Concepts and strategies for diplomacy in the Lula government 2 2 DIPLOMACY, STRATEGY & POLITICS - OCTOBER/DECEMBER 2004 Celso Amorim DIPLOMACY, STRATEGY & POLITICS - OCTOBER/DICIEMBRE 2004 3 Mercosur Perspective 4 4 DIPLOMACY, STRATEGY & POLITICS - JANUARY/MARCH 2005 Eduardo Duhalde Mercosur Perspectives Eduardo Duhalde * B y any criteria, Mercosur is one of its regional members’ major achievements in recent years. Today, its consolidation is a State policy and its expansion and deepening is independent from any changes the governments of the Member States might undergo as a result of electoral processes. From a political perspective, Mercosur has yielded undisputable results, not only as warrant of the prevalence of democratic governments and peace in the region but also because it reinforces cultural ties and advances the consolidation of a regional “identity.” From a social viewpoint, regional integration, based on Latin American countries’ shared cultural, geographic, and historical features, renders a more equitable, favorable contribution to the peoples of the region in the context of the ongoing continentalization and globalization processes. * Former President of the Argentine Republic Chairman of the Mercosur Permanent Representatives Commission DIPLOMACY, STRATEGY & POLITICS - JANUARY/MARCH 2005 5 Mercosur Perspective This process is thus a strategic instrument for achieving political stability, economic growth, and social justice in the member countries and the means to invest the regional with an identity and with a major role on the international stage. I start from the premise that Mercosur is an irreversible process, which is already being expanded to include the other South American countries and is based on the unity spirit that permeated the work of our liberators. I thus find it indispensable to examine the perspectives open to integration in the present and in the immediate future so that we can formulate policies and create instruments conducive to internal consolidation and to spearheading a union of South American countries. Accordingly, in this analysis I will briefly review the course followed so far and offer some thoughts on future prospects, taking into consideration a series of aspects I deem fundamental for ensuring the integration process and for tackling the multiple external negotiations. Antecedents The profound changes occurred in the world in the late eighties and early nineties favored the integrationist forces in Argentina and Brazil, two countries that soon took up the promotion of the interests of Paraguay and Uruguay. The signing of the 1991 Asunción Treaty was one of the most significant political and economic milestones for the region in the 20th century. Mercosur began as a free trade zone endowed with the instruments to become a customs union in the short run and the intention of becoming a Common Market further on. From an economical standpoint, the association’s first years saw the expansion of intrazonal trade as well as increased trade with the rest of the world and a greater flow of investments into the region. This also contributed to ensuring and deepening internal economic reforms, which raised the degree of industrial complementation and made it possible for small and medium enterprises to participate in international transactions. By 2001, ten years alter the signing of the Asunción Treaty, total intrazonal exports had trebled, from US$5 billion in 1991 to US$15 billion, with a peak of US$20 billion in 1997. 6 6 DIPLOMACY, STRATEGY & POLITICS - JANUARY/MARCH 2005 Eduardo Duhalde In addition, trade with the associated countries (Chile and Bolivia) had a positive performance, with a growth of more than 140 percent, while trade with the rest of the world grew 100 percent. This improved performance of intrazonal trade can be observed both in Mercosur as a whole and in each member country individually. As regards institutional aspects, at first a small structure was contemplated, but one dynamic enough to permit the achievement of the objectives envisaged by the Asunción Treaty, and endowed with two decision-making bodies – the Common Market and the Common Market Group. This organization’s main characteristics were intergovernability, the lack of a fixed headquarters for its bodies, and consensual decision-making. In 1994, with the signing of the Ouro Preto Protocol, the States Parties ratified the initial structure, fine-tuned its competences, and increased the number of decision-making bodies by establishing the Trade Commission. Moreover, stronger commitments were undertaken with respect to the binding character and implementation of the norms handed down by the aforementioned bodies and a mechanism was established for these norms’ incorporation into the national legal systems. The regional crisis Mercosur was born in a context characterized by very favorable external and internal circumstances but in spite of this the process, after the initial impulse, began to show increasing problems in the late nineties. The succession of international financial crises that began in the second half of the nineties with the Mexican crisis, followed by those of Southeast Asia, Russia, Brazil, and Turkey, coupled with the low prices of commodities and the retraction of capital flows, was compounded by the problem of intrazonal relative prices. The devaluation of the Brazilian currency early in 1999, followed by the Argentine crisis late in 2001, considerably affected the price of trade transactions in the expanded market. In addition, the group’s economic recession produced a change in trade among members, causing the States Parties to adopt unilateral measures that were often inconsistent with the commitments undertaken. The proliferation of protectionist measures also led to bilateral trade disputes, several of which had to be solved under the dispute solution system. It should be DIPLOMACY, STRATEGY & POLITICS - JANUARY/MARCH 2005 7 Mercosur Perspective mentioned that between 1999 and 2003 nine Arbitration Tribunals were held. Under these circumstances, quadripartite negotiations aimed at deepening both the free trade zone and the customs union came to a definite standstill. This brought to the fore a series of flaws in the integration process: imperfections in the common external tariff, noncompliance by the States Parties, legal gaps, and failure to incorporate common norms into domestic legislation. All of these formed an inadvertent legacy of the years of intrazonal trade growth. In 2000, the States Parties concentrated their efforts on what was called the “Re-launching of Mercosur”, which consisted in the formulation of an integrated work program whose main axes were: elimination of obstacles to access to the regional market; establishment of disciplines for encouraging investments, production, and exports; review of the common external tariff; institutional reform; and coordination of macroeconomic policies. However, the persistence – and aggravation – of the regional and international situation prevented the achievement of results that warranted talking of a significant qualitative change in the integration process. The international situation in 2001 (little dynamism of the world economy, the drying-up of capital flows to emerging countries, the drop in the prices of the region’s major exports) translated into an unprecedented period of economic crisis in Mercosur countries. Intrazonal trade showed a strong contracting trend as exports decreased more than 30 percent in 2002 as compared with the previous year. It was my lot to be a player at these difficult moments experienced by Mercosur when I was my country’s Head of State. But I could say that the abandonment of convertibility in Argentina permitted the beginning of a process of normalization of intrazonal relations, which contributed to the configuration of a more favorable setting for resolving problems of relative competitiveness of chronically competitive sectors in intra-regional trade. A new impetus to Mercosur In 2002, the governments of all States Parties focused on leaving behind the conflictive relations of the preceding years and on finding ways to strengthen the integration process. 8 8 DIPLOMACY, STRATEGY & POLITICS - JANUARY/MARCH 2005 Eduardo Duhalde This made it necessary to rethink the political and institutional space that had been to a certain extent postponed in view of the trade successes of the early nineties. At the same time, a process was begun for the gradual elimination of intrazonal conflicts – a process known as “clearing the table” – through a series of bilateral negotiations among some members. Furthermore, the awareness grew that unless a “common interests matrix” was reconstructed, the strategic meaning of Mercosur as a regional public policy would become gradually diluted. For the conception of this “matrix”, work began in 2003 on a positive agenda that included not only economic and trade issues but also the establishment of new bonds in the political, social, cultural, educational, scientific, and technological areas, aimed at building up the regional identity. The problem of the asymmetries among the States Parties also began to be addressed in earnest only then and, at the Asunción Summit, the Presidents decided to get a firm hold on these issues and work started on the identification of measures to be adopted. Finally, in December 2003, a series of norms was approved to deal with the situation of Paraguay and Uruguay, the smaller countries, and to ensure greater customs flexibility.