Problematizing the EU’s Model Export to Mercosur

– Strategies and Motivations –

by

Tobias Lenz St. Antony’s College, University of Oxford

Paper prepared for the GARNET conference “The European Union in International Affairs”

Brussels, 24-26 April 2008

DRAFT: Please do not quote!

Address for Correspondence: Tobias Lenz, St. Antony’s College, 62 Woodstock Road, Oxford, OX2 6JF, UK. Email: tobias.lenz@sant.ox.ac.uk

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I. Introduction1 Discourse about the European Union (EU2) as a model has become fashionable among European policy-makers in recent years. As they seek a more prominent role for the Union in international affairs, they have increasingly drawn on its internal achievements to legitimize stronger activism internationally.3 This discourse emphasises the Community’s achievements in building a supra-national system of governance, based on the values of freedom, human rights, the rule of law and democracy4, which has brought peace and prosperity to a continent once devastated by wars between its member states. These developments contain lessons that are important not only for Europe, so the discourse goes, but are relevant for the wider world. Others should be inspired by the European experience or emulate these lessons directly, and the EU itself ought to take a proactive stance in teaching them.5 In one of the most explicit pronouncements up to date, Romano Prodi made the case for the EU as a model beyond its own borders:

Our European model of integration is the most developed in the world. Imperfect though it still is, it nevertheless works on a continental scale … and I believe we can make a convincing case that it would also work globally.6

Last year UK foreign secretary David Miliband transformed this discourse into a full-fledged international role for the EU. The EU should not strive to become a superpower, he contended, but should rather develop into a ‘model power’.7 Many academics seem to share this discourse and the positive promises it holds.8 Debates about the EU as a ‘normative’ and ‘civilian power’ are predicated on the normative conviction that the EU model, i.e. its own internal experience, constitutes the EU’s most important resource when acting internationally and should therefore form the basis for an increasing activism internationally. Hence, the EU model lies at the heart of much of the EU’s recent international activism in general and its promotion of regional integration in particular. This paper analyses the latter, i.e. the EU’s promotion of regional integration, in more detail. It asks how exactly the Community impacts regional schemes elsewhere and explores the strategies and motivations of the Commission’s activism in this regard. It thereby draws on the case of Mercosur – a regional integration scheme in South

1 Earlier versions of this paper were presented at the 5th GARNET PhD school on 'Global Governance & Regionalism: The Role of EU, WTO & International Economic Institutions', Geneva, 3 – 7 December 2007, and at the International Studies Association conference in San Francisco, 25-28 March 2008. I wish to thank the workshop participants as well as Anne Deighton, Christian Burkhardt and Anna Holmwood for their constructive comments. The arguments advanced here also owe much to lengthy discussions with Kalypso Nicolaïdis. 2 I use the term ‘European Union’ synonymously with the expressions ‘Union’ and ‘Community’ for the time after the Maastricht Treaty. Before that period, I speak of ‘European Community’ or ‘EC’. 3 (cf. Bickerton 2007) 4 Ian Manners identifies 9 ‘constitutive’ values and principles in the EU which include sustainable peace, social liberty, associative human rights, inclusive equality, social solidarity, sustainable development, good governance, supranational rule of law, and consensual democracy (Manners 2006). 5 (European Commission 1995c) 6 (Prodi 2000, p. 6). For other pronouncements in this vein, see (European Council 2001, p. 3; European Economic and Social Committee 2006; Solana 2007)

7 (Miliband 2007) 8 See, for instance, (Dahrendorf 1979; Pogge 1995)

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America founded in 1991 that consists of Argentina, Brazil, Paraguay, Uruguay and, since 2006, also Venezuela. Mercosur is one of the EU’s most important inter-regional partners and the first region with which the Community treaded the path towards Inter-regional Association, which is currently stalled. Hence, EU-Mercosur relations as the pioneer of EU-driven interregionalism promises to tell us a lot about the driving forces of an increasing policy discourse and respective policy practice based on the depiction of the EU as a model of regional integration. In methodological terms, this case represents a crucial case study.9 The paper proceeds in four sections. The second section sets out the conceptual framework, seeking to explicate and streamline existing arguments under a coherent framework for analysing the EU’s promotion of regionalism abroad. It draws three distinctions: passive vs. active promotion, routinized vs. strategic behaviour and the pursuit of milieu vs. possession goals. The third part sketches out an asymmetrical comparison of the US’ promotion of European integration in the post-WWII era to gain some perspective on the Mercosur case study and leverage for problematizing the EU’s current practices. The fourth section analyzes the EU’s promotion of regional integration in Mercosur. The fifth section concludes by identifying three emerging tensions in the Community’s support for regionalism abroad. The main argument of the paper is that the EU’s active promotion through its own support was largely in line with and complementary to its passive promotion through its ‘model function’ in Mercosur integration for most of the 1990s. This allowed the Community to pursue longer-term milieu and medium-term possession goals in a complementary fashion. Triggered by external events, this ‘harmonious’ pursuit of both types of foreign policy goals became increasingly difficult in the early 2000s. In that situation, the Community’s economic possession goals trumped its longer-term milieu goals, which found its expression in the increasing divergence between its active and passive promotion of regional integration in Mercosur. I also contend that while the pursuit of these policy goals does indeed reflect strategic behaviour by EU actors, much of the actual content of their support for regionalism in Mercosur seems to constitute the routinized externalization of domestic European models rather than mirroring strategic thinking as regards the relationship between policy means and ends in this endeavour.

II. Analytical Framework: EU Promotion of Regional Integration

It has long been recognized that the EU has an impact on regional projects in other parts of the world by virtue of its own nature as a successful model of integration.10 Similarly, it also actively supports such schemes abroad by sharing know-how and granting financial aid for the creation of regional institutions. While the EU’s influence on global regionalism receives growing attention, there have been few systematic analyses of this influence.11 I introduce three crucial distinctions into the analysis of that policy, in order to structure and streamline the arguments that have

9 (Eckstein 1975; George and Bennett 2005, p. 120-21) 10 (Nye 1965; Kaiser 1968; Edwards and Regelsberger 1990; Zimmerling 1991) 11 For good recent exceptions, see (Bilal 2004; Farrell 2007)

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been advanced in this context. Type of Promotion: Passive vs. Active The first distinction refers to the role of the EU in the promotion process: is it passive or active? Rather than dichotomous, this distinction is best thought of as a continuum that captures various degrees of EU activism, with these two adjectives constituting the two poles of the spectrum. They refer to two ideal-typical roles of the Union: that of model12 and that of an actor.13 However, the actor-category is confined to those instances of EU actorness that refer directly to the promotion of its model and does therefore not cover the whole range of EU foreign policy practices such as ESDP peacekeeping missions. The EU as a model is an important aspect of its diffusion and some authors have argued that it is the main way in which the Community shapes other regional integration schemes around the world.14 This has two aspects, one of agency-driven choice and one of structural ‘coercion’. Regarding the first, as one of its most successful and widely acknowledged instances, the EU has attracted others to emulate it through its ‘power of attraction.15 The Community exerts influence “by simple virtue of its very existence”16 or, in other words, it shapes others “through what it is, rather than through what it does.”17 The EU’s attraction has a strong normative dimension that encompasses practices, institutional arrangements or other forms of governance, but also ideas and norms that the Community itself embodies.18 However, as debates about the ‘Asian way’ in regionalism in the 1990s indicate, the Union may also represent a counter-model of regional integration that is to be avoided.19 All of these arguments refer to choices made by others who look at the EU model when designing own integration efforts. However, emulation does not necessarily imply a conscious choice and – as EU policy-makers often suggest – a genuine admiration for the EU model. European integration may also ‘compel’ others to follow its example. Reflecting the Community’s structural power in the international system20, this encompasses two dimensions. Economically, the structural effect of trade diversion of the European Internal Market constitutes a strong incentive for others to engage in regionalism as well.21 In this case, the EU’s ‘power of attraction’ flows from the size and high degree of integration of its market.22

12 The EU as a model has also been referred to as a blueprint, template, reference point, experiment and the likes (Wallace 1995; Rhodes 1997; Rosamond and Jorgensen 2001; Walker 2001). 13 In the literature on policy transfer, this difference is conceived as one between policy transfer, where the policy exporter plays a major role, and lesson-drawing, which is an activity of the policy importer without active participation of the policy exporter (Rose 1993; Dolowitz and Marsh 1996; Evans and Davies 1999; Stone 1999; Page 2000). 14 (Leonard 2005) 15 (Nye 2004). However, whereas Nye’s soft power can be yielded like other sources of hard power and thereby entails activism, the EU as a model in this category refers to strict passiveness. 16 (Rosamond 2005, p. 472) 17 (Maull 2005, p. 778) 18 Farrell (Farrell 2007, p. 308) therefore terms this phenomenon ‘normative suasion’ which is close to Joseph Nye’s concept of ‘soft power’. 19 (Foot 1995; Higgott 2007). However, even in Asia, regional integration has started to follow the European experience more closely since the Asian financial crisis in 1997/98 (Conde 2007). 20 (Barnett and Duvall 2005) 21 (Baldwin 1993; Sverdrup 1998; Mattli 1999; cf. also Kux and Sverdrup 2000) 22 (Meunier and Nicolaïdis 2005)

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Geostrategically, it may also be driven by ‘power balancing’ behaviour as emphasised by realists, based on the realization that in order to have a voice in today’s international affairs regional integration is the only way, especially for smaller countries. The EU’s structural power is similar to the notion of the EU as an international presence defined as ‘the impact of the region on the external world due to size, demography, economic strength, that is, factors which do not depend on a purposive policy to influence’.23 Such a position is not only represented by academics, but has been voiced by leading politicians themselves. The Czech President Václav Klaus, for instance, referred in a recent interview to exactly that phenomenon noting that “EU membership isn't a question of attraction. There simply is no alternative.”24 Powel and DiMaggio have termed this phenomenon ‘mimetic isomorphism’ which occurs when organizations model themselves on others in situations of uncertainty such as poorly understood organizational technologies, ambiguous goals, or unclear solutions.25 This is a common situation in the formation of regional integration schemes, which usually occur under conditions of little previous knowledge about region-building in general and specific means-ends relationships in particular. In this case, uncertainty provides a structural constraint, but there is room for agency in deciding what models to draw upon. In most cases, attraction is combined with the EU’s own activism in spreading its model. These are closely related as the EU’s policy of promoting regional integration draws heavily on its ‘model function’ for credibility and legitimacy.26 As Nye has observed more generally, attraction is a crucial basis for successful foreign policy.27 Today, the worldwide support for regional integration is a fundamental goal of the EU’s foreign policy and rests on three pillars: group-to-group dialogue28, financial and technical assistance for regional institution- and market-building29 and the negotiation of preferential trade agreements (PTAs) with groups of countries.30 This activism will be further outlined in the empirical section. Type of Actor Behaviour: Routinized vs. Strategic The second distinction refers to a central question of the EU as an actor: Does the externalization of its model reflect routinized or strategic behaviour? This distinction addresses the degree of strategic thinking involved in model transfer. It is predicated on the assumption that arguments such as the ones in the ‘external governance’ literature – for example, that the EU seeks to “tackle interdependencies through the external projection of internal solutions”31 – do not tell us enough about the degree of intentionality of such behaviour. How far does the EU’s support for regionalism reflect genuine strategic thinking? Or is it better conceived as “unreflexive behaviour mirroring the deeply engrained belief that Europe’s history is a lesson for everybody”?32 Consequently, strategic behaviour relies on rational choice models that 23 (see also Bretherton and Vogler 2006; Hettne 2007, p. 110) 24 “The Past is the Past”, Interview with Václav Klaus in DER SPIEGEL, 11/2006, 13 March 2006 25 (DiMaggio and Powell 1991, p. 69) 26 (Smith 2003, p. 95) 27 (Nye 2004) 28 (Edwards and Regelsberger 1990; Monar 1997) 29 (Grugel and Hout 1998; Westphal 2005) 30 (Brown 2005; Meunier and Nicolaïdis 2006; Robles 2008) 31 (Lavenex 2004, p. 695) 32 (Radaelli 2000; see also Bicchi 2006b; Bicchi 2006a, p. 287)

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address means-ends relationships. They assume (rather than test) that actors engage in a continuous process of consideration of how their self-interest is best translated into desired outcomes, consciously designing policies according to a given context. A theory of routinized behaviour, in contrast, suggests that practices become routinized over time. There is a large degree of inertia and under conditions of uncertainty in particular actors do what they know to do best rather than what would be the most reasonably conducive to the intended outcomes.33 This logic is similar to the one of path dependency analysed in the historical institutionalism literature.34 In this vein, the EU’s policy to foster regionalism abroad has been attributed to a “form of narcissism” or the inherent “propensity to reproduce itself”35 – lines of reasoning that hint at a form of ‘default’ behaviour springing from the EU’s own internal experience. The explanation of routinized behaviour draws on sociological arguments about the connection between the EU’s internal structure and procedures on the one side, and its external behaviour on the other. Nicolaïdis and Egan describe how such a logic may play out in the context of the Community.36 They trace the process of bureaucratic organisation in the European Commission throughout the enlargement process, showing how civil servants moved between different Directorate Generals (DG) and took their respective knowledge and ‘ways of doing things’ with them to apply it in a different context. People who were originally employed in the DG Internal Market were transferred to DG Enlargement after its completion and have now become responsible for the European Neighbourhood Policy after the accession of the new member states in Central and Eastern Europe has been concluded. Type of Policy Goals: Possession vs. Milieu The distinction between possession and milieu goals goes back to Arnolf Wolfers. He defines possession goals as those that refer to ‘the enhancement or the preservation of one or more of the things to which [a nation] attaches value’. They are specific such as a stretch of territory, membership in the UN Security Council or tariff preferences. One nation holds them at the exclusion of another because their supply is limited. Milieu goals, on the other hand, seek to ‘shape the environment in which a nation has to operate’.37 They are systemic. In other words, the distinction between possession and milieu goals can be conceived as the difference between acting to enhance one’s own place in the system vs. acting on the system as such. The two are related in so far as the pursuit of milieu goals may be a means – albeit an indirect one – towards the achievement of possession goals. This is the case when they are largely complementary. However, as in the case of the Marshall Plan outlined below, they may also be contradictory. In that case, the pursuit of milieu goals requires the willingness to forego benefits or even accept temporary losses in possession goals. Associated with this distinction in policy goals is a difference in the time horizon required to achieve them. Possession goals may be achieved more quickly because a specific possession may ceteris paribus be obtained in a shorter time period than a change in the structure of the international system. In other words, the pursuit of 33 For an interesting application of this distinction to the EU Mediterranean policy, see (Bicchi 2006a) 34 (Steinmo, Thelen et al. 1992; Pierson 2000; Thelen 2004) 35 (Bretherton and Vogler 1999, p. 249, respectively; Smith 2003, p. 70) 36 (Nicolaïdis and Egan 2001) 37 (Wolfers 1962, p. 73-74)

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milieu goals generally requires a longer-term outlook than that of possession goals. In sum, possession goals aim at the acquisition of immediate specific benefits, while milieu goals seek a longer-term change in systemic structures. Relating these considerations to the EU’s promotion of regionalism, what kinds of motivations underpin such a policy objective? Two broad motifs can be distinguished. The first one could be called a geostrategic motivation. It is predicated on creating and strengthening regional arrangements in the quest for a multipolar world order.38 Peter Katzenstein’s metaphor for describing the current world order can be interpreted as an objective that the EU constantly strives for when promoting regionalism in the world, namely the establishment of a ‘world of regions’.39 Björn Hettne has termed such a world order ‘multiregionalism’ defined as a ‘horizontalized, institutionalized structure formed by organized regions’.40 In this vein, EU geostrategic ambitions through the promotion of regionalism constitute a challenge to the US position in the international system.41 Mary Farrell has argued this point, contending that “[i]n the absence of any direct challenge to the reign of the hegemon, inter-regional cooperation remains as the indirect reaction to the pervasive influence and might of the world’s super-power.”42 Such a conception is in line with Pedersen’s theory of ‘co-operative hegemony’ defined as “soft rule within and through co-operative arrangements based on a long-term strategy.”43 The advantages of such a strategy are two-fold. Creating a ‘European world order’44 enhances the EU’s international actorness as a ‘civilian power’ that encourages peaceful cooperation around the world and boosts its legitimacy as a distinct actor in a state-centric international system. Frederik Söderbaum follows this line of argument when positing that promoting regional integration “not only justifies and enhances the EU’s own existence and efficiency as an ‘actor’; the strategy also promotes the legitimacy and the status of other regions.”45 This is the background when the Belgian Prime Minister Guy Verhofstadt calls for a G-8 comprised of regions rather than countries: “we need to create a forum where the leading continental partnership can all speak on an equal footing: the European Union, the African Union, the Common Market of the South (Mercosur), the Association of Southeast Asian Nations (ASEAN), the North American Free Trade Agreement (NAFTA), etc.”46 The second motif is economic. It is predicated on trade and economic gains associated with larger, well-integrated markets in which EU products can circulate freely.47 According to this logic, the EU needs to have important economic interests at stake in order to get involved in the integrative efforts of other countries. These interests fall into two main categories. First, the EU promotes the integration of national markets into regional economies to benefit from economies of scale. Market size has become an important criterion for investment and trade decisions by private companies and 38 see, for instance, (Santander 2001; Faust 2004; Söderbaum and Van Langenhove 2005; Westphal 2005) 39 (Katzenstein 2005) 40 (Hettne 2007, p. 114) 41 (Rüland 2001; Kupchan 2003; Link 2005, p. 150) 42 (see also Calleo 2004; Farrell 2004, p. 5; Higgott 2005) 43 (Pedersen 2002, p. 683) 44 (Hettne 2005) 45 (Söderbaum and Van Langenhove 2005, p. 251) 46 (cited in Söderbaum and Van Langenhove 2005, p. 250) 47 (Smith 1998; Farrell 2004, p. 6)

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serves as a strong incentive for European traders and investors.48 Second, through the negotiation of bi-regional trade agreements, the Union has a powerful tool to shape the framework of economic governance in counterpart regions.49 As the creation of regional markets goes hand in hand with the development of a regional economic governance framework, the Union has an interest in being able to access the enlarged market on terms that are favourable to its own industry. Regional economic integration is an ongoing process that is never complete. The EU has a comparative advantage in this field as it can draw on its long experience in formulating common rules to impact similar processes elsewhere.50 This has become especially salient since a so-called ‘deep integration’ agenda emerged in the early 1990s.51 Addressing ‘behind the border-barriers’ to trade such as divergent technical norms and standards as well as differing regulatory frameworks is said substantially to increase welfare gains.52 Again the competitive element, especially vis-à-vis the US as regards preferential market access, may spur the EU’s economic motivation in specific cases. Through the intensification of globalization and the end of the Cold War ‘geoeconomics’ is increasingly trumping ‘geopolitics’ as a driver of foreign policy. Alberta Sbragia and others have done interesting work on how this logic has played out in the new regionalism since the early 1990s, resulting in patterns of ‘competitive regionalism’ with the EU and the US as hubs of an increasing number of preferential trade agreements.53

48 (cf. Lamy 2001) 49 (Meunier and Nicolaïdis 2005; Meunier and Nicolaïdis 2006) 50 (Claeys and Sindzingre 2003) 51 (Lawrence 1996); see also the special issue of the Journal of European Public Policy on EU trade policy, Vol. 13, No 6, 2006 52 (Evans, Gasiorek et al. 2006) 53 (Sbragia 2002; Rüland 2005)

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In conclusion, the conceptual framework outlined before can be depicted as follows: II. Asymmetric Comparison: The US Marshall Plan and European Integration Before we turn to examining the case of the EU’s promotion of regional integration in Mercosur, it is illuminating to do an asymmetric comparison of that case with the US promotion of regional integration in Europe after World War II.54 Even though historical comparisons, even asymmetric ones, raise difficult questions of comparability, they help to overcome the problem of idiosyncrasy of individual case studies and act as a mirror to gain some perspective on the case chosen. In the current context, it serves to highlight and problematize some of the characteristics of the EU’s policy of promoting regionalism in Mercosur. Several historians have argued that the Marshall Plan was predicated on the idea that the US model has universal relevance and should be emulated by others. Creating a ‘United States of Europe’ was a popular idea among American policy-makers who

54 This comparison will focus on the beginning of the European integration process. It should be noted that the US’ support for it has largely ceased since the end of the Cold War and the inception of Economic and Monetary Union.

Promotion of EU Model

Type of Promotion

Characteristic of Actor Behaviour

Type of Policy Goal Motivation

Passive (Model)

Routinized

Active (Actor)

Strategic

Milieu; long(er)-term

Possession; short(er)-term

- power of attraction - structural power

Policy motivations - economic - geostrategic

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“frequently lectured Europeans on the importance of the American lesson”.55 Michael Hogan, one of the foremost historians of the Marshall Plan, argued that it was guided by the ambition “to remake Western Europe in the likeness of the United States”, portraying it as “an international projection of the corporative political economy that had evolved in the United States.”56 Therefore, the US model may be seen as the basis for an American strategy to promote regionalism in Europe. Of what kind was that strategy? What were the driving forces behind it? After World War II, the US heralded a superior dominance of power vis-à-vis the rest of the world – in economic, political and security-related matters. It faced a situation in which it had to assume the task of rebuilding world order after years of economic turmoil that had resulted in a destructive world war. In view of an incipient clash with communism, it opted for a long-term strategy of ‘benign hegemony’ which aimed at creating a world economic and political order that was to be conducive to American interests. A central part of that strategic project was the promotion of European economic recovery through the Marshall Plan. There has been an extensive, but inconclusive debate among historians about the motivations that underpinned its creation. It is clear that a multitude of considerations were at play and can be historically documented. The dominant ones included, on the geostrategic side, the containment of the Soviet Union and the integration of Germany57; and on the economic side, the objective to lessen the US burden for the economic recovery of Western Europe which would enable them to play a larger role in countering the Soviet threat as well as the goal to rebuild important pre-war export markets.58 The debate about the relative weight of these factors has been inconclusive because of the methodological problem that in the long-run both economic and geopolitical motivations pulled in the same direction and are therefore difficult to disentangle from the perspective of the observed outcome. This difficulty indicates that it is easier for the researcher to arrive at valid inferences about the driving forces of a policy when there are contradictions; more specifically, in situations where different logics ‘dictate’ different actions that lead to divergent outcomes. In the US case, it is therefore analytically easier to arrive at valid inferences about the driving forces of US post-war policy in Europe by applying Wolfer’s distinction of policy goals rather than debating contending policy motivations. US policy-makers at the time were aware that the pursuit of any foreign policy objective, be it geostrategic or economic, hinged on the recovery of the West European economies to pre-war strength and beyond. If that did not happen, the achievement of any other foreign policy objective would be difficult, if not impossible. Regional integration was considered a promising strategy to achieve this goal59, despite US policy-makers’ awareness that economic integration in Europe was likely to entail protectionist tendencies – a setting in which longer-term economic and geopolitical milieu goals clashed with short-term economic possession goals. In that situation, they were willing to trade short-term losses for long-term gains. In order to further European integration, they accepted European discrimination against

55 (Lundestad 1998, p. 15) 56 (Hogan 1987, p. 22 and xii, respectively) 57 (Wexler 1983; Lundestad 1998) 58 (Leffler 1992; Tucker 1997; Gillingham 2003) 59 This led to the rather paradox situation that “Washington pursued European integration with considerably more fervor than the six ECSC/EEC countries themselves.” (Lundestad 1998, p. 42)

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American products for quite some time after World War II.60 In fact, they not only accepted, but promoted enhanced discrimination by pushing the Europeans to form a Customs Union (CU) or – even better – a Single Market rather than a ‘simple’ free trade agreement.61 At the same time, the then undersecretary for economic affairs Will Clayton “negotiated painstakingly with Republican leaders at home to relax tariffs and encourage imports” to convince reluctant European leaders to pursue regional integration decisively.62 At the multilateral level, US policy-makers legitimized these protectionist European policies by inserting the necessary exemption clauses into the wider international economic framework they were seeking to establish at the time. Hence, the charter for the establishment of an International Trade Organization, which eventually failed, and its successor, the General Agreement of Tariffs and Trade (GATT), exempted CUs and ‘the adoption of an interim agreement necessary for the attainment of a customs union’ from the Most Favoured Nations clause.63 This is paradoxical in so far as the creation of a liberal international economic order partly served the purpose of countering European discrimination against the US in bilateral relations by binding it to a commitment of gradual trade liberalization at the multilateral level. However, this again attests to American policy-makers’ fundamental commitment to long-term European economic recovery (for self-interested economic and geopolitical motives) based on accepting short-and medium-term economic losses. This US strategy has been described as ‘benign hegemony’ which, based on the proceeding debate, can be defined as a strategy to exert influence over the world in a way that sacrifices short-term gains for longer-term geostrategic ones. In how far can the EU be conceptualized as a ‘benign hegemon’ in that sense, seeking to exert influence on other world regions in order to secure longer-term economic and strategic interests?

II. EU’s Promotion of Regional Integration in Mercosur How do the various logics outlined before play out in the case of Mercosur? The following section will apply the analytical framework to the Southern Cone, focusing on the distinction between possession and milieu goals in highlighting emerging contradictions in the Union’s promotion of regionalism. I will argue that the EU model as emulated by Mercosur and as externalized by the Community itself increasingly diverged and led to emerging tensions that have contributed to stalling recent negotiations over an Association Agreement. Underlying this growing divergence is an incipient clash between longer-term milieu and shorter-term possession goals underpinning the EU’s promotion of regionalism, which was triggered by events largely outside the interregional relationship. This led to a strategic re-orientation of the EU’s regional policy. 60 This is not to imply that European discrimination hinged exclusively on American acceptance of it. After the US started becoming more critical of European protectionism in the 1970s, it nevertheless continued. 61 (Wexler 1983, p. 230; Hogan 1987, p. 274) 62 (Leffler 1992, p. 161) 63 (Wexler 1983, p. 231-32, emphasis in original)

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Passive ‘Promotion’ of the EU Model The EU promoted Mercosur passively in major respects, with both of the logics outlined above having some purchase in explaining its emergence and development. The structural effects of European integration were felt in the Southern Cone, both directly and indirectly. Mercosur has been depicted as ‘the first integration project generated by globalization’64 in that South American policy-makers were quite aware of the need for developing countries to unite in order to reap benefits from globalization, especially amidst a tendency towards stronger regionalization which found its European expression in the Internal Market project in the early 1990s.65 Baldwin has interpreted Latin American regionalism as a structural outflow of the negotiation of an US-Mexico Free Trade Agreement (FTA), which threatened the competitiveness of other Latin American businesses relative to their Mexican counterparts.66 On the other hand, especially for Brazil, Mercosur has always been a tool to enhance its regional and international power vis-à-vis other great international powers, including the EU, as expressed in slogans such as ‘autonomy of development’ and ‘building a regional power’.67 Brazil’s continuous resistance to the US’ project of a Free Trade Area of the Americas (FTAA) due to fears of an eventual dissolution of Mercosur also attests to a geostrategic rather than economic logic. Due to geographic proximity and historical legacies (Monroe Doctrine), these structural logics have their main root in relations to the US, with the EU playing a less important role. However, even if an important initial impetus for engaging in regional integration was structural and this may partly explain the timing of the process, this logic does not explain why this endeavour took the form it took. In other words, why Mercosur opted for a kind of regional integration that followed a EU rather than North American model. This is where the ‘logic of emulation’ comes in. The EU model of successful regional integration has been regarded as a “constant source of inspiration” in Mercosur and beyond.68 Stemming from a genuine admiration for the success of European integration, “Latin Americans [had] been observing and studying [the European model] closely for some time.”69 In public statements, Latin American leaders have expressed this logic. Eduardo Duhalde, Mercosur’s Head representative, recently announced in regard to the founding of the ‘South American Community’, for instance, that “our mirror will be the European Union, with all its institutions.”70 Emulation is most visibly reflected in two areas, content and form.71 As regards content, the path of Mercosur’s economic integration has followed the gradual and ambitious EU example.72 It started with sectoral cooperation and integration between Argentina and Brazil in economically (and militarily, cf. cooperation in nuclear technology) strategic industries in the late 1980s. Since the early 1990s, it has continued with the progressive liberalization of trade, the formation of a (incomplete) CU in 1995 and the ambition to create a common market in goods, services, capital, and labour. In addition, Mercosur rests on a strong commitment to further political 64 (Vasconcelos 2007, p. 167) 65 (Valls Pereira 1999, p. 9) 66 (Baldwin 1993) 67 (da Motta Veiga 1999, p. 26-27) 68 (IRELA 1991, p. 26) 69 (see also Mukhametdinov 2007, p. 224; Vasconcelos 2007, p. 167) 70 (Harris 2005, p. 418) 71 There are marked differences in function, however, that will be discussed below. 72 (Hurrell 1995; Valls Pereira 1999; Malamud and Schmitter 2007)

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integration alongside economic integration.73 More specifically, Mercosur policy-makers have emulated the general ‘regulation-heavy’ approach to market integration from the EU74 and continuously borrow even specific EU norms and standards “whenever possible and expedient” such as resolution 54/92 on toys and safety requirements or certain competition legislation.75 Second, there is a clear resemblance in the institutional form of both integration schemes that hint at emulation. Policy-makers in Mercosur opted for a relatively elaborate institutional framework in the EU vein, with marked differences, however, in their respective competences.76 The Southern Cone features a Common Market Council, similar to the EU’s Council of Ministers, with a six-monthly rotating presidency; a Common Market Group, similar in function but not composition to the European Commission as well as an Administrative Secretariat (AS) that fulfils some functions of the European Commission such as operational support for other bodies; a Joint Parliamentary Commission (JPC) similar to the European Parliament (EP); an Economic and Social Consultative Forum (ESCF) similar to the EU’s Economic and Social Committee; and 11 Working Sub-Groups, some of which were directly modelled on the EU example.77 Powel and DiMaggio’s concept of ‘mimetic isomorphism’ help in illuminating these similarities between the EU and Mercosur. They argue that under conditions of uncertainty and with a limited range of possible models available, policy-makers tend to emulate organizational forms in the quest for legitimacy and success. Furthermore, isomorphism (institutional homogenization) increases over time as organizations that ‘produce similar services or products’ become connected and structurally equivalent through increased interaction. In such a situation, institution-builders do not rely on evidence that emulation enhances organizational efficiency.78 In this vein, Mercosur policy-makers, faced with uncertainty under conditions of little previous knowledge with region-building and a drastically changing post Cold War context, largely emulated EU processes and institutions in the quest for success of their regional project. Under these circumstances, evidence that they would suit the specific South American context and that transplantation was indeed feasible was not necessarily required given the existence of a European model they perceived as successful. Mercosur’s institutional evolution over time seems to confirm to some extent the logic of ‘mimetic isomorphism’, despite the fact that most Mercosur institutions remain strictly intergovernmental in nature.79 The AS has gradually been strengthened, bestowing it with technical – in addition to administrative – competences. A Committee for the Defense of Competition was introduced in 1996 with the Fortaleza Protocol and a Committee of Permanent Representatives as a sub-structure to the Common Market Council was created in 2003. The JPC was upgraded to a Mercosur Parliament (MP) in 2007, which will be directly elected from 2010 onwards. And the dispute settlement mechanism has progressively become more institutionalized, culminating in the creation of a Permanent Review Tribunal (PRT) in 2004 with the Protocol of Olivos.80 However, we cannot understand these similarities in Mercosur 73 (Hirst 1999) 74 (Duina 2006a, esp. p. 95-97) 75 (Rivière Martí 1997; Duina 2006b, p. 269) 76 (Phillips 2004, p. 96-99) 77 (Sanchez-Bajo 1999, p. 935) 78 (DiMaggio and Powell 1991, p. 64-67) 79 (Grieco 1997; Malamud 2003) 80 For a comparison with the European Court of Justice, see (Giovanna Lucarelli de Salvio and Gama

Sa Cabral 2006)

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and EU structures without looking at the Community’s own activism analyzed in the next section. Active Promotion: Pursuit of Milieu or Possession Goals? Since the early 1990s, the EU has actively supported Mercosur’s development based on its own model. Against this background, this section explores two questions. First, in how far has the EU’s passive promotion and its active support constituted complementary processes that mutually reinforced each other? Second, what does this activism tell us about the kind of foreign policy goals the EU has pursued? Throughout the 1990s, the EU’s active support of Mercosur was largely complementary to its passive promotion with both having mutually reinforcing effects. As regards the two core objectives of Mercosur – regional institutionalization and regional market building – the Community sought to strengthen these endogenous initiatives and only went beyond them on the margins. Such a strategy assured that both the Union’s medium-term economic interests of enhancing its presence in the world’s emerging markets as well as its long-term geopolitical interests in building a more regionalized world order could be pursued simultaneously. Regarding regional institutionalization, the Commission directly supported or funded external support to strengthen the capacity and effectiveness of the newly created Mercosur institutions that had been modelled on the EU.81 It supplied integration know-how, helped in the training of personnel, lent technical support and provided substantial financial aid to the Administrative Secretariat, the Presidency as well as general institutional support, formation and information.82 It also introduced a Joint Advisory Committee to discuss ways for the EU to share its knowledge on integration, a task that was partly performed through the Training Centre for Regional Integration, founded in March 1993 in Montevideo. The EU-financed Institute for Europe-Latin American Relations (IRELA) also provided training for the Joint Parliamentary Commission83, and lent support in setting up the Economic and Social Consultative Forum. On the margins, this support went beyond endogenous initiatives emerging from Mercosur itself, as reflected in the fact that its Economic and Social Consultative Forum only gained legal status due to the Commission’s pressure.84 Support for regional market building constituted the focus of EU support for Mercosur after the singing of the Inter-regional Framework Agreement (IFA) which was to prepare the stage for political and economic association, including the reciprocal liberalization of trade. This support was multifaceted. First, it lent technical support to the creation of a common legal framework. The first Memorandum of Understanding, for instance, identified four areas of mutual cooperation85:

Customs: This project (€ 5.3 million) aimed to create and harmonise customs

81 (Interinstitutional Cooperation Agreement 1992, Art. 6) 82 (Hoste 1999, p. 8; Santander 2005, p. 291-92) 83 This institution also profited from a co-operation agreement with the European Parliament signed in 1996 (Klom 2000, p. 9). 84 (Sanchez-Bajo 1999, p. 935) 85 eurOsur, No.25, May 1998, Art. 14

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legislation and the training of Mercosur personnel in tariff issues.86 Agriculture: This project (€ 11.2 million) provided technical assistance to

harmonise phytosanitary and zoosanitary norms. Technical norms: Projects (€ 4.14 million) focused on the improvement of

product quality, notification and information, the establishment of a Mercosur body for norm-setting, accreditation and certification; a process supported by the European Standardisation Committee.87

Statistics: This project (€ 4.1 million) sought to harmonise statistical indicators intra- and inter-regionally.88

A Mercosur official affirmed that the EU did have its own medium- and longer-term economic possession goals in mind during that process: “[representatives] come from the EU … to Mercosur meetings … The technical norms are European.”89 Second, the Community contributed resources to develop the physical infrastructure necessary for economic integration. It financed several infrastructural projects, partly through EIB loans, such as the Hidrovía project and the Brazil-Buenos Aires and Montevideo-Buenos Aires roads.90 This active support continued unabated when it became clear that Mercosur’s economic integration entailed discrimination against third parties, detrimental to EU short-term possession goals, especially in the economic realm. There are several dimensions to this. First, the introduction of the Common External Tariff led to a higher rather than lower level of tariff protection in some sectors such as capital goods. Second, the introduction of a wide variety of standards and norms that in some areas went far beyond the level of regulation of the EU (e.g. public health and food) and were seldom directly compatible constitute serious non-tariff barriers to trade.91 Nevertheless, the EU continued to support Mercosur’s integration process as part of a broader effort to assure its viability in the medium- and long-term, i.e. that “the MERCOSUR pole be defined with as much precision as possible” and 92 The Commission sketched out its approach in an early strategy document:

the consolidation of Mercosur is a crucial factor in the medium- and long-term progress of its members and the region as a whole. This consolidation does, however, depend on two conditions: the irreversibility of the undertaking given and uncontested international recognition. Both these conditions make the Community an obvious partner: firstly, because its integration offers the proponents of regional integration a model; secondly, because it can back them up with know-how.93

86 (Westphal 2005, p. 173) 87 (Santander 2005, p. 292) 88 If not indicated otherwise, the allocated amounts are taken from (European Commission 2002a) 89 (Sanchez-Bajo 1999, p. 935; cf. alsoDuina 2006a, p. 97). In fact, this was not a specific to Mercosur as the Union expected that its model of regional economic governance be adopted as 'best practice' in regional governance within the various Latin American sub-regions and possibly also in the WTO (European Commission 1998, section 6). In addition, it sought to keep its interests in mind through repeated reference to the importance of the principle of ‘open regionalism’ and the necessity to organize integration in Mercosur in accordance with the principles of GATT in subsequent political dialogues (Diedrichs 2003, p. 169). 90 (European Commission 1994, p. 9-10) 91 (cf. also European Commission 1998; Duina 2006a) 92 (Vasconcelos 2001, p. 148) 93 (European Commission 1994, p. 5)

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While the Community sought to ‘lock-in’ the integration process by direct support for its institutionalization as outlined before, uncontested EU recognition eventually required formal agreements. A first step to this end were the initially informal ministerial meetings, held since the first half of 1992, which were subsequently transformed into a regular political dialogue at ministerial level with a formal legal base in the Interregional Framework Agreement of 1995. This helped to sharpen and legitimize Mercosur’s international profile, despite the imminent danger of substantial overlap with the Rio group dialogue as rationalization of the timely and organisational burden of holding them with individual countries was one of the main original reasons for conducting group-to-group dialogues.94 The IFA signed in 1995 constituted the formal recognition of Mercosur as an entity. The Commission had previously pressured Mercosur to obtain international legal personality through a change of the founding treaties so that the agreement could be signed between two regional organisations without the formal participation of the member states.95 This attests to how the quest for the recognition of Mercosur in particular intermingled with the pursuit of more general longer-term milieu goals, seeking to elevate regions to the status of formal international actors. The agreement reflects other milieu goals that outlined the EU’s view of how international relations were to be conducted. First, the agreement covered a wide range of issues96, reflecting the Community’s conviction that in a world of increasing interdependence, countries and regions have to cooperate in resolving common transborder problems. Second, certain normative values were considered indispensable to international cooperation, expressed in the inclusion of a ‘suspension clause’ on democracy and human rights. The framework agreement was to be substituted by political and economic association, which would be the first agreement ever signed in international relations between two CUs. Once again, we see the intermingling of the specific and the general. Specifically, granting the association status to Mercosur would be a strong political signal as it had previously only been granted for historical reasons in successive Lomé Conventions or political ones in the direct neighbourhood of the EU.97 On the other hand, the novelty of such an agreement at a time of worldwide geo-strategic change has a strong ‘indicator value’ beyond Mercosur, attesting to the Community’s intention to contribute to ‘reordering’ the world system after the collapse of bipolarity by elevating regions as important actors onto the international stage. The eventual move towards economic association was certainly partly motivated by the quest for economic possession goals in the Southern Cone98, but the way reciprocal trade liberalization initially was to be achieved indicate that they were to be pursued in a way that would not prejudice the achievement of longer-term milieu goals. The focus was on a gradual approach based on due consideration of context and timing to avoid putting the internal coherence in Mercosur at risk. There was internal 94 (cf. Monar 1997, p. 268-69) 95 (Peña and Torrent 2005, p. 25) 96 The agreement included issues as diverse as agri-food and industrial standards, intellectual property, energy, science and technology, environmental protection, training and education, culture and combating drug-trafficking. 97 (Smith 1998, p. 161) 98 Several Commission documents at the time also emphasise this logic among others. However, Diedrichs makes a convincing argument that this can largely be explained by a bureaucratic politics logic, according to which the Commission emphasised the economic advantages of closer relations as a way to convince reluctant member states to go along with the Commission’s support of Mercosur more generally (Diedrichs 2003, p. 120-122).

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agreement that this step would “have to be studied according to the circumstances and the progress achieved in the context of the [Framework Agreement].”99 As long as Mercosur had not achieved a sufficient level of regional integration and economic development – terms that were left open as to their exact meaning – reciprocal trade liberalization was considered unfeasible and undesirable.100 This argument is strengthened by the fact that until the late 1990s, no empirical studies existed that would justify the economic logic of bi-regional integration with Mercosur.101 The negotiation mandate was relatively modest, covering only the liberalisation of trade in goods and services and stating that negotiations were “aiming towards free trade, ... in accordance with WTO rules.”102 The latter stipulation attests to the Community’s commitment that the desire to pursue longer-term geostrategic goals through international agreements should not conflict with the global economic governance framework whose maintenance was also in the Union’s long-term interest.103 Negotiations for the Association Agreement started only slowly in November 1999, while tariff negotiations were postponed until October 2001, initially with very modest offers by both sides.104 However, the medium- and long-term pursuit of milieu goals through support for Mercosur’s integration efforts changed in the early 2000s, catalysed by two simultaneous developments, both internal and external. Internally, the financial and economic crisis that hit Brazil and Argentina in the late 1990s and early 2000s resulted in a harsh backlash for EU-Mercosur negotiations. As political relations between Brazil and Argentina soured, the integration process ground to a halt and was even reversed as new trade barriers were erected by the member states.105 Externally, two developments crystallized at more or less the same time. First, the US seemed to be making major advances towards the conclusion of the FTAA, which bore the direct economic threat, from a European perspective, of “the emergence of a pan-American bloc led by the USA which could shape the rules of the worldwide economy.”106 In 2002, US President George Bush obtained Trade Promotion Authority making major progress in these negotiations seem imminent.107 Second, the failure of trade talks in Seattle in 1999 and Cancún in 2003 made quick progress in multilateral trade liberalisation seem unlikely, while it became increasingly apparent that the EU would be unable to reach agreement on the Singapore issues (investment, competition, public procurement and trade facilitation) it had introduced in the WTO in 1996.108 This situation changed European policy-makers’ calculations on both the demand and supply side. As regards supply, it became clear that Mercosur’s internal economic

99 (European Commission 1995b, p. 106) 100 (European-Commission, 1995b, p. 108) 101 (Torrent 2002, p. 219, footnote 2) 102 (Jonquières 1999, my emphasis) 103 (European Commission 1995a, p. 5) 104 Mercosur's first offer on tariff reductions, for instance, covered only 38 percent of EU imports (Devlin, Estevadeordal et al. 2002, p. 107). 105 (Dimon 2006, p. 210) 106 (Santander 2002, p. 497). Such fears are not unfounded. A detailed study by Sen on NAFTA demonstrated that US traditions of jurisprudence indeed significantly shape the reform process in the region and that the new regional regime is increasingly harmonised around US standards and practices, not only for Mexico but to some extent also for Canada (Sen 2003). 107 (Lamy 2002c) 108 (cf. Faust 2005)

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turmoil would make the conclusion of the Association Agreement increasingly difficult. On the demand side, an agreement became ever more pressing as external pressures heightened (progress in FTAA negotiations), and alternative venues to achieve similar objectives seemed increasingly unavailable (stalemate in WTO negotiations). From a European perspective, therefore, an ambitious agreement became more important, while turning out to be increasingly unlikely. This led to the formulation of new objectives in trade liberalization negotiations with Mercosur, defined as FTAA parity: “we are aiming at an agreement that goes beyond the FTAA, and the EU is not prepared to conclude a deal that would be less comprehensive than the FTAA.”109 Hence, the EU sought a much more ambitious negotiation agenda than originally envisaged: “the negotiations will cover the whole range of sectors, because Europe will come with its own interests, such as industry, services, public procurement, and intellectual property.”110 Given the difficulty at the multilateral level, the bi-regional context offered a promising alternative to push an ambitious agenda in a more cooperative negotiation environment, giving it the opportunity to “explore complementary negotiation methods to bring more ambitious results.”111 Against this backdrop, the EU largely abandoned its longer-term milieu goals of ensuring the long-term viability of Mercosur, pursued in a cooperative fashion, to obtain the immediate economic possession goal of effective market access. This had two elements, one of timing and one of content. First, it became increasingly reluctant to show due consideration of Mercosur's needs and demands – an approach that had characterized the EU’s approach to economic liberalization hitherto. Despite Mercosur’s difficult economic situation, the Commission pushed forward with its liberalisation agenda and even raised its assertiveness in this regard. EU officials reminded their counterparts publicly that giving access to the largest internal market in the world must mean that EU products can circulate freely within Mercosur112, while conveying that the “Commission is convinced that one of the answers to the financial and economic turbulences should be deeper and faster regional integration.”113 Second, the Union assertively enlarged the scope of the envisaged agreement far beyond what the negotiation mandate had originally envisaged. Largely driven by DG Trade, the Union introduced ‘WTO-plus’ conditionality. While it had envisaged the conclusion of WTO-plus agreements before, it did not insist on it. In view of the external context, the newly proposed agreement with Mercosur would have to be WTO-plus, “i.e. to genuinely enhance our multilateral ambitions in the WTO, which are already rather high.”114 This ambition referred to both the scope of regulatory coverage of the negotiation agenda (quantitative dimension) as well as the depth of integration in individual sectors which entailed “rule making going beyond the basic multilateral rules” (qualitative dimension).115 The EU was increasingly convinced that “the most important thing… is to ensure that FTAs provide for real

109 (Patten 2000a; Lamy 2002c) 110 (Lamy 2000; see also Patten 2000a) 111 (Mandelson 2005) 112 An internal Commission document even noted: “Given that the EU has already shown the route to follow, we expect (and request) that the [integration] process is substantially accelerated in Mercosur” (cited in Bilal 2004, p. 17) 113 (Patten 2002b) 114 (Lamy 2002b). For a more extensive discussion about the EU's reasons for this shift and the rationales behind the approach, see (Lamy 2002d). 115 (European Commission 2002b, p. 14)

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integration”, not only regionally, but also inter-regionally.116 Internally, the Union outlined detailed ‘minimal requirements’ on key aspects of the negotiations with Mercosur that covered issues such as services, government procurement and investment and that were to be addressed “based on the experience of the EU integration.”117 By this point, the EU had become openly prescriptive in the type of regional integration it promoted, narrowly focused on a specific economic regional governance model that clearly reflected short-term economic possession goals. In addition, the Community sought to speed up negotiations by enlarging the 'trade carrots' it offered as an incentive. Shortly before the FTAA summit in Miami in November 2003, the EU made the largest offer ever proposed in a bilateral trade deal on government procurement that would give Mercosur companies access to a market worth € 200 billion.118 It also made serious efforts to improve the market-access conditions for agricultural products from Mercosur, which had turned out to be one of the most contentious issues in the negotiations.119 Another element of the strategy were efforts to mobilise the business community to pressure Mercosur to move the bi-regional negotiations and the internal integration process forward.120 The rationale was to co-opt those interests that were most likely to be in favour of such an agreement. The Commission also gave the business community greater practical access to the negotiations to the same end. Recommendations by the Mercosur-European Union Business Forum (MEBF) on business facilitation were directly incorporated into a Business Facilitation Action Plan, negotiated in 2002, to support Mercosur economic integration, especially in the area of customs.121 Trade facilitation was also included in the EU’s financial and technical assistance, explicitly in regard of business priorities: “the EU cooperation policy instruments will be very supportive of the MEBF priorities.”122

This meant that financial and technical assistance became more narrowly focused on economic integration in Mercosur and especially trade-related matters in those areas that were of greatest economic interest to the EU: “We will continue to support Mercosur’s integration efforts, notably in areas such as services and procurement.”123 Shortly after this declaration, the Community announced a € 4 million package in trade-related technical assistance which focused on reducing non-tariff barriers to trade.124 In the 2002-2006 Regional Strategy Paper, 44 percent of cooperation

116 (Lamy 2002d, p. 1406, my emphasis) 117 (cited in Bilal 2004, p. 18) 118 Press release, 14 July 2003 119 (Santander 2005, p. 301-302) 120 (Ferrero-Waldner 2005). It is interesting to note the evolution in the way EU Commissioners ‘instrumentalised’ the MEBF for its purposes. In the early phase of its existence, the EU only welcomed some of the MEBF’s contributions to the negotiations (Lamy 2002a; Patten 2002a), while at later stages it actively sought its support and demanded enhanced participation (Ferrero-Waldner 2005). 121 (European Commission 2002c; see also Lamy 2002a) 122 (Patten 2002a) 123 (Patten 2000b). The Union’s new priority in development policy had been codified in new policy guidelines that emphasised the link between trade and development (European Commission 2000). This new policy was subsequently reflected in the huge upsurge of trade-related technical assistance: between 2001 and 2004, the Commission spent € 2.8 billion in supporting developing countries to benefit from trading opportunities with the EU, including new commitments of € 700 million a year (Press release, 21 September 2004). 124 Press release, 12 March 2004

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resources were dedicated towards this end. It aimed to, inter alia, “[stimulate] Mercosur to adopt legislation … which is basically inspired by the EU competition policy.”125 Subsequently, some of the money allocated for the 2002-2006 period that had not been spent was re-directed towards further trade-related technical assistance, especially on sanitary and phytosanitary standards and customs matters.126 This trend continues in the current Strategy Paper for the period 2007-2013 where priority is given explicitly to Mercosur’s efforts for the completion of the common market, which receives 70 percent of cooperation resources. As this strategy of obtaining effective market access in Mercosur has shown little success up-to-date, the Union is starting to pursue an alternative route that may have detrimental consequences for the cohesion of Mercosur as a region. A bilateral ‘strategic partnership’ with Brazil has been launched which transferred parts of the cooperation on trade-related matters as well as a whole array of more politically oriented issues to the bilateral level.127 These are not necessarily in direct competition, but they may nevertheless divert attention and resources to the bilateral level and constitute a strong political signal to the other Mercosur members that the bilateral relationship enjoys priority over the bi-regional one. On the other hand, it may attest to the fact that the EU has not given up on its ‘policy of assertiveness’, but rather increased it even further. In this vein, plans for a ‘strategic partnership’ may serve to put new pressure on Mercosur countries to move forward more decisively with their internal economic integration by opening up a credible alternative that could eventually result in a bilateral rather than bi-regional FTA. What does this EU activism in promoting regional integration in Mercosur tell us about the type of actor behaviour? Are the policy changes outlined before the reflection of strategic action or rather routinized behaviour? Routinized or Strategic EU Behaviour? The general direction of the policy reflects strategic behaviour by EU actors as it is based on conscious political decisions taken at the highest political level, which are by definition strategic. This entails the decisions to actively promote regional integration in Mercosur in the first place, to allocate financial and technical resources to specific projects, and to gradually deepen relations through a two-step process that entailed a preparatory phase which culminated in the launch of free trade negotiations in 1999. The EU’s recent assertiveness in pushing its trade agenda also reflects a specific strategic interest as analysed before. However, if one looks more closely at how this strategic agenda is implemented, routinized behaviour seems to dominate the process. EU actors generally supported regional institutionalization in Mercosur along its own lines, especially as regards the existence of certain institutions whose necessity for regional integration is not obvious from a functional point of view, especially in the beginning of an integration process, such as the ESCF or MP. The Community’s targeted support for the MP, the PRT and AS, as outlined in the latest regional strategy paper, hints at the fact that it extrapolates rather unreflexively from its own integration process, especially given that these institutions have not yet achieved the status and degree of supranationality that EU actors would like to see emerge. Strong 125 (European Commission 2002a, p. 24) 126 (European Commission 2007c) 127 (European Commission 2007b; European Commission 2007a)

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institutionalization and possibly a certain degree of supranationality in the institutional framework, or at least some degree of autonomy of an institution that defends the ‘common interest’, may constitute a necessary requirement for a regional project to succeed.128 Therefore, the promotion of these features may indeed reflect the strategic objective to see regional integration elsewhere succeed. However, this does not explain why the EU promotes an institutional framework that looks very much like its own, with stronger similarities in form than in content. Another indication that EU activism reflects routinized behaviour is that technical support for the respective Mercosur institutions is rendered in the form of consultancy work. These consultants are either people from the respective counterpart institutions in the EU whose relationship is often codified through institutional cooperation agreements which exist between the European Commission and the AS as well as the EP and the JPC. Or they are experts from more specialized EU institutions that cooperate with their respective counterparts by giving technical advice as is the case with the European Court of Justice and PRT, the statistics organizations or the standardisation committees. What holds for both of these groups, however, is that without much knowledge of the local context, they convey their very own experience as members of European institutions and explain their functioning in order to build institutions in Mercosur. This mirrors routinized rather than strategic behaviour and leads to institutional isomorphism.129 The EU’s support for regional market-building works similarly. EU experts, with specific habits and ‘ways of doing things’, consult Mercosur officials in the creation and implementation of the required legal framework. This confirms to the sociological logic outlined by Egan and Nicolaïdis for the bureaucratic organisation within the Commission, as sketched before. Interestingly, a very similar logic holds for the negotiation of the current FTA, which are partly conducted by Commission officials that were deployed in multilateral trade negotiations before. Hence, they moved from the failed negotiations over the Singapore issues in the context of the WTO to the bi-regional negotiations between the EU and Mercosur. This partly explains why the very same issues emerge on both negotiation agendas. It has to be noted, however, that this routinized behaviour, at least in the economic domain, coincided with the Community’s strategic interests in that the compatibility of trade norms and standards between both sides serves its economic preferences.

III. Conclusion This paper presented a framework to analyse the EU’s promotion of regional integration abroad and applied it to the case of Mercosur, distinguishing three dimensions: passive vs. active promotion, routinized vs. strategic behaviour, and the pursuit of milieu vs. possession goals. The analysis showed that all categories are relevant to capture important aspects of the EU’s external influence on regional integration in the Southern Cone. I argued that the Union supported Mercosur both passively by providing a model as well as actively through direct financial and technical support as well as the negotiation of a FTA which is still underway. I went on to contend that the EU’s activism reflects an underlying change in policy goals that

128 (Malamud and Schmitter 2007) 129 (DiMaggio and Powell 1991, p. 69)

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drive its assistance for Mercosur. Spurred by external events, advances in FTAA negotiations and the stalemate of multilateral trade liberalization, short-term economic possession goals came to increasingly trump longer-term economic and geostrategic milieu goals. This stands in stark contrast to the US’ support for European integration in the post-war era. American policy-makers were for a long time willing to sacrifice short-term possession goals for the sake of longer-term milieu goals. While the pursuit of these interests does indeed reflect strategic behaviour by EU actors, much of the actual content of their support for regionalism in Mercosur seems to constitute the routinized externalization of domestic European models. The rest of the conclusion is dedicated to identifying three tensions in the Community’s promotion of Mercosur’s regional integration process, contrasting it with the US’ example outlined above. The first one refers to the relationship between its passive and active promotion of regionalism. The available evidence suggests that its active promotion is considered legitimate only as long as it does not stray too far from its passive promotion.130 Once the Union sought to assert a degree of economic integration that Mercosur was not yet able or willing to endorse, its activism met with resistance, making any progress in the inter-regional relationship difficult. This argument implies that the scope of its own activism is largely confined by the extent to which the Community constitutes a model for the counterpart region. The extent of its passive promotion can be seen as an indicator of the popularity of its model, which largely conditions the legitimacy of its own action. In such a situation, it is questionable whether the Union’s ‘our-size-fits-all’ approach in its active promotion is desirable.131 It also suggests that increasing assertiveness in actively promoting a certain EU model is doomed to failure as long as there is no endogenous move in that direction, given conditions of relative power symmetry. This was a lesson US policy-makers had already internalized 60 years ago. Even though they had a keen interest in European integration to succeed, they were aware of the limits of its promotion from the outside. As Eisenhower argued, the US “can and must encourage unity in Europe, but we cannot compel unity.”132 We can imply two things from a situation when the active promotion of regionalism is largely in line with the passive promotion. First, it is more likely that due account is taken of the local context because emulation by the other side (passive promotion) only goes so far as it is deemed useful in a given context by local actors themselves. Second, it serves as an assurance mechanism that the active promotion aims at enhancing the effectiveness of endogenous strategies and actions rather than imposing an own agenda from the outside. The second emerging tension refers to the distinction between routinized and strategic EU behaviour. As we have seen, much of the actual content of Community promotion of regionalism in Mercosur reflects routinized behaviour, stemming from the advice given by European consultants who seek to transfer their familiar ways of doing things to a very different environment without much knowledge of that environment. However, institutions and procedures that worked well for Europe do not necessarily produce equally advantageous effects elsewhere if they are transferred in such an unreflexive manner. This is Jones’ central criticism when outlining why the European

130 Legitimacy is not to be equated with success, but is a necessary requirement for it, if large power asymmetries do not exist and direct imposition is not an option. 131 (for a similar view in Latin America, see Freres and Sanahuja 2005; Bicchi 2006a) 132 (Lundestad 1998, p. 46)

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model of market integration is a bad model for multilateral trade liberalization.133 If the EU wants to be not only potentially more successful with this policy but also more responsible as an international actor, it needs to think more strategically about specific means-ends relationships in the context of integration in the Southern Cone, taking its own interests into consideration.134 Duina has convincingly shown how there is no single blueprint for regional market building and that specific attempts to do so are deeply embedded in local institutions and politico-legal traditions.135 This would imply, for instance, that EU actors should familiarize themselves more thoroughly with the local context to find out where Mercosur wants to go and under what structural circumstances and then design a policy that is specifically geared towards these parameters. It would also mean that EU actors ought to become aware of the current and possible future consequences of their actions, especially as regards their assertive trade liberalization strategy. The third emerging tension is the question of coherence between the internal and external planes.136 This tension refers specifically to two aspects of its recently more assertive trade liberalization policy in Mercosur, which indeed carry some traits of ‘soft imperialism’, defined as “the imposition or strategic use of norms and conditionalities enforced for reasons of self-interest rather than for the creation of a genuine (interregional) dialogue.”137 First, the focus on effective market access and liberalization across a wide range of issues seems to neglect the lesson that the successful development of the Community’s own internal market entailed the protection of strategic industrial industries for quite some time – the effects of some of which still constitute a major obstacle in the current negotiations with Mercosur, as is evident with the Common Agricultural Policy.138 In the Mercosur case, it has been argued that discriminatory tariff preferences and discriminatory sectoral policies explain the success of the rise in intraregional trade, which is generally considered crucial for the development of regional integration more widely.139 The US seemed to have understood that lesson in the post-war era as it did accept discrimination at the regional level while mitigating this effect in the longer-run at the multilateral level. Therefore, Dwight Eisenhower welcomed European proposals for deeper economic integration with the words: “We watch these exciting new developments with the keenest interest. Because, my friends, as Europe grows stronger economically we gain in every way.”140 Freres and Sanahuja have put forward a very similar suggestion for the EU’s policy vis-à-vis Mercosur, which would be possible under WTO rules and seems to be even less threatening to the EU than it may have been to the US back then, given that Mercosur is firmly committed to a strategy of ‘open regionalism’.141 Second, the EU’s eagerness to speed up the process of Mercosur’s internal economic integration so that a trade deal would be facilitated belies the Community’s own experience that market-building takes time. Mercosur has achieved a remarkable degree of integration in only 17 years, which led Javier Solana to speak with some 133 (Jones 2006) 134 (cf. Mayer and Vogt 2006) 135 (Duina 2006a) 136 For an elaboration of why this is an important aspect for the EU as an international actor, see (Nicolaïdis and Howse 2002) 137 (Hettne and Söderbaum 2005, p. 539) 138 (Robles 2008, p. 188) 139 (Markwald and Bosco Machado 1999, p. 64) 140 (Lundestad 1998, p. 51) 141 (Freres and Sanahuja 2005)

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admiration of Mercosur’s achievements in the mid-1990s: “In the EU, to come where Mercosur is after one year, takes us four or five years.”142 Once again, American policy-makers seemed to have understood this lesson. Even though they also had a keen interest in quick progress towards economic integration in Europe, they realized that “no customs union can be brought into full and effective operation by the stroke of a pen and that its formation necessarily involves complex negotiations and adjustments “which can only be achieved by progressive steps over a period of years.”143 European experience, know-how and direct support certainly have the potential to speed up the process in Mercosur, but even then a process that has taken decades in Europe cannot be condensed into a few years elsewhere. This analysis is a single case study and therefore the generalizability of these findings are unclear. In order to get a more complete picture of the EU’s promotion of regionalism abroad and its possible contradictions, more comparative work is necessary. It is certainly worth undertaking.

142 (cited in Mukhametdinov 2007, p. 211) 143 (Wexler 1983, p. 232)

25

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