When trade liberalization is not enough: Making the case for Aid for Trade in Latin America and Caribbean Osvaldo Rosales Director, Division of International.

OSVALDO ROSALES ECLAC 1

When trade liberalization is not enough:Making the case for Aid for Trade in

Latin America and Caribbean

Osvaldo RosalesDirector, Division of International Trade and Integration

Economic Commission for Latin America and the Caribbean (UN-ECLAC)


Since 1980s the region underwent substantial reforms, including trade liberalization

0

10

20

30

40

50

60

70

80

90

100

Uru

gu

ay

Me

xico

Bra

zil

Pe

ru

Arg

en

tina

Ve

ne

zue

la

Co

lom

bia

Ecu

ad

or

Pa

rag

ua

y

Bo

livia

Gu

ate

ma

la

Co

sta

Ric

a

Ch

ile

Nic

ara

gu

a

1980s 1990 around 2003

> 100%

29%

10%

Latin America: Unilateral liberalization


Despite progress in trade liberalization, Latin America and Caribbean remain less trade-oriented than other regions of the world

Sources: ECLAC official data, COMTRADE and World Development Indicators 0% 20% 40% 60% 80% 100% 120% 140% 160%

Brazil

Panama

Colombia

Argentina

El Salvador

Guatemala

Peru


Uruguay

Venezuela

Bahamas

Ecuador

Barbados

Mexico

Honduras

Chile

Bolivia

Nicaragua

Dominican Republic

Jamaica

Costa Rica

Paraguay

Trinidad and Tobago

Guyana

0

10

20

30

40

50

60

70

80

East Asia& Pacific

Europe &CentralAsia

LatinAmerica &Caribbean

MiddleEast &NorthAfrica

SouthAsia

Sub-Saharan

Africa

World

Merchandise trade (% GDP), 2006


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.

GDP per capita / GDP per capita in US

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0

Venezuela

Paraguay

Brazil

Mexico

Colombia

Latin America

Guatemala

Honduras

Ecuador

Bolivia

Nicaragua

El Salvador

Peru

Uruguay

Costa Rica

Dominican Republic

Panama

Argentina

Chile

Korea

Singapore

Ireland

2006

1990


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)

Concentration of exports, 2006

0% 20% 40% 60% 80% 100%

Brazil


El Salvador

Mexico

Argentina

Barbados

Uruguay

Honduras

Costa Rica

Colombia

Nicaragua

Peru

Paraguay

Chile

Guatemala

Guyana

Bahamas

Bolivia

Ecuador

Panama

Belize

Jamaica

Venezuela

% top 10 products

% top 5 products


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


The key is an explicit strategy of competitiveness…learning from previous experiences of success and failure

Public-Private Alliances (PPA) to enhance competitiveness

and innovation

Active export promotion and diversification policies Enhancing SME´s export orientation Pursuing trade diversification towards products with

greater value-added and higher technology/knowledge content

Innovation policies linked with export promotion FDI´s attraction policies Education & human resources Infrastructure and logistic Institutional reforms


…lowering the trading costs

Source: “Connecting to Compete”, 2007, The World Bank

59

58

47

41

40

23

0 10 20 30 40 50 60 70

Sub-Saharan Africa


Middle East and North Africa

South Asia

East Asia and Pacific

Europe and Central Asia

% of respondents deeming the overall logistics costs to be high/very high


Latin American countries are lagging behind in logistics performance

Source: Logistics Performance Index, The World Bank

0

5Logistics performance index

Customs

Infrastructure

International shipments

Logistics competence

Tracking & Tracing

Domestic logistics costs

Timeliness

Latin AmericaHigh-income countriesEmergent Asia countries (Malasya, China, Thailand, Indonesia, Vietnam y Philippines)

OSVALDO ROSALES ECLAC 10Source: “Doing Business”, The World Bank

The red tape adds to trading costs

0 10 20 30 40 50 60 70

Venezuela

Nicaragua

Paraguay

Bolivia

Colombia

Peru

Uruguay

Latin America & Caribbean

Ecuador

Chile

El Salvador

Honduras

Guatemala

Brazil

Costa Rica

Mexico

Argentina

Dominican Republic

OECD

Panama

Canada

United States

Time for import (days)

Time for export (days)


Chile, Barbados and Mexico are the champions of competitiveness in the region, but the remaining countries rank low:

Source: World Economic Forum

Global Competitiveness Index rankings, 2007 (131 countries considered)

0

20

40

60

80

100

120

140

Chile

Barba

dos

Mex

ico

Panam

a

Costa

Rica

El Sal

vado

r

Colom

bia

Brazil

Urugu

ay

Jam

aica

Hondu

ras

Trinid

ad a

nd T

obag

o

Argen

tina

Peru

Gua

tem

ala

Domin

ican

Repub

lic

Venez

uela

Ecuad

or

Bolivi

a

Nicara

gua

Surin

ame

Parag

uay

Guy

ana


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 SME´s

to privilege cooperation efforts before negotiation process in the regional integration upgrading


ECLAC’s 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)


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 .


Three pillars of ECLAC’s trade-related capacity building and technical assistance

I. 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


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


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.).


ECLAC’s 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


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.


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.


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 WTO’s Trade Policy Reviews;

Host, organize and catalyze the AfT LAC Support Network.


In conclusion…

ECLAC’s understanding of the region’s development process and close contacts to the countries and regional organizations enable it to provide significant support to the region’s AfT undertaking and assume a leadership role in conceptualizing, operationalizing and implementing the initiative in LAC.

THANK YOU.

When trade liberalization is not enough: Making the case for Aid for Trade in Latin America and Caribbean Osvaldo Rosales Director, Division of International.

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