23/01/2023

Perspectives of the Mercosur – European Union Agreement

If effectively materialised, the association agreement between Mercosur and the EU would provide an opportunity to underscore the capacity of our country and its Mercosur partners to turn the ambitious goals laid down in their strategies for international trade integration into tangible facts.

From an Argentine standpoint, as well as that of its Mercosur and EU partners, after almost thirty years of discussions on the idea of a bi-regional agreement and more than twenty years of negotiations under different administrations, it would be difficult for the respective political leaderships to explain to their citizens the economic and political consequences of a possible failure. All the more so if such consequences could even affect the survival of Mercosur itself. On the contrary, it would be more convenient for them to take advantage of its re-foundational scope for Mercosur itself and its strategy of insertion in the world. 

Following its possible formal conclusion and subsequent enforcement, the main phase of this bi-regional partnership would begin. This can be called the "day after" phase. This is the moment when both at governmental and business levels, the necessary actions must be undertaken to comply with the commitments made within the established deadlines, and the required steps must be taken to take effective and therefore measurable advantage of the expected expansion of the respective markets.

In practice, however, preparation for the "day after" phase begins when the final draft of the full agreement is available and communicated, in all its pillars (political, cooperation and trade) and in all its organisational and possibly transitional provisions. 

To a large extent, the effectiveness of what each country and its companies achieve in their respective strategies to take advantage of the agreement will depend on what they begin to do now in terms of the opportunities and challenges emerging from its effective conclusion and implementation.

At least from an Argentine perspective, three issues will merit special attention in the preparation for "the day after":

• one is the need to pay careful attention to the practical implementation of the provisions of the bi-regional agreement for the support of effective participation and internationalisation of small and medium-sized enterprises;

• the other refers to the active participation of the different local governments together with their respective productive sectors in maximising the opportunities that will be provided by the bi-regional agreement;

• and the third is to analyze the multiple developments that may arise from the bi-regional agreement once incorporated, with its respective rules of origin, into the network of preferential trade agreements that Mercosur and the EU have entered into or may enter into with other countries and regions, and especially with those of South America.

As in today's world the cultural diversity factor has acquired significant relevance, it is increasingly difficult to try to reach such different consumers without adapting to their tastes, beliefs, values, styles, and priorities. This implies in-depth knowledge of the other market(s) in every aspect and dimension, which is generally gained by living in one way or another for a certain period of time in the other market.

There appears to be three recommended requirements to substantially enhance the capacity of a country like Argentina to understand the future development of its foreign trade in a global context of multiple options and in a state of constant change, and to effectively take advantage of agreements such as the one under negotiation with the EU.

The three are interrelated and, notwithstanding others, are as follows: 

• To have human resources able to understand other national realities in their respective modalities of goods and services consumption that the country itself can produce and potentially export given its resources. In other words, to train professionals and technicians who have the right knowledge of what consumers in other countries may possibly demand. This knowledge is acquired primarily by living for some time in the respective country, whether as a "backpacker" or a student, company executive, temporary worker, journalist, artist, scientist, sportsperson or diplomat, among other possible activities. Thus, the effects of cultural diversities with respect to the observer's country of origin can be fully grasped;

• To facilitate the development of specialists with sufficient knowledge of the political, economic, cultural and legal realities of the other countries, including their foreign affairs. This involves human resources with adequate knowledge of the literature and history, as well as of the possible ethnic or religious diversities of countries with which one seeks to strengthen trade links. This means training people who understand, respect, and even admire the other country.

• To employ human resources with a reasonable command of the other country's primary language and of the prevalent customs of its population. While English is used globally for communication, it would be advisable for anyone who works and lives in a country where English is not the first language to at least understand the language spoken by most of its population.

These are human resources requirements that may also affect the capacity of the country and its companies to fully benefit from the bi-regional agreement between Mercosur and the EU, in the event that it effectively materialises and enters into force.

Félix Peña is the Director of the Master's 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.