Cómo aman a Cristo cada uno de los órdenes angélicos

The single-undertaking rule of the Uruguay Round, take it or leave the GATT-WTO multilateral system, was a kiss of death to agricultural exporters particularly of temperate zones like the Mercosur countries. To some extent, the Agreement on Agriculture improved transparency and this is put prominently by observers that remain positive with the outcome of this Round. Nevertheless, many other policies green-lighted by this Agreement opened the door to highly distortionary policies that have allowed agricultural protectionism to increase particularly in industrial countries after this round was completed. In my view, the URAA is the worst in the history of the GATT-WTO. Once burned, twice wise and the Mercosur countries are now negotiating with far greater determination than in the Uruguay Round. This is great news which unfortunately may come too late. For example, in the Doha Round Brazil and Argentina have joined the G-20 and stand firm in demand for a more open multilateral system. Essentially, their position is that no agreement is far better than another unbalanced outcome. Also, under the pressure of the Mercosur countries, in the FTAA negotiations, the single-undertaking rule has been abandoned. The first policy suggestion is for the Mercosur countries to maintain the firm stance that they have taken as defined in the G-20 position. Accepting anything less will probably involve more costs than benefits. No agreement is better than another unbalanced outcome like the UR but if this is the final outcome, then the Mercosur countries will have to live with the URAA probably for decades to come.

A second suggestion is to strengthen the demands of the Mercosur countries in negotiations with industrial countries with further empirical analysis of the costs inflicted by their protectionist policies. Two effects for which there is practically no evidence are in the area of social impacts (poverty and distribution), and the solvency implications. Important trade policies like the GSP, AGOA and Everything but Arms are implemented with a clear poverty-reduction focus. At the same time, industrial countries’ agricultural policies have impoverished the Mercosur countries but this is nowhere demonstrated with professionalism. This knowledge-vacuum should end.

A third suggestion is for the Mercosur countries to demand that debt and trade be included as a negotiating topic. The line of reasoning that links these two issues is simple. Rich countries’ trade barriers reduce exports and worsens the solvency indicators of efficient producers thus raising domestic interest rates which in turn lowers growth. Clearly trade and debt are more closely linked than other areas that are currently being negotiated like trade and intellectual property, and trade and environment which are two areas of interest to industrial countries. Bringing trade and debt into the negotiations would also tilt the political-economy in favor of liberalization. Creditors in industrial countries would become a force against powerful agricultural lobbies and would argue that if the barriers that protect these groups are not lowered, they would likely not cash all of their loans.

A fourth policy suggestion is to use the opportunity opened by the expiration of the Peace Clause to initiate cases under the Dispute Settlement Body of the WTO against subsidy policies with clear negative effects on Mercosur’s exports. The media has reported that cases are being analyzed and initiating these cases would begin to document just how costly these industrial country policies are. In this regard, countries in the region should not feel weakened by the political clout of industrial countries’ negotiators.

A fifth suggestion is for Mercosur to remain alert of the negative consequences of RTAs to which it is not a party. Based on sound evidence, compensation should be sought for actions such as the forthcoming expansion of the EU. It is recognized that RTAs generally have negative consequences on non-members and the evidence presented above indicates that this is all the more likely, the higher the protection afforded by the member countries. This is precisely the case in temperate agricultural products in most RTAs to which Mercosur is not a member.

As said, regionalism could produce results that are superior to the very poor outcomes of the multilateral negotiations. Nevertheless so far, the regional policies of the Mercosur countries have not been successful in knocking down agricultural trade barriers. On the contrary, the analysis shows several examples of how regional policies by many non-member countries have had clear negative effects on agricultural exports of member countries. The failure of Mercosur in expanding its regional outreach suggests that it is becoming an agreement that has ceased to create business and growth opportunities to the member countries. Two policy suggestions stem from here.

The first is based on the fact that in recent years, the dynamic markets for agricultural exports have been the developing countries. This apparently contrasts with the allocation of resources of Latin America’s Governments which have been mainly allocated to negotiations with industrial countries. The highly mercantilistic stance of these countries is another reason why more attention has to be paid to integration with other developing countries. The recent announcement of a trade agreement between Mercosur and some of the Andean countries apparently represents a good example. Ongoing efforts to cement closer ties with China, India and other developing countries with weak comparative advantage in temperate agriculture, could become promising negotiations. Second, as discussed in the previous section, in the forthcoming months the focus of attention will be the FTAA. Several elements in the agenda look promising, but others may entail costs. Two sources of gains come from the fact that the FTAA will knock down regional agricultural barriers to market access which among the three pillars of agricultural protectionism, inflict the greatest losses to Mercosur. Also, one agreement covering the whole hemisphere should streamline the criss-crossing of an increasing number of protectionist rules of origin that continue to erect barriers. On the negative side, informed criticisms have been raised to the refusal of the US to negotiate agricultural subsidies and antidumping regulations. In this regard, Mercosur countries must remain firm but flexible to positions of being compensated for reforms that remain politically difficult for the US. Other agenda topics where Argentina and Brazil have raised concerns and objections include intellectual property and government procurement. As a consequence, and from the standpoint of these countries, the overall balance of the FTAA is being reassessed. In this analysis, account must be taken of the fact that the US continues to sign FTAs with Chile, Central America and is concluding negotiations with the Andean countries. All of these agreements continue to raise the costs to Mercosur of remaining in the borderline of the FTAA. In this dynamic shift of trade-offs, maintaining inflexible positions may end up being more costly than beneficial.

APPENDIX

TABLE A.1