Our purpose is to contribute to the analysis of the implementation of
different modalities of regional preferential agreements (RPA's) (1).
This subject can be approached from at least three relevant perspectives.
The first one is the relation or connection between RPA's rules and collective
disciplines resulting from the rules of World Trade Organization (WTO)
multilateral global trade system.
The second perspective is the relation or connection between the rules
of some RPA's and the collective disciplines resulting from a broader
regional preferential agreement to which they could be formally related.
This perspective is relevant in certain cases, such as the Latin American
Integration Association (LAIA) that formally is the enabling framework
for most of the RPA's concluded among Latin American countries. Eventually
this could be relevant in the case of the Free Trade Area of the Americas
(FTAA), depending upon its final format.
The third one is the relation or connection between the rules of an RPA
and the domestic law of each participant country, particularly concerning
the normative framework of public policies affecting foreign trade as
well as firms' strategies and investment decisions.
We will start by analyzing the phenomenon of RPA's and their rules. Thereafter,
we will approach each of the perspectives mentioned above. We will make
special reference to LAIA's and Mercosur's cases. Finally, we will deduce
some conclusions related to the main topic of the Second Conference IDB-CEPII.
The regional preferential agreements and their rules
The regional preferential agreements have proliferated in last years.
In this regard, Professor Jagdish Bhagwati refers to --with some exaggeration
perhaps-- an "epidemic" (2). Formally, all of them consider
that they are consistent with WTO principles, objectives and rules. That
is to say, they want to be perceived as tools functional to the objective
of expanding and freeing the global trade of goods and services and to
the objective of contributing to a greater welfare of their citizens and
even for the whole humanity.
This is not a new phenomenon. On the contrary, in historic terms, the
new event is the existence of a global framework of multilateral trade
disciplines initiated in 1947 with GATT and accomplished in 1994 with
WTO creation. Before the Havana Conference, there had been various precedents
of RPA's, usually associated to the beginning of a new sovereign State.
The Zollverein is the most known, but not the only one (3).
Through history, we can observe in the genesis and development --including
the eventual failure-- of RPA's, the constant interaction among political,
economic and legal factors. Capturing the whole essence and dynamics of
each RPA --and of RPA's as an historic and contemporaneous international
phenomenon-- requires understanding the interaction of the three logics
of power, welfare and legality. This can be easily perceived by anyone
who is or has been an actor in the processes of negotiation and decision-making
on each partner country regarding any RPA. Alternatively, eventually to
anyone who is or has been an actor at the multinational level of the institutional
mechanism of any RPA.
Therefore, understanding and assuming this interaction is relevant to
any academic reflection trying to comprehend the phenomenon of RPA's and,
particularly, to any attempt of theoretical elaboration. It is more relevant
yet, in the case of any policy-oriented reflection. Having said this,
it is still relevant to understand separately the dynamics of each of
the three logics, but knowing in advance that this captures only a part
of a more complex reality.
RPA's are agreements adopting different modalities. There are not pre-established
models with universal validity. They may be classified pursuant to different
criteria. The following four seems to be the most relevant:
- existence or lack of physical contiguity among partners;
- bilateral or multilateral scope according to the number of participant
- market integration techniques utilized within those stated by Article
XXIV of GATT-1994, that is to say, a free trade area or a customs union,
or within those permitted by the extent of the Enabling Clause, negotiated
and approved during the Tokyo Round (4), and
- the distribution of economic and political power among partners and,
particularly, the extent of disparity on their respective degrees of
Each agreement develops its own system of rules. In certain way, they
can be visualized as a "private club" within the frame of a
"global club" (5). From the global trade system's point of view,
RPA's are differentiated subsystems, with a geographic regional character
in certain cases.
RPAs' rules can be visualized as a code of signals to markets --and third
countries-- as to which will be the future conditions governing trade
and investment flows within the economic area integrated by the partner
In the frame of contemporary global economic competition, these signals
fundamentally attempt to attract productive investments and to influence
the strategic decisions of firms, both of those already operating within
an economic area that involves an RPA --big companies and SME's-- and
of those competing in the global market.
As a result, the perception of the rule quality of an RPA -- measured
in terms of the potential of effectiveness, efficacy, sustainability and
legitimacy (6)-- is a key factor for the "decoding" carried
out in their respective strategies by firms competing, or attempting to
compete, at the global or regional markets of goods and services. That
explains also the importance for companies and investors of the fluent
dissemination of information about rules, including those at the stage
of preparation (7). From this perspective, the transparency in the process
of RPA's rule making is something valuable for the competitive intelligence
of companies. In certain way, we could affirm that today the quality of
an RPA, at least from the point of view of its rules-production and decision-making
processes, is reflected in the quality of its web page.
Those who operate in global and regional firms count with a clinical
eye prepared to distinguish, in the perspective of their competitive intelligence
management, solid and credible signals from those being predominantly
exercises of "diplomacia mediática" or "policies
of special effects". In particular, the quality and sustainability
of the political systems of the partner countries, as well as the quality
of their respective macroeconomic, industrial and foreign trade policies,
are relevant factors in the judgment carried out on credibility of signals
arisen explicitly or implicitly from an RPA's rules.
The origin of an RPA's rules is, in general, an international multilateral
legal instrument that establishes a treaty, as defined under the Vienna
Convention, whatever its formal denomination may be. From the original
constitutive agreement derives a rule's system of the association of States,
applicable only between partners, notwithstanding the economic effects
that it may produce beyond the limits of the respective economic area.
The constitutive pact is based on a satisfactory balance of national
interests between partners. Nobody can force a sovereign State to be part
of an RPA. If any country decides to do so is because the RPA is considered
convenient to its national interest. The factor explaining the origin
of the constitutive pact is the perception of expecting mutual benefits
by all the partners. It also explains its maintenance through time. This
perception allows an RPA to acquire legitimacy before the respective citizens.
The social legitimacy is a key factor for the sustainability of an RPA
through time (8).
We can observe three common denominators as to the objectives of RPA's
system of rules, whatever their modalities may be. They are:
- guaranteeing the access to the respective markets, of goods and eventually
services and persons originating from each of the partners;
- establishing some degree of discrimination in favor of the partners
on the access to the respective markets -- for example, through a common
tariff in case of a customs union, or specific origin rules and investment
and public procurement regulations in case of a free trade area -- and,
eventually, to the way of operating within each of their markets, and
- developing explicit or implicit collective disciplines between partners,
with the practical effect of conditioning the autonomy on the shaping
and implementation of public policies, especially in the fields of macroeconomics,
foreign trade and investments.
Generally, a mechanism for producing rules is also included in the original
pact, from which may result secondary or complementary rules with respect
to those included in the founding agreement. The rational conclusion is
to suppose that while producing these rules -- as happened with the original
agreement -- the partners wish them to penetrate into reality, being effective
and, therefore, producing the expected economic and eventually political
There is not a unique model deriving from international rules, which
prescribes how RPA's institutions should be organized (9). However, through
the analysis of concrete cases we can recognize certain functions that
institutions should comply with. The principal ones are:
- preservation through time of the reciprocity of national interests
that explains the original pact;
- producing complementary and secondary rules derived from the constitutive
agreement, which permits its implementation, its adaptation to changing
circumstances or -- particularly in the case of a common market or economic
union -- the further development of a common project;
- management of conflicts that may arise between partners as a result
of the implementation of the RPA and the trade or investment dispute
resolution through common jurisdictional mechanisms, arbitral or judicial,
- the dissemination of information on rules and their implementation.
These functions will be broader if RPA's objectives are deeper and more
complex. For instance, a monetary union and an economic union between
a large number of contiguous sovereign States, having developed or attempting
to develop explicit political objectives (including the field of security),
may require more complex institutions than a simple free trade area between
countries lacking physical proximity.
Finally, two factors have a strong influence on the characteristics and
modalities of RPA's institutions:
- degree of interdependence and connectivity existing among the economies
of the partner countries, weighed in particular by the intensity of
the trade, investment and financial flows, and
- the distribution of relative power - economic and political - between
partners, in particular with respect to asymmetries in the interdependence
and connectivity of their respective economies.
The regional preferential agreements and the WTO
The issue of linking the multilateral global trade system with the regional
preferential subsystems -- including the tension between both phenomena
- has today and will continue having in the near future a significant
place, both in the academic consideration and the practice of the international
Multilateralism, understood as the system of principles, rules and institutions
aimed to develop at a global scale, collective disciplines affecting the
international trade of goods and services, including the investment flows.
This multilateral global trade system is developed within the WTO, especially
in its main contractual frames, the GATT-1994 and the GATS.
Regionalism, understood as regional subsystems resulting from preferential
agreements -- therefore discriminatory -- entered into by a group of two
or more countries, whether contiguous or not, whatever their modalities
and objectives additional to the economic and trade ones may be. As such,
they are exceptions to the principle of non-discrimination and the most-favored-nation
treatment, cornerstones of the multilateral global trade system of the
WTO. From the latter's perspective, they represent subsystems with their
own objectives, rules and institutions.
The relevance of this link has been intensified in the last years, due
to the Uruguay Round results and the creation of WTO; the NAFTA; the expanding
process at the European Union; the progress of negotiations of North/South
free trade agreements (for example, FTAA; APEC; free trade agreements
with the EU; free trade agreements concluded by USA, among others, with
Mexico and Chile in the Latin-American area, and the beginning of the
negotiating process between Mercosur and the EU); and the multiplication
of free trade and integration agreements between developing countries,
for example within LAIA's, among which one of the most significant is
Mercosur due to its economic dimension.
The link between regional preferences, bilateral or multilateral, and
the multilateral global trade system is also one of the most relevant
issues in the agenda of the negotiating round initiated at Doha within
the frame of WTO.
As a consequence of all this, we can observe an important growth of related
bibliography, and many of the contributions have the merit of offering
multidisciplinary perspectives in which all factors are taken into account,
not only the commercial ones. Therefore, they enter within the broader
theoretical frame of international relations, not being confined to the
more restricted frame of international trade (10).
The experience of recent years allows making some observations about
the interaction between the multilateral global trade system and the preferential
regionalism, from the standpoint of the international commercial and economic
1. In the international trade, both the multilateral global system
and the preferential regionalism, in their accurate expressions of last
part of the 20th century, are political, economic and legal-institutional
realities with profound roots in their respective environment, and will
continue forming part of the world scenario in the near future.
Both systems have their own logic and dynamics. Only in theoretical
terms, anyone could imagine the suppression of one of these realities.
The first one reflects a deeper process with a clear political, economic
and cultural dimension, which is the growing and apparently irreversible
globalization of the world economy and politics.
The second reflects the existence of international subsystems where
deep forces sustaining the distinction between "us" and "them",
as is the case of the European Union, the Mercosur and the NAFTA, go
far beyond the commercial sphere and respond since the foundational
moment to powerful political and even strategic reasons. They are nurtured
by the fact that their member countries share geographical spaces, but
above all, they share historical, strategic and cultural spaces. However,
it also reflects international trade negotiating strategies, which impels
the growing multiplication of free trade bilateral agreements between
nations with economic and even political affinity but without geographical
Regionalism among neighboring countries in its trade and economic dimension
is usually only part of broader processes aimed to generate spaces of
peace, political stability and democracy, in which the integration logic
-- deep-rooted in the open society values -- is predominant. Progressively,
they are processes looking for sustainability in the social cohesion,
as a central value and as a privileged competitive tool at a global
2. Multilateralism and regionalism are not necessarily contradictory
dimensions to the efforts of building a global system of international
trade and economic relations, based on principles of free trade and
a reasonable balance between the interests of different nations.
On the contrary, since the creation of the European Economic Community
-- going through its enlargement and formation of a single market until
the present stage of a monetary union -- we can observe a constant interaction
between the achievements of this regional experience with the ones occurred
at the multilateral global level and in other regions.
The snowball effect of RPA's is translated into what was named competitive
regionalism and into driving forces to the own multilateral global trade
negotiations. The concern towards the competitive preferential regionalism
is also a factor influencing the achieved consensus at the global multilateral
level, as we could observe at the Uruguay Round negotiations and, eventually,
will the case of the Doha Round.
However, at the same time, the development of the multilateral global
trade disciplines, especially since the Uruguay Round conclusion, conditions
the development of the regional preferential schemes, reducing the room
for the development of the feared temptation to develop real or mythical
The "stumbling blocs" ghost, which was made popular in the
academic literature since Bhagwati's stating in 1991 (11), did not get
reflected in reality, even when there is room to consider that not all
of the regional preferential manifestations could totally fit, or at
least in all their aspects, within the figure of the "building
In this sense, special attention deserves the discriminatory effects
that may arise from RPA's -- especially in their access conditions by
third countries -- which are not the result of a geographic regional
international subsystem, and which involves countries without any direct
3. Principles and rules, multilateral and regional, interact in various
Increasingly, RPA's whatever their modalities may be, for example, free
trade area or customs union, or the multiple hybrids we could observe
in practice, are conditioned by WTO rules. Their international legitimacy
depends largely upon their conformity with Article XXIV and with other
contractual commitments taken on at the WTO, such as the already mentioned
At the same time, in some cases the "WTO-plus" character of
RPA's establishes precedents affecting future multilateral negotiations
--both global and regional--, as has been the particular case of NAFTA
-- and would wish to be the case of the free trade agreement entered
into USA and Chile --, at least in the USA vision.
The interaction between multilateral global trade rules and regional
preferences has also practical relevance when examined through the perspective
of the domestic law of the countries that are members, at the same time,
of WTO and of one or various RPA's. It is more evident in cases of countries
such as Argentina, where their Constitution guarantees the supremacy
of treaties over national legislation. We will approach this topic later
4. The observed trend, not only towards the pacific coexistence
but towards the constructive complementation as well, between multilateralism
and preferential regionalism, could be reinforced in at least three
spheres of action:
- In the multilateral level, to the extent that there is a strengthening
of WTO mechanisms aimed to guarantee the dynamic compatibility of
RPAs and the multilateral global principles and rules.
Different specialists have proposed practical ideas in this direction
(12). This would mainly implicate giving form to collective disciplines
referring to rules of access to the different preferential agreements
in order to avoiding discrimination against countries with potential
conditions to acceding; to strengthen the rules in order to avoiding
the discriminatory effect that may result from the specific origin
rules of the free trade agreements; to carry out an impartial and
effective monitoring of RPAs' evolution in light of the multilateral
global commitments; to guarantee a maximum degree of transparency
on their rules and their implementation, and to expedite the access
of particulars to the utilization of disputes resolution mechanisms,
in cases where an RPA clearly collisions with the multilateral global
system principles and rules, weakening or nullifying their efficacy.
The idea at this level would be to believe in the global vocation
of RPA's, but just in case, monitoring it closely and strengthening
- In the regional and even interregional level, to the extent member
countries of an RPA carry out, in the rules applicable to their reciprocal
relations and to their foreign trade policies, their expressed political
will of being consistent with the commitments taken on at the WTO.
To that end an essential element is the authentic vocation of stability
and permanence of an RPA, that is to say, it cannot be perceived as
an easily "disposable" instrument of foreign trade policy.
It is that vocation -- together with the opening to the rest of the
world - the one that brings legitimacy to the preferential treatment
from the perspective of the multilateral global trade system.
At the same time, the already mentioned consistency contributes to
protect the interests of countries of less relative dimension, especially
in the cases of RPA's characterized by obvious asymmetries in the
size and the degree of development of their partners' respective markets.
It also contributes to one of the central purposes of an open preferential
regionalism process, which is creating a predictable frame to attract
global competitors investments interested in introducing their investments
and rendering services via networks beyond the limited dimension of
a region, and
- In the national level, to the extent each country is capable of
developing strategies of international economic insertion, which allow
them taking maximum advantage of the broader operation margin allowed
by the end of the Cold War bipolar world and the economic globalization,
capitalizing on their favor the greater degree of permissibility existing
today in order to profit from all the opportunities of economic competition
at a global scale.
This leads to looking for foreign commercial alliances neither exclusive
nor excluding, in spite of privileging, as the core of this strategy,
the strategic alliance with the contiguous region.
This is more apparent due to the recent trend to assert, from the
conceptual and practical point of view, the idea of integration to
the world and to a determined region, privileging the national interest
of creating at the same time, stable, flexible and dynamic external
environments favorable to domestic efforts for consolidation of democracy,
economic modernization, social cohesion, and the competitive insertion
both in one region and the whole world.
The network-integration (13) concept with its institutional consequences
is increasingly the counterpart of the development by firms of trade
and production networks at a global and regional scale. Within this
concept, we find one of the keys to understand the dynamic and complementary
relation between the global multilateralism and the preferential regionalism,
perceived from the unavoidable and privileged view, from both countries
It is in this context that we should approach and reinforce the arguments
aimed to achieve within the WTO framework a development of collective
disciplines regarding RPA's, and especially, regarding those that do not
reflect the commercial dimension of natural geographic regionalisms.
These collective disciplines may be a key factor to assure the preservation
of the "rule-oriented" character, as opposed to the "power-oriented"
one, not only of the multilateral global trade system but of each RPA
as well (14). Within the predominance of a "rule-oriented" approach,
we could finally find the answer to Bhagwati and many others' legitimate
concern, towards the negative effects potentially caused by a proliferation
-- or epidemic -- of RPA's, conceived mainly as instruments of international
power and not necessarily as a way to advance the expansion and freedom
of global trade.
The regional preferential agreements implemented within the frame
of broader agreements: the LAIA's case
Within LAIA's frame, we find a broad number of RPA's between Latin-American
countries. Precisely, the transformation in 1980 of LAFTA into LAIA had
as its principal objective facilitating the implementation of RPA's between
peers or groups of member countries open to other partners, but with preferences
not automatically extendible to all of them.
In fact, LAIA has become a frame that enables the implementation of RPA's
between some of its member countries, despite its more general objectives
-- including the achievement through time of a common Latin-American market
-- and other functions it complies or may comply in relation to the expansion
and liberalization of trade and economic cooperation among partners.
Specifically and in theory, at least at this level, LAIA guarantees a
regional system of collective disciplines about the circumstances, modalities
and procedures that a group of partners -- two or more, but less than
the total -- have to use when they want to develop trade preferences among
them not applicable to other partners. That is, if they wish to discriminate
with respect to other partners. A key rule prescribes that these agreements
are submitted for consideration to all other partners and being open to
their eventual access through previous negotiation.
In practice, however, LAIA's ruling effect on the issue has been developing
a registry of RPA's ("protocolización" in Spanish) setting
forth discriminations among partners, covering them legally in GATT through
the application of the Enabling Clause. There has been little progress
in the extension of these preferences to the rest of the partners or in
the development of another instrument foreseen by the Treaty of Montevideo
of 1980, which is to build a system of regional preferences --as a step
toward a common market-- through agreements of regional scope that involves
all member countries.
The fact that the LAIA's legal system has been perceived by businessmen
as one of poor quality, where rules could be easily let aside or changed
if circumstances so require, could be seen as one of the reasons of its
very limited practical effects.
The Treaty of Montevideo of 1980 that created LAIA was notified in GATT
within the frame of the Enabling Clause. Since then the Secretary periodically
reports to WTO, through its Commerce and Development Committee, on the
RPA's implemented within its jurisdiction.
Which is the extent of the "agreements of partial scope" (Articles
4 and 7) foreseen by the Treaty of Montevideo of 1980? (15) The question
is pertinent, taking into account the practice that sometimes has been
followed when putting into force RPA's among member countries.
For example, at least in the case of Argentina it has been understood
that these RPA's -- implemented under the modality of agreements of partial
scope according to LAIA's norms -- enter into force and are applicable
in the domestic legal system of the country, since their "protocolización"
at LAIA's General Secretary, and the notification of this record to Customs
pursuant to Decree 415/91.
The foundation of this practice would be that the Treaty of Montevideo,
when establishing the figure of agreements of partial scope, would allow
the Argentine Executive Power to conclude agreements in simplified form,
that is, without submitting them to the Congress for approval. Moreover,
the National Supreme Court would have endorsed this procedure in its judgment
of May 7 1998, in the case "Dotti, Miguel A. and others on smuggling".
What is in reality established to this respect by the Treaty of Montevideo
of 1980? Two provisions are fundamental to the full intelligence of its
text. First, article 4 provides that "for fulfillment of the basic
functions of the Association foreseen by article 2 of the present Treaty,
the member countries establish an area of economic preferences, composed
by a regional preference on tariffs, agreements of regional scope and
agreements of partial scope". Second, article 44 of the Treaty provides
that "the advantages, favors, franchises, immunities and privileges
that the member countries apply to products coming from or destined to
any other country whether member or non-member, by decisions or agreements
not foreseen in the present Treaty or in the Cartagena Agreement, will
immediately and unconditionally be extended to the remaining member countries"
(16). The Third Section of the Treaty, from article 7 to 14, further develops
article 4, as to the agreements of partial scope. Thereafter, Resolution
2 of LAIA's Council of Ministers regulates them. Its article 5 stipulated
the procedures for agreement within the frame of LAIA.
In any moment, neither the Treaty of Montevideo of 1980 nor its regulation
says anything, directly or indirectly, with respect to the way these agreements
will take effect in their respective domestic legal systems. This is an
issue defined at the constitutional level of each member country, and
upon which the Treaty does not refer. Therefore, the issue of how an agreement
of partial scope takes effect in a domestic legal system shall be answer
on each specific case, according to the respective constitutional provisions.
Then, it does not seem sustainable to argue that the Treaty introduces
the figure of agreements in simplified form if it had not been foreseen
by the respective Constitution.
This should not get attention since the real significance was to define
rules for one of the modalities by which member countries may agree between
themselves reciprocal preferences or any commitments linked with the Treaty's
objectives -- in this case limited only to a group of member countries
--, without application of article 44 provisions, that is, the most-favoured-nation
clause. To sum up, the Treaty focuses on regulating the use of article
44 exceptions, which is the true cornerstone of its legal architecture.
In any case, the way LAIA's approaches the issue of the conciliation
of RPA's implemented within is framework and its broader regional objectives
could be a precedent to have in mind in the negotiations of the FTAA.
It seems possible that the system of agreements of partial scope of LAIA,
if further developed based on the already acquired experience and if effectively
applied in its two central components -- the control by the other partners
and the right to access through negotiations by the other interested partners
-- could eventually serve as precedent, in the event that FTAA's architecture
intends to combine the rules for the whole hemisphere with those of the
RPA's developed between some of the member countries.
The regional preferential agreements and their validity in the domestic
laws of their member countries: the case of Mercosur and, in particular,
the one of Argentina
The domestic legal order of each country determines, normally in its
Constitution, the procedure to undertake international commitments by
way of Treaties agreed with third countries (17). Frequently, we observe
a distribution of competences between the Executive Power, which negotiates
and signs a treaty and the Congress, which approves it. After the approval,
the Executive Power ratifies the respective treaty, which will take effect
pursuant to its corresponding provisions. In some cases, a Constitution
explicitly foresee or give some reason to admit the figure of agreements
under simplified form or executive agreements, which do not require Congressional
At the same time, the domestic law determines the rank of a treaty within
the legal hierarchy of the country. In some cases, such as Argentina's,
a highly evolved modality has been used, consisting of giving explicitly
to the international treaties a superior hierarchy in respect to laws.
In other words, a succeeding law -- and even less a normative act of less
hierarchy -- cannot modify the rights acquired by citizens with the provisions
of the respective treaty.
For any country -in this case Argentina-, the international collective
disciplines accepted at the WTO and at an RPA, for example Mercosur, restrict
the margin of governmental movement in the formulation and implementation
of foreign trade public policies and in the international trade negotiations.
These restrictions operate as counterparts of the advantages they offer:
access to other markets and predictable rules affecting the international
competitiveness of firms. They are the result of the development of an
international system of trade and investments based on legal rules adopted
by consensus. They place certain order in the competition for the world
and regional markets. It is not however a perfect legal system. However,
for any relatively marginal country in terms of its participation in the
world trade -- being consequently more a "rule taker" than a
"rule maker" is -- this is a more reasonable option than power
criteria deciding upon the implementation of rules.
They are collective disciplines undertaken by the sovereign will of a
country and, in general, they require Congressional approval. In the particular
case of Argentina, as per the Constitution of 1994, treaties expressing
them have a superior hierarchy to domestic laws. They generate rights
enforceable at the jurisdictional proceedings of the country.
In the case of the WTO, Marrakech Agreements of 1994 define rules for
the world trade of good and services. They have implications in what member
countries -- including Argentina -- may or may not do with their foreign
trade, and among others, with their intellectual property and investment
legislation. They create rights and obligations enforceable by WTO member
countries and against them. In some cases, they are also directly enforceable
at the domestic level too. The mechanisms of dispute resolution guarantee
their fulfillment. Disregarding WTO rules has costs for any country, not
always apparent in the short term.
At the same time, the Treaty of Asunción creates Mercosur and
originates legal commitments and collective disciplines undertaken within
its frame. It gives a legal basis to unrestricted free trade among partners.
That implicates the rights acquired by citizens and firms of the member
countries, to export and import without tariffs of any kind of restrictions,
goods going to or coming from other partners.
Among the commitments undertaken in the Treaty of Asunción, we
observe the existence of a common external tariff as of the conclusion
of the transitional period. The 1994 Decision in that regard can be modified
by consensus by another Decision of the Mercosur Council or, in some cases,
by the Common Market Group -the executive body--. This means that the
partners have entrusted Mercosur, through its competent agencies, any
valid modification to its import or export tariff. Yet it is not valid
to do so unilaterally. The idea of having a common external tariff was
part of the agreed strategy between Argentina and Brazil in June 1990.
Hence, Chile did not participate in the creation of Mercosur, in spite
of having the invitation.
If any Mercosur partner were to leave apart their undertaken commitments
pursuant to the Treaty of Asunción, it would have to propose its
modification or complementation -- which would have to result from other
treaty, generally named "Protocol", counting with the agreement
of all partners and with the approval of each Congress -- or to give notice
of termination according to the foreseen procedures. Even so, the commitments
undertaken in the Program of Trade Liberalization would remain in force
for two more years. This would implicate that imports coming from partners
would continue having zero tariff with no possible valid application of
restrictions of any kind, except those contained in the Treaty of Montevideo
of 1980, article 50, for example, by motives of public security and health.
Any breach by one of the partners may give place, or to a dispute resolution
procedure in the frame of Protocol of Brasilia or to an appeal to national
jurisdictional proceedings, in order to protect acquired rights. In the
Argentine case, in theory at least, we should not overlook the fact that
if a foreign investor could prove that the breach of the undertaken commitment
in the Treaty of Asunción -- for example on intra-Mercosur's tariffs
-- has caused him a significant damage, he may end up appealing to domestic
jurisdictional or eventually international arbitral proceedings, in order
to secure the corresponding compensatory damages. If that were the case,
the foreign investor could resort to some of the agreements on investments
signed by Argentina, all of them related between themselves by the most
favorable treatment. Naturally, there would be need of proving in addition
to the damage that the investment was made taken into account the commitments
undertaken under Mercosur.
Unilateral behaviors contrary to the commitments undertaken at the WTO
and Mercosur may affect the foreign credibility of the respective country,
with significant impact on investment decisions, especially those of multinational
corporations. Those requiring greater scale may opt for settling in Brazil,
to have the guarantee of accessing the market of greatest dimension of
South America. In any event, they would have legally assured the access
to the market of the other partners, at least up to two years after a
country eventually gives notice of termination of the Treaty of Asunción.
According to the Treaty of Asunción, we can infer that member
countries have formally undertaken the obligation of negotiating with
their Mercosur partners any international trade commitment affecting the
common external tariff, except those cases where, by consensus, the partners
would have accepted individual negotiations within the ordinary normative
frames, as has been the case, for example, with Mexico.
In the particular case of Argentina, we must highlight one legal problem
due to its legal and practical significance (18). That is, after the 1994
constitutional reform, the usual practice, pursuant to Decree 415/91,
of incorporating to the domestic legal system of Argentina commitments
undertaken in Mercosur by way of "agreements of partial scope"
of LAIA. They could not modify the Treaty of Asunción. In fact,
if they were to do so, they would be contrary to constitutional provisions
and, therefore, judicially challenged since, on one hand, the Constitution
reformed in 1994 does not recognize the figure of "executive or simplified
form agreements" -- as happens in other legal systems of countries,
that explicitly or implicitly recognize this figure --, and on the other
hand, they could not have superior hierarchy to laws. They would only
have the legal level of an Executive Power act. If they were to breach
Legislative powers, they would be invalid.
In this perspective, what does Decree 415/91 stipulate? Article 1°
prescribes that agreements subscribed by Argentina within LAIA's legal
frame, will take effect under the conditions and since the dates agreed
on each one, notwithstanding their publication in the Official Gazette.
Article 2° establishes that for the application on Argentine territory
of the agreements mentioned in article 1°, the Undersecretary of Industry
and Trade of the Ministry of Economy will forward to the Customs National
Administration a duly certified copy by LAIA's Secretary General and by
the Argentine representation before this Association, without requesting
any other formality. This provision, which should be read in light of
the provisions contained in article 1°, modified a prior regulation
(Decree 101/85), which foresaw the need of joint resolution from the Foreign
Council and the Ministry of Economy. This was the reason for the referred
decree, with the practical purpose of simplifying the necessary procedure
to notify Customs about the preferences negotiated in the framework of
agreements of partial scope, or about eventual modifications of the trade
preferences to be negotiated later on. From here comes the expression
"without requesting any other formality".
Therefore, we could not argue that this decree altered the constitutional
powers with respect to negotiation and approval of treaties. That is so
the case, that when Mercosur was created it was made by an international
treaty, duly approved by the Congress, notwithstanding the requirement
of putting its text in an agreement of partial scope, the ACE 18, in order
to make its preferences compatible with the provisions of the Treaty of
Montevideo of 1980; hence avoiding its automatic extension to the other
member countries, by virtue of above mentioned article 44 provisions.
Furthermore, the ACE 18 contains the so-called bolt clause in its article
18, which determines that: "every modification to the present Agreement
can only be made by agreement of all signatory countries and will be subject
to the previous modification of the Treaty of Asunción according
to the constitutional procedures of each signatory country".
Additionally, it should be taken into account that Decree 415/91 precedes
the constitutional reform of 1994, which by giving the international treaties
a superior hierarchy to laws, confers a different perspective to the interpretation
about the constitutional provisions respecting to the negotiation and
approval of the treaties.
If practice recommends the flexibility of the procedures to enter into
and put into force the international agreements within the frame of one
of the treaties mentioned before, we should turn to an explicit legislative
act in that sense from the Legislative Power or, if necessary, to a modification
of the mentioned treaties. Decree 415/91 offers only a flexible regulation
for notifying to Customs about concrete trade preferences granted in the
setting of agreements duly put into effect, or their eventual modifications.
This has been the case of the preferences included in agreements executed
within the framework of LAIA, before the constitutional reform of 1994.
The issue is not academic. It involves the legal security for the international
economic relations of Argentina. It has to do with the reinforcement of
Congress participation in the integration process. It relates to the transparency
of governmental acts, in particular of the rules implemented in the domestic
legal system, considering that the actual practice allows that important
international agreements do not get published in the Official Gazette.
This has been the case, among others, of the automobile sector regulations
between Argentina and Brazil, and even those of Mercosur. It has also
been the case of some of the free trade agreements concluded with other
LAIA's countries, as for example, those with Chile and Bolivia.
The issue is even more serious when an agreement of partial scope made
in a simplified form may introduce, eventually changes to acquired rights
under treaties approved by the Congress, such as the Treaty of Asunción.
In fact, this practice may allow the bilateral modification of rules or
procedures established in precise form by treaties -- such as Asunción
--. Further, this may put these bilateral agreements outside the reach
of Protocol of Brasilia, which guarantees an efficient system-- perfectible
though -- of dispute resolution.
At least in the case of Mercosur it is recommendable then to articulate
more sound and flexible procedures for the incorporation of new regional
agreements --derived of the Asunción Treaty or concluded with other
LAIA's members-to the domestic law of each member country. These procedures
should result from legal instruments agreed by the member countries, through
Protocols duly approved by each Congress.
In any case and this is clear at least for Argentina, the above mentioned
practice is one of the reasons why Mercosur is perceived by investors
as a low quality "rule-oriented" process. The fact that many
rules formally approved by Mercosur institutions have not been enforced,
further contributes to its poor image and, eventually, help to explain
its problems of efficacy and even of social legitimacy (19).
RPA's, both among neighbors and non-neighbors countries, are today a relevant
dimension of the realities of international economic relations. They are
part of the international landscape.
Even if eventually from a theoretical point of view it could be wise
to recommend the limitation of the trend toward new RPA's, it seems difficult
to imagine countries behaving according to such recommendation.
In addition, it seems difficult to avoid all of the existing or proposed
RPA's presenting themselves as highly consistent with the principles,
objectives and rules of the multilateral global trade system. They all
prefer to define themselves as a model of "open regionalism".
On the contrary, what could be necessary and possible is to improve global
collective disciplines to assure that a higher number of old and new RPA's
could really be consistent with the WTO.
The main challenge ahead is, therefore, to assure that they could be
consistent with the principles and collective disciplines of the multilateral
global trade system. That means that they could be an effective "building
block" toward a more integrated and open global economy. In addition,
especially when they include developing countries, this meaning that they
could represent a real contribution to the development of relatively smaller
and poor economies.
To obtain those objectives RPA's should always imply permanent commitments
to open the markets of the member countries. In addition, they should
include rules allowing third countries to become members through negotiations.
That should always be the case when a RPA involves non-neighboring countries
and therefore, is not part of a broader political and economic strategy
to build a stable and peaceful geographical based regional subsystem.
To preserve the "rule-oriented" character of a concrete RPA
-against the "power-oriented" alternative-- could be crucial
for the defense of the national interests of less developed members. Low
quality RPA's could be the result of poor rules of the game and of weak
enforcement capacity. Then, they could play against the interests of smaller
member countries and in favor of those of more developed members. Eventually,
Mercosur could be an example.
However, the "rule-oriented" approach could be also crucial
to preserve the health of the multilateral global trade system. The proliferation
of RPA's without strong collective disciplines to implement them, could
be very negative for the objectives of free trade and development at the
From that point of view, strengthening the monitoring capacity of WTO
and the implementation of a reviewed article XXIV of GATT-1994 should
be one of the concrete results of the Doha Development Agenda negotiations.
Strong collective disciplines concerning their rules of origin, among
other requirements, should be included in the reviewing process of article
XXIV. Strengthening the effective role of the Regional Agreements Committee
of WTO should be also a priority.
A reasonable degree of interaction between the rules of both the WTO
and RPA's legal systems, could improve predictability and as a result,
the conditions to attract investments and global competitors toward developing
This also implies strengthening the "rule-oriented" approach
in the implementation of RPA's at the domestic level and within more broader
RTA's --those that enable the development of a network of other RTA's--
as is the case of LAIA and could also be the case of the FTAA.
In some way, LAIA's rules and experiences could be a useful precedent
for the final architecture of the FTAA. Particularly having in mind the
need to conciliate the hemispheric preferential system with subregional
agreements such as NAFTA and Mercosur, among others.
(1) We use in this paper the concept of regional preferential agreements
(RPA's) to include all kind of trade preferential agreements (TPA's),
both among contiguous and non-contiguous countries.
(2) See BHAGWATI Jagdish and Arvind PANAGARIYA, "Bilateral trade
treaties are a sham", in the Financial Times, Monday July 14, 2003,
page 15. Also see the interview to Professor Bhagwati, in Clarín,
Buenos Aires, June 27, 2003. For a reply to Professor Bhagwati arguments,
see among others, GRISWOLD Daniel, "Bilateral deals are no threat
to global trade", in the Financial Times, Monday July 28, 2003, page
(3) See MACHLUP Fritz, "A History of Thought on Economic Integration",
Columbia University Press, New York 1977; see also, NOLDE B. "Droit
et Technique des Traités de Commerce", chapitre X, "Les
Unions Douaniéres", in Recueil des Cours de l'Académie
de Droit International", La Haye, 1924, ps.437-50, and ANDERSON Kym
and Hege NORHEIM, "History, geography and regional economic integration",
in Regional Integration and the Global Trading System, edited by Kym ANDERSON
& Richard BLACKHURST, St.Martin Press, New York, 1993, ps.19-51.
(4) See WINHAM Gilbert, "International Trade and the Tokyo Round
Negotiation", Princeton University Press, Princeton, New Jersey,
1986, ps.141-46 and 274-80. See also, SRINIVASAN T.N. "Developing
Countries and the Multilateral Trading System", Westview Press, 1998,
ps.21, 24 and 99.
(5) See SNAPE Richard H., "History and Economics of GATT's Article
XXIV", in Regional Integration and the Global Trading System, edited
by Kym ANDERSON & Richard BLACKHURST, St.Martin's Press, New York,
(6) See PEÑA Félix, "Concertación de intereses,
efectividad de las reglas de juego y calidad institucional en el Mercosur",
Informe elaborado para el Programa Estado de Derecho de la Fundación
Konrad Adenauer y la Red Mercosur, Mayo 2003.
(7) See PEÑA Félix, "Civil Society, Transparency and
Legitimacy in Integration Processes and Trade Negotiations: Mercosur's
experience and lessons for the negotiations with the European Union",
paper prepared for the Chaire Mercosur -Sciences Po- Working Group on
EU-Mercosur Negotiations Annual Seminar, September 2003.
(8) See PEÑA Félix, "Consensual Integration Alliances:
The Importance of Predictability and Efficacy in the MercosurInstitutional
Experience", Miami European Union Center, University of Miami, Jean
Monnet/Robert Schuman Paper Series, Vol. 2 nº 3, March 2003 (www.miami.edu/EUCenter/penafinal.pdf)
(9) See among others, KAHLER Miles, "El nuevo regionalismo y sus
instituciones", in Regionalización e Integración Económica:
instituciones y procesos comparados, Roberto BOUZAS (compilador), Nuevohacer,
Grupo Editor Latinoamericano, Buenos Aires, 1997.
(10) See for example, THORSTENSEN Vera, "Organizaçâo
Mundial do Comércio: As Regras do Comércio Internacional
e a Nova Rodada de Negociaçôes Multilaterais", Aduaneiras,
Sâo Paulo, 2001, ps.237-54; JACKSON John, "The Jurisprudence
of GATT & the WTO", Cambridge University Press, 2000, ps.99-112.;
DAM Kenneth W., "The Rules of the Global Game: a new look at US International
Economic Policy", The University of Chicago Press, Chicago and London,
2001, ps. 131-47; LAFER Celso, "A OMC e a regulamentaçâo
do comercio internacional: uma visâo brasileira", Livraria
do Advogado, Porto Alegre 1998, ps.49-53; HOECKMAN Bernard M. and Michel
M. KOSTECKI, "The Political Economy of the World Trading System",
Oxford University Press, 2001, ps. 346-68; BHAGWATI Jagdish N. "Multilateralism
and Regionalism in the Post-Uruguay Round Era: What Role for the US",
in Multilateralism and Regionalism in the Post-Uruguay Era: What Role
for the EU, edited by Olga MEMEDOVIC, Arie KUYVENHOVEN and WillemT.M.MOLE,
NEI, Kluwer Academic Publishers, 1999, ps.31-44; MESSERLIN Patrick A.
"MFN-Based Freer Trade and Regional Free Trade: What Role for the
EU", in MEMEDOVIC, op.cit., ps. 45-86, and ROESSLER Frieder, "The
relationship between regional integration agreements and the multilateral
trade order", in ANDERSON op.cit, ps.311-25.
(11) See BHAGWATI Jadgish, "The World Trading System at Risk",
Princeton University Press, Princeton, NJ.1991.
(12) See SERRA Jaime and others, "Reflections on Regionalism: report
of the study group on international trade", Carnegie Endowment for
International Peace, Washington 1997, ps. 41-56; McMILLAN John, "Does
regional integration foster open trade? Economic theory and GATT's article
XXIV", in ANDERSON op.cit. ps. 292-310.
(13) See CASTELS Manuel, "End of Millennium", Blackwell Publisher,
(14) See JACKSON John, op.cit. ps.6-10.
(15) See PEÑA Félix, "Entrada en vigencia de acuerdos
de la ALADI y del Mercosur", in Revista La Ley, Buenos Aires, 28
de septiembre de 2000.
(16) Article 44 was then modified because of the participation of Mexico
(17) See JACKSON John, op.cit, ps.195-398.
(18) See PEÑA Félix, op.cit in note 15.
(19) For a more detailed analysis of this aspect, see the article mentioned
above in note 5. The author has been warning since many years about the
economic and political implications of Mercosur as a poor quality "rule-oriented"
process. See for example, PEÑA Félix, "Reglas de juego
e instituciones en el Mercosur", in Revista de Derecho Privado y
Comunitario, nº 14, 1996, ps. 395-408. See also PEÑA Félix,
"Reflexiones sobre el Mercosur y su futuro", in Grupo de Reflexâo
Prospectiva sobre o Mercosul, Clodoaldo HUGUENEY FILHO, Carlos Henrique
CARDIM, organizadores, MRE/BID/IPRI/FUNAG, Brasilia, 2002, ps.271-288.