Coordenação de Raul Mendes Silva
The Path to Ouro Preto:
The Diplomacy of the Common Foreign Tariff (1)
Minister of Foreign Affairs 1991 – 1994 and as of January 2003
The year 1994 was crucial in the recent history of Brazil in more than one aspect. In the first place it was the year in which the process of redemocratisation of the country really became consolidated with the holding of general elections, after the turbulence caused by the impeachment of Collor, he himself the first President elected directly by popular vote since Jânio Quadros. It was the great merit of Itamar Franco, chosen to be Collor’s Vice-President and promoted to the Presidency in the wake of the latter’s downfall, to have firmly and democratically carried the political process through to Fernando Henrique Cardoso being elected in a totally transparent and tranquil manner. 1994 was likewise the year of the Real Plan, thanks to which many Brazilians (including those of my generation) were for the first time able to contemplate the long-lasting prospect of living without inflation or with inflation kept at tolerable levels. It was up to Fernando Henrique Cardoso, called by Itamar to take over the Ministry of Finance at a time when few believed in the possibility of credibility being restored to the economic policy, to form and to lead the team that would prepare and undertake the feat of controlling inflation, a task that so many others before them had failed.
But also on the level of trade negotiations, 1994 was a year marked by several important events. That year witnessed the signing and – after painstaking discussions in Congress – ratification of the agreements of Marrakech, which concluded the most sweeping round of multilateral trade negotiations ever – the so-called Uruguay Round of GATT - and probably the first that really required Brazil to make a serious effort to adopt standards and practices. “For better or worse” (as President Geisel said about multinational corporations), the Uruguay Round marked for Brazil a moment of inflexion of our foreign economic relations, thereby “consolidating” (although far less than in practice) the unilateral trade opening begun in the Sarney Government and greatly expanded in the Collor Administration.
1994 was also to be, according to the ambitious targets set in the Treaty of Asuncion, the year in which the initial phase of implantation of Mercosur was to be concluded, with the end of the process of “linear and automatic” tariff relief and the establishment of the Common Foreign Tariff, the core of the Customs Union between Brazil, Argentina, Uruguay and Paraguay. There were, of course, other aspects to be resolved, including those relating to the institutional framework and legal personality of MERCOSUR (the true objective of the Ouro Preto Protocol), but the precise contours of internal liberalisation, with the possible exceptions and timeframes for eliminating it, within what came to be called the “regime of adequacy,” and the definition of the Foreign tariff were the nucleus of the final treaties of the Mercosur “transition period”. (2) Together with the conclusion of the Uruguay Round, the process that would lead to Ouro Preto was undoubtedly of great importance from the angle of foreign-trade policy, mainly because, like the Uruguay Round and unlike other facts or tendencies, its effects were of a legal rather than a merely political nature.
Before proceeding to recapitulate the principal moments and diplomatic events related to this process (since in the case of the Uruguay Round this was the culmination of negotiations begun about six years earlier), it is convenient to point out that the trade policy-related initiatives (some of them our own, others against which we had to react) did not end here. In late 1993 NAFTA was consolidated. In early l994 – and as an extension of NAFTA - President Clinton launched the idea of a free trade area of the Americas (FTAA, as it came to be known), to become the central point of the Summit Conference held in Miami in December l994. Also in late 1993, on the occasion of the Meeting of the Presidents of the Group of Rio, President Itamar Franco proposed the creation of a free trade area for South America (which was then called ALCSA). This initiative, which would become the almost obligatory point of bilateral presidential or ministerial meetings with other countries in the region during 1994 (with variable receptivity, depending on the interlocutor) was detailed in a ministerial meeting of ALADI in February l994. This represented not only an attempt to anticipate a response to the attacks against a hemispheric zone from the United States or even from other South American countries, but also a way of reconciling the already more developed reality of Mercosur with the awareness that, from Brazil’s point of view, regional integration could not be achieved with only the members of that group, to the detriment of the Amazonian neighbours and Chile. This was the natural development of the Amazonian Initiative outlined at the start of the Itamar government – which some commentators less fond of the technicalities of the processes of integration called “Merconorte” (which in turn sprang from a mistaken perception that Mercosur only referred to the southern part of South America, rather than, at least potentially, the whole bloc).
The decision taken in the period prior to signing the Treaty of Asuncion in 1991, regarding the adoption of a Common Foreign Tariff for the process of regional integration among the four countries, was not the result of in-depth economic studies. The choice of model of the Customs Union was mainly political and largely due to a mixture of voluntarist idealism based on the realisation that free-trade areas were not sufficiently solid or lasting projects (compare the European Union with the EFTA, for example), and the need to ensure a certain amount of harmony in the behaviour of the four countries towards new – or renewed – tendencies to form large economic-commercial blocs. In another article that I co-authored, I endeavoured to show how the Initiative for the Americas launched by President Bush – whether this was one of his objectives or not – overlapped the nascent efforts to integrate the southern sub-region of our continent and eventually had a catalysing effect on the trade-liberalisation pacts in the so-called Southern Cone.(3) The convenience or even necessity of a joint response to the proposals of the United States President were perceived by the Brazilian and Argentinean negotiators, who then tried to broaden and deepen the agreements begun in the Sarney/Alfonsin period. The question was the subject of explicit understandings in the Mercosur between Menem and Collor in Buenos Aires in July l990. Uruguay and Paraguay espoused the idea of a joint negotiation, whereas Chile, initially invited to join the group, rejected the offer and sought a separate understanding with the United States. Although, and especially in that exploratory period, it was not possible to conceive of a co-ordinated negotiation vis-à-vis the big partner to the North, even without the perspective of a Customs Union, the target of a Common Foreign Tariff certainly contributed to focusing minds and disciplining attitudes. Without any palpable practical results, the 4+1 Agreement (the so-called Agreement of the Rose Garden) was above all important for showing that the four countries were really determined to proceed with their own process of integration and liberalisation and, quite surprisingly, in the light of the history of lack of union among Latin Americans in the face of the United States, to act in a disciplined fashion as a bloc, at least when general concepts were discussed.
So, contrary to what happened in 1994, in the period before the Treaty of Asuncion the target of a Common Foreign Tariff raised no great controversy, neither in Brazil or among the four partners. Indeed, the internal resistance to Mercosur was expressed more through criticism of what many held to be mistaken priorities - favouring relations with the neighbours to the detriment of what some critics saw as the far more promising negotiations with the United States – than in doubts as to the model that Mercosur was to adopt.(4) Apart from the occasional demonstration, which did not actually affect the spirit and conviction of the negotiators, it was only after the Treaty, and especially as the date drew closer to make concrete decisions on the Common Foreign Tariff, that criticism of the Customs Union was felt more incisively, to the point of calling for careful political evaluation by top levels in the Brazilian government. Nor were any major conceptual divergences recorded among the partners. Although Domingo Cavallo had already been for some time the Argentinean Minister in charge of trade negotiations – initially as Chancellor and then as Minister of the Economy – I do not recall any episode in this phase (unlike later events) – when our neighbours cast any doubt on the convenience of the Customs Union as the target and model for Mercosur. Thus, when the Treaty of Asuncion established the pursuit of a single tariff structure for the area of integration that was taking shape, it was neither the subject of any surprise nor of any significant controversy.
My personal participation in the intra-Mercosur negotiations was interrupted by my appointment as Ambassador to Geneva, where I was responsible, among other matters, for the negotiations of the Uruguay Round of GATT. In this context I would like to record two facts of a certain relevance to the processes being addressed here. The first was the incipient co-ordination that Brazil, Argentina and Uruguay began to exercise in GATT, even on the themes to be discussed in the Round. The second, more significant given the main purpose of this text, resulted from the initiative of harmonised tariff offers, which showed a certain degree of seriousness and commitment to the notion of the Common Foreign Tariff. It is true that Paraguay, which was then negotiating its adhesion to the Agreement, did not resist the pressures for consolidation below the levels agreed by the others (35% for industrial goods not previously consolidated, which were the majority, and a slightly higher ceiling for agricultural produce), which caused some clashes not only in Geneva but also in the capitals. The attitude of the other three countries nevertheless strengthened the Customs Union project.
On returning to Brazil as Secretary-General at the invitation of the appointed Chancellor José Aparecido, who was later confirmed as Minister, I did not at first notice any clearly perceptible problem with regard to the twin concepts of the Common Foreign Tariff and Customs Union. I was aware that there were internal criticisms on this aspect of the integrationist project by some prominent politicians and diplomats. Among them was my friend and former superior, Ambassador Paulo Nogueira Batista, who would for some time before his premature death become Ambassador to the ALADI and in this position a natural participant in the internal debates on regional and sub-regional integration. I shall return to this point further ahead. Concerning our partners, no major difficulty of a conceptual or political nature as to the basic model we had chosen had called my attention. I was not unaware of the specific problems that existed in respect to tariff harmonisation, with Brazil more concerned about protecting certain sensitive sectors, such as capital goods and information technology, and the others in general more inclined towards a tariff structure that facilitated importing feedstock, equipment and so on (even this statement calls for some qualification, because, for all their liberal discourse, our partners were nonetheless concerned about protecting their industrial complex, even if it were more limited, the best known case being the Argentine automobile industry). Be that as it may, the course of the process of integration did not seem to be at stake.
At the end of 1993, two situations/trends were to have repercussions on the discussions and plans relating to Mercosur. In the first place, the Clinton Government actively sought the approval of Congress for the Free Trade Agreement with Canada and Mexico. Oddly enough, the United States, taking advantage of Mexico, went to the point of asking the Latin-American Presidents, during the Summit Meeting of the Group of Rio in Santiago, to send a message to the United States Congress urging them to approve the Agreement. This was not actually carried out – at least not like that – in light of the objections of some countries, including Brazil, against interfering in another nation’s Legislative, which would be a bad precedent that we would not like to see one day repeated in respect to our own Congress. But the movement already denoted a clear interest on the part of Washington to involve the region in trade-liberalisation projects in the hemisphere. Such interest would take shape more clearly some months later with the convocation of the Summit of Miami. The receptivity of most of the countries of the Group of Rio to such an odd suggestion already showed an open attitude towards initiatives that were later taken by the Government of the United States in the sense of reviving, in new apparel, President Bush’s “Enterprise for the Americas”. Coincidentally, at this same meeting in Santiago, President Itamar Franco forwarded the idea of a Free Trade Area for South America – a formula found to reconcile the Mercosur process already underway with the need for a policy of integration with our other neighbours (in the literal sense). Conjugating these two initiatives (the first, of course, with far greater attraction) would prepare the occasion so that in early 1994 doubts on the Customs Union could be expressed more clearly.
The first time I noticed any serious resistance to the Customs Union was at a bilateral meeting between Brazil and Argentina held in early 1994 in the presence of Ministers, Ambassadors and other high officials of the Ministries of Foreign Affairs and Finance of both countries. On the Argentinean side, both Di Tella and Cavallo were present. At a certain moment the discussion centred on the Brazilian proposal for the ALCSA, which raised doubts on the part of the Argentineans. Besides my own position as Chancellor, having already promoted the idea to President Itamar Franco, another sponsor of the initiative among those present was Ambassador Paulo Nogueira Batista. I feel that I am committing no injustice to that great diplomat’s thinking by stating that, along with the merits that I myself and others saw, from both the political and commercial point of view, in a simple and “GATT-compatible” scheme of South-American integration, our Ambassador to the ALADI saw in it the possibility of the Mercosur Customs Union project becoming diluted. For perfectly legitimate reasons (although I did not agree with the conclusions), Ambassador Batista held that adopting a Common Foreign Tariff with our neighbours jeopardised our interests and would lead to a second “consolidation” below the Brazilian tariff structure, thereby reducing the margin of protection necessary to important sectors of our industry. This point of view was obviously not espoused in the Brazilian financial area. As for the Ministry (I am referring, of course, to the bureaucracy), which was very zealous about concluding the Mercosur tasks as initially assigned, their attitude was essentially one of inertia. On my part, I understood and even shared some of the preoccupations with the liberalising effects on our industry, but I felt that within certain limits this was a necessary price to pay in order to preserve the unity of Mercosur, which, besides its obvious political and strategic importance, had already revealed its utility from the economic point of view. (As a matter of fact, one of the most notable changes that I was able to observe in the two years between going to Geneva and coming back to Brazil was precisely the attitude of Brazilian businessmen with regard to Mercosur, passing from poorly disguised scepticism to almost enthusiastic adhesion).
These Brazil-Argentina meetings were characterised from the very start, still during the Sarney/Alfonsin period when the Brazilian delegation was co-ordinated by Ambassador Francisco Thompson Flores and the then Minister Samuel Pinheiro Guimarães, by a great freedom of dialogue among those attending. This continued to be the case in later stages, and agreement was often seen between members of the delegation of one country and those of another, as well as divergences within the same delegation, which were expressed without inhibition. On the Brazilian side there were no objections to ALCSA – unlike the Argentinean side – although there might have been varying degrees of enthusiasm. The curious thing was the unexpected support given to the idea by Cavallo, who envisaged, like Ambassador Batista, albeit for different reasons, the opportunity to be free of the prospect of the Common Foreign Tariff in an area of free trade in which Mercosur would be somewhat diluted. This was obviously not what our initiative proposed, but the sudden and unexpected alliance between a critic of liberalisation in Brazil and a champion of radical free-trade schemes in our neighbour was the first clear sign that in important sectors of the Governments, especially the Argentinean, there was strong feeling against the Common Foreign Tariff.
The catalysing factor of the new position adopted by Buenos Aires was obviously NAFTA. The possibility of coming to integrating in a free-trade zone with the United States was very attractive to the Argentinean economic authorities. Brazil was seen as reticent to this type of integration – on account of the same doubts that are still aired with regard to FTAA. For these currents in Argentina, this viewpoint stressed reclaiming the freedom that the Customs Union project had removed, of individual members making agreements with third countries. Positions were not uniform in our neighbour, and especially in San Martin there was a strong current that saw relations with Brazil as a priority. If there was to be a divorce (in the sense that the Customs Union project meant a marriage), then it would have to be on a amicable basis! With this in mind, Chancellor Guido Di Tella, whose position seemed to oscillate between the pressures of Cavallo and the sentiment that predominated in his own Ministry, had a long conversation with me during the Meeting of Marrakech that concluded the Uruguay Round. The core reasoning was what I have summed up above: Brazil was against NAFTA; Argentina had a more open view of her international insertion and indeed needed an agreement with the United States in order to lock in her reforms and also as a guarantee to attract foreign investors. Although not openly expressed, this also seemed to be the preference of the two smaller members of Mercosur. I myself, convinced as I was of the political and economic reasons behind this model having been adopted, told Di Tella that I viewed the Customs Union as part of the very essence of Mercosur and that to abandon it would mean having to review the whole project of regional integration, which would even impact the liberalisation programme, since we would have to impose restrictions on transactions in order to prevent triangulation and so on.
This firm attitude was essential, but our partners’ desire to negotiate with the United States was clear, regardless of whether this was based on the realistic perspective of concrete gains or on mere illusion. As part of the problem with regard to Brazil was based on an erroneous (or at least exaggerated) perception of our resistance to any opening concerning our neighbour to the North, I decided to suggest to President Itamar Franco that I would send a letter to the Presidents of our three Mercosur partners to say essentially that: 1) Brazil was not against a negotiation with the United States or with NAFTA, provided we were invited (we would not knock on any doors); 2) any negotiation would have to be undertaken in conjunction with the Mercosur countries and preserve the Customs Union project, and consequently: 3) any separate negotiation would mean that the bases of the sub-regional integration project would have to be reviewed. The effect of the communiqué was immediate. The theme of the dissolution of the Customs Union did not appear on the agenda for the next few months. And even when it did reappear in the discussions, this was done obliquely, disguised as a differentiated treatment for the process between Brazil and Argentina and the process related to all Mercosur, that is, also including Uruguay and Paraguay.
The Common Foreign Tariff was once again questioned, this time internally. I have already mentioned that our Ambassador to ALADI, the talented and hardworking Paulo Nogueira Batista, a ferocious critic of the disorderly opening that had occurred in the Collor period, was opposed to the Customs Union on the grounds that in practice this would lead us to a new tariff consolidation below the levels to which we had already committed ourselves in the Uruguay Round. The reasoning, apparently validated by certain attitudes and positions expressed today – on account of the debate on applied versus consolidated tariffs as the starting point for FTAA negotiations - was that despite the “mattress” that existed between the tariffs actually used and those announced and legally practised in GATT/WTO, Brazil would be held to what was agreed upon in Mercosur, thus losing flexibility for her own trade policy. Moreover, according to the same line of reasoning, the more “liberal” sectors of bureaucracy would use the opportunity created by the Common Foreign Tariff negotiations to force another lowering of the tariffs. In practice this did not happen, or happened in a very limited way, since most of the reductions made in the last months of 1994 obeyed another logic, more related to the stability of prices than to the negotiation of the Mercosur foreign tariff. But in theory the argument about flexibility did remain valid.
At that time – and even today – I was convinced that Brazil, being the strongest partner in the Customs Union, would have the means to raise the tariffs as and when it needed, as long as it made its presence felt. This would naturally involve a process of consultations with the other countries, who would try to obtain concessions or countervailing advantages, but this did not strike me as something impossible. On the other hand, abandoning the Common Foreign Tariff would mean admitting that each one was to follow its own path, especially in the negotiations with the United States, and this would imply totally losing any relevance within the Group. There were risks: Ambassador Batista’s argument was something to be borne in mind, but in balancing the different sides it appeared to me that it was important to preserve the objective of the Customs Union.
Here I shall make a brief digression concerning the attitudes that prevailed in Itamaraty vis-à-vis our neighbours, namely Argentina. Despite major progress in bilateral relations with Buenos Aires since the two countries had undergone the process of redemocratisation, there remained in the more traditional currents of Brazilian diplomacy a certain mistrust in respect to the firmness and/or sincerity of our neighbour’s intentions. Perhaps because I had practically begun my professional contacts with Argentina, already concerned with this approximation – when I worked with Renato Archer in the Ministry of Science and Technology – I was never contaminated by this sentiment, which affected many of my colleagues, especially the older ones, regardless of their political and doctrinary leanings. I saw our association especially as the realisation of integrationist ideals involving developing countries that needed to strengthen their democratic institutions and fortify their bargaining position in a world that was more and more dominated by large economic blocs (the United States would have to be seen as a large “bloc,” with or without NAFTA) that were increasingly aggressive in economic and trade negotiations.
The Common Foreign Tariff matter reached a point of inflexion when the Brazilian position was being prepared for the meeting to be held at the end of the first semester in Buenos Aires (it was finally held in early August). President Itamar Franco, aware of the diverging positions on the issue, called a meeting at the Planalto Palace with the Ministers most directly involved in the theme (Foreign Affairs and Finance, and (I believe) Industry and Trade) as well as the Ambassadors to the three Mercosur neighbour countries and ALADI. It is not usual for Ambassadors to take part in ministerial meetings, especially when these are for the purpose of defining Government positions. The mere calling of the meeting was in itself a sign that the President – who obviously had the last word – was sensitive to the “dissident” arguments of the Ambassador to ALADI, and that must be why he considered it useful that these should be exposed and debated. The situation was naturally delicate, with implications that went beyond the Common Foreign Tariff and affected the very conducting of foreign policy, something that those present must have been aware of.
Following the exposés and comments of several participants, the President determined that the line to be followed was the one proposed by me and supported by the Ministers and Ambassadors present. The fact that Minister Ricúpero had defended the same point of view was obviously very important at that moment of consolidation of economic policy. The exception, of course, was Ambassador Batista, whose memorandum on the matter – delivered to me and the President – had caused the meeting to be called. This was in fact the last time I was to see my friend. Symbolically, but somewhat tragically, my wife called me to tell me of his death when I was meeting with the Argentineans on a ranch outside Buenos Aires where, with the intense participation of the economic teams of the two countries (which in our case included Minister Ricúpero, the Secretary of Economic Policy, Winston Fritch, and from Itamaraty, Ambassador Denot Medeiros in addition to our Ambassador in Buenos Aires, Marcos Azambuja) the broad lines of the Common Foreign Tariff were bilaterally settled. Although I played a relatively small role in the technical negotiations, which were entrusted more to the Ministry of Finance, I would say that the most difficult points involved defining the tariffs for certain capital goods and primarily information technology, for which we wanted to keep a degree of protection that the Argentineans found excessive. Once matters had been settled between Brazil and Argentina, we met on the following days in Buenos Aires, now in the sphere of Mercosur. As usual, the two minor partners presented all kinds of demands in terms of exceptions, time schedules for meeting the standards, and so on. These demands, often formulated in a tone that denoted resentment at the previous understandings between Brazil and Argentina (inevitable in order to be able to speed up negotiations), were the source of some friction, which fortunately did not reach the point of upsetting the equilibrium of the agreements. So, with minor concessions – naturally, given the disproportion among the partners – not only were the general lines defined but also specific elements of the tariff structure of Mercosur, including exceptions and the times for their harmonisation. The principle of the Common Foreign Tariff was practically approved, leaving the minor adjustments to the meeting in Brazil, in addition, of course, to other major issues such as the car and sugar industries. Nevertheless, such questions, however fundamental they might be, had more to do with internal liberalisation than the Customs Union itself. The latter was to suffer another tentative attack prior to Ouro Preto. But before discussing this point, it might be useful to briefly describe the unfolding broader situation of the other negotiations (actually pre-negotiations) in which the Mercosur countries were involved and which were being held parallel to all this.
It is not really necessary to dwell further on any of the other processes, especially because some of them (the Summit of Miami, for example) have already been studied at length.(5) Nonetheless, I offer the following facts without trying to draw precise conclusions on the impact they may or may not have on Mercosur negotiations. Concerning Miami, in the first place I would say that a broad complex negotiating process was carried out in which Brazil, presiding over the Group of Rio, co-ordinated the Latin-American positions. In the aspect that could more directly relate to the intra-Mercosur process, our principal aim was to guarantee that the negotiations run according to a reasonable schedule in order not to upset the development of the integration mechanisms already in progress. Although it often seemed that we were about to be out on a limb, our determination and the prestige of Brazil ensured that liberalisation between the countries of the projected FTAA would not take place before 2005 (as a matter of fact, from the strictly formal point of view this could even be later, since the year 2005 was suggested for the end of the negotiations and in theory these could provide a later date for the implementation of whatever was agreed). Therefore, we often had to stand up to our neighbours and even the United States. The negotiations were led brilliantly by the then Secretary-General of Itamaraty, Ambassador Roberto Abdenur, with occasional interventions made by me (the most important being a telephone inquiry from our head-negotiator, who was meeting with the other participants near Washington, in which I categorically refused to accept a timeframe of less than ten years for the negotiations).
With regard to our ALCSA proposal, we continued to defend it at the various bilateral meetings with other South-American countries. Some, like Venezuela, were highly receptive, while others, such as Colombia and Chile, were more reticent. On our side there were also the evident difficulties of allocating human resources, at that moment practically all absorbed by the urgent tasks concerning Mercosur and the pressures of preparing for Miami. Even so, some modest progress was made, and the principle that renegotiating these agreements should focus on free trade within a relatively short term was approved in the work of reviewing the agreements with the other Latin-American countries within the scope of ALADI (an imposition of the imminent coming into effect of the Common Foreign Tariff).
Another initiative at this time – and one in which the Mercosur countries were able to act together quite harmoniously – was the start of preparations for trade negotiations with the European Union. An important mark in this sense occurred parallel to a meeting between the Group of Rio and the EU held in São Paulo in April 1994 shortly after the above-mentioned Meeting of Marrakech, in which the Argentinean doubts with regard to the Common Foreign Tariff had been expressed with such emphasis. The incipient discussions continued in Brussels – with our Ambassador Jório Dauster playing an outstanding role – and at a meeting parallel to the General-Assembly of the United Nations. All this finally led to a meeting of the Chancellors of the four countries with Jacques Delors, President of the Commission, at the end of the year, and to the signing of a memorandum, in December 1994, which in still somewhat vague terms offered the starting point for the negotiations that ensued. Paradoxically, this initiative, which among other things depended on the supposed existence of a Customs Union among the four countries, was enthusiastically welcomed by all and, as far as I know, was met with no resistance. Besides contributing indirectly to consolidating Mercosur, the possibility, even on the distant horizon, of a free-trade zone with the European Union was in the eyes of the Brazilians an important counterweight to any future agreement with the United States. The relevance of this becomes clear when we realise that at that time, with the Uruguay Round just concluded, there was no immediate prospect of negotiations on the multilateral level. On the other hand, given the foreign trade structure in the four countries, it was perfectly reasonable to pursue with Europe a process parallel to whatever eventually is set up with our big partner in the hemisphere.
The last manoeuvres concerning the Common Foreign Tariff were a surprising. As the Ouro Preto meeting drew closer, the Argentineans began to show signs of unease. Together with discussions involving institutional aspects such as the Secretariat, the venue, the possibility of a permanent tribunal and so on, which were at the top of the agenda for the two smaller countries, the preparatory meetings concentrated on themes such as the adjustment regime, technical questions on the Common Foreign Tariff and restricted or special-regime goods. Di Tella asked me to receive one of the senior officials who were coming to Brazil for one of these meetings, as his personal envoy. The message that he brought from the Chancellor consisted essentially of the proposal to set apart the Brazil-Argentina integration process, which would continue to focus on a Customs Union of the whole Mercosur, restricted to an area of free trade. In other words, Mercosur would be set up at two speeds. The motivation behind this suggestion was never completely clear and the alleged reasons seemed insufficient or even futile. According to Buenos Aires (Cavallo was once again the instigator), it was essentially a question of isolating the negotiations between the two major economies from the constant demands and difficulties created by the minor partners. I cannot deny that, to a certain extent, I shared that feeling and that I often felt a certain annoyance or even exasperation at the appealing requests of Uruguay and Paraguay, understandable as they might be. On the other hand, there were legitimate concerns about the capacity, especially the latter’s, to rigorously apply the Mercosur rules, beginning with the Common Foreign Tariff, which would certainly create problems concerning inspection and so on. Yet it was odd that these doubts should arise at practically the last moment, when negotiations were to a great extent already terminated. Moreover, Mercosur had gained some political weight of its own, which enabled us to seek agreements with other blocs.(6) Part of the attraction of Mercosur lay precisely in its agglutinating capacity, which went beyond the immediate economic interest of the two major partners. In the case of the European Union, this was certainly one of the aspects that Brussels took into account when beginning discussions with us. Reversing this model of integration would have a negative impact on more than one front. For political rather than economic reasons, I was opposed to this new suggestion, which would have a disintegrating effect (even if not intentional).
Di Tella, and in a more general way the Argentinean Minister of Foreign Affairs, did not seem too concerned about the matter, but when we met in a joint meeting of Ministers of Foreign Affairs and Finance/Economy in the São Paulo Club in November 94, Domingo Cavallo once more took up the attack. We had an intellectually heated discussion during a plenary meeting attended by the teams of both sides, which in our case included, in addition to my colleagues from Itamaraty, Minister Ciro Gomes and Secretary Winston Fritch, at the end of which Cavallo gave up the idea, either because he was dissuaded by the arguments presented or more likely because he realised that it was useless to continue insisting. In retrospect and in the light of the attitudes that Minister Cavallo would have when he returned to the command of the Argentinean economy with regard to the FTAA negotiations, now in the De La Rua Government, my impression is all the stronger that the target of those attacks was not really the difficulties with Uruguay and Paraguay but rather the never-abandoned desire to redirect Mercosur in a way that would afford Buenos Aires a direct relationship with the United States without the “encumbrances” of the Customs Union. Only the tactic had changed.
With the meeting of the São Paulo Club, the conceptual “battle” on the subject of the Common Foreign Tariff had for the time being come to an end. The discussions in Ouro Preto centred on other questions that had more to do with trade liberalisation among members than the attitude towards third parties. Apropos, I would like to register another comment that Cavallo made to our economic team that, coming from whom it came, quite surprised me. In the face of the liberalisation measures that we kept on making, Cavallo - the great defender of trade opening - chided us for “exaggerating”. Apart from institutional aspects, the hardest negotiations before and during the Conference of Ouro Preto concentrated in areas where trade was still the object of strong restrictions and/or regulation, such as sugar and the automobile sector. In the latter case, the details were essentially settled between the representatives of the economic Ministries of both countries. This does not quite exempt the Ministry of Foreign Affairs, or myself in particular as Minister, from the responsibility for any flaws in the Agreement, since the political drive to see it finalised came mostly from our side. But even without delving into the technical details of the negotiation, the strong impression remains that, from our point of view, the possible disadvantages of the agreement were less the result of a failed negotiation than the fragile position in which we found ourselves, with the market all but liberalised, in the face of a complex car industry such as Argentina’s, involving as it did wide margins of protection, subsidies, TRIMS (the term used in GATT/WTO to define certain investor requisites), and so on.
It would be overly pretentious to claim that the actions and postures adopted by Brazil in the various processes of trade negotiations followed a clearly defined strategy. Especially because many of them were improvised responses to attitudes or proposals of other countries. Yet it would not be an exaggeration to say that a certain view of how Brazil should insert itself into the system of international economic relations permeated our positions in the various forums. It was obvious, for example, that being firmly anchored in our region – South America – was an essential part of this view. For this purpose, it was fundamental to strengthen the only integration mechanism already reasonably developed and structured, although a lot had still to be done, namely Mercosur. The Common Foreign Tariff was viewed as the backbone of this mechanism and for this reason a great deal of the diplomatic activity with our neighbours – not to mention the internal discussions – focused on this point. Beyond Mercosur there was the awareness of the need to develop effective and “GATT-compatible” forms of integration with South America as a whole. We knew that the purpose of calling our other neighbours to form a Customs Union would at that juncture be too ambitious and would create possibly insurmountable resistance. The solution reached was the proposal of a free trade area – ALCSA – which, if it was consolidated, could eventually merge with an expanded Mercosur (not as today with Chile and Bolivia as associated countries, but as a process that could evolve towards a Customs Union for all, or almost all, South America). In the light of the steamroller already looming ahead in favour of a free trade area involving all the Americas (with the obvious exception of Cuba), these tasks took on a sense of urgency that the Itamar Franco Administration, in its foreign policy, tried to deal with to the best of its abilities. Some tasks were already concluded, albeit imperfectly, such as the Mercosur Customs Union, while others, such as those that would potentially mould ALCSA, had hardly even begun. To prevent these projects – which were important for Brazil’s multilateral integration – from being bowled over, a reasonable schedule was sought for hemispheric negotiations, which in a way was achieved. Parallel to this, a conscious endeavour was made to balance the liberalising initiative on the American continent with a similar effort in respect to Europe.
Not having participated directly in the later discussions, I do not feel free to judge whether the timeframes that were established and the processes launched in embryonic form in 1994 were put to full advantage, in the light of the “implicit strategy” that I have briefly outlined above. For several reasons the first eight years of the decade that stretched from Miami (or from Ouro Preto) to the Conference that marked the beginning of the FTAA went by more quickly for some processes than for others. The FTAA, for all the rhetorical clashes and intense negotiating efforts, proceeded on its seemingly inexorable way, whereas Mercosur got caught up in conflicts, often of a minor nature, between the members and saw its dynamics partly compromised by the successive financial crises of the relevant economies, all of them vulnerable to the fluctuations of global markets. ALCSA, whose initial denomination was abandoned, perhaps not to hurt the feelings of the most powerful partner, proceeded shakily and unsteadily and always met with resistance from our Mercosur partners, a resistance that we probably worried about more than we should have. There were obviously also objective drawbacks, even among the members of the Andean Pact, but even so (and with the important reservation made above that I followed these matters at a certain remove), I have the feeling that we could have obtained a stronger commitment from some of our other neighbours, especially Venezuela, when political conditions were more favourable. As for the European Union, aside from a certain degree of voluntarism (which always comes in useful) on the part of Spanish and Portuguese Ministers and Commissioners, they only seem interested in Mercosur when negotiations with the United States threaten to make some definite progress.
In the face of everything, 2005 will arrive – as far as the interlocution between the FTAA and the other processes are concerned – practically as if we had agreed in 1994 to a free-trade area for the Americas for the following year. The most important difference is the existence today of multilateral negotiations – not a negligible factor and one that should be taken into consideration in our global strategy. One question that should be considered, for example, is to find out whether we should make any important concessions on the hemispheric regional level (or bi-regional, in the case of the European Union), since we hear repeatedly that the advantages we seek can mostly only be obtained on the multilateral level (that is, within the WTO “Round”). As regards the other elements of this “implicit strategy,” even aware of its likely difficulties and upsets, I believe that they are still valid. A strong Mercosur with the potential to spread to other countries in South America (after all, the European Union and even the European Common Market – no longer mentioned – were not born ready-made with their present composition), is a necessary basis for us to achieve proper negotiating conditions with the large economic blocs. The United States is the principal of these blocs, not only in terms of numbers but also the degree of internal cohesion, with implications that go far beyond those that can be more easily seen on the strictly commercial level.
London, August 2002
Post scriptumThe circumstance of the President of the Republic, Luís Inácio Lula da Silva, having distinguished me with the appointment to the position of Minister of Foreign Affairs has encouraged me to add some brief prospective reflections on Mercosur to this text, written la
(2) For a historical analysis of the various stages of Mercosur, including the “Tasks” to be completed by 31 December 1994, see SEIXAS CORREA, L. F.: “A Visão Estratégica Brasileira do Processo de Integração”, September 2002 (Text available on the page of the Ministry of Foreign Affairs on the Internet).
(3) AMORIM, Celso & PIMENTEL, Renata. “A Iniciativa para as Américas: o Acordo do Jardim das Rosas” in GUILHON DE ALBUQUERQUE, J. G. (org) Sessenta Anos de Política Externa, vol 2 – Diplomacia para o Desenvolvimento, São Paulo, Núcleo de Pesquisa da USP, 1996.
(4) In 1990 and up to the middle of 1991, the “Initiative for the Americas” was given more attention than the project of integration with our neighbours by institutions directed at intellectual debates on current affairs, such as the “National Forum” directed by former Minister Reis Velloso. (cf REIS VELLOSO, J. P., org.: O Brasil e o Plano Bush, Nobel, 1991)
(5) See, among others, SIMAS MAGALHÃES, Fernando: Cúpula das Américas de 1994: papel negociador do Brasil, etc..., IRBR, FUNAG, 1999. For the approach from the point of view of the United States, see FEINBERG, Richard, Summitry in the Americas: a progress report, Institute of International Economics, 1997.
(6) Not only the European Union but also the United States themselves became slowly convinced of the importance of the Group. Contrary to what at the time was the standard of behaviour of the United States Administration, Secretary of Trade Ron Brown during the Summit of Miami asked for a joint meeting with the Chancellors of the four countries.
December 1993. Solemn moment at the signing of the Protocol of Ouro Preto.
President Itamar Franco in the centre, with Chancellor Celso Amorim to his right.
March 1993. The sponsors of the Protocol of Ouro Preto, President Itamar Franco (left)
and Chancellor Celso Amorim (right). In the centre, Finbar Gangar, President of Trinidad and Tobago
23 July 1998, Ushuaia, Argentina. Summit Meeting of the Presidents of countries
of the Southern Cone, together with Nelson Mandela, President of South Africa
Chancellor Celso Amorim
Brasilia, 14 October 1999. From the left, Argentinian President Carlos Menem,
Chancellor Luiz Felipe Lampreia and President Fernando Henrique Cardoso
En route to Mercosur, meeting of Presidents Alfonsin (Argentina), Sarney
(Brazil) and Julio Maria Sarguinetti (Uruguay)
President Fernando Henrique Cardoso in Buenos Aires, together with his Mercosur colleagues,
at the inauguration of President Fernando de la Rúa (to the right)