The 10 advantages of participating in global international trade

The recent exchange between the President of Uruguay, Luis Lacalle Pou, and that of Argentina, Alberto Fernandez, on the occasion of the meeting of the Presidents of Mercosur. The dialogue (which transcended more in its harshness than in its content) actually comes to certain messages that the President of Brazil, Jair Bolsonaro, had sent weeks before and to other exchanges – of a few months ago – between partners of Mercosur, which took place in the meetings of the organs of the bloc.

In any case, something is happening: the governments of Uruguay and Brazil demand reforms in Mercosur and Argentina does not subscribe to these proposals.

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What reforms do they and Argentina want, no

It turns out that Mercosur is a pact signed between Argentina, Brazil, Paraguay and Uruguay 30 years ago with the aim of integrate the savings of the 4 partners (Venezuela joined once, but was later suspended for non-compliance with the rules of the pact) thanks to the reduction in tariffs for international trade between them. And this objective was relatively achieved and today the companies of the member countries trade and generate alliances within the pact with more comfort. But it turned out little. And the deal demands something more because the evolution of globalization requires the expansion of markets. Access to more countries, regions, continents.

There is something deeper: how the global economy works now.

Successful companies in the world today participate in international networks in which allied productive organizations (regardless of the countries in which they are located) they innovate, invest, plan, produce in partnership, organize marketing and sell in various parts of the globe. Globalization has never been so deep and today it is “hexagonal” because it is made up of six major systemic flows: international trade in goods; Services; productive financing; foreign direct investment; information and data; and even the telemigration of international workers into global organizations that interact in real time beyond countries.

It turns out that Mercosur, which was designed for intra-bloc integration, today presents, by virtue of its age, an obstacle for the link between companies outside the bloc. Evolution today requires more access to other markets and don’t settle for four neighbors closer to each other. This requires greater participation in transnational production processes. And this is what appears in the controversy.

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The substantive debate

But there is something else here: in addition to the specific event mentioned – which happened a few days ago – there is behind a more essential question which brings us to another, deeper question. Is it understood which benefits generate the most international economic integration?

Thus, something more relevant in the treatment should be saved: the market expansion, trade openness, participation in cross-border networks of economic development and innovation and, in general, productive internationality. Everything generates benefits for countries. And in this case of globalization, the reverse (closure) delays the productive development and consequently the quality of life of the populations.

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Experience shows that those who export the most to the world do very well (the highest export ratios to GDP are observed in Hong Kong, Singapore, Ireland, Vietnam, Holland or Belgium) and even those who matter a lot have local capacity to produce a lot and good (the highest import ratios to GDP are observed in Luxembourg, Ireland, Belgium, Vietnam, the Netherlands or Estonia).

Indeed, the evidence (contrary to what many suspect and fear in our case) shows that Argentina, being one of the countries that exports the least and imports the least relative to the size of its economy in Latin America, it hurts.

The 10 advantages

The above is verified if it is observed that participation in global international trade through robust exports generates ten main benefits:

• It improves the quality of what is produced (even for local demand) because external demand forces raise standards.
• The quality – and quantity – of jobs created are improved because companies that compete internationally must invest in their people
• Is equivalent to exchange rate volatility because you access trade dollars that are not short term like financial dollars.
• It feeds the international investment who goes where there is market access.
• The domestic investment because exporting means producing more and better.
• The maturation of the ecosystems of local suppliers in value chains (suppliers who take advantage of exporters’ demand).
• Increase the tax collection by large companies of exporters.
• It also increases the gross product because net exports are increasing.
• The consequent reinforcement of many companies which on a larger scale and thus benefit the productivity and competitiveness of the economy – in addition to spreading entrepreneurship and improving production expectations by diversifying market risk.
• It is facilitated – through the companies – the improvement of the average levels of systemic technology and consequently of the productive and entrepreneurial culture.

In this context of globalization, closure delays productive development and, consequently, the quality of life of populations.

It is curious that in exchange, in Argentina we are wary of the advantages of internationality. Exports, the above mentioned advantages of which are often not understood; but also imports, which present contributions such as access to technology and international productive knowledge, investment facilitation, contribution to systemic efficiency, participation in international value chains, possible higher revenues from taxes on imports and job creation in services are developed to allow these imports to be consumed.

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Evidence shows a direct relationship between closure and delay, and – conversely – between external integration and progress. A new consensus on this subject is therefore a requirement.