Georgetown Americas Institute

Trade is a fundamental determinant of productivity and income growth. Access to regional and global markets makes it possible to expand the scale of production and promote specialization and diversification, while facilitating access to critical inputs, capital goods, and technology. All this increases the efficiency of resource use, enhancing the added value that is generated within a country’s borders. In the last 30 years, Latin America has made important efforts to liberalize trade both through unilateral initiatives and in the context of negotiations at the regional, extra-regional and multilateral levels. As a result of these actions, tariffs have been substantially reduced and non-tariff barriers have been removed.

Even so, the results were not in line with expectations, at least for the region's average. Latin America's participation in global trade has been stagnant for the last three decades (between 4 and 5%) and the indicator of exports to products has increased timidly. One of the reasons for this poor performance is that trade within the subcontinent has not been as dynamic as it has been in other blocs and regions (eg EU, NAFTA, Southeast Asia). These exports have remained at levels of 15% of total foreign sales since the 1990s. A critical aspect that explains this phenomenon is that trade costs go beyond tariffs and classic non-tariff barriers: the reduction and simplification of customs and border procedures, and the improvement of the transport infrastructure that connects the different markets within the region are very relevant to take advantage of the geographical advantage of the neighborhood.

On the other hand, a crucial aspect that promotes trade both regionally and with third markets is the participation of global value chains. Until now, with a few exceptions (eg Mexico, Costa Rica), Latin America has not been able to take advantage of them. However, recent nearshoring trends from pandemic shocks and geopolitical conflicts could present an opportunity. For this, it is necessary to standardize and reduce regulations (eg rules of origin) that promote productive integration between regional partners and with large production and consumption markets relatively close, for example, with North America. The latter could also happen with a natural partner in the region such as the European Union. Most of the countries have agreements with this market, except for Mercosur, which is in the last stages of closing a treaty that has taken more than 20 years. The implementation of said agreement could be a catalyst for investment, modernization and trade promotion via integration in production chains between these two blocks.

Finally, another critical aspect of the global context refers to climate change with highly relevant implications for trade. The region has opportunities in terms of exports of goods and services with low emissions, but for this it must implement clear policies that promote the decarbonization of the economies in order to adapt to trade regulations that several countries are promoting (for example, tariffs on imports for carbon content). These regulations, however, should be consistent with international trade rules.

The program presented below allowed the discussion of all these issues that are so relevant to regional and global integration.

This conference was sponsored by the Georgetown Americas Institute and the Department of Economy at the Universidad Torcuato di Tella.