For many years, the Community of Andean Nations (CAN) was considered a robust institution and an effective mechanism for trade integration. However, its health started to deteriorate dramatically as it marked 38 years of existence. The Andean regional block entered a crisis that lasted for more than a year, when two of its members negotiated for themselves Free Trade Agreements with the US. Peru signed a FTA in December 2005 and Colombia in February 2006. In April 2006, the CAN lost almost a third of its weight when Venezuela left the community because it openly disagreed with the trade policies of its Andean partners.
In CAN today there is no longer one model, but rather two opposing conceptions of the aims of integration. Peru and Colombia follow the doctrine of “open regionalism”, in other words the deepening of trade liberalisation as the central pillar of integration, whereas Bolivia and Ecuador are pushing for a more integrated union whose central thrust isn’t trade but sovereignty.
Is it possible to integrate the Andean region with two such opposing visions? Leading officials of CAN, specialists, businessmen and representatives of social movements tried to respond to this question in a workshop of reflection on the future of Andean integration which took place 12-13th February in La Paz, under the auspices of the Bolivian Vice Ministry of External Trade.
Crisis of paradigms in CAN
It is possible to identify three phases in the development of the Community of Andean Nations (CAN). The first that lasted from its founding in 1969 to 1980 focused on import-substitution as the paradigm for integration, the second period from 1990 to 2006 adopted a open model of integration that centred on trade liberalisation and the disappearance of the idea of planned development. In the third period, which can be seen as still in a process of transition, from 2007, there has begun the end of the hegemony of the model of the 90s and the resurgence of a Latin American paradigm of regional unions.
Why has the most advanced regional block on the continent become listless and lost power and cohesion in this third phase? The Venezuelan President Hugo Chavez says that FTAs killed CAN, the Bolivian government blames the current crisis on a doctrine of the institute CEPAL which infected the integration programme with a neoliberal virus, known as open regionalism.
In the mid 90s, CEPAL launched its theory of open regionalism linked to the fashion of neoliberalism, which proposed that the Andean Community should be a trade block completely directed towards the global economy, focused on inserting itself into a globalised economy and not in establishing autonomy or sovereignty in the region.
CEPAL pushed trade initiatives such as the World Trade Organisation as well as the North American Free Trade Agreement (NAFTA, signed by US, Canada and Mexico) and the Free Trade Agreement of the Americas (FTAA) as instruments for integration even though they promoted the dismantling of the State and unregulated free markets. Under the influence of this doctrine, Andean rules were changed to accommodate neoliberalism, liberalisation and deregulation of markets as key elements within the regional integration process. Amongst other rulings, the CAN issued in 2004 Decision 598, which allowed countries to negotiate trade agreements with third parties, which before were done together as a community and only “exceptionally" by individual country members. Decision 498 meanwhile established principles and rules for progressive trade liberalisation of services.
According to the Peruvian economist and consultant to CEPAL, Ariela Ruiz Caro, Andean integration shifted to depend on the market and the IMF and World Bank who did not support regional projects. CAN became a puppet without the capacity to make proposals and started to crumble as an institution. It had lost the initial aims with which it was created, in other words the promotion of equitative and balanced development and the bringing together of peoples through cooperation rather than competition.
Neoliberalism of the 90s not only unravelled the productive apparatus of the region, but also wrenched away the community identity of countries forcing them to compete amongst themselves for investments and export markets. Open regionalism played its part in accentuating the trade component and cutting back political aspirations of regional integration processes. The actual crisis in CAN has shown the profound crisis of the paradigm which says that the central pillar of integration is free competition and opening up trade, observed Pablo Solón, the Bolivian Government’s chief trade negotiator.
A new paradigm for integration
The Bolivian Government proposes building a new CAN based on the old principles of cooperation, complementarity and solidarity, which are indispensable for the preservation of unity and to effectively confront imperialism. This proposal recovers the initial political aims of integration: placing a priority on liberation, autonomy and the full exercising of sovereignty rather than on the uniting of markets.
If a regional alliance is not built as a counterweight to other global regional blocks, the countries of the region will continue to be dependent. In this sense, the guiding aim should be to convert CAN into a platform or a seed for a bigger integration project such as the South American Union (UNSUR), a block which has a sovereign voice in a globalised world which can balance existing forces and contribute towards the construction of a multipolar world.
It will involve developing an alternative model of integration, explained Solon, which transcends trade to include the economy, society, politics and culture, and which returns a protagonist role in the economy to the State. The new scheme proposes that States should be strong drivers in the economy controlling natural resources and public companies, which promotes policies of development and is responsible for the redistribution of wealth, because the market has failed completely in this task.
Recent history shows very clearly that a spectacular growth in direct foreign investment or of exports is not enough to achieve development. Instead there has to be a focus on the equitative redistribution of wealth and the resolution of profound asymmetries or inequalities at territorial, social and cultural levels.
Solón speaks of an integration model which promotes harmony with nature and is not based on over-exploitation, because it makes no sense to build an alliance that destroys forests and adds to global warming because this implies consumption of natural capital and puts future generations’ survival at risk.
Just as humans have a responsibility to the environment, the environment must also have a protagonist role in integration. In a new more integrated model of integration, the centre must be human beings and nature rather than trade. Bolivia is still looking for a participative integration from above and below, which is based on serving all peoples and not just governments or a few powerful economic sectors.
The first step is to reformulate CAN
This type of integration would have been unthinkable just four years ago, when neoliberalism dominated, but the new political context in Latin America is allowing for a rethinking of the integration paradigm, based on small advances and at different speeds but very different from the Washington Consensus.
A more integrated and effective integration will depend on a profound reformulation of CAN, whether it is revising its neoliberal-formed laws or the strengthening of different non-trade components such as energy, financing, infrastructure and social policies.
Solón suggests revising and reverting CAN rules related to liberalisation of strategic services, such as services linked to energy and air navigation, for example.
Whilst programmes of Andean finance may be said to have advanced considerably with the establishment of the Andean Corporation Fund (CAF in spanish), countries today still need cheaper loans than they can get from a South American Bank. On energy, a South American strategy is needed which looks to the future of the region and allows Bolivia to benefit from its advantages in this area. Past agreements have meant that less developed economies subsidise regional powers, which happened for example with the cheap gas that Bolivia sold to Brazil. At the same time, infrastructure projects can not have exports as their primary goal but rather the integration of peoples of the region. Infrastructure projects must have a social content and be respectful of the environment.
CAN has a constitution of rights that is one of the most progressive in the world, but doesn’t apply it. What is missing at the moment is the coordination of social policies (in education, migration and health) and the defence of human rights.
In parallel, the community needs to preserve the positive aspects of trade exchange of goods in the region and advance towards a Common External Tariff (AEC in spanish), even if countries who have signed FTAs are openly working against this aim. The countries who signed FTAs promised that it would not have negative consequences for their neighbours but the reality has been totally different.
A high level commission has to be built to monitor the impacts of FTAs in different countries (loss of markets or undermining generic medicines for example) and which would adopt corrective measures to protect affected nations. Moreover, the community should promote policies that favour small producers with a differential treatment in order to limit intra-firm trade (which equals about 40% of trade). The logic of liberalisation has up to now favoured big producers, now it’s the turn of the small producers.
The prime task is to reformulate the concept of supranationality of CAN. Supranationality is the final aim of all integration, but in the actual situation of crisis of the community the imposition of laws contrary to the interests of countries can not be allowed. In this phase, it will be important to put consensus before votes.
The Bolivian Government proposes concretely to revise articles 26 to 28 from the Cartagena Agreement and to define three hierarchies of decision-making in CAN: decisions that must be ratified by Congress even if they have been approved by consensus in CAN; decisions that must be approved by consensus in CAN, and operational decisions that can be approved by vote within CAN.
Solón concluded with the following proposals: We need an Andean Commission and a Secretary General that is more integrated and not just based on trade; to restructure the Secretary-General so it is more subordinate to its country members; to define budgets based on realities of countries; to allow greater social participation in integration which goes further than the current Labour and Business councils, changes to the Andean Tribunal to fit a revised concept of supranationality, and a reformulation of the Andean Parliament.
Two visions and two reactions to the Bolivian proposal
CAN’s Secretary General Freddy Ehlers praised the “interesting” Bolivian proposal. He agreed that the community had to go beyond simple trade integration, that there must be more dialogue and a recognition of the right to politically dissent. He recognised that the Secretary General must change, restructure and become closer to the people.
The reaction from national business interests and including from some executive structures of the Andean Community was different however, as they are still dominated by ideas of open regionalism. Cristian Espinosa, current director general of the Secretary General of CAN, believes that the global model of open regionalism is still “in gestation”, as the experience in Asian countries, Central America and Mexico has shown.
“Global policies are based on open regionalism, the WTO influences us all, in trade rules and in processes of integration. The CAN is not outside this nor immune from it, we are part of this current,” said the functionary who in the past played an important role in Ecuador’s negotiations for a FTA under the government of Alfredo Palacio.
Several Bolivian businessmen such as Gary Rodríguez, Director of the Bolivian Institute for External Trade (IBCE); Eduardo Peinado, President of the National Chamber of Bolivian Industries, and Eduardo Bracamonte, President of the National Chamber of Bolivian Exporters agreed that trade is the most important element of integration and expressed their continued faith in big returns from insertion into the global economy.
After an extensive defence of Chilean liberalism, Rodriguez affirmed that trade is a fundamental tool for development. According to Rodriguez, neither “ideologising” or “idealising” integration are advisable and even less so repeating models made “redundant by history”. The President of IBCE described the Bolivian attempt to reformulate CAN and Mercosur as “theatre” when there are more important internal problems.
According to Peinado, the Bolivian proposal must be understand as “additional” which will require deeper evaluation and consensus. The industrialist emphasised that “living well” depends on the permanent search for markets, in other words integrating further in the global economy maintaining economic liberalisation and macro-economic stability, and being vigilant in improving products quality and keeping prices competitive.
Bracamonte expressed no doubt that the spirit of integration must be based on trade and was even stronger in his criticisms: “When trade is led by political rules, the result is bad trade practices”, asserted the jewellery exporter, fearful that the policies of Evo Morales’ government will push Bolivia closer to the situation of Haiti than Ecuador.
Espinosa and Peinado recognised that trade is not the central part of integration, but a fundamental component because it generates wealth and can link peoples, whilst Rodriguez admitted the inappropriateness of adopting a naïve open model. Nevertheless, the three representatives agreed that external markets are by their nature the platform for promoting integration.
Abundant evidence shows that CAN is experiencing a crisis, but also there are facts that contradict this assertion, protested Espinosa, such as the growth of trade links the broadening of integration processes to new areas (Pacific, Europe), new members, growth of benefits due to the proliferation of agreements and a favourable political discourse that has created a suitable environment for integration.
“Governments are committed to integration, but have different visions of how to do it. But there is only one reality with one dilemma: integration focused inwards or outwards. The challenge for CAN is to loo for a balance and a synergy between these two tendencies,” concluded the CAN functionary.
Trade is not integration
In the past, countries linked with certain political objectives in order to lobby at the global level: today integration is interpreted as the signing of trade treaties, in large part based on the influence of the ideology of open regionalism, a vague and confused category that has been one of the “CEPAL’s biggest conceptual disasters,” asserted Uruguayan researcher Eduardo Gudynas from the Latin American Centre for Social Ecology (CLAES).
Open regionalism left an open vacuum in integration, taking out its political content and giving it a contractual orientation. The doctrine ignored international politics and didn’t consider regional geopolitics, failed to discuss development policies from a regional perspective and didn’t include citizen participation.
Obviously the paradigm helped to increase trade flows but was not positive in terms of integration. Now every Andean country negotiates for themselves and signs agreements which transcend the trade arena establishing rules in areas of intellectual property, state purchases, benefits for investments and supranational rules which affect public policy and contradict Andean regulations.
An increase in trade does not mean more integration, just as FTAA was never about integration, because integration means that both sides develop. It is also not about free competition, because in an unequal world the worst result is equal rules for everyone, emphasised Pablo Solon.
The lesson which emerged from the discussion is that open regionalism is no longer a hegemonic concept within CAN, because there are now two visions. It has to be recognised that half of the members do not share a neoliberal and “free trade” focus which dominated regional integration in recent years. As a result, it is not a question of asking all countries to think alike but to respect the sovereignty of those who think differently, to ensure that agreements with third parties do not directly affect countries in the block and to construct rules that guarantee this. “We do want a single vision from a neoliberal lens. It has been a year since we said this and I don’t see any change that reflects this new reality,” said Solón.
The general agreement is that CAN needs urgent surgery and some basic changes in how it functions: rather than increasing liberalisation, there is need to deepen the levels of political integration, there must be a permanent forum for negotiations with third countries, a recognition of the asymmetries and prevention of failed strategies like FTAA and the Doha round, an acceptance of diversity of trade strategies and the facilitation of gradual convergence.
Paraphrasing the Ecuadorian President Rafael Correa, the Secretary General of CAN Freddy Ehlers stressed that the existing schizophrenic bipolar world (where rich country governments promote the development of trade in the morning and in the afternoon talk of decreasing trade because trade and production is destroying nature) is not living an epoch of change, but rather a change of epochs, perhaps even of civilizations in which countries of CAN if they unite, could play a key role.
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Trade and Integration are not the same
José Manuel Quijano, economist and member of the Sectorial Commission of Mercosur highlights several differences between trade agreements and processes of political integration. To start with, trade agreements are static and are not renegotiated, whilst a political integration agreement is dynamic and can be changed by protocols and further agreements.
1. FTAs impose rules of free trade in an essentially asymmetric market. A political agreement promotes the control of trade in order to allow a member to diversify and generate chains of production.
2. Trade treaties include issues which go beyond trade; integration agreements discuss these issues in a political sphere and with the help of special supranational bodies.
3. FTAs create States that are subordinate and become part of global production chains as specialists in exporting primary commodities. Integration agreements push against dependence on primary goods and look to develop productive chains.
4. FTAs are the most basic and superficial form of relationships between countries. They do not go further than a simple trade agreement between States, yet are based on unifying markets in free trade zones. The next step are customs uninos which look to harmonise trade policies, and beyond that common markets which harmonise almost all economic policies of various countries that allows monetary integration. As a final step, an economic community integrates labour markets and social policies.