is the questioning of the system based on rules
and institutionalized through the WTO. It affects three elements: i) the
principle of non-discrimination, embodied in the most-favored-nation clause;
ii) its exceptions, the main one being that which authorizes preferential
trade agreements, and iii) the dispute settlement mechanism.
Even when this is not a front formally incorporated into any international
negotiating environment, it is difficult to imagine that it will not be
present in some way or another in the necessary consensus building process
implied by the G20 Summit of Buenos Aires. In this regard, given the evident
inequality of relative power among the countries that compete for world
markets, it would seem essential to reaffirm the validity and strength
of the principle of non-discrimination. At the same time, it would be
necessary to redesign i) the rules that affect the compatibility of preferential
trade agreements with the global multilateral system of international
trade, and ii) the dispute settlement mechanisms to ensure their effectiveness.
A second front is that of interregional and trans-regional preferential
agreements. These agreements are likely to multiply especially if the
standstill of the Doha Round were not to lead to new modalities of agreements
with a multilateral global scope and, much more so, if the mentioned questioning
resulted in the actual collapse of the principle of non-discrimination
resulting from Article I of the GATT-WTO. From the perspective of Argentina
and its Latin American partner, the main front of interregional negotiations
to watch closely is the agreement between Mercosur and the EU. Regarding
the negotiations of trans-regional scope, the one that seems to deserve
more attention is that of the Comprehensive and Progressive Agreement
for Trans-Pacific Partnership" (CPATPP).
A third front is that of regional geographic agreements. Without underestimating
others, the three most important regional fronts are those that are developing
among the NAFTA countries; among European countries -partly because of
Brexit-and among Latin American countries (Mercosur, the relation Pacific
Alliance-Mercosur and ALADI).
The year 2018 presents a dense agenda of various international trade
negotiations. These would all give rise to "private clubs" of
international trade and, therefore, would have some kind of discriminatory
effect towards those countries not included in the resulting agreements.
They can even contribute to a fracture of the current global multilateral
system of world trade.
Many of these negotiations will have an impact -to a greater or lesser
degree, directly or indirectly- on one of the most relevant dimensions
of current international relations, which is the redesign of the institutional
architecture of international trade, with the objective -at least formal-of
reaching a reasonable degree of order in a system that is undergoing and
accelerated process of change and, at the same time, producing a favorable
effect so that international trade contributes to the sustainable economic
and social development of a large number of countries.
The essence of such negotiations is not only to define ground rules that
enable to achieve economic and even political objectives considered valuable
for the countries that participate in them, but also to install institutional
mechanisms that ensure that such rules effectively penetrate reality.
It is, therefore, not a minor issue for the stability of the international
system, either globally or in the different regions, and especially for
those countries with less relative weight in their relations with the
At the beginning of the year, these negotiations present an uncertain
future. The strained climate in the international coexistence of nations
also contributes to generate these uncertainties. A recent issue of "The
Economist", with the striking cover title of "The Next War.
The growing threat of great-power conflict ", includes a special
report on "The future of war. New battlegrounds." Specifically,
it analyzes the factors (geopolitical and technological) that explain
the trends in possible armed conflicts involving major powers (see "The
Economist", January 27, 2018).
In the perspective of Argentina and its Latin American partners, the
development of the 2018 international trade negotiations agenda unfolds
on three main interlinked fronts which are: the multilateral global, the
interregional or trans-regional, and the regional geographic. (See the
2017 edition of this Newsletter on http://www.felixpena.com.ar/).
Moreover, these are fronts influenced by factors that transcend the commercial
and which reflect the deep changes that have been observed in recent years
in at least the following aspects:
i) the greater physical and cultural connectivity of nations and regions;
ii) the unequal redistribution of relative power -both political and
economic- between the main countries, as well as between the companies
that compete for international markets; and
iii) the impact on the production and exchange of goods and services
of innovations resulting from continuous technical progress, as well
as cultural and demographic changes.
The mentioned ones are changes that, in addition, are rendering obsolete
many strategic approaches originated in a historical moment that is being
overcome. This period began at the end of the Second World War and was
characterized by a strong concentration of political and economic power
-and therefore of negotiating clout-in a very small group of countries
belonging to what was called the West. At times, as for example during
the 1990s, it generated the expectation of reaching the conditions to
consolidate a unipolar international system. It was the time of "the
end of history".
This also caused a certain degree of obsolescence of the concepts, theories,
paradigms and models that, during the last seventy years, have developed
and prevailed in international trade negotiations and in the modalities
of the resulting agreements. An example of this is the concept of "free
trade zone" in the light of the interpretation that prevailed on
the rules that were created with the GATT, especially with its article
Hence, the necessary negotiating strategies of each country -including
those of its companies-require taking into account the complexity of the
commercial, political and technological factors that are now affecting
the redesign of the institutional map of world trade. Negotiating as if
nothing had changed can be a serious mistake.
A first front of the current international trade negotiations is the
multilateral global. The central issue on this front is the questioning
that has been made to the multilateral global trading system institutionalized
by the WTO (on the need to defend the WTO system see the excellent article
by Andrew Elke, in the East Asia Forum of last February, included bellow
as recommended reading). Relevant protagonists, especially in the US,
which had a decisive role in promoting the creation of the GATT, affirm
it is a system guided by rules that, in some cases, have become obsolete.
We should bear in mind, however, that the questioning of the rules of
the world trading system embodied in the GATT and then in the WTO often
came from developing countries, and in particular from Latin America.
As we have pointed out on other occasions, they considered that the interpretation
of some rules of the system -including Article XXIV- introduced unnecessary
rigidities, contrary to the flexible modalities of cooperation and economic
integration necessary in the relations between developing nations.
At the G20 meeting in Hamburg, in July of 2017, a consensus could not
be reached on the need to preserve and eventually update the multilateral
global trading system based on rules (see the July
2017 edition of our Newsletter on http://www.felixpena.com.ar/). This
was reflected in the ambiguities of the corresponding paragraph of the
final communiqué of the Summit.
Nor was it possible to make progress in this regard at the XI WTO Ministerial
Conference, held in Buenos Aires, in December 2017 (see the December
2017 edition of our Newsletter on http://www.felixpena.com.ar/). Although
it was not an issue included in the formal agenda of the Conference, simply
reviewing the press coverage of the event indicates the relevance that
was attributed to this issue. This was also reflected in the "Buenos
Aires Declaration" of the presidents and ministers who attended
the opening of the Conference (https://www.wto.org/).
Why is it relevant to address the issue about the preservation of the
multilateral global system guided by institutionalized rules, formerly
in the GATT and now in the WTO? The fact that the questioning of the system
has been made by the US government gives it, indeed, a significant political
The main reason is that at least three key elements of the current system
are affected by such questioning. The first is the principle of non-discrimination,
embodied in the most-favored-nation clause established by Article I of
the GATT. The second is that of the exceptions to this principle, the
main one authorizing-under certain conditions, not clearly defined-those
that result from the application of Article XXIV of the GATT. The third
element is the dispute settlement mechanism, which was perfected when
the creation of the WTO under the leadership of the great Latin American
expert and Uruguayan jurist, Julio Lacarte Muró.
Although the first front is not formally incorporated into any sphere
of international trade negotiations, it would be difficult to imagine
it not being present in any way in the deliberations that precede the
necessary and complex process of consensus building implied by the upcoming
G20 Summit of Buenos Aires.
In the perspective of Argentina and its Latin American partners, but
also of other regions, the fundamental thing would seem to be to reaffirm
the validity and strength of the principle of non-discrimination, avoiding
its gradual erosion. This can be considered as non-negotiable in view
of the evident inequality of relative power between the nations that compete
for world markets. At the same time, it would seem necessary to redesign,
i) the rules that affect exceptions to this principle, through the determination
of the compatibility of preferential trade agreements (regional, inter-regional
or trans-regional) with the global multilateral system of international
trade, and ii) the mechanisms for settling disputes, in light of the experience
gathered since the creation of the WTO.
A second negotiating front is that of preferential agreements of interregional
and trans-regional scope. These are agreements that are likely to multiply,
especially if within the WTO, among other factors, the standstill of the
Doha Round does not to lead to new modalities of agreements of multilateral
global scope. Much more so, if the questions we have already mentioned
translated into an actual collapse of the principle of non-discrimination
resulting from Article I of the GATT-WTO. Furthermore, we should not rule
out that the promotion of trans-regional agreements reflects a strategy
that goes beyond the stage in which the epicenter of the global international
trading system was the WTO, through the creation of other multilateral
systems of global scope.
From the perspective of Argentina and of its Latin American partners,
the main front of interregional negotiations to watch closely is the agreement
between Mercosur and the EU. Although the bi-regional negotiations seem
to have entered into a conclusion stage, it is prudent to wait for the
facts to confirm what the negotiators have optimistically allowed to transcend.
The erratic history of these long negotiations makes caution advisable,
at least on the part of those who do not have access to all the necessary
information. Even if it were confirmed that the signing of the bi-regional
agreement is imminent, it would take a relatively long period to make
it effective and realize its practical impact.
Meanwhile and as we have pointed out before, it would seem even more
advisable to take full advantage of the 1995 bi-regional framework agreement,
especially in terms of the roadmaps and mechanisms provided for in articles
6 to 24 (for
the full text of the agreement, still in force, go to http://www.sice.oas.org/).
A bi-regional report on any progress made in compliance with such articles,
would be extremely useful and should be easily accessed through the web.
Regarding the negotiations of trans-regional scope, the one that seems
to deserve more attention is the future of the Trans-Pacific Partnership
(TPP). After the withdrawal of the US, negotiations to achieve the effective
validity of the agreement have continued. It has been announced that the
remaining eleven countries will sign it in March. It will be called "Comprehensive
and Progressive Agreement for Trans-Pacific Partnership" (CPATPP).
(See the information on https://en.wikipedia.org/.
It was not possible to access the new text of the agreement that would
be signed. It has been pointed out that the negotiations and the texts
remain secret (in this regard, see what was published by Civil Liberties
Australia, on https://www.cla.asn.au/News/category/treaties/).
The original text of the TPP provided that any country, even when not
a member of APEC, could apply to become a member (see the text of article
30-4 on https://www.direcon.gob.cl/).
Official sources have allowed to transcend the possibility that after
Brexit, the entry of Great Britain to this mega trans-regional agreement
"of the Pacific" could happen (see https://www.ft.com/,
The possibility that the US government finally decides to return and the
addition of other highly relevant countries of the Asia-Pacific region
have not been ruled out yet.
In this regard, it should be noted that a development that will be advisable
to monitor closely is that of the scope involved in the concept of "geographic
region". A recent book on the Eurasian regional geographic space
published by Bruno Maçâes, who was the Secretary of State
for European Affairs of Portugal, helps to reflect on this issue with
a perspective that contemplates the historical and cultural as well as
the contemporary and geopolitical. (See the reference listed as recommended
reading of this newsletter. For more information on the author, go to
Finally, the third front of negotiations is that of preferential agreements
between countries of the same regional geographical space. Among others,
the three most important regional fronts are those that are being developed
among the NAFTA countries, among the European countries, partly as a consequence
of the withdrawal of the United Kingdom, and among the Latin American
The latter has three main spheres of negotiations. One of them is the
recovery of the full vitality of Mercosur. The electoral processes in
Brazil and Paraguay will probably affect the pace that can be applied
to the adoption of decisions that will allow for the full restoration
of such vitality, based on the progress that has been achieved in the
last Mercosur meetings. The second is the articulation between the Pacific
Alliance and Mercosur, in which there have also been advances in recent
months. Finally, the third is that of the initiatives aimed at harnessing
the full potential of the institutional framework of LAIA. The three can
be linked together and, to that end, it will be essential to watch closely
the progress that can be achieved from the initiatives promoted at the
time by the General Secretariat of the LAIA. (In this regard, refer
to the June 2017 edition of this Newsletter on http://www.felixpena.com.ar/).
The three fronts that make up the 2018 agenda of international trade
negotiations relevant to Argentina and its Latin American partners will
require an effective effort of intelligent monitoring by the respective
governments and the social sectors concerned, especially the business
sector. Only through well-processed quality information can they expect
to adapt their own strategies to negotiations that will continue to be
very dynamic and complex. This will require an effort to overcome concepts
and approaches that have become obsolete. Such effort will not come easy.
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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