04/05/2020

CONNECTIVITY, DIVERSITY, SOLIDARITY

Conditions to the building of sustainable regional spaces of prosperity and peace

Understanding the factors that lead to a global systemic crisis is essential when aspiring to overcome it. Such is the case of the COVID-19 pandemic. Facing it successfully requires the capacity for coordination at global, regional and national levels.

It also implies placing this global crisis within the framework of the changes observed in the international system. Understanding this global pandemic requires clarifying the effects that a hyper-connected world has on the flow of goods, ideas, beliefs, dreams, as well as plagues.

International trade and its protagonists are feeling the effects of this crisis, globally, regionally as well as in each individual country, hence the importance of having quality information on the pandemic and its effects on trade and regional integration, which includes the Mercosur.

It is possible that the current pandemic will impose the need for innovation in the institutions (decision-making systems, management and production of rules) of international governance whose reach will be defined on the basis of accumulated experience.

If one thing stands out from the methodology of integration originally applied in Europe, it is that its formulation requires operating simultaneously in three dimensions; the political, economic, and legal.

To imagine a process of integration among sovereign nations –which do not wish to cease being such-, contiguous and diverse, and with unequal relative power, without the consent and support of the people (political dimension); without the sustainable articulation of their economic and productive systems (economic dimension); and without a basis in common rules and institutions (legal dimension), would be to condemn it to failure, or to having a merely conjunctural effect.

In the European experience, common institutions and rules of the game allowed for the generation of expectations of mutual gains, the protection of interests of less powerful partners, and the achievement of a reasonable balance between two requirements that may seem contradictory: the amount of predictability necessary to encourage productive investments, and the flexibility required to enable the rules to adapt to dynamic and unpredictable realities.

Integration processes such as the European model or that of the Mercosur are not necessarily centered on a pre-determined final product consisting of the transformation of autonomous power units into a new "supranational" unit, although this was an apparent goal in the initial stages. Their objective is not to overtake pre-existing independent national spaces, or their respective markets, through rigid conceptual formulas, such as those of a "customs union " or a "free trade zone". They do not imply the disappearance of national identities. They aim for a greater connectivity, an appreciation of cultural diversity and interests among partners, and greater collective solidarity. In other words, the goal is to achieve the conditions for the predominance of prosperity and peace among contiguous nations.

On the contrary, the pooling of resources and markets with a view towards permanence, the collective discipline arising from an effective enforcement of common rules and institutions, the productive linkage  that makes it costly to withdraw from the joint-labor pact between a group of nations, and the reality of increased power to operate effectively in the international system, are just some of the positive effects that may explain why this method of integration has so far had a validity that exceeds its original space and time.

The aforementioned dimensions have also been present since the creation of the Mercosur. They are essential in evaluating its results and examining steps aimed at its continuous and necessary adaptation to new realities.

The political dimension is reflected in the consolidation of the democratic systems of its member countries based on the cooperation and integration of their production systems. In order for this to take place, it was fundamental that the quality of the relationship between Argentina and Brazil be affirmed, as outlined in the 1986 bilateral integration agreement. The agreement based itself on the mutual understanding that developed by stopping the collision course that had characterized the bilateral relationship in previous years.

The economic dimension, in turn, results from the idea of ​​creating a common market and of negotiating as one with third countries. Achieving its final perfection does not have a time stamp, the focus is on creating  instruments which are functional to obtaining the objective pursued, especially those of a common external tariff and joint negotiation.

Finally, the legal dimension is reflected in the rules and institutions of the constituent treatises. It is on the basis of these rules that the commitments of member countries should be understood. For example, if a country at some point does not agree that Mercosur have a common external tariff, it will either have to denounce the Treatise and withdraw from Mercosur under the conditions envisaged, or have it modified with the corresponding parliamentary approval.

In this proposed perspective, several issues stand out in the current agenda of priorities for Argentine foreign trade. There is a plan to renew strategies for the global projection of goods and services that the country can produce with quality and efficiency, due to its endowment of natural resources, talent and creativity.

This is a necessary renovation due to changes that are taking place at a global and also at a Latin American level. They reflect an era that stands out for the large number of protagonists -countries, companies, consumers, social organizations- competing for world markets, with multiple options for buying and selling goods and services and for what is needed and what is valued.

These are changes that intensify the interaction between different cultures that characterize countries and regions and, therefore, international trade. Understanding the scope and effects of cultural diversity, with its impact on priorities and preferences of citizens and consumers, is a crucial factor for the international competitiveness of our country and its companies. We are now entering a stage of the world trade in which the protagonists are more numerous and more connected. This makes it hard to imagine that there are so few protagonists with a major influence on the definition of priorities and rules for global competitiveness.

At the Latin American level, the reform of the Mercosur and its coordination with the Pacific Alliance is a priority. It would seem advisable to achieve this objective without reforming the Treaty of Asunción, since it could pose internal difficulties for member countries. This would be feasible without any dogmatic approaches concerning what a customs union or a free trade area should be. The combination of political opportunity, economic pragmatism and legal flexibility would allow for the achievement of concrete results while ensuring the necessary predictability of the accepted  rules.

In any case, it is evident that adapting the methods used to build the Mercosur to new global, regional and national realities is convenient. This would be better than abandoning the political and economic objectives that led to its creation in 1991, as an initiative for integration between Argentina and Brazil, which Uruguay and Paraguay later joined.

Felix Peña is a specialist in international economic relations, international trade law, and economic integration. He is a member of the Editorial Board of the Foro del Sur Foundation’s magazine Archivos del Presente, Director of the International Trade Institute of the ICBC Foundation and of the Master in International Trade Relations and of the Interdisciplinary Nucleus of International Studies at UNTREF, and Vice-president of the Argentine Council for International Relations (CARI).