Recently, my participation in various competitions in professional and academic settings has provided me with a valuable opportunity to reflect on the current state of international trade. A question about the current state of this landscape led to the idea of to explore some perspectives that prioritize practice and experience over purely theoretical conclusions.
Indeed, a presentation on the interpretation of trade flows in goods and services sparked a series of ideas and the exploration of fundamental answers. To define the scope of this analysis, it is crucial to examine the current scenario in which Argentina is currently negotiating several agreements of varying scope. These negotiations are being approached from both a national and a regional perspective, through the main bloc of which it is a part: the MERCOSURseeking to align their interests with the international context.
I define this complex panorama of possibilities metaphorically as "Negotiating Labyrinths" (Negotiating Labyrinths), a precise description of Argentina's participation in International Agreements, with special emphasis on the tactical challenge of negotiation. For a better understanding, it is appropriate to complement this image with another metaphor, popularized in the analysis of Free Trade Agreements: the "Spaghetti Bowl" (coined by the economist) Jagdish Bhagwati in the 90s). This term refers to the description of the intricate and chaotic structure of the links and negotiations between States in the global context.
Using these metaphors – a plate of tangled spaghetti and a labyrinth with its forks and possible dead ends – will facilitate visualization and analysis, in this case, focusing on the Rules of Origin.
Introduction to the Scenario: The Negotiating Labyrinth
Within the labyrinth of negotiation, the basis for the Rules of Origin is constituted by the rules "framework" established by the WTOBased on these criteria, the members establish their foundations and precedents for building their own rules of the game.
However, various factors—ranging from force majeure events such as environmental disasters and armed conflicts to evolving interpersonal relationships among state decision-makers—have caused these baselines to shift. The rules are being reconfigured, altering the negotiation environment and giving rise to new and distinct interests.
In this scenario, MERCOSUR, as the main bloc of which Argentina is a part and through which it negotiates most of its trade agreements, has the MERCOSUR Rules of Origin (ROM) (Dec. CMC 05/23). With its updated version, the ROM sought to simplify and update its rules, criteria, and procedures, and then also incorporate adaptation to the Eighth Amendment to the Harmonized System.
These updates are due to the diversity of agreements that MERCOSUR has negotiated in the last decade, ranging from simple update instruments to mega agreements of high complexityThis scenario is spiced up by the adrenaline involved in the task of unifying criteria within the bloc, respecting the interests of each partner without leading to a crossroads of conflicting interests with the need for modernization and external integration.
These agreements illustrate the diversity:
- Inter-blocs and Third Countries: UE (in closing stage), EFTA (closed), WATER (in the process of closing), to Canada (ongoing) and Singapore (closed).
- regional: MERCOSUR with Chile (ACE 35), Colombia (ACE 72), Ecuador (ACE 59) and Bolivia (ACE 36 y GTBO).
These examples reflect the complexity of converging towards a single point. Using the world map as a reference, the business intelligence exercise for Rules of Origin can be structured as follows: five reference models that fuel the global "Spaghetti Bowl":
- Group 1: ALADI Model with the Economic Complementation Agreements (ACE).
- Group 2: European Model with Free Trade Agreements (FTAs).
- Group 3: North American Model (USMCA, formerly NAFTA), marked by its strong focus on the regional value chain.
- Group 4: East Asian Model with the CEPA (Comprehensive Economic Partnership Agreement), including its plurilateral RCEP (Regional Comprehensive Economic Partnership).
- Group 5: Trans-Pacific Partnership (CPTPP), a plurilateral agreement that represents a new center of economic integration distinct from ALADI, Europe and the classic US model.
inside this "bowl of trade agreements"MERCOSUR operates as the fork who must choose which strands of spaghetti to keep.
The Formula for Preferential Rules of Origin
In the negotiating framework, the Rules of Origin seek a combination of criteria (not a single formula) to ensure that a product benefits from preferential tariff treatment.
Although the WTO Agreement on Rules of Origin seeks to harmonize non-preferential rules, preferential rules They vary significantly by region. Within all the structures mentioned, there is always a convergence on three fundamental criteria, which can be combined to determine the "nationality" of a good:
- The Change in Tariff Classification (CCA): (CC, CP, CSP) Requires that imported non-originating material undergo a substantial transformation that is reflected in a change in its tariff classification (at the chapter, heading, or subheading level). This is the most commonly used criterion in American and European-type agreements, as it simplifies customs controls, although it requires a detailed analysis to prevent compliance with rules of origin through minimal operations.
- Regional Value Content (RVC): It requires that a minimum percentage of the final value The product must have been generated within the territory of the agreement. This criterion incorporates a formula for calculating the value of regional inputs in contrast to inputs from outside the zone, tending to favor regional productive integration and local investment.
- Specific Operations or Processes: It requires a specific manufacturing or processing operation (e.g., a specific chemical process) for the good to acquire origin, regardless of the CCA or CVR. This is the criterion mostly used in negotiating rules for particularly sensitive sectors.
The Crossroads of Strategic Implementation
Now, how do the various variables of agreements come together internally when establishing the bases and criteria specific to each negotiation?
Another question arises, along with a path of multiple forks and dead ends. The key is to preserve institutional memory and long-term strategies to achieve the central negotiating objective.
The negotiator's skill is put to the test by this path forward: to translate a political mandate into a specific formulaThis requires precise technical knowledge and the validation of accurate trade flow data as essential tools for validating positions at the negotiating table, without losing sight of the bloc's collective interest.
The key to negotiation within this labyrinth is knowing how to distinguish the passable paths (agreements with broad internal consensus and high benefit) from the dead ends (negotiations that are too ideologized or dependent on other non-commercial factors).
Conclusion
In closing, it could be said that, regardless of the current situation in MERCOSUR—where the pressure of national interests sometimes clashes with the bloc's structure and the imperative to negotiate jointly—it is essential to stop the frenzy. We need slow down and understandJust like in the story of Alice in Wonderland: The path doesn't matter if you don't know where you're going..
She holds a degree in International Trade (Universidad Nacional de Luján) with postgraduate studies in the Master's Degree in International Economic Relations (Universidad Nacional de Tres de Febrero). She has been a professional development fellow of the Organization of American States (OAS) at the George Washington University School of Law (USA). In the academic field, she is a professor at the Universidad Nacional de Luján. In the professional field, she has been an official of the Secretariat of Commerce dependent on the Ministry of Economy of the Nation, since 2005. Currently, she is the National Coordinator of the Technical Committee No. 3 "Trade Standards and Disciplines" in charge of the negotiations of rules of origin of MERCOSUR; in addition, she is the Alternate National Coordinator of the Technical Committee No. 8 "Transposition of nomenclature of trade agreements with third countries and groups of countries" also of MERCOSUR.
