When trade liberalization is not enough: Making the case for Aid for Trade in Latin America and Cari

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When trade liberalization is not enoughMaking
the case for Aid for Trade in Latin America and
Caribbean

• Osvaldo Rosales
• Director, Division of International Trade and
  Integration
• Economic Commission for Latin America and
• the Caribbean (UN-ECLAC)

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Since 1980s the region underwent substantial
reforms, including trade liberalization
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Despite progress in trade liberalization, Latin
America and Caribbean remain less trade-oriented
than other regions of the world
Merchandise trade ( GDP), 2006
Sources ECLAC official data, COMTRADE and World
Development Indicators
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The regional experience shows that market opening
alone is not sufficient for sustained exports and
economic growth
The growth rate in the region has not been
sufficient to ensure convergence with the
countries of the North. In the last 20 years,
only Chile, C. Rica, Panama and D.R show a clear
trend of convergence.
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The export basket continues to be concentrated in
few products

• In most countries of the region, five products
  account for over half of all exports
• High concentration of natural-resource based
  (oil, iron and steel, copper) and agricultural
  products (soy, sugar, beef, coffee)

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The problem is not lack of market access

• Proliferation of FTAs and integration agreements
  
• Inside the region (CARICOM, CACM, Andean
  Community and Mercosur) and
• Outside the region (especially with US, Canada,
  EU and Japan)
• ECLAC estimates that appx. 60 of LAC exports in
  2005/2006 were covered by PTAs (sharp increase
  since mid-1990s)
• Market access is still important, however to take
  full advantage of it requires actions to
  facilitate trade and to raise overall
  competitiveness.
• The high cost of logistics and the red tape are
  often more restrictive that the actual trade
  barriers

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The key is an explicit strategy of
competitivenesslearning from previous
experiences of success and failure

• Public-Private Alliances (PPA) to enhance
  competitiveness and innovation
• Active export promotion and diversification
  policies
• Enhancing SMEs export orientation
• Pursuing trade diversification towards products
  with greater value-added and higher
  technology/knowledge content
• Innovation policies linked with export promotion
• FDIs attraction policies
• Education human resources
• Infrastructure and logistic
• Institutional reforms

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lowering the trading costs
of respondents deeming the overall logistics
costs to be high/very high
Source Connecting to Compete, 2007, The World
Bank
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Latin American countries are lagging behind in
logistics performance
Source Logistics Performance Index, The World
Bank
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The red tape adds to trading costs
Source Doing Business, The World Bank
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Chile, Barbados and Mexico are the champions of
competitiveness in the region, but the remaining
countries rank low
Global Competitiveness Index rankings, 2007 (131
countries considered)
Source World Economic Forum
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The role of regional integration is crucial

• Bigger and unified markets
• Harmonization/ convergence of norms and rules
• Productive integration
• Regional value chains
• Translatinas
• Trade facilitation as a key aspect of
  internationalization strategy
• mainly for small economies
• for SMEs
• to privilege cooperation efforts before
  negotiation process in the regional integration
  upgrading

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ECLACs vision and experience

• A4T should focus on three aspects of
  trade-related capacity building
• Strengthening national and regional institutions
  responsible for trade and development
• Helping firms to get more competitive in global
  markets, with emphasis in SMEs
• Reducing domestic barriers to competitiveness
  (trade facilitation and infrastructure physical,
  human and institutional)

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A4T in LAC economies

• Provides a unique opportunity to address these
  challenges in a collective way and developing a
  broader and better coordinated approach to
  trade-related TA.
• Implementation requires policy coordination and
  priority-setting among the national agencies and
  establishment of public-private partnerships to
  mobilize A4T programs.
• An useful opportunity to build bridges among
  different visions on integration and trade in
  South America, enhancing cooperation aspects and
  delaying negotiations issues for better times .

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Three pillars of ECLACs trade-related capacity
building and technical assistance

• Formulation and implementation of a trade
  development strategy
• Trade transformation and diversification, by
  sectors and markets
• Incorporation of knowledge and value-added
  activities in goods and services.
• Reinforce linkages between goods and service
  exports
• Appropriate institutions necessary for
  technological advance and innovation in the
  export sector

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II. Development of local capacity

• Compatibility and convergence among the various
  levels of trade negotiations multi-, pluri-,
  regional and bilateral.
• Some of them, N-S agreements with broad
  commitments on critical issues
• Administration and implementation of trade
  agreements (including regional integration
  efforts)
• In 2010, 10 LA countries will have FTA with USA
  11-18 and the Caribbean with the EU and 13
  agreements will connect LA with Asian countries
• Diffusion of information and trade related
  matters, focused on emerging markets such as
  China, India and ASEAN.
• Joint-ventures of LAC governments oriented to
  explore new opportunities on trade and investment
  with Asian economies

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III. Trade Facilitation in areas related to

• Informatization of Customs procedures (Edocs,
  CEFACT) targeting SMEs
• Sanitary and Phytosanitary measures
• Technical barriers to trade
• Physical infrastructure (maritime transport,
  ports etc.).

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ECLACs contribution to the A4T Initiative

• Collaborate with IDB and WTO on
• Identification of specific projects and
  initiatives for linking trade and development
• Participation in the design and implementation of
  regional mechanisms to implement A4T/ Design of
  performance indicators
• Support the WTO monitoring and evaluation work
  from the regional perspective

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I. Identification of projects and initiatives

• Work with governments in collaboration with
  private sector on
• Implementation and administration of bilateral
  and multilateral trade agreements
• Definition of Action Plans in the trade
  facilitation area (C.America, next pilot plan)
• Formation and functioning of A4T National
  Committees as mechanisms to articulate the A4T
  agenda.

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II. Regional coordination and cooperation
mechanisms

• To develop a regular regional mechanism to share
  AfT experiences between countries, donors,
  international agencies and the private sector
• Identify and implement technical assistance
  programs to support AfT.

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III. Support WTO monitoring and evaluation

• Support information recompilation and
  systematization for the joint WTO/OECD database
• Providing information on the countries in the
  region to support WTOs Trade Policy Reviews
• Host, organize and catalyze the AfT LAC Support
  Network.

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In conclusion

• ECLACs understanding of the regions development
  process and close contacts to the countries and
  regional organizations enable it to provide
  significant support to the regions AfT
  undertaking and assume a leadership role in
  conceptualizing, operationalizing and
  implementing the initiative in LAC.
• THANK YOU.