Mercedes Botto Andrea Carla Bianculli - Flacso

When president Menem announced Mercosur and a rapid acceleration in the integration schedule –
tariff reductions in five years instead of ten – he did not consult with business [Schneider, 2004].
However, and given the lack of “local” studies and expertise, informal consultations were carried
out with Chilean experts, who provided technical assistance in terms of the tariff policy and the two
main options that were then on the agenda: the implementation of either a plain tariff or a tariff
escalation scheme. Finally, the government opted for the tariff escalation, and its implementation
would be done with the technical assistance of foreign experts as well. Apart from the technical
challenge imposed by this decision, this also implied a political challenge both in terms of the
participation of Argentina in the region and in the multilateral arena as well.
During those years, regionalism and regional integration appeared as effective tools in order to
facilitate entrance into a much more developed multilateral trading system. However, once again,
two options were then on the agenda: the creation of either a free trade zone or a customs union.
While the first option was clearly promoted by the Ministry of Economy on the basis that a free
trade zone would allow for more manoeuvres in the negotiation of the foreign trade policy – a
vision shared as well by certain business think-tanks such as Fundación Mediterránea and Centro de
Estudios Macroeconómicos de Argentina (CEMA), the opposing option was the establishment of a
customs union, an idea mainly promoted by public universities and the Economic Commission for
Latin America and the Caribbean (ECLAC).
Business participation in the negotiations for the establishment of the CET was mostly precluded
given the opposition they would present to the proposed escalation tariff scheme16. The
implementation of the trade liberalization program, which was intended to be universal and
automatic, together with the creation of Mercosur led to a participation pattern mostly based on the
pressure of groups seeking protection. At several times, business actors let government officials
know of the necessity of establishing side payments and other compensatory mechanisms to restore
balance and maintain the incentives for all parties to participate in free trade. On the one hand,
these voices were never powerful enough to convince government officials to put the issue on the
agenda. However, on the other hand, it is noteworthy that the Argentine government maintained
the schedule to which it had committed, ignoring thus the claims and petitions put forward by the
business sectors and lobbies who called either for specific exceptions or for a delay in the agreed
schedule. Certainly, this is based on the fact that the CET provides a shield against domestic
pressures for increased protection. Thus, no group can seek greater protection since the
government cannot grant it without violating the CET, an instrument which is beyond domestic
control.
A tariff escalation scheme as the one proposed with the Mercosur CET appeared to be the most
viable from a technical point of view, though its political significance was even greater. In spite of
some delay on the original deadlines, the bloc finally achieved free trade amongst the member
countries by 1999, when the CET would finally start to rule. The adoption of the CET would entail
the commitment to a long-term political project with Brazil, which in turn would allow for a better
16 The presence of tariff escalation means that processing industries benefit from higher levels of protection
on their value added than is evident from the nominal tariffs alone.
16