The Union of South American Nations: the new(est) regionalism in Latin America.

AuthorBennett, Jackson
  1. INTRODUCTION

    Since their independence, Latin American countries have attempted to integrate both politically and economically. (1) While countries in Latin America have created institutions to facilitate trade liberalization and regional integration, this process has only fumbled toward the goal of regional integration. (2) With the agreement to form the South American Community of Nations (SACN) and subsequently the Union of South American Nations (UNASUR), Latin American countries have made an important step toward realizing the goals of true regional integration. (3) Successful integration, however, will only be accomplished with significant change to the status quo that takes into consideration problems encountered in the past. (4)

    This Note will begin with a discussion of the history of integration in Latin America. (5) It will go on to discuss the legal framework of the agreements in place today, the infant structure of UNASUR, and the current climate in Latin America concerning regional integration. (6) This Note posits that the integration envisioned by UNASUR will be difficult because it relies on existing institutions without altering the pre-existing legal structure of trade relationships. (7) It concludes that regionalism is only beneficial to Latin America if an organization is given the necessary legal power to implement economic integration. (8)

  2. HISTORY

    1. South American Trade Regions

    The dream of regional harmony in Latin America is not a new one. (9) Simon Bolivar, following the revolution that led to Latin American independence, articulated the need for the political integration of the Latin American region. (10) Early movements toward regional integration were generally political, not economic, in nature and were focused on maintaining the region's newly won independence. (11) Though economic transformation was a necessary effect when changing from colonies to independent states, the language Bolivar utilized spoke of a political and cultural unification intended to prevent outside interests from taking advantage of the nascent states. (12) In Bolivar's view, regional conflict and vulnerability to large powers, specifically Great Britain and the United States, threatened Latin America's newly found independence. (13) He feared these countries gaining a foothold and exploiting the region, as Latin America's colonial rulers had done for years. (14)

    While Latin America's independence from Spain changed the region's political structure, it also transformed the economic landscape. (15) The region's mercantile economies began to modernize by instituting reforms that would allow them to compete in the industrialized world. (16)

    The economies of the region benefited from laissez-faire policies, which allowed them to freely export their agricultural goods all over the world. (17) At the onset of the Great Depression, however, their export-reliant economies began to sink into recession as foreign demand decreased. (18) Only government protection and foreign assistance prevented a complete collapse of the economy. (19)

    The need to protect and incubate industries in order to create a viable economy was addressed in the years following World War II by convincing leaders to adopt import substitution policies on both a national and, subsequently, regional basis. (20) In the 1950s the general trade policy of Latin American countries, even amongst themselves, was highly protectionist. (21) With the potential benefits that regionalized trade could bring in mind, Latin American governments took a first step toward a program of regional economic integration. (22) As this program developed, sub-regional bodies were created, leading to the regional agreements in operation now: ALADI, the Andean Community and the Common Market of the South (MERCOSUR). (23)

    1. Early Regional Agreements

      a. LAFTA

      LAFTA represents the first incarnation of regionalized trade in South America. (24) The treaty's stated goal was to gradually eliminate trade restrictions on imports from member states. (25) From the ECLA's point of view, and to many outside and inside the region, LAFTA was intended and believed to be a "magic pill" that would reform the economic structure and improve general welfare throughout the region. (26) Unfortunately, LAFTA never got off the ground. (27) Early results suggested that the pieces of the "trade-pie" were not cut equally. (28) Countries with "larger national markets and more diversified industries ... were reaping most of the benefits [of LAFTA]." (29) Instead of trade increasing the well-being of all, LAFTA improved conditions for a few, while others--Chile, Colombia and Peru--began running trade deficits. (30) "LAFTA was producing on a regional scale the dominance-dependency relationship characteristic of North-South relations in general which [sic] many developing countries ... criticized with increasing vehemence." (31) The most frustrated countries were those mid-way up the developmental chain because they had intended LAFTA to stimulate their economies and industrial growth. (32) Thus, in 1966 Chile, Colombia, Ecuador, Peru and Venezuela decided to form their own sub-regional common market in reaction to their frustrations with LAFTA. (33)

      LAFTA's failure to stimulate growth resulted mainly from two factors: First, LAFTA's structure was built around governing trade among its member countries rather than around creating trade opportunities for all members. (34) Second, LAFTA agreed to agree in the future on lowering trade barriers; it was therefore merely a framework for agreeing to tariff reductions at a later date. (35) These limitations did not mean the economies of the LAFTA nations did not prosper and grow; rather, the causes of this prosperity were primarily extra-regional in nature and not a result of regional integration efforts. (36)

      b. ALADI

      LAFTA eventually ended in failure, and in 1980 was replaced by the Latin American Integration Association (ALADI in Spanish). (37) ALADI replaced LAFTA with a different, more streamlined structure, intended to fix some of LAFTA's inherent problems. (38) For example, ALADI changed the goals for integration by recognizing that less developed countries need economic support from more developed countries, and changed the mode of integration by calling for a process of subregional integration. (39) As compared to a single free trade area, ALADI is more of an association amongst countries that promotes the creation of trade preferences in the region by 1) creating regional trade preferences; 2) allowing regional scope agreements; and 3) allowing partial scope agreements amongst member countries. (40)

    2. The Andean Group/Community

      The initial signatories to the Cartagena Agreement were Bolivia, Colombia, Chile, Ecuador and Peru. (41) The goals of the Andean Group were aggressive and unique for its time. (42) There were many important goals that were to help attain a common market by 1980, including automatic reductions in national tariffs, the goal of a common external tariff by 1980, and the immediate establishment of a minimum common external tariff. (43) One of the most important innovations, and changes from LAFTA, was the preferential treatment that the Andean Group afforded less-developed members. (44)

      Prior to the Andean Group's official change to the Andean Community, the Quito Protocol began a massive movement toward subregional trade liberalization and the creation of a multilateral free trade area within the Andean subregion. (45) In 1996, the Trujillo Protocol changed the Andean Group to the Andean Community. (46) Through the plenary powers of member countries' presidents, the Andean Community was able to move forward with rapid trade liberalization. (47) The bureaucratic nature of the Andean Community, however, does not necessarily lead to effective or timely implementation of policy changes. (48)

      The Andean Community benefited from the mistakes made by LAFTA, which attributed to its early success. (49) Many of the items addressed in the Cartagena Agreement were direct responses to LAFTA's failures or affects. (50) An example that stemmed directly from LAFTA's failures was the adoption of an automatic schedule for tariff reductions. (51)

      a. Functional Problems

      i. Implementing a Common Market

      While the structure of the Andean Community is impressive and close to the ground, there have been significant problems that call into question its functionality. (52) Creating a common market, which is a goal of the Andean Community, requires high levels of cooperation among member states. (53) The Andean Community, however, has consistently shown an inability to meet deadlines for implementing many of the President's Council's decisions. (54)

      Inadequate planning and unrealistic targets have lead to large amounts of work falling to certain institutional bodies without the required funding or support necessary to realize these goals. (55) This situation creates distrust in the general public and frustration in interest groups promoting liberalized trade who then seek trade liberalization through alternate means. (56) Specifically, these groups have attempted to convince member states to sign bilateral trade agreements with more powerful non-member states. (57) The difficulty of presenting a united front without distraction is monumental in itself, and adding factors that distract from the overall goal of economic integration makes this task near impossible. (58)

      ii. Open Regionalism (59)

      Members of the Andean Community have signed trade agreements with non-member states; these agreements frustrate the Andean Community's overall goals. (60) The lack of a sense of community among member countries and strong institutions to enforce trade regulations blurs the Andean Community's trading policy. (61) As a result, the Community's trade policy with non-members is put together piecemeal by different institutional bodies and member states. (62)...

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