11/12/2024
Negotiations for a bi-regional agreement between the Mercosur and the European Union (EU) have been long, partly due to their successive interruptions. The international context in which they find themselves has changed since the long road began towards what, in principle, was concluded on December 6, 2024, at the negotiating meeting in Montevideo.
Neither Mercosur nor the EU, as integration initiatives, can claim the same level of external credibility today that they had when negotiations first began. In the European case, the so called "Brexit"; and the growing perception of euro-skepticism have not helped to strengthen the image of the integration commitments undertaken. In the case of Mercosur, questions have recently been raised about the real scope of the integration process and its sustainability.
What is clear is that a new path lies ahead and navigating this path may require two to three years. Only then will the Mercosur-EU bilateral agreement be fully concluded, after the necessary ratifications. Only then will its effects penetrate the realities of both regions.
We will then have effectively entered what we could call “the day after” the negotiation and the conclusion of the bi-regional agreement. From that moment on, it will be possible to assess the actual quality of the preparation that Mercosur countries – and especially their companies –have developed based on their decision to effectively negotiate the agreement.
Negotiating with other countries while preparing to capitalize on the opportunities arising from concluded agreements are inseparable elements of an effective external trade strategy. One conditions the other, as the outcomes of international trade negotiations can overlook the level of preparedness that a country and its productive sectors can hope to attain. This becomes even more complex when negotiations involve countries with varying levels of
development.
Preparing for the "day after"; of the bi-regional agreement coming into force seems to be a priority today for our country and its Mercosur partners. This requires outlining a strategy for external trade insertion that takes into account the conclusion of the bi-regional agreement, as well as the need to develop the opportunities that must arise from the agreement.
A pessimistic view of the opportunities arising from the bi-regional agreement, translated into a passive attitude, especially among business sectors, reflected in a lack of preparation to successfully navigate the "day after," could mean missing business opportunities that normally require time to fully develop.
Without prejudice to others, at least three areas of action require attention to design an effective external trade integration strategy in the new landscape for Argentina and its partner countries—one that prepares them for the "day after" of the bi-regional agreement coming into force. These areas are: the various modalities and intensities of transnational productive linkages, the quality of connectivity between different national spaces, and the creation of rules of the game that shape global or regional economic competition. These areas of action remain relevant even if the bi-regional agreement does not materialize as currently envisioned, at least regarding the participating countries of the current Mercosur bloc.
Furthermore, at least three issues stand out for their importance during the preparatory phase leading to the effective implementation of the bi-regional agreement. From an Argentine perspective, these are issues that will require special and urgent attention. The first relevant issue will be the adaptation of policies and the organization of the public sector, particularly its modes of interaction with the business and labor union sectors, to gradually position the country to navigate the new competitive environment being shaped by the bi-regional agreement and its multiple potential developments.
One of these developments would be the connection between the preferences negotiated under the agreement and those stemming from other trade agreements, such as those the EU has concluded or may conclude with other Latin American countries, which Mercosur has also negotiated or may negotiate in the future. Such a connection would make it possible to develop strategies involving various forms of transnational production chains.
To this end, it will be necessary to establish an intelligent distribution of responsibilities among different ministerial bodies and, at the same time, identify the public policies that will require greater attention, considering the commitments arising from the development of the bi-regional agreement as well as the challenges related to competitiveness that are involved in successfully operating in European markets. In this defining of responsibilities, it must be kept in mind that the bi-regional agreement
should be seen as part of the development of an extensive network of preferential trade agreements that could encompass countries from very different regions around the world.
The perspectives of the WTO and its current rules of the game make it essential to undertake international negotiations aimed at developing such a network of preferential
trade agreements. A second relevant and complementary issue will be the development of policies and actions aimed at achieving a significant increase in the number of companies capable of expanding their current or potential capacity to produce goods and provide services that are both competitive and sustainable in the European market. The goal, of course, is to secure a sustained presence in EU markets—ideally for a minimum of three years, whether on store
shelves or within production chains.
This will require both the national government and provincial governments—especially those interested in leveraging the bi-regional space based on local capacities to produce goods and provide services—to strengthen institutions dedicated to trade and investment promotion, as well as to improve coordination among them. It will also involve promoting public policies aimed at fostering operational links between academic and research and development institutions—both public and private—and the
respective operators in the productive sectors. The goal is to develop a broad network of competitive intelligence and connections between the country’s technological and productive capacities. Among other functions, such a network should enable up-to-date knowledge of the preferences of various European consumers and the factors influencing their changing priorities.
The third issue will be to strengthen Mercosur’s capacity to function as an institutional framework that facilitates the competitive integration of its member countries into the economic context that could emerge as a result of the bi-regional agreement. Beyond the debate, which is often overly theoretical, about whether the Mercosur is or
should be a free trade area or a customs union, emphasis should be placed on a vigorous effort to transform it into an effective mechanism for joint endeavor among its member countries—one that is efficient, operates based on enforceable rules, and contributes to achieving clear competitiveness gains for its members.
The three relevant issues mentioned in the preceding paragraphs entail developing the capacity of Mercosur member countries to act collectively with a reasonable degree of organization.
Félix Peña is the Director of the Master Degree in International Trade Relations of the Universidad Nacional de Tres de Febrero and the Director of the International Trade Institute of the ICBC Foundation.
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