| ARE THE RULES OF MERCOSUR CREDIBLE?
If not, what could be the political and economic consequences?
The credibility of the ground rules in an agreement
between sovereign nations that decide to work together, because they understand
that it is in their best interest, is what allows a rational articulation
between the three dimensions of a voluntary integration process. These
dimensions are the political, the economic and the legal. The articulation
between them is essential for the process to become credible.
In a process such as Mercosur, the credibility of the ground rules
is a relevant question from the perspective of the member countries and
of those countries who seek to negotiate agreements with them that have
an impact on trade and investment.
Two recent events make this issue more current. The first is the idea
that a Mercosur country can negotiate bilateral free trade agreements
with non-member countries which are not part of the network of preferential
trade agreements of Latin American countries, especially within the framework
of LAIA. The second is that a Mercosur member country may unilaterally
modify a significant part of its external tariff without the formal consent
of the other member countries.
These two facts are related to each other and would imply, in practice,
discarding the idea that Mercosur is a customs union and replacing it
with the idea that it is a free trade zone. If this were eventually the
preference of the member countries, it would require an amendment of the
current version of the Treaty of Asuncion. This would not only involve
an agreement between the executive authorities of the member countries,
but would also require the formal approval of their respective legislative
An alternative procedure could be what is often referred to as the
"liquefaction" of what was agreed, that is, to erode -sometimes
very gradually, almost "by dripping"-the commitments assumed
by means of interpretations that, in practice, would imply a substantial
modification of what was formally agreed. One side effect of this course
of action would be the erosion of the credibility of the whole process
in its legal, economic and political dimensions.
The issue of the role of the Law in a process of economic integration
has been present from the very beginning of the development of the idea
of institutionalizing joint work in the area of trade and investment between
the countries of Latin America.
In this regard, it is worth reading the prologue entitled "The Role
of Law in a Process of Economic Integration'', which was prepared by the
legal section of the Institute for the Integration of Latin America (INTAL-IDB),
as an introduction to the "Manual on the Law of the European Communities'',
by Italian Professor Nicola Catalano. This work was published by the Institute
in 1966 as part of its broader goal of facilitating a better understanding
of the budding experience of European integration.
Reading this prologue is still a good starting point for those who, several
decades later, are beginning to specialize in the relevant issues of integration
processes in this or other regions. It is also a good starting point for
those who operate in the political or economic sphere of a contemporary
integration process and, in particular, for those who wonder about the
relevance of the legal aspect of its development.
Slightly over thirty years after its creation as the institutional framework
of an economic integration process between four South American countries
(Argentina, Brazil, Paraguay and Uruguay), it is timely to question the
credibility of the ground rules agreed for the development of the so-called
Mercosur since the signing of the Treaty of Asuncion, in 1991. On previous
opportunities we have addressed from different perspectives certain issues
related to those that we will develop here (see for example the August,
September and October 2021 editions of our newsletter).
It should be noted that the credibility of the ground rules in a relationship
between sovereign nations that decide to work together because they understand
that it is in their best interest, is what enables the needed rational
articulation between the three essential dimensions of a voluntary integration
process. These dimensions include the political, the economic and the
legal aspects. In other words, without credible rules, such articulation
becomes difficult and even impossible.
Therefore, it is a question whose answer becomes most relevant, both
from the perspective of the member countries and of those who seek to
negotiate agreements with them that have an impact on trade and investment.
These are essential questions in order to be able to assess their effective
value as legal rules from a political and an economic viewpoint. They
become even more relevant when one of the purposes of an integration project
is to influence the image of the member countries on the external front,
namely in the countries of those who have to make the relevant investment
decisions, that is to say, to invest money that will eventually generate
From a political perspective, the credibility of the legal rules of an
integration process is linked, among other aspects, to the level of confidence
generated, especially in the citizens of the member countries, by the
commitments assumed in relation to the idea of joint work undertaken in
the regional space. If the rules were not credible --at least those considered
most relevant for the intensity and quality of relations between the associated
countries- it is obvious that the project as such would also lose credibility.
This loss of credibility would affect the image of the member countries
in the eyes of other countries, somehow indicating that what is promised
will not be fulfilled and, therefore, should not be taken seriously.
From an economic perspective, such credibility refers mainly to the perception
that an investor from a member country or from a non-member country may
have regarding the actual compliance with the rules at the moment of effectively
realizing their investments, particularly if these involve considerable
sums. Moreover, in the event that the rules were not complied with, that
there would be effective and therefore credible judicial instances to
resort to for the legal defense of their interests.
Among others, two recent events contribute to the current relevance of
the issue at hand:
a) The first is the onset of the idea that a Mercosur member may negotiate
bilateral free trade agreements with non-members and countries that
are not part of the network of preferential trade agreements signed
by the Latin American countries, especially within the scope of LAIA.
This would imply contradicting basic rules of the Treaty of Asuncion
(articles 1 to 8) which can be attributed to the particular circumstances
at the time of its inception. Assuming that the member countries shared
the idea that negotiating bilateral free trade agreements with non-member
countries would be convenient for them, it might require prior modification
of the corresponding articles of the Treaty.
b) The second is the idea that a member country can unilaterally modify
a significant part of its external tariff without the formal approval
of the other member countries. In practice, this would imply the dilution
of one of the basic instruments of Mercosur, which is precisely the
common external tariff (article 1 of the Treaty). The history of the
Treaty of Asuncion helps us to understand why the rules that today would
make it legally impossible to cast aside the instrument of the customs
union were initially adopted.
The two facts mentioned above are related to each other and would imply,
in practice, setting aside the idea that Mercosur is a customs union and
replacing it with the idea that it is a free trade zone. If this were
eventually the preference of the member countries, it would require a
modification of the Treaty of Asuncion. In such a case, an agreement between
the corresponding executive authorities would not be sufficient, and would
therefore require the formal approval of the legislative bodies of each
An alternative procedure could be what is often referred to as the "liquefaction"
of what was agreed. That is, to erode -often gradually, almost as if "by
dripping"-the commitments undertaken by means of interpretations
that, in practice, would imply a modification of what was formally agreed.
The cost could be to sow doubts --even serious ones-about the credibility
of what was agreed. These are doubts that would extend far beyond the
economic and the legal aspects and would penetrate deeply into the political
The consequences could be serious, especially if we take into account
that the erosion of the credibility of legal rules can have a very negative
impact on an association of contiguous nations that understand that they
need to work together within a credible framework of regulations. Much
more so considering that these are nations that are markedly unequal in
their relative power, as a result of their disparate geographic and, above
all, demographic dimensions.
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Félix Peña es Director
del Instituto de Comercio Internacional de la Fundación ICBC; Director
de la Maestría en Relaciones Comerciales Internacionales de la
Universidad Nacional de Tres de Febrero (UNTREF); Miembro del Comité
Ejecutivo del Consejo Argentino para las Relaciones Internacionales (CARI).
Miembro del Brains Trust del Evian Group. Ampliar