Capítulos

Special Edition 1996

X-RAYING Latin American and Caribbean trade policy

SELA Permanent Secretariat

Summary

The Trade Policy of Latin American and Caribbean countries today has two fundamental characteristics. First, it is becoming increasingly complex as it reflects elements ranging from traditional deficiencies in transportation to the protection of intellectual property. Regional trade policy has also broadened as it seeks to reconcile the deepening of regional integration with negotiations to establish a hemispheric free trade zone and the assumption of obligations resulting from the multilateral trade system.

Traditional issues and problems

Despite the significant transformation in Latin American and Caribbean economies at the end of the 80s as a result of economic and trade liberalization, the region's external trade continues to show signs of structural weaknesses. Some of the «traditional» problems still present in Latin American and Caribbean trade policy include:

-Commodities continue to be the dominant exports while the most significant imports are manufactured goods:

-The Latin American and Caribbean region's share of world trade remains relatively low (approximately 5%) while imports are on the rise:

-Services in upport of exports (e.g., active trade promotion, identification of external demands or potential investors, export or import financing, transportation and customs services, and information on exportable supply) have not reached satisfactory levels, particularly when compared to the competitiveness levels demanded by world markets.

-The trade liberalization generated by the Uruguay Round does not solve all the problems of market access for the region's goods, many of which remain subject to anti-dumping measures and barriers resulting from technical, environmental or phytosanitary rules in industrialized countries.

Trends and changes in regional trade

Significant transformation is taking place and this is changing the nature of Latin American and Caribbean external trade:

-Booming intraregional trade: The integration factor is a priority in national policies throughout the region. Promoting regional integration has a two-fold purpose: (1) facilitating the participation of each country in the global economy and (2) «regionalising» globalisation; that is to create space for preferential action between neighboring partners. Integration has managed to push ahead in spite of those who predicted its failure: since the early 90s, nothing has been able to stop the steady march of integration, not the unilateral trade opening to all the partners of the region, not the initiation of the hemispheric process, nor the volatility of capital markets. Intraregional trade is growing at a faster pace than trade with the rest of the globe, leaping from 13.1% of total regional trade in 1990 to 20% in 1995, according to ECLAC figures. Thus, the historical record set in 1981 (16% of the region's total trade) has been surpassed. In addition, intraregional trade is characterized by a significant share of manufactured goods. In intra-ALADI trade this rose from 51.2% in 1990, to 60.5% in 1994.

Similarly, intraregional trade is a significant element in the external trade of many countries, accounting for 59% of Paraguay's exports, 52% of Uruguay's, 46% of Argentina's, and over 20% for Brazil, Colombia, and Chile.

From 1990 to 1994, intra-scheme trade spurred by integration has increased 2.9 times within MERCOSUR, 2.6 times in the case of the Andean Group, 1.9 times in the Central American Common Market, and 0.1 times in CARICOM. Trade among the different schemes, however, has shown a slower growth rate: from 1990 to 1995, trade between MERCOSUR and the Andean Group increased from US$ 2.4 billion to US$ 3 billion, while in the case of trade between ALADI and CACM, it increased from US$ 1.2 billion to US$ 1.8 billion (ECLAC figures).

-The next goal is convergence. Besides integration, the region's trade agenda is also seeking to achieve the convergence of agreements and schemes. But there is no «global plan» to direct the process. A pragmatic approach has prevailed, dictated by circumstances, as evidenced by the overlapping and countless number of agreements.

A new dimension: the hemispheric process

Although its objective differs from that of subregional schemes (which seek to achieve integration, viewed in terms of interdependence based on solidarity and reduced sovereignty), the preparatory process for the creation of a hemispheric free trade zone brings into play another dimension in subregional and multilateral commitments even though the «ceiling» and «floor» of the hemispheric commitments are not yet clear.

In this regard several points still need to be clarified:

-treatment of the asymmetries between participating countries,

-scope of trade liberalization (all products and services?),

-negotiation methodology (on the basis of regional subgroupings, bilaterally or multilaterally?).

The Meeting of Government Officials Responsible for Trade Policy, which SELA, ALADI, and ECLAC convened in Caracas on 8 February 1996, made it clear once again that «the establishment of a hemispheric free trade area must be founded on existing subregional and bilateral agreements, and in this respect, the meeting reiterated that these agreements needed to be strengthened.»

To date, the 7 Working Groups established by the Ministerial Meeting in Denver have progressed with their data gathering process on national regulations in the hemisphere. The forthcoming Trade Ministerial Meeting in Cartagena, Colombia (21/3/96) should determine follow-up activities and decide on the eventual creation of 4 additional Groups (intellectual property, government procurement, services, and competition policy).

The U.S. election campaign has eclipsed this process somewhat, but several elements give reason to predict the continuation of this endeavour which is being fostered by the shared interests of the parties involved:

-the creation of «blocs» elsewhere encourages the countries of the hemisphere to consolidate links between them;

-the formation of a «hemispheric» bloc would increase each country's negotiating power at the international level;

-markets of the hemisphere offer a wide array of possibilities for all the countries in terms of trade and investment, surpassing any relative differences that may exist between them.Source: OAS, 1995.

Commitments and the new Multilateral Agenda

-Reconciling regional and multilateral commitments. As the commitments stemming from advances in integration have increased, so have those resulting from the implementation of the Uruguay Round results. For example, prior to the Round, average «consolidated» (i.e., committed) tariff positions in developing countries was 22%, and now, the average is 72%. Likewise, the percentage of industrial imports of the developing countries which enter on the basis of consolidated tariffs increased from 14% to 59%. There is need for harmonising commitments in all areas which are covered simultaneously by regional or subregional regulations, and by the Round agreements (for example, intellectual property, services, and rules of origin.)

-Preferences and special and differential treatment. The level of commitment tends to e the same; but different timetables are established in accordance with development levels. This implies modifying the region's trade policy concepts and instruments in order to meet commitments similar to those of industrialized countries. Similarly, conditionalities for obtaining preferential treatment in non-trade related areas have increased, as in the case of the fight against drug-trafficking.

-New trade issues broaden the concept of «market access». Issues previously unknown to the trade agenda are now changing the very essence of the concept of trade, which until now was limited to those measures applied at borders. The defenders of the «new» trade issues assert that, from an entrepreneurial standpoint, tariff liberalisation does not eliminate distortions in market access resulting from certain domestic policies. In fact, trade and investment decisions made by businesses take into account not just tariffs, but other factors including environmental and labor-related legislation, investment regimes, the regulatory framework for competition policy, government procurement, among others. (Recently, for example, the United States of America has used the issue of «trade and corruption» in their market access criteria.)

The new trade issues share an objective, namely to «harmonize» domestic «para-trade» policies that have an impact on trade and capital flows, and to establish multilateral regulations in this respect. The eventual negotiation of disciplines on some new issues could be of interest to the developing countries, providing they are conducive to consolidating market liberalization and transparency, and support individual modernization efforts, as for example competition policies and the link between trade and environment. Other issues, however, such as «social dumping» should be rejected to the fullest extent.

Clearly, there are three (3) principal risks to be avoided when dealing with these issues:

-that policy harmonization be determined with criteria that do not take asymmetries into account,

-that several of these new issues become new forms of protectionism;

-that the scope of multilateral trade instruments be excessively broadened, thus weakening those already created.

-The diversification of Latin American and Caribbean trade partners is on the rise. The figures attest to the region's quest for new partners: between 1993 and 1994, exports to the European Union rose 16%; exports to Asia increased 20%, while those to other regions increased 15% (source: WTO, 1995). Whether it be on an individual basis or in the framework of subregional schemes, the countries of the region must try not to put all their eggs in one basket.

Short-term priorities

The trade policy agenda set by Latin America and the Caribbean requires that regional and national positions be defined, in the next months, on matters crucial to development. These include:

-steps bringing the region closer to convergence as a necessary stage at this moment, resulting from prior advances under way at the subregional or bilateral levels in its various facets (trade liberalization, common regulations, macroeconomic coordination, and other cooperation sectors and areas).

-the active participation of Latin America and the Caribbean in the WTO (including participation in the new Committee of the WTO responsible for the revie of the link between regionalism and multilateralism and the advancements made in integration schemes;

-follow-up preparatory work on the hemispheric free trade area and the linkage of this process with intraregional and convergence commitments;

-the diversification of the region's trade partners;

-treatment of «relatively less-developed economies» in the hemispheric process and in that of intraregional convergence and integration and in the multilateral sphere;

-formulation of the agenda for the WTO Ministerial Conference in Singapore (December 1996), including the evaluation of the application of the Uruguay Round commitments as well as the eventual consideration of «new» issues (environment, competition, investment, government procurement), and «traditional» issues of interest to the region (antidumping, commodities, relationship between regionalism and multilateralism, the trade-currency-finance link);

-the consolidation of the regional and the subregional institutional framework on the basis of the changes spurred by globalization and the new economic and trade policies of the countries of the region.

For all these issues, the Meeting of Government Officials Responsible for Trade Policy, supported by the SELA/ALADI/ECLAC working mechanism and with the participation of the Secretariats of the subregional integration organisations, serves as an active and flexible working tool that contributes to the joint formulation of the agenda and to the analysis of the substantive items on this agenda with a three-dimensional approach, namely regional, hemispheric and multilateral, as reiterated at the Second Meeting held in Caracas on 8 February last.

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