July 10, 2013

Repercussions Are Still Being Felt on the Morales "Incident"


"It is very clear that this is an event that goes beyond the explanations that have been given here," said the Secretary General. "With all due respect to my European Observer friends, with all the affection that we have for them, there is a serious matter here that has not been clarified."
The incident, said the leader of the hemispheric institution, "leaves a wound.” "And the best way to heal that wound, to mend that wound, is to know what really happened, what really took place," continued the Secretary General. "Where did this news come from that Mr. Snowden was on the plane? Why was it believed?" The best way to clear everything up, he added, "is through transparency."

The quote above is from OAS' Secretary General, Jose Miguel Insulza, and expresses two diplomatic approaches to the Morales incident. On the one side, the Latin Americans want a mea culpa from the Europeans as well as a satisfactory explanation. On the other side, the Europeans want to get over it and go on with business as usual.

In my previous post, I concluded that nothing was going to happen, just because the Latin Americans were much more dependent from the Europeans than the other way around. That is simply because the EU is one of the most important cooperation partners of the region. This cooperation focuses mainly on the stability of the regimes, various forms of democratic deepening and, above all, the fight against poverty. Moreover, the EU is one partner that engages in direct investment in the Latin America region. In this post, I want to balance a bit more that conclusion. I still think nothing serious will happen, e.g. the breaking of diplomatic relations between Bolivia and the four European nations or the European nations really issuing a formal apology and explaining what exactly happened. However, based on the fact that the relationship has indeed suffered damage, there might be some aspects in that relationship on which Latin America might have some leverage.

Since 2010, the EU has placed priority on the following issues covering its relationship with Latin America:

  • deepening political dialogue at bilateral, regional and multilateral level;
  • deepening mutually beneficial trade and investment ties;
  • furthering closer bilateral relations with individual Latin American countries while also supporting regional integration;
  • increased dialogue on macro-economic and financial issues, environment and energy or science and research, intensifying our cooperation in these fields;
  • supporting the region’s efforts to reduce poverty and inequality and to pursue sustainable development, in line with the EU’s Agenda for Change;
  • adapting cooperation programmes to cover innovative areas not addressed by traditional development cooperation;
  • involving civil society in the Strategic Partnership including through the

It is not coincidence that trade and investment is mentioned in second place. In fact, I would argue that trade is a major pillar in such relationship. If we follow that line, Mercosur will have to be considered the area of interest for the EU within the region. That is because Mercosur has increasingly become an important trade partner for the EU. The Commission portrays it so:
  • The EU is Mercosur's first trading partner, accounting for 20% of Mercosur's total trade.
  • Mercosur is the EU's 8th most important trading partner, accounting for 3% of EU's total trade. EU's exports to the region have steadily increased over the last years, going up from € 28 billion in 2007 to € 45 billlion in 2011.
  • Mercour's biggest exports to the EU are made of agricultural products (48% of total exports) while the EU mostly exports manufactured products to Mercosur and notably machinery and transport equipment (49% of total exports) and chemicals (21% of total exports).
  • The EU is also a major exporter of commercial services to Mercosur (€13.4 bn in 2010) as well as the biggest foreign investor in the region with a stock of foreign direct investment that has steadily increased over the past years and which now amount to €236 billion in 2010 compared to € 130 billion in 2000.
Here are some more statistics (PDF) if you want to take a closer look at EU-Mercosur trade relations.

Similarly, since 2010, the EU and Mercosur are having meetings to reach a trade agreement among the two regions. The EU (as well as Mercosur) places great expectations on the outcomes of these meetings.

So, what I am trying to say here is that the Morales incident is not really minor for the EU, because it cannot actually afford to manage this diplomatic problem in a careless manner. The actual consequences for the EU might be felt on the trade negotiations with Mercosur. For example, the negotiations might be delayed. Since it is already the 12th round, I don't think the EU has an interest on delaying the outcome even more. However, the pressure under which the EU is or might be in the near future, most likely will not be enough to force the EU to do something it doesn't want to do. An official apology and a public explanation of what really happened will not be offered by the Europeans. Bilateral apologies and assurances that that will never happen again might be already in the works.