Changing Market, Constant Politics?

Coalitions and the Remaking of

Trade Statecraft in Brazil and Turkey
Dr. Vinícius Rodrigues Vieira
Visiting Professor, University of São Paulo
25th World Congress of Political Science
Brisbane, 25 July 2018
Argument
• Domestic Institutional Design Impacts the Ability to Carry Statecraft;
• Yet, Domestic Institutional Design comes from Societal Coalitions;
• Factors converge to determine the success of the competition state
(Cerny 1998), but also relates to Cerny’s (1998) concept of
“competition state”, defined as having political capacities necessary
to develop rules that prompt market actors to engage in outward-
looking development strategies.
• As the empirical analysis suggest, emerging market democracies may
enhance statecraft and their ability to compete in international markets
by creating “nodal bureaucracies” to carry trade and investment
diplomacy insofar as they are backed by societal coalitions.
Method
• Paired-comparison between Brazil and Turkey
• Focus: Changes in the Institutional Design of Foreign Economic
Policymaking after 2008
Causes however can be traced back to early 1980s, at the beginning of
economic liberalization in both countries (long duration, trajectories of
globalization);
Brazil: entrepreneurs seek to circumvent the centrality of the Ministry of
Foreign Affairs (known as Itamaraty) and hence the subordination of the
market agenda in trade and investment to the state/governmental one;
Turkey: government creates the Ministry of Economy in 2011 to centralize
the export and outward FDI policy in the post-crisis, then addressing
entrepreneurs’ need to find outlets for goods and capital.
Grounding the Comparison
• Similar transition from ISI to an Open Economy
• Not to mention that both cases are dual transitions (yet to be explored)

• Similar regional setting

• Customs Union in 1995 (MERCOSUR and EU);
• Pursuit of influence over other neighbors (South America and Middle East);
• Shielding from established and rising powers (USA/EU and China/Russia).

• Different winners from liberalization (but both conservative/rural)

• Agribusiness in Brazil and new manufacturers in Turkey (like those who
prompted the rise of the Anatolian Tigers)
Export of Goods and Services (% GDP)
Export value index (2000 = 100)
FDI inflows as Percentage of the GDP
FDI, net outflows (% of GDP)
FDI, net outflows (% of GDP)
Horizontal and Vertical Integration
• KEY TO THE CONCEPT OF NODAL BUREUCRACY

“The higher the concentration of functions related to horizontal and

vertical coordination in a policy area, the stronger is the status of a
state division as nodal bureaucracy”

HORIZONTAL: Connects different parts of the state/government

VERTICAL: Connects the state with non-state actors
Brazil: Challenge for Entrepreneurs
• CAMEX (created in 1995 amid the implementation of MERCOSUR’s
first provisions) had never become the “nodal bureaucracy”;
• Workers’ Party (PT) comes to power in 2003
• Retains policymaking centralized in the Itamaraty;
• South-South Diplomacy (Partisan Idological component;
• State/governmental agenda subordinates the market/entrepreneurs agenda
• Free Trade Area of the Americas’ (FTAA/ALCA) negotiation are halted in 2005;
• All baskets into WTO’s Doha Round, deadlocked since 2008;
• Never-ending MERCOSUR-EU negotiations (launched in 1995);
• Economically-irrelevant PTAs (e.g.: with Egypt, Palestine, India, SACU).
Brazil: Institutional Design
President’s Office

Itamaraty

Other Ministries Ministry of

and Agencies MDIC/CAMEX Agriculture

Business
Associations/
Interest Groups
Turkey: Opportunities for Entrepreneurs
• Undersecretariat for Foreign Trade (created in 1994) becomes the
“nodal bureaucracy”, yet directly linked to the Office of the Prime
Minister
• Justice and Development Party (AKP) comes to power in 2003
• Like PT in Brazil, AKP adhers to market fundamentals;
• Yet, it is less contentious in foreign affairs, keeping first the target to join the EU;
• Throughout time exports to the developing world increase
• Market goals in line with state imperatives (recovering influence over the Middle East);
• 18 PTAs, including with Chile, Malaysia, and South Korea;
• Entrepreneurs demand outlets to export capital.
Turkey: Institutional Design

Prime Minister

Other Ministries Ministry of Ministry of Trade

and Agencies Economy and Customs

Business
Associations/
Interest Groups
Summary of Findings
Decade Feature Characteristic Brazil Turkey
Itamaraty (de facto for
Fragmented vs. trade); CAMEX (de jure
Ministry of Economy
2010 Institutional Design Centralized Nodal for trade); Ministry of
(2011-2018)
Bureaucracy Finance (for investment
policy only)
PT heads the presidency
(links with inward-looking
manufacturing), but relies AKP gathers both ISI
Coalition of Coalition vs. Majority
2000 on the support of more widows and new exporters
Exporters Emerge Rule
conservative forces in the from the hinterlands
parliament (including
agribusiness)
1990 Regional Pressures Customs Union MERCOSUR With the EU
1980 ISI exasperates Hinterlands Emerge Agriculture New manufacturers
Do the Party and Political System matter?
• Brazil after Rousseff’s fall and the end of PT rule (2016)
• Coalition Presidentialism (BUSINESS AS USUAL!)
• President buys support (BUSINESS AS USUAL!)
• Case: CAMEX under Temer government (2016-2018)
Moved to Itamaraty under José Serra’s tenure (2016-2017)  PSDB member (major
supporter of PMDB government);
Went back to the MDIC as Serra’s left the Itamaraty and Temer wanted to show deference
to a small coalition partner ahead of the (the Brazilian Republican Party)
APEX (Agengy for Export and Investment Promotion) remains in-between ministries.
Thus, does the fragmented party system limits the elaboration of a more effective
institutional design (Itamaraty centralizes things, while trade remains dispersed as much as
investment policy, which also counts with the participation of the Ministry of Finance)???
Do the Party and Political System matter?
• Post-2018 Turkey under Presidentialism
• Fusion of the Ministry of Economy (in charge of trade and investment policy)
with the Ministry of Customs and Trade (which used to operate current rules
rather than seeking new agreements or policies of investment and export
promotion)  new Ministry of Trade;
• AKP gathers under a single party (and leader!Erdogan!!!) the same societal
coalition formed by ISI widows and new manufacturers from conservative areas
Religion and Nationalism expressing conservatism is key in shaping the societal coalition
and support to Erdogan (Lula has never reached the same status in Brazil);
PT has not managed to do the same in Brazil not only because of party fragmentation,
but also as a consequence of the governing party constant clashes with more conservative
coalition partners quite influential in the agricultural frontier (evangelicals).
HENCE, DOES POLITICS TRUMP SOCIETY???
Conclusion: Society prevails over Politics
BUT IT MAY BE RESHAPED BY GROWING EXPOSITION TO MARKETS
• Considering the trajectories of economic liberalization, the logic of
societal coalitions seems to prevail over other factors in explaining
the limits of reforming the institutional design needed to carry the
trade (and also investment) economic statecraft
• Thus, institutional design is not a function only of the party and the
political system  impact exists, yet it is not deterministic
• Societal coalitions reframed as the economy became more open
• Endowments are not fate
• What about institutional designs necessary for effective statecraft?