Copyright © by the Inter-American Development Bank All rights reserved For more information visit our website: www.iadb.org/pub Copyright © by the Inter-American Development Bank All rights reserved For more information visit our website: www.iadb.org/pub This page intentionally left blank Dealing with Disparities Juan S Blyde Eduardo Fernández-Arias Paolo Giordano Editors Inter-American Development Bank Copyright © by the Inter-American Development Bank All rights reserved For more information visit our website: www.iadb.org/pub Deepening Integration in MERCOSUR Copyright © by the Inter-American Development Bank All rights reserved No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by information storage or retrieval system, without permission from the IDB Produced by the IDB Office of External Relations The views and opinions expressed in this publication are those of the authors and not necessarily reflect the official position of the Inter-American Development Bank Cataloging-in-Publication data provided by the Inter-American Development Bank Felipe Herrera Library Deepening integration in MERCOSUR : dealing with disparities / Juan S Blyde, Eduardo Fernández-Arias, Paolo Giordano, editors p cm Includes bibliographical references ISBN: 978-1-59782-072-1 Southern Cone of South America—Economic integration Regional disparities—Southern Cone of South America MERCOSUR (Organization) I Blyde, Juan S II Fernández-Arias, Eduardo III Giordano, Paolo (Paolo Maria) IV Inter-American Development Bank HC167.S67 D823 2008 338.98 D823 dc22 LCCN: 2008940951 Copyright © by the Inter-American Development Bank All rights reserved For more information visit our website: www.iadb.org/pub ©2008 Inter-American Development Bank 1300 New York Avenue, N.W Washington, D.C 20577 www.iadb.org Preface v Acknowledgments vii Introduction .1 Part I: Overview The Challenge of Disparities Chapter The Treatment of Asymmetries in Regional Integration Agreements Paolo Giordano, Mauricio Mesquita Moreira, and Fernando Quevedo Chapter Disparities and Integration in MERCOSUR .25 Juan S Blyde and Eduardo Fernández-Arias Part II: Deeper Integration and Economic Disparities 39 Chapter Regional Disparities in Regional Blocs: Theory and Policy 41 Anthony J Venables Chapter National Disparities and the Regional Allocation of Resources: A Positive Framework 59 Gianmarco I P Ottaviano Chapter MERCOSUR: Asymmetries and Strengthening the Customs Union— Options for the Common External Tariff 81 Silvia Laens and María Inés Terra Chapter Asymmetries and Disparities in the Economic Integration of a South-South Customs Union 115 Marcel Vaillant Copyright © by the Inter-American Development Bank All rights reserved For more information visit our website: www.iadb.org/pub Ta b l e o f C o n t e n t s iv Table of Contents Chapter National Policies and the Deepening of MERCOSUR: The Impact of Competition Policies 151 Gustavo Baruj, Bernardo Kosacoff, and Fernando Porta Chapter Tax Harmonization and Economic Integration .219 Fernando Rezende Chapter Regional Competitiveness Policies for Deeper Integration in MERCOSUR 255 Renato G Flôres, Jr Part IV: Coordination of M acroeconomic Policies 279 Chapter 10 MERCOSUR in Transition: Macroeconomic Perspectives 281 Daniel Heymann and Adrián Ramos Chapter 11 Macroeconomic Coordination Policies: From Europe to MERCOSUR 305 Diego Moccero and Carlos Winograd Part V: Institutions for a Deeper Integration 353 Chapter 12 Regional Governance Institutions, Asymmetries, and Deeper Integration in MERCOSUR 355 Roberto Bouzas Chapter 13 Overlapping Asymmetries or Normative Cubism? The Transposition of Norms in MERCOSUR 381 Deisy Ventura Copyright © by the Inter-American Development Bank All rights reserved For more information visit our website: www.iadb.org/pub Part III: Coordination of Microeconomic Policies .149 T his volume is the result of a research project coordinated by the Inter-American Development Bank to analyze the most important issues of economic integration and policy coordination that countries face when they advance towards deeper integration and need to address development disparities among partner countries The analytical issues studied in this book explore the various facets of an integrated approach, both to uncover the challenges that disparities pose for integration agreements and to propose actions for dealing with them In order to provide a concrete angle for the investigation, the studies in the volume build on the experience of MERCOSUR However, the results and lessons learned are certainly applicable to other integration agreements—particularly those of the South-South type, such as the Andean Community and the Central American Common Market Like MERCOSUR, these other agreements face specific challenges in dealing with disparities among their partner countries The collection of studies presented in this book merges rigorous but accessible theoretical frameworks with empirical analyses of the main issues, creating a good balance between theory and practice The multiplicity of approaches also provides a rich and comprehensive view of a complex topic The chapters have been prepared by highly regarded economists from Europe and Latin America, who were selected for their international experience, their expertise in the field, and their capacity to produce innovative work The Integration and Trade Sector is pleased to present, in this volume, the results of the aforementioned research project, carried out in collaboration with the Southern Cone Country Department We hope that the book makes a significant contribution to the understanding of how progress in finding solutions to address the challenges that disparities pose to deeper integration Santiago Levy Algazi Vice President for Sectors and Knowledge Antoni Estevadeordal Manager, Integration and Trade Sector Copyright © by the Inter-American Development Bank All rights reserved For more information visit our website: www.iadb.org/pub Preface Copyright © by the Inter-American Development Bank All rights reserved For more information visit our website: www.iadb.org/pub This page intentionally left blank W e acknowledge the essential contribution of Robert Devlin, former Deputy Manager of the Integration and Regional Programs Department, who led and coordinated with us the research project that has culminated in this book’s publication We are also indebted to Mauricio Mesquita Moreira and Fernando Quevedo, whose comments and suggestions in different phases of the project were fundamental in bringing this book to fruition We thank all the participants in the Technical Workshop held in Washington, D.C., and in the General Conference in Rio de Janeiro in 2005 for providing helpful comments on earlier versions of the volume’s chapters In particular, we are indebted to Carlos Amorín, Reginaldo Braga Arcuri, Eliana Cardoso, Christian Daude, Atish R Ghosh, Ilan Goldfajn, Hernán Lacunza, Gerardo Licandro, Mario Marconini, Jỗo Bosco Mesquita Machado, Felix Pa, Luis Porto, Marcelo Olarreaga, Didier Opertti, Javier Ortiz, Luiz A Pereira, Rubén Ramírez Lescano, Ricardo Rozemberg, Pablo Sanguinetti, André Sapir, Darío Saráchaga, Jeffrey Schott, Alexandre Schwartsman, Eduardo Sigal, Rogério Studart, Ricardo Varsano, and Luiz Villela for their valuable insights We would like to thank Nohra Rey de Marulanda and Ricardo Santiago, former Managers of, respectively, the Integration and Regional Programs Department and the Regional Operational Department 1, who supported the launching of the research project on which this book is based We also acknowledge the generous contribution of Ricardo Carciofi, Director of the Institute for the Integration of Latin America and the Caribbean (INTAL), who was instrumental in organizing the conference in Rio de Janeiro Finally, we thank Mariana Sobral de Elía, María de la Paz Covarrubias, and Carolina Saizar, who helped in countless ways in the preparations for the workshops and the development of the book We also thank Andrew Crawley for a thoroughly professional job during the editing and proofreading processes Juan S Blyde Eduardo Fernández-Arias Paolo Giordano Editors Copyright © by the Inter-American Development Bank All rights reserved For more information visit our website: www.iadb.org/pub Acknowledgments Copyright © by the Inter-American Development Bank All rights reserved For more information visit our website: www.iadb.org/pub This page intentionally left blank ... the Inter-American Development Bank Cataloging -in- Publication data provided by the Inter-American Development Bank Felipe Herrera Library Deepening integration in MERCOSUR : dealing with disparities. .. salient disparities in MERCOSUR Juan S Blyde and Eduardo Fernández-Arias delve deeper into the subject in Disparities and Integration in MERCOSUR, ” analyzing the asymmetries that different disparities. .. particularly in agreements whose institutional architecture is intergovernmental Success in reducing asymmetries, and in advancing toward a common goal in an increasingly solid integration project,