Chávez, Morales seek transformation of MERCOSUR trade bloc

by Jason Tockman
January 21, 2007

As South American presidents gathered in Rio de Janeiro this week to negotiate regional trade and integration strategies, including the possible ascension of Bolivia as a full member of the Southern Cone trade bloc MERCOSUR, Presidents Hugo Chávez and Evo Morales challenged the bloc to abandon its free market neoliberal roots. Bolivia’s Morales called for ‘profound reforms’ in the MERCOSUR structure, while Chávez of Venezuela declared his intent to ‘decontaminate it of neoliberalism.’ The direction taken by the trade bloc, which encapsulates 250 million people and a gross domestic product of about $1 trillion, will shape how effectively it will be able to reduce poverty, spur regional integration, and establish a hemispheric counterweight to United States.

In its present form, MERCOSUR has more in common with the U.S.-initiated North America Free Trade Agreement (NAFTA) and the European Union than the alternative framework for trade and integration that has been articulated by Chávez and Morales. The two leaders have joined with Cuba to launch a socialist-oriented accord called the Bolivarian Alternative for the Americas (the ALBA in Spanish, or alternately the ‘People’s Trade Agreement’) based upon cooperation, solidarity and complementarity. The ALBA includes provisions in which member nations collaborate in industrial and infrastructure development projects, and provided the greatest benefits to the smallest economy (Bolivia). This past week, newly elected Presidents Daniel Ortega of Nicaragua and Rafael Correa of Ecuador both expressed an interest in joining the ALBA.

The expansion of MERCOSUR, however, without significant reforms would frustrate the implementation of the ALBA. Although an expanded but essentially unchanged MERCOSUR would probably increase trade and GDP for its member countries, it can also be expected to contribute to Latin America’s extremely inequitable distribution of wealth and maintain the region’s dependent economic role as an exporter of primary products. A MERCOSUR status quo would essentially subjugate the ALBA within a framework of market liberalization, despite Latin Americans’ deep and widespread discontent with neoliberalism.

MERCOSUR and neoliberalism
The Common Market of the Southern Cone, MERCOSUR, was created as a ‘customs union’ in 1991 with the Treaty of Asunción. It initially comprised Argentina, Brazil, Paraguay and Uruguay and sought to achieve several objectives: to integrate its member nations through the free movement of goods, services and capital; ensure protection of investments by foreign firms from member nations; establish ‘rules of origin’ standards for traded goods; devise a common external tariff (CET); and harmonize trade and economic policies within member nations. The union also established ‘safeguard’ mechanisms by which countries can establish limited trade barriers if there is a threat of significant economic harm from a rapid influx of imported goods. MERCOSUR includes a dispute resolution process which favors negotiations, although countries may resort to tribunals to adjudicate their differences.

As a customs union, the MERCOSUR structure goes beyond the trade liberalization measures of trade deals like NAFTA, seeking also to harmonize certain political and economic activities of the member nations. In this respect, MERCOSUR can be understood as a less-developed cousin of the European Union. In addition to the common external tariff (which has been criticized as more symbolic than real), MERCOSUR countries have developed common trade negotiating positions and explored coordination of fiscal and monetary policies, including the possible development of a common currency.

Many scholars of political economy have decried MERCOSUR as advancing an essentially free trade agenda. Brazilian writer Emir Sader attacks the existing trade bloc as a vehicle to move Latin America closer to neoliberalism, accusing it of accelerating “the continent’s regression to a primary export base.” Professor Nicola Phillips similarly suggests that the bloc was constructed so as to “facilitate and further domestic liberalisation and deregulation processes by putting in place reinforcing mechanisms at a regional level.” Regional liberalization such as MERCOSUR, Nicola explains, “…offered policy-makers a means of both ‘selling’ neoliberalism to skeptical elements of the electorate and creating an impression of compulsion in order to achieve acquiescence to the new economic orientation and its associated adjustment costs.”

Like NAFTA, MERCOSUR positions itself within the global trade framework of the World Trade Organization (WTO) system, prompting researchers Tussie, Casaburi and Quiliconi to describe the regional blocs as “the most prominent new ‘clubs’ sustaining liberalization”. However, an important conceptual difference exists, as NAFTA embodies the free trade area model, while MERCOSUR is a customs union. At the heart of this difference is what Jean Grugel describes as a ‘partnership’ or ‘cooperative’ approach (that of the European Union and MERCOSUR) versus a ‘market-led’ strategy (NAFTA and the proposed FTAA) to regional integration. It is this distinction that enables Chávez and Morales to believe that their vision for a new type of trade and integration can function within a MERCOSUR setting.

The pirates board HMS MERCOSUR
Embodying what he calls an ‘axis of hope’, writer and historian Tariq Ali colorfully describes Chávez, Morales and Castro as contemporary pirates laying siege to the neoliberal economic model. The effort of Venezuela and Bolivia to re-conceptualize and remake MERCOSUR represents one front in their campaign to create an alternative vision for social and economic integration. Toward this end, Chávez argues:

We need a MERCOSUR that prioritizes social concerns. We need a MERCOSUR that every day moves farther way from the old elitist corporate models of integration that look for…financial profits, but forget about workers, children, life, and human dignity. (Baribeau 2005)

Elaborating on this agenda, journalist Sarah Wagner writes: “Chávez’s proposal rejected commercial integration as the base for linking Latin American countries, advocating that commerce and competition must take a backseat to cooperation and complementation. It also recognized that the struggles of…all the peoples throughout Latin America, are one and the same and installing a system based on economic rivalry would only hinder, if not destroy, integration.”

So how can a trade institution grounded in the free market serve as a vehicle for social justice and equity? In a 2006 interview with Carsten Schiefer, Mexico-based sociologist and economist Heinz Deiterich explores this apparent contradiction. Due to the entrenched political and economic power of the upper class, the church and the media, Deiterich explains, any attempt to move rapidly toward a socialist state “would lead rapidly to the collapse of the system because there is no basis of power from which to execute it.” Instead, he believes, countries of the periphery/semi-periphery such as Venezuela and Bolivia must incrementally, but steadily, build an alternate, parallel system based on the empowerment of the social movements, workers, farmers and small business owners. While this can set the stage for a democratic transition to socialism, Deiterich warns, the end product is far from certain:

that does not lead automatically to socialism. But a parallel development is made by devising structures for an economy of equivalence. That’s the decisive difference: It’s not going to be a matter of making a democratic revolution first and following it sometime later with a socialist revolution. It’s a matter of doing both at the same time along parallel paths. That is the new, Latin American solution: safeguard against the Monroe Doctrine for survival while introducing socialist development… Whether finally the social-democratic capitalist or the socialist direction will predominate, we don’t know.

In this context, Deiterich speculates that neither “democratic socio-economic development” nor socialism in Venezuela is likely to succeed outside of the cooperation, solidarity and mutual support of a regional trade bloc. Thus, even within the existing free market framework, MERCOSUR can offer a critical locus of both integration and resistance, from which an alternate socio-economic model can emerge.

Conclusion
In so far as MERCOSUR does reinforce the centrality of the free market in the economies of its member nations, it may serve to proscribe the ‘movement toward socialism’ declared by Presidents Morales and Chávez. In fact, it could be said that the actually existing MERCOSUR represents a ‘movement toward capitalism,’ or that MERCOSUR further enmeshes its members within the global capitalist framework.

This is not to say that MERCOSUR could not be conceived of as a site for designing a strategy for equitable social and economic development, due to its regional character (as opposed to hemispheric) and the characteristics of a customs union as opposed to a trade area. MERCOSUR is not NAFTA. Its structure and membership offers more latitude for implementing a different model for integration, based upon non-capitalist principles, such as those of the ALBA. The full participation of Venezuela and Bolivia will provide an important opportunity for MERCOSUR to become an alternative to neoliberalism.

Clearly, there are political, institutional and regulatory impediments to genuine reform, and pressure from transnational business interests could derail the effort to remake the trade bloc. The showdown over the soul of MERCOSUR is still likely to come, and much will depend upon both the positions adopted by Brazilian President Lula da Silva, and upon social movement mobilization around trade policy in the region. Those of us in the North should take note of this power struggle with interest, as our compañeros in the South may succeed in illuminating an alternative path for just and fair social and economic integration. And if the pirates succeed in transforming MERCOSUR, the resulting model might just prove contagious.

Jason Tockman is a Masters student in Latin American Studies at Simon Fraser University in Vancouver, Canada; he can be reached at jtockman@sfu.ca.