At the beginning of the 21st century, the international system is characterised by ever increasing interdependence, forcing actors to re-organise their relations. The new overlapping foreign policy instruments and cooperation formats on a bilateral, (sub)regional, interregional and multilateral level, in which states pursue different strategies for the assertion of interests, result in constellations that can be favourable but are often problematic for the conclusion of free trade agreements (FTAs).
The EU, only recently having started to develop a common foreign policy and institutionalising relations with partners on a bilateral, interregional and multilateral level, is not free from this problem. Following an incoherent foreign trade policy, in which it shifts from bilateral (South Africa) to interregional (South East Asia) an mixed strategies (South America), the Union faces challenges in the conclusion of interregional FTAs. A current example is the ongoing bloc-to-bloc trade negotiations with the MERCOSUL (Mercado Comum do Sul in Portuguese or Common Market of the South in English) countries and the recent establishment of a bilateral SP with the MERCOSUL member Brazil that aims at cooperation on several topics, including trade.
In the literature, attention has been paid to regionalisation and interregionalism, as well as the duality of the EU’s biregional relations and bilateral SPs creating chances and limits of global policy-making. But although trade has played a prominent role in the study of interregional relations, attempts to link the duality of biregional and bilateral approaches in EU foreign policy with foreign trade policy-making have been modest. This study provides an in-depth analysis of the impact of the EU’s bilateral SP with third states on the Union’s ability to conclude FTAs with economic blocs the SP is integrated with. A single case study, focusing on the coexistence of interregional EU-MERCOSUL FTA negotiations and the bilateral SP between the EU and Brazil, analyses the SP’s value as an EU foreign policy instrument for the enhancement of negotiations on interregional FTAs.
List of Contents
Tables
Figures
List of abbreviations
Introduction
Theoretical considerations
(Neo)Liberal Institutionalism
Interregionalism
Research Design
Interregionalism between the European Union and Latin America
The European Union’s foreign policy: interregionalism and trade
Latin America and Brazilian foreign policy: regional leadership and global aspirations
The European Union’s relations towards Latin America:
the broader region, MERCOSUL and Brazil
The role of the EU’s Strategic Partnerships in negotiations on interregional free trade agreements – the case of Brazil and MERCOSUL
Independent variable one: Extent of interdependence
MERCOSUL – a regional integration project falling short of expectations
The low level of intraregional trade within MERCOSUL
Interdependence and the EU
Independent variable two: Mutuality of interests
Interests within MERCOSUL – economic and foreign trade policies between open trade and protectionism
Change in government – change in economic and trade policies: new chances for cooperation
Interests and the EU – the problem of agriculture and the long-awaited window of opportunity
Independent variable three: Distribution of power
Brazil as an emerging power – implications of becoming a Strategic Partner for Brazil as well as for the other MERCOSUL states
Strategic Partner Brazil’s role in the re-launch of EU-MERCOSUL trade negotiations
The EU’s Strategic Partnership with Brazil and its role in EU-MERCOSUL trade negotiations
Conclusion
Bibliography
Tables
Table 1: Prisoners' Dilemma
Table 2: Strategic Partnerships and trade negotiations
Table 3: Interregionalism between the EU and Latin America
Table 4: EU-MERCOSUL working groups (trade pillar) and Brazil-EU sector dialogues (field of Competitiveness, growth and jobs)
Figures
Figure 1: Effects of regimes on state behaviour and outcomes
Figure 2: Forms of cooperation within international relations
Figure 3: X-centred research design
Figure 4: Path diagram on causes and effects by Gerring (2005)
Figure 5: Biregional and hybrid form of interregionalism: inter-bloc FTA negotiations and bilateral SP
Figure 6: Coleman's bathtub model (adapted)
Figure 7: Regional organisations in Latin America
Figure 8: MERCOSUL members’ (excluding Venezuela) exports to the region as share in total exports in % (1994-2016)
Figure 9: MERCOSUL members’ (excluding Venezuela) exports to the region as share in total exports in % according to country (1994-2016)
Figure 10: Brazil Export Partner Share Top 7 (2016)
Figure 11: EU imports and exports to MERCOSUL (excluding Venezuela) as % of total extra-EU trade in goods (2006-2016)
Figure 12: EU trade flows and balance with MERCOSUL (excluding Venezuela) in total goods in Mio € (2006-2016)
Figure 13: EU imports from MERCOSUL (excluding Venezuela) by product grouping (2016)
Figure 14: EU exports to MERCOSUL (excluding Venezuela) by product grouping (2016)
Figure 15: Trade in goods between EU and MERCOSUL members (excluding Venezuela) in value Mio € (2006-2016)
Figure 16: EU trade flow and balance with Brazil in Mio € (2006-2016)
Figure 17: MERCOSUL states' (excluding Venezuela) annual GDP in current US$ (1994-2016)
Figure 18: MERCOSUL states' (excluding Venezuela) exports of goods in services to the world in current US$ (1994-2016)
Figure 19: MERCOSUL states' (excluding Venezuela) GDP growth in annual % (2003-2016)
Figure 20: MERCOSUL states’ (excluding Venezuela) weighted average tariff rate, all products in % (1994-2016)
Figure 21: EU imports from MERCOSUL countries (excluding Venezuela) according to products in % of total imports from MERCOSUL countries (excluding Venezuela) (2016)
Figure 22: EU exports to MERCOSUL countries (excluding Venezuela) according to products in % of total exports to MERCOSUL countries (excluding Venezuela) (2016)
Figure 23: EU outward FDI stocks to MERCOSUL (excluding Venezuela) in Bio € (2012-2015)
Figure 24: Brazil growth (annual %) and growth in trade with the world and the EU (annual %) (2007-2016)
List of abbreviations
Abbildung in dieser Leseprobe nicht enthalten
Introduction
At the beginning of the 21st century, actors find themselves in an international system of ever-increasing interdependence. Forced to find new ways to organize their relations, non-state actors, states and inter- and supranational organisations have established new instruments to structure their cooperation on a bilateral, (sub)regional, interregional and multilateral level. Many times, the various forms of cooperation overlap, creating cooperation problems not only between the partners but also with actors involved in other cooperation formats. This is problematic in view of the increasing pressures and current international race for the conclusion of free trade agreements (FTA). Every state is involved in a multitude of overlapping cooperation mechanisms through which it pursues different strategies for the assertion of interests. Mutually influencing each other, certain constellations of cooperation schemes can either create a favourable or harming environment for the conclusion of FTAs.
The European Union (EU), only recently having started to develop a common foreign policy and institutionalising relations with partners on a bilateral, interregional and multilateral level, is not free from this problem. Following an incoherent foreign trade policy, in which it shifts from bilateral (for example in South Africa) to interregional (like in South East Asia) approaches, it also pursues strategies of simultaneity like in the case of South America. Here, the Union is involved in the multilateral Doha Round, the biregional EU-Common Market of the South (MERCOSUL for Mercado Comum do Sul in Portuguese or MERCOSUR for Mercado Común del Sur[1] in Spanish) negotiations and the bilateral Strategic Partnership (SP) with the MERCOSUL-member Brazil. The simultaneity of cooperation formats in EU-South American relations carries the potential to enhance but also to hinder the conclusion of interregional FTAs. A current example is the ongoing bloc-to-bloc negotiations between the EU and the MERCOSUL countries on an interregional FTA[2] and the establishment of a bilateral SP with the MERCOSUL member Brazil that aims at cooperation on several topics, including trade.
In the literature, much attention has been paid to regionalisation, not only in Europe (although it is the dominant strand), but also elsewhere and accordingly, interregionalism has become an increasingly prominent topic of research. In this context, the duality of the EU’s biregional relations and bilateral SPs creating chances and limits of global policy-making has received attention (Bendiek & Kramer, Die EU als globaler Akteur, 2009; Bendiek & Kramer, Globale Außenpolitik, 2009; Dominguez, 2015). Within the study of relations between the EU and Latin American countries, trade has played a prominent role (Grabendorff, 2003; Gratius & Nolte, 2013), with a special focus lying on the trade relations between the EU and the subregional MERCOSUL (Thorstensen, Marçal, & Ferraz, 2013). Although negotiations on an FTA between the EU and MERCOSUL have received attention (Flôres, 2013; Messerlin, 2013; Wigell, 2015), attempts to link the duality of biregional and bilateral approaches in EU foreign policy with foreign trade policy-making have been modest.
The aim of this master thesis is to fill this gap in the literature and to provide an in-depth study of the impact of the EU’s bilateral SP with third states on the Union’s ability to conclude FTAs with economic blocs the SP is integrated with. A single case study, focusing on the coexistence of interregional negotiations on a prospective EU-MERCOSUL FTA and the bilateral SP between the EU and Brazil, will be conducted to evaluate the SP’s value as an EU foreign policy instrument for the enhancement of negotiations on interregional FTAs. Accordingly, the research question guiding this case study is “Do the European Union’s bilateral Strategic Partnerships with third states integrated with regional economic blocs enhance or block the ability to conclude interregional free trade agreements?” or otherwise said: “Are Strategic Partnerships drivers or blockers of interregional free trade agreements?”. To give answers to this question it will be proceeded as follows: after an introduction to the topic, a section on theoretical considerations will focus on the theory of (Neo)Liberal Institutionalism and interregionalism, from which hypothesis will be derived that will be presented in the subsequent part on the research design. Thereafter, a chapter on interregionalism between the EU and Latin America, including the EU’s foreign policy in general and towards Latin America as well as Brazilian foreign policy towards the region as well as to the world, will give the necessary background information for the better understanding of the subsequent analytical part on the role of the EU’s SP with Brazil in negotiations on an interregional EU-MERCOSUL FTA. The analytical part will be divided into three subsections, according to the hypothesis. The first one will focus on the extent of interdependence, the second on the mutuality of interests and the third on the distribution of power among Brazil its MERCOSUL partners and the EU as indicators for the effect of the bilateral SP with Brazil on the EU’s ability to conclude an interregional FTA with MERCOSUL. The case study will identify strengths and shortcomings of the EU’s strategy and give important findings that can be applied to other contexts. The relevance of this study cannot be underestimated, considering the growing pressures on the EU to conclude FTAs in an international environment of increased competition for markets and trading partners.
Theoretical considerations
When studying the role of the EU’s SPs in concluding FTAs with regional economic blocs, one is confronted with a set of different institutions in an interregional environment. The international relations theory of (Neo)Liberal Institutionalism provides insights into their functioning and considerations on the phenomenon of interregionalism set the scene for their interplay.
(Neo)Liberal Institutionalism
The study of international institutions began after the Second World War with increasing efforts by former allies and enemies to establish international organisations. While realists focused on the limits of cooperation within an anarchic international system, scholars of liberalism concentrated on its prospects and the possibilities to change the anarchic structure of international relations. Back then, the focus of the so-called traditional institutionalists was basically limited to the appearance of international organisations (as well as emerging regional blocs), understood as “formal arrangement[s] transcending national boundaries that provide[] for the establishment of international machinery to facilitate cooperation among members in the security, economic, social or related fields” (Plano & Olton, 1979: 288). In the late 1970s and early 1980s, the field underwent a decisive change following the debate on the explanatory power of (neo)realist theory then dominating international relations. (Neo)realists assumed that due to the United States of America’s (USA) gradual decline in power, international organisations like the General Agreement on Tariffs and Trade (GATT) or the International Monetary Fund (IMF) would become ineffective and international cooperation could not be maintained. Despite some setbacks, this has not been the case and even new international organisations were created (Zangl, 2010: 132). As a result, regime theory, focusing on international political economy and cooperation in international economic relations, emerged[3]. The narrow concept of traditional institutionalists was broadened and focus put on international regimes, defined as implicit or explicit principles, norms, rules, and decision-making procedures around which actors’ expectations converge in a given area of international relations. Principles are beliefs of fact, causation, and rectitude. Norms are standards of behavior defined in terms of rights and obligations. Rules are specific prescriptions or proscriptions for action. Decision-making procedures are prevailing practices for making and implementing collective choice. (Krasner, 1982: 186)
In contrast to international organisations, regimes do not posses actor quality and are limited to specific policy areas, like for example international trade (Zangl, 2010: 133). In the early 1990s, the focus shifted again and regime theory was renamed (Neo)Liberal institutionalism. Moving international institutions, “defined as persistent and connected sets of rules, formal and informal, that prescribe behavioural roles, constrain activity, and shape expectations” (Keohane R. O., 1990: 732) to the centre of considerations, it was established as a broader set of theories ascribing institutions a central role in the studies of international relations.
(Neo)liberal institutionalists share central assumptions of realists on the nature of the international system, namely that in an anarchic international system states act rationally (on the basis of cost-benefit calculations) to realise their egoistic interests (Zangl, 2010: 131). But (neo)liberal institutionalists reach different conclusions that are closer to liberalist assumptions emphasising international cooperation and institutions. In essence, it is their assumptions on the role of institutions in international relations that divide them from (neo)realists. (Neo)realists reject (neo)liberalists’ assumption that long-term inter-state cooperation is possible if it is in the common interest of the states (Keohane R. O., 1984: 4) and that institutions do matter in international relations because they make a difference in the behaviour of states and in the nature of international politics” (Stein, 2008: 212). Their pessimistic worldview leads them to the conclusion that the persistent uncertainty of states about other states’ intentions makes them continuously seek to maximise their relative power position in the international system, which prevents long-term cooperation (Mearsheimer, 1994/95: 11). Mearsheimer argued that:
[b]ecause states in a realist world are concerned about the balance of power, they must be motivated primarily by relative gains concerns when considering cooperation. While each side wants to maximize its absolute gains, it is more important to make sure that it does better, or at least not worse, than the other state in any agreement. However, cooperation is more difficult to achieve when states are attuned to relative-gains logic, rather than absolute-gains logic. This is because states concerned about absolute gains need only make sure that the pie is expanding and that they are getting at least some portion of the increase, while states that worry about relative gains must care also about how the pie is divided, which complicates cooperative efforts. (Mearsheimer, 1994/95: 12-13)
The varying conclusions on the role of institutions emerge from the differing emphasis put on two central elements in (Neo)Realism and (Neo)Liberal Institutionalism: power and interests. (Neo)realists, who stress the importance of power, argue that “institutions […] reflect state calculations of self-interest based primarily on the international distribution of power” and that “[t]he most powerful states in the system create and shape institutions so that they can maintain their share of world power, or even increase it” (Mearsheimer, 1994/95: 13). Consequently, (neo)realists deny institutions actor quality and the ability to influence state behaviour (Mearsheimer, 1994/95: 7) arguing they are mere instruments of states used to translate power and bargaining strengths into outcomes. (Neo)Liberal Institutionalism, in contrast, stresses interests in international relations, arguing that, despite their pessimist worldview, long-term international cooperation is possible in the context of increasingly complex interdependence in inter-state relations if it is in the common interest of the states (Keohane R. O., 1984: 4). They believe that international cooperation is possible beyond (hegemonic) power structures due to international institutions’ potential to solve, in the common interest of all states, cooperation problems that emerge from increasingly complex interdependence (Zangl, 2010: 131-132).
Despite the assumed problem-solving potential of international institutions, (neo)liberal institutionalists like Keohane concede that under the conditions of anarchy a common interest among states does not automatically translate into institution-building and maintenance. In After Hegemony. Cooperation and Discord in the World Political Economy (1984) he uses the game-theoretic model of Prisoner’s Dilemma (Hardin, 1982) to capture the problem for inter-state cooperation. Pursuing their egoistic interests, states face incentives to act contrary to agreements, which can lead to cheating behaviour and hence to outcomes contradicting the common interest of all (Keohane R. O., 1984: 67-69). Stein in this context comments that the “Prisoners’ Dilemma game is the quintessential example of a situation in which autonomy results in poorer outcomes. In such cases, institutions can resolve the collective action problems and allow states to reach mutually preferred outcomes” (Stein, 2008: 208) (table 1).
Table 1: Prisoners' Dilemma
Abbildung in dieser Leseprobe nicht enthalten
Source: Own illustration, based on Keohane, Robert O. (1984): After Hegemony. Cooperation and Discord in the World Political Economy , Princeton: Princeton Univerity Press, p. 67.
Accordingly, in the pursuit of their egoistic interests, states create institutions to achieve defection from cheating or the ‘second-best outcome’. Keohane referred to the centrality of actors’ cost-benefit analysis in the establishment and maintenance of international institutions (Keohane R. O., 1984), leading to the hypothesis that the lower the costs and the higher the benefits of institution-building and maintenance, the higher the chances for institution-building and maintenance, while the higher the costs and the lower the benefits of institution-building and maintenance, the lower the chances for institution-building and maintenance. Keohane argues that cost-benefit calculations on the creation and maintanance of an international institution are basically influenced by three factors. First, the extent of interdependence between states in a certain policy field is believed to primarily determine the benefit that states can expect from cooperation. It is assumed that the higher the extent of interdependence, the higher the expected benefits of international cooperation and the less attractive unilateral action. This typically applies to states with dense trade relations, who have higher interests in stabilising an international trade regime than countries with less developed trade ties (Zangl, 2010: 142). Second, cost-benefit analysis is influenced by the number of states in a certain policy field, mainly affecting the cost side of institution-building and maintenance. The more states are involved, the more difficult it is to find agreement on the establishment of international institutions and to implement agreements. Third, distribution of power in a specific policy field is regarded relevant in inter-state institution-building and maintenance. Keohane claims that hegemonic power distribution in certain policy fields in which states share interests in cooperation can be a supportive but not necessary factor in the construction and maintenance of international institutions. He argues that less powerful states may hinder institution-building and maintenance, because their costs outweigh their benefits. In contrast, powerful states occupying a hegemonic position in a certain policy field may be willing to bear the costs of institution-building and maintenance because these do not outweight the expected benefits of institutionalised cooperation. In another publication Keohane, in collaboration with Robert Axelrod, furthermore points to the effects of context and structure on institution-building and maintanance, arguing that “[t]o ignore the effects of context would be to overlook many of the most interesting questions raised by a game-theoretic perspective on the problem of cooperation” (Axelrod & Keohane, 1985: 227). In this light, the authors introduce two more factos that are believed to have significant effects on institution-building and maintenance and help explain the success and failure of cooperation, namely mutuality of interests and the shadow of the future, understood as states’ expectation about future payoffs.
The inclusion of context and the reference to payoff structures in the analysis of international institutions serves to shift from institution-building and maintenance to the effects of international institutions. Keohane and Axelrod argued that the analysis of the context of games leads us to regard context as malleable: not only can actors in world politics pursue different strategies within an established context of interaction, they may also seek to alter that context through building institutions embodying particular principles, norms, rules, or procedures for the conduct of international relations. (Axelrod & Keohane, 1985: 228)
The authors basically argue that institutions change the context in which states operate, which leads to the states’ revaluation of the context and consequent adjustment of strategy and action. Therefore, international institutions “make a difference in the behaviour of states and the nature of international politics” (Stein, 2008: 212). According to Keohane, they can affect capabilities by serving as a source of influence for states whose policies are consistent with régime rules or which are advantaged by the régime’s decision-making procedures. […] Régimes may also alter the underlying power capabilities of states, whether by reinforcing the dominance of the rich, powerful states (as dependency theory argues) or by dissipating the hegemon’s resources (as claimed by some versions of hegemonic stability theory. […] International institutions may alter calculations of interests by assigning property rights, providing information, and altering patterns of transaction costs. Short-run self-interest is affected by constraints imposed on policy choices by agreed-upon rules; long-run conceptions of self-interest may be reshaped as a result, in part, of practices engaged in over a period of time. (Keohane, Autumn 1990: 737)
Krasner illustrated the effects of institutions on state behaviour (Krasner, 1982). Figure 1 shows that basic causal variables and related behaviour and outcomes are directly linked (path a), but that in situations in which states show interest in cooperation and unilateral behaviour results in suboptimal outcomes, regimes or international institutions can stand between basic causal variables (mainly power and interests) and related behaviour and outcomes, thus creating a different outcome (path b). Keohane and Martin added that institutions’ “impact on outcomes varies, depending on the nature of power and interests” (Keohane & Martin, 1995: 42) of states.
Figure 1: Effects of regimes on state behaviour and outcomes
Abbildung in dieser Leseprobe nicht enthalten
Source: Krasner, Stephen D. (1982): Structural causes and regime consequences: regimes as intervening variables , International Organization 36, (2), p. 193.
When looking at context and the effects of international institutions on state behaviour, problems can arise from the existence of multi-level games, which describe situations in which different games affect each other and thus make their outcomes mutually contingent. Keohane and Axelrod called attention to the problem of incompatibilities between games among different sets of states within international relations, arguing that
[m]any different games take place in world politics, involving different but overlapping sets of actors. Sometimes the existence of more than one game makes it easier to attain cooperation, but related games may also create difficulties for one another. That is, games in world politics can be compatible or incompatible with each other. (Axelrod & Keohane, 1985: 242)
This problem becomes apparent in interregionalism, where different logics of regional cooperation collide.
Interregionalism
Interregionalism is rooted in the study of regions, understood “as a limited number of states linked by a degree of mutual interdependence” (Nye, 1968: vii), which developed along the processes of worldwide regionalisation that had started in 1950s Europe. In 1958, Haas defined regionalisation or regional integration as
the process whereby political actors in several distinct national settings are persuaded to shift their loyalties, expectations and political activities toward a new centre whose institutions possess or demand jurisdiction over the pre-existing nation states. The end result of a process of political integration is a new political community, superimposed over the pre-existing ones. (Haas, 1958: 16)
In 1968, Nye gave a more general definition of regionalism, characterising it as “the formation of interstate associations or groupings on the basis of regions” (Nye, 1968: vii). More recently, it has been defined as “a state-led project to organize a region along particular political and economic lines” (Philipps & Prieto Corredor, 2011: 117), approaching aspects of Haas’ definition on the emergence of new entities. In the international system, regions function as a subsystem lying between the global and the state level (Nolte, 2016: 2). They are consolidated by regional organisations, defined as “international organisation[s] composed of three or more geographically proximate states having a continuous institutional framework” (Marks, Lenz, Ceka, & Burgoon, 2014: 7). Regional organisations give the region actorness, expressed in the management of cooperation in a vast number of policy fields as well as in the formulation and representation of the region’s common interests towards actors outside (Nolte, 2016: 2). Against the background of globalisation and its growing interdependencies that caused the increasing role of regions within the international system, a reorganisation of international relations is required but associated with a number of problems. First, there are problems with regard to the region itself. In most cases, regions are not organised in one single but a multitude of institutions on different levels overlapping each other with regard to mandate and membership, creating an ‘organisational chaos’ in the region (Nolte, 2016: 2-3). Second, there are problems of region-to-region cooperation. The establishment and maintenance of so-called interregionalism, generally understood as institutionalised relations between two or more world regions, are complicated by a problem just mentioned: the chaotic institutional infrastructure that makes it difficult for potential partners to identify points of contact and thus hinders the establishment and maintenance of cooperation. Third, there is the problem of complex multi-level relations between the actors. While in the past, states have been the main actors in the international system, regions are now entering the stage. This requires the reorganisation of collaboration on different levels and a detailed examination of the concept of interregionalism. While interregionalism in a stricter sense refers to institutionalised relations between two or more groups of states from different regions (between regional groups/organisations in all possible constellations), it in a broader sense includes transregional (between regional groups/organisations and regional organisations from more than one region) and hybrid forms (between regional groups/organisations and third countries) of cooperation (figure 2).
Figure 2: Forms of cooperation within international relations
Abbildung in dieser Leseprobe nicht enthalten
Source: Own illustration.
The multitude of international cooperation formats creates multi-level games interacting with each other, possibly leading to suboptimal outcomes that were not intended by the actors. When intending to institutionalise cooperation it is therefore necessary to begin with a look at the (inter)regional architecture as a whole.
The same applies to interregional cooperation formats established by the EU. First and foremost, it is needed to be pointed out that for reasons of coherence with the literature, in cases of EU cooperation with another region it will be referred to ‘interregionalism’ (instead of biregionalism) and in cases of EU cooperation with third states as ‘bilateral’ (instead of hybrid). Ten years ago, the Union began establishing a hybrid form of interregionalism, the bilateral SPs with third countries. Overlapping with regional integration schemes, the SPs potentially disrupt regional fora, thus creating suboptimal outcomes. Instead of serving European interests, the SPs can initiate developments that contradict them. Nonetheless, the institutional overlapping also carries the potential to create favourable outcomes for the EU. This is especially relevant in the context of the EU’s decision to create bilateral SPs with third countries integrated with regional economic blocs the Union already institutionalised interregional cooperation with and the Europeans’ interest in establishing interregional free trade areas. The question to be posed is: “Do the EU’s bilateral SPs with third states integrated with regional economic blocs enhance the ability to conclude interregional FTAs?”, are they drivers of interregional FTAs? Argumentation will be based on assumptions of (Neo)Liberal Institutionalism with its notion that cooperation is conditional on the existence of a common interest in cooperation and states’ cost-benefit considerations on absolute gains. Assuming that the lower the expected costs and the higher the expected benefits of institutionalised cooperation, the higher the chances for institution-building and maintenance, leading to the central hypothesis of this research project that:
H: SPs enhance the chances for an interregional FTA, if they shift the cost-benefit calculations of all states involved in interregional cooperation toward the benefit side.
In the following section on the research design, this general hypothesis will be split into three more specific ones that will lead the examination of a still understudied phenomenon. The aim is to fill the gap in the literature on combining the study of the EU’s bilateral SPs and the Union’s ambition to conclude interregional FTAs.
Research Design
The choice for a research design is inseparable from the research question guiding a research project (Ganghof, 2005: 86). Based on the research question underlying this project, the objective is to identify the causal mechanism between ‘Strategic Partnership’ (x) and ‘interregional FTA conclusion’ (y) and to explain the effect of x on y, leading to an x-centred research design (Ganghof, 2005: 77) (figure 3).
Figure 3: X-centred research design
Abbildung in dieser Leseprobe nicht enthalten
Source: Own illustration.
Gerring pointed to the complexity of the causal link between causes and effects. Against the background of some causes not being the prior cause of an effect, he advocates for the identification of the ultimate, the fundamental cause, presenting the following path diagram (Gerring, 2005: 175) (figure 4):
Figure 4: Path diagram on causes and effects by Gerring (2005)
Abbildung in dieser Leseprobe nicht enthalten
Source: Gerring, John (2005): A Unified Framework for the Social Sciences. Journal of Theoretical Politics , 17 (2), pp. 175.
In the diagram, x1 is considered as the cause, while causes x2 to x4 are regarded as intermediate and not satisfying as causes. The model seems to be very helpful against the background of the many intervening mechanisms that can be found in interregionalism. As already shown, multi-level games affect each other, potentially creating unintended outcomes. Therefore, it must be distinguished between cooperation and problems associated to it on the regional, the biregional and the hybrid level, all influencing each other (figure 5).
Figure 5: Biregional and hybrid form of interregionalism: inter-bloc FTA negotiations and bilateral SP
Abbildung in dieser Leseprobe nicht enthalten
Source: Own illustration.
Within this research project, testing for the effectiveness of bilateral SPs in the conclusion of interregional FTAs, SPs are conceptualised as the central cause of the success or failure of interregional trade negotiations. The analysis will focus on the EU’s and SPs strategic use of the bilateral partnership and resulting processes on different levels of cooperation. The study will only consider enhancing and hindering factors for interregional trade negotiations that stem from the SPs, factors that cannot be traced back to the bilateral partnerships will not be considered. To explain the effects of SPs on the dependent variable ‘interregional FTA conclusion` (y), theoretical assumptions of (Neo)Liberal Institutionalism are used. Factors assumed to influence the dependent variable are conceptualised as the independent variables (x1-xn). Keohane identified three factors to have an influence on institution-building and maintenance (extent of interdependence, number of states, distribution of power). In collaboration with Axelrod structure and context were included and two more factors identified that were believed decisive with regard to the effects of international institutions (mutuality of interests, shadow of the future). Within this research project, the factors are narrowed down to three: extent of interdependence, distribution of power and mutuality of interests and put as independent variables x1 to x3, which are supposed to explain the outcomes on the dependent variable y (interregional FTA conclusion). The factor number of states is eliminated because of the assumption that mutuality of interests and distribution of power already cover the relevant aspects for the measurement of effects of x on y. The factor shadow of the future is integrated into the variable mutuality of interests, grounded in the assumption that states’ calculations on future-payoffs are part of their interests, finally translating into (no) mutuality with other states’ interests.
Building on Keohane’s assumptions on actors’ cost-benefit analysis, three hypotheses are derived from the variables. H1 (extent of interdependence), refers to the assumption that (especially in trade relations) the higher the extent of interdependence, the higher the expected benefits of cooperation and the less attractive unilateral action. On condition of regional (economic) interdependence, it is unlikely that an SP’s privileged position creates incentives to act unilaterally. Instead, chances increase that the SP is used to advance the interregional agenda.
H1: If the extent of interdependence between states integrated with a regional economic is high (low), SPs are more likely to function as drivers (blockers) of interregional FTAs.
H2 (mutuality of interests) refers to the need for a common interest in trade negotiations among states and a certain convergence of interests in topics discussed as a precondition for the conclusion of interregional FTAs.
H2: If the mutuality of interests is high (low) among states in the regional economic bloc the SP is integrated with as well as with the EU, SPs are more likely to act as drivers (blockers) of interregional FTAs.
Finally, H3 (distribution of power) refers to cost-benefit calculations of powerful and less powerful states on the absolute gains of institutionalised cooperation. While more powerful (hegemonic) states might be willing to bear higher costs of cooperation, less powerful states might rather opt for unilateral strategies because expected costs overweight expected benefits. Consequently, the SP’s willingness to use its position to advance the bloc’s interests instead of egoistic ones determines advancements (stagnation/setback) in interregional FTA negotiations.
H3: If the SP uses its position to advance the mutual interests of the blocs (its own interests), SPs are more likely to functions as a driver (blocker) of interregional trade negotiations.
To test the hypotheses, a qualitative single-case (small-N) study will be conducted. The case-selection is based on techniques by Seawright and Gerring (Gerring, 2007; Seawright & Gerring, 2008), leading to the choice for a typical case where “the researcher wants to find a typical case of some phenomenon so that he or she can better explore the causal mechanisms at work in general” (Seawright & Gerring, 2008: 299). Resulting from the x-centred research strategy, the case will be selected based on the universe of cases that depends on the research question. The universe of cases of this research project consists of all cases in which the EU is simultaneously engaged in interregional trade negotiations and bilateral SPs with countries that are embedded in regional blocs. Due to the complexity of EU trade relations, it makes sense to start with the EU’s SPs: Brazil, Canada, China, India, Japan, Mexico, Russia, South Africa, South Korea and the USA (table 2), out of which four informal partnerships (Canada, Japan, Russia and the USA) can be excluded due to lack of institutionalisation.
Table 2: Strategic Partnerships and trade negotiations
Abbildung in dieser Leseprobe nicht enthalten
Source: Own illustration, based on: European Commission (2017): Negotiations and Agreements , (retrieved 23 November 2017); European Commission (2017): Overview of FTA and other Trade Negotiations , (retrieved 23 November 2017).
Regarding integration schemes the SPs are integrated with, Mexico is excluded for two reasons. First, although being integrated with the North Atlantic Free Trade Agreement (NAFTA), Mexico and its partners Canada and USA conduct trade negotiations with the EU unilaterally. Second, the Pacific Alliance (PA), integrating Mexico with Chile, Colombia, and Peru, is not considered due to its short time of existence (established in 2011) and the already existing EU-Mexico Global Agreement. China, India, and Japan are excluded because they share different overlapping integration schemes (ASEAN Plus Three[4], ASEAN Plus SIX[5] ), which leads to interfering effects that make significant results impossible. The remaining two, Brazil within MERCOSUL and South Africa within the South African Development Community (SADC), differ insofar as the competence for negotiations with third parties either lies in the regional organisation, as in the case of MERCOSUL (Art. 13, Tratado de Assunção, Mercosul, 1991) or in its member states, like in the case of South Africa[6]. Hence, the case study will focus on the EU’s bilateral SP with Brazil and its role in interregional EU-MERCOSUL FTA negotiations.
As shown, processes often cannot be reduced to simple causal relationships between x and y, wherefore causal chains need to be broken up. Within this case-study, the method of process-tracing is used “to identify the intervening causal process–the causal chain and causal mechanism–between [the] independent variable […] and the outcome of the dependent variable” (George & Bennet, 2005: 206). The method “open[s] up the black box of causality to study more directly the causal mechanism whereby X contributes to producing Y” (Beach & Pedersen, 2013: 11) and “enables the researcher to make strong within-case inferences about the causal processes whereby outcomes are produced” (Beach & Pedersen, 2013: 2). As part of process-tracing, the bathtub model (Coleman, 1990), one of the most important tools in social sciences for the analysis of multi-level issues, is used to explain causal links between the context given on the macro-level (e.g. through institutions) influencing individual decisions on the micro-level, ultimately aggregating as outcomes on the macro-level. The two-level model shows how the context influences actors’ perception of reality (logic of situation), resulting in individual actions of actors on the micro level (logic of selection) and becoming effective as outcomes on the macro level (figure 6). The model helps to analyse how SPs set the context on the macro-level, consequently influencing states’ individual behaviour on the micro-level, ultimately aggregating as outcomes on the macro-level in form of advancements/setbacks in in- terregional FTA negotiations.
Figure 6: Coleman's bathtub model (adapted)
Abbildung in dieser Leseprobe nicht enthalten
Source: Own illustration based on Coleman, James Samuel (1990): Foundations of Social Theory , Cambridge: Harvard University Press (p. 702), adapted with Esser, Hartmut (1999): Soziologie. Allgemeine Grundlagen (3rd ed.), Frankfurt a.M./New York: Capus Verlag (p.98) and elaborations by Geddes, Barbara (2003): Paradigms and Sand Castles. Theory Building and Research Design in Comparative Politics , Ann Arbour: University of Michigan Press.
The data selection is based on the independent variables expected to explain variance in the dependent variable. For the independent variable mutuality of interests, public statements, country strategy papers, press releases etc. that can be found on government, ministry as well as the MERCOSUL websites; documents published by the European Commission and the European External Action Service (EEAS) and its delegations to the MERCOSUL countries; as well as Joint Statements of the parties involved in trade negotiations will be used. The variable distribution of power will mainly consider newspaper articles and interviews with representatives giving information on the countries’ cost-benefit calculations. Regarding the variable extent of interdependence, economic factors are decisive. National statistical offices and ministries of economics, as well as international institutions such as the EU and the World Bank, provide the necessary information here. In addition, secondary literature is regarded as a useful source for analysis. The considered time span of analysis covers the ten years between the establishment of the SP between the EU and Brazil in 2007 and today.
Interregionalism between the European Union and Latin America
The European Union’s foreign policy: interregionalism and trade
The EU is a highly complex system of actors and structures. Within this multi-level governance system (Hooghe & Marks, 2001), national political structures are entangled with supranational and international ones, leading to a multifaceted scheme integrating decision-makers on the supranational, international, national and subnational level. Accordingly, the EU’s foreign policy is fragmented in a variety of levels of action, instruments, and proceedings. Characterised by dichotomy, it is divided into an area where decisions are taken supranationally, including e.g. the European foreign trade policy, and an area that requires intergovernmental decision-making (principle of unanimity), including the Common Foreign and Security Policy (CFSP) and the Common Security and Defense Policy (CSDP).
Trade has not only been central in the process of European integration, but also in the relations between the EU and third countries. Since external trade and investment have been decisive for economic growth (and thus welfare) of the world’s largest trading bloc (European Commission, 10 benefits of trade, 2010), trade policy is the most advanced field in EU foreign relations (Varwick & von Ondarza, 2011: 145). It is aimed at creating a global system for fair and open trade, the opening up of markets with key economies and the ensuring of rule compliance and sustainable development (European Commission, Trade Policy, 2017). According to Article 3 of the Treaty on the Functioning of the European Union (EUR-Lex, Treaty, 2007), the EU has exclusive competence in trade policy. With member states losing their ability to conclude FTAs individually, the EU becomes the central actor in the ‘global race for FTAs’ and bilateral market access:
[e]arlier, FTAs have deepened regional economic integration, while the WTO (and earlier the GATT) has been in charge of global trade integration. With a new trend towards inter-continental FTAs, this division of labour has become blurred. When some countries engage in bilateralism, the incentive increases for others to follow the suit: If competitors obtain privileged access to important export markets due to FTAs, there is an incentive for adversely affected countries to negotiate similar deals. (Melchior, 2003: 1)
Hence, the EU has been engaged in a number of bilateral and interregional trade negotiations. Nevertheless, it is confronted with cooperation problems that hindered the conclusion of FTAs, like the EU-USA negotiations on TTIP have shown.
Already with the Maastricht Treaty (1993), the EU tried to complement its foreign policy with a political component, establishing the intergovernmental CFSP and CSDP which have been further formalised by creating the post of a High Representative for Common Foreign and Security Policy and the External Action Service (EAS) with the Lisbon Treaties (2009). Constantly trying to adapt to the changing international environment and problems arising from globalisation, the EU defined the European Security Strategy (ESS) in 2003, which stresses the EU’s need to “be more active in pursuing its strategic objectives” and that “[a] more active EU taking on greater responsibilities will also carry greater political weight” (EUR-Lex, 2003). The strategy proposes an international order based on effective multilateralism grounded in well-functioning international institutions and emphasises the importance of cooperation with inter-national partners. Besides multilateral cooperation, bilateral partnerships with key actors and emerging powers like the USA, Russia, Japan, China, Canada, and India are explicitly men-tioned. Although the EU has traditionally based it’s foreign relations on a region-to-region approach, it proved to be difficult to cooperate within biregional frameworks due to the lack of corresponding institutions and the resulting need to deal with a group of states with sometimes diverging interests. To overcome stagnation, it established bilateral SPs with like-minded and powerful regional key players that were hoped to exercise influence on its neighbours and the regional agenda in the interest of the EU (Hess, 2012: 4). SPs are institutionalised forms of cooperation between a regional organisation and a third state integrated within another regional bloc (Drechsel, 2016: 31). While it is uncontested that “the EU’s bilateral strategic partners have been chosen because they are positioned at the nexus of regional and global politics” (Hess, 2012: 4), the concept is missing a clear definition. Basically, SPs can be ident-ified as forms of cooperation between actors that share common interests in specific policy fields or towards other actors, ideally based on equal rights and duties, and bound to rules of exclusivity under reduction of competition in the relationship (Maihold, 2009: 194-195). While some criticised that the objectives the EU tries to pursue with it remain unclear (Bendiek & Kramer, Interregionale Beziehungen, 2009: 8), others argued that “the EU is working towards free trade agreements in most cases: its strategic partners are important trading partners and offer inter-esting markets for European goods” (Hess, 2012: 3). In any case, hybrid interregional relation-ships with key players integrated with regional blocs carry the potential to complicate regional as well as interregional arrangements (Doctor, 2015: 972). Therefore, the ESS has been criti-cised for its failure to identify the functional differentiation between the European foreign policy instruments (Drechsel, 2016: 4). The EU’s foreign policy has also been criticised for its lack of political strategies towards other regions and the complex structure of institutions and partners missing clearly identifiable hierarchies. This ‘patchworks’ of interregional and bilateral relations would only be used depending on issues and the current political situation to realise short-term objectives. Thus, it has been argued that there was a need for European strategies for interregional relations to be able to build up an international order of effective multilateralism (Bendiek & Kramer, Die europäische Politik, 2009: 218).
Latin America and Brazilian foreign policy: regional leadership and global aspirations
Like Europe, Latin America shows a long history of regional integration projects dating back to the 1960s. While economic integration has already played the central role in the government-driven and inward-oriented model of import-substitution called ‘old regionalism’, it has developed during another wave of regional integration in the 1990s. Back then, to enhance the states’ competitiveness in the world economy, projects following the logic of export-oriented ‘open regionalism’, including the Andean Community (CAN, formerly known as the Andean Pact), the Central American Integration System (SICA) and not least MERCOSUL, were established. With the first decade of the 21st century projects of ‘new regionalism’ that are less trade and more politically oriented, like for example the anti-free trade Bolivarian Alliance for the Peoples of Our America (ALBA) and the Union of South American Nations (UNASUR), emerged. But these projects, depending primarily on presidential actions (so-called ‘presidential diplomacy’, (Malamud, 2005), rather than consolidating the regions, revealed the frictions between the states. In fact, no other world region has developed a comparatively high number of regional integration schemes and complex regional architecture as Latin America (figure 7). Nonetheless, it keeps generating new regional organisations, like the only recently established Pacific Alliance (PA) that symbolises the shift back to economic integration and a more pragmatic approach that seeks to expand already existing bilateral agreements (Nolte, 2017: 2-3).
[...]
[1] Due to the focus on Brazil, its central role in the region and its Strategic Partnership with the EU, the Portuguese acronym MERCOSUL will be used.
[2] In the literature, the term FTA is used although more precisely, an EU-MERCOSUL Association Agreement with a trade component is being negotiated.
[3] While in the USA the focus was on international political economy, in Europe the field evolved around cooperation in international security and the use of regimes in the stabilisation of security in the East-West-conflict.
[4] Includes the ten ASEAN members plus the People’s Republic of China South Korean and Japan.
[5] Includes the ten ASEAN members plus the People’s Republic of China South Korean and Japan, as well as India, Australia and New Zealand.
[6] In 2004, the EU and South Africa concluded the Trade, Development and Cooperation Agreement that is being replaced by the interregional EU-SADC EPA.
- Citation du texte
- M.A. Josephine Susan Götze (Auteur), 2018, The EU's bilateral Strategic Partnerships. Drivers or blockers of interregional free trade agreements?, Munich, GRIN Verlag, https://www.grin.com/document/432533
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