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The end of the Castro regime, Mercosur, and free trade

Will the Castros permit the younger generation to really take control, or are recent changes simply measures designed to appease?

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The Castro brothers
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Yves Hayaux du Tilly
On 6 March 2013 12:18

The measures being taken by Raul Castro in Cuba recently seem to follow the best practices from business schools to pave the road for an orderly generational change. 

These include easing the acquisition of cars and homes, the lease of farmlands, and setting-up businesses and foreign travel permits; a limitation of 10 years in public office; a maximum age for public officers; a restriction to two terms for leaders; the replacement of old members of the council of state with new blood, most importantly Miguel Diaz-Canel Bermudez and Mercedes Lopez Acea as new vice-presidents of the council of state; and, not least, Castro himself making public his decision to step aside in February 2018.

But will the Castros permit the younger generation to really take control, or are these simply measures designed to appease?

Does Diaz-Canel represents a new breed of Cuban politicians, less charismatic, less populistic, and more of what we would consider a technocrat?

The foregoing is a cause of concern mostly because if Castro gets it right, Cuba will get it wrong. Let me explain: If Castro is successful in paving the road to give access to a new generation of leaders while maintaining the same regime, Cubans will continue refraining themselves unto the world economy, with all the risks and advantages that the foregoing implies.

On the other side, the Castros are running out of time and are clearly showing signs that they understand the risks of gripping to power the way they have done so far.

I think the US embargo on Cuba has been and will continue to be one of the most important factors allowing communism in Cuba to survive the way it has. Ceasing that embargo will pose Cuba a challenge for which it is not prepared and that may effectively force it to further open its economy.

The opportunity to work and meet with a more democratic and open Cuba by 2018 seems to be there. It should be done through trade and investment, innovation and exchanges.

Mercosur: Isolation or integration?

Mercosur is stalled, both in its negotiations among its members and with other economic blocks. As an example, Mercosur started negotiations with the EU back in 2000 and after a six-year suspension, relaunched such negotiations in 2010.

Pursuant to the EU - after more than two years of technical work, the EU estimates that it is now time to proceed to the exchange of market access offers if we want to give a renewed impetus to this negotiation with the objective of concluding a balanced and ambitious trade agreement.

The only ‘advance’ (towards further isolation, radicalism and inaction) was the inclusion of Venezuela as a member of Mercosur in 2012. It does not take much to conclude that finalising negotiations with EU will not happen any time soon. As a contrast, on the northern side of the Americas, Mexico started negotiations with the EU for what would become the first transatlantic FTA for the EU in November 1998. Negotiations concluded one year later and the free trade agreement between Mexico and the EU came into force on July 2000.

Voices have been raised by partners of Mercosur concerned by such isolation. Mercosur rules contain a drag along provision, under which trade agreements with third parties can only be formalized if all full members are included. And with Argentina and Venezuela as full members, and considering their current policies towards foreign investment, it is not only negotiations with the EU, but in fact any negotiations that seem little more than a mere theoretical possibility.

Among those that have expressed their concern, President Mujica of Uruguay warned about the recently announced intention of the United States and the European Union to establish a major north Atlantic free trade zone: “How do you penetrate such a huge free trade space? We must lift our heads and look around to what is happening in the world. Imagine the growing difficulties for those left out in the cold to have access to those agreements”.

The Uruguayan president went further to admit that “there is panic to be left on your own”.

WTO? EUS? TPP?

As I have discussed previously, bilateral agreements among countries and blocs of countries are replacing trade rules’ attempts at the global level. 

In this regard, Herminio Blanco, one of the nine candidates for the post of Director General of the World Trade Organisation (WTO) to be appointed on May 31st, is aware of the tremendous challenges that the WTO faces to regain credibility and leadership. He proposes focusing on having the WTO get over the Doha round and deliver the harmonisation and trade facilitation measures required at a global scale. 

EUS (EU and US FTA) and to a lesser extent TPP (Trans-Pacific Partnership) negotiations may have a tremendous impact on world trade, mostly with regard to the harmonisation of norms and standards that will facilitate trade among countries that are part of those agreements, and may change the way the world has been trading in the last years.

Three of the nine candidates come from EMAs and the candidate proposed by Mexico, Herminio Blanco, former Minister of Economy of Mexico, successfully negotiated NAFTA which has become the standard used in free trade negotiation. I hope that reason prevails over politics and WTO elects the best candidate.

Yves Hayaux du Tilly is a lawyer and foreign affairs analyst

Read more on: mercosur, Raul Castro, the Castro brothers, Fidel Castro, free trade, and Yves Hayaux du Tilly
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