LAC integration process has boosted intra-regional trade links, according to SELA study

The promotion of intra-regional trade flows has been an objective and essential tool for the integration process in Latin America and the Caribbean, as the countries of the region recognize the need to expand their domestic markets and achieve greater inclusion into global trade.

Caracas, 3 August 2015.- With the creation of the Latin American Free Trade Association (LAFTA) in February 1960, Latin America and the Caribbean started to create spaces to facilitate internal trade through the progressive elimination of tariff barriers. That process has been driven by the subsequent creation of subregional blocs such as the Central American Common Market (CACM), the Andean Community of Nations (CAN), the Caribbean Community (CARICOM) and the Common Market of the South (MERCOSUR), thus promoting greater cooperation and searching for the economic progress of the region.

Under this premise, and with the purpose of deepening understanding of the dynamics of trade integration in the region, the Permanent Secretariat of the Latin American and Caribbean Economic System (SELA) presented the document “Assessment Report on Intraregional Trade in Latin America and the Caribbean: 1980 – 2013”, which updates and supplements the “Assessment Report of the Regional Free Trade Agreements in Latin America and the Caribbean: 1980 – 2011”, drafted in 2013.

The analysis argues that the promotion of intra-regional trade flows has been an objective and essential tool for the integration process in Latin America and the Caribbean, as the countries of the region recognize the need to expand their domestic markets and achieve greater inclusion into global trade.

The study describes the commercial dynamics of the traditional sub-regional integration blocs: CAN, CARICOM, CACM and MERCOSUR, whose member countries account for more than half of the total exports of Latin America and the Caribbean. It points out that nominal intra-regional exports have grown, on average, at an annual rate of 9.33%, which is above the average annual variation registered in trade exchanges with the rest of the world: 8.09%.

The report also highlights that the share of Latin American and Caribbean exports in global trade grew slightly from 5.33% in 1980 to 5.98% in 2013. Meanwhile, other trading blocs in the world, such as the Association of Southeast Asian Nations (ASEAN), have managed to consistently boost their exports through a deep process of productive transformation, increasing from 3.91% of world trade in 1980 to 6.52% of global exports in 2013.

In spite of this reality, the research shows the progress of the region in reducing its dependence on exports of primary products, through the promotion of structural changes which have gradually increased exports of manufactured goods, although with low technological content. However, the increase in raw materials prices, particularly over the last decade, has led to a rebound in exports of natural resources to the detriment of trade in products with a higher processing level.

The document indicates that the progress of globalization and the development of value chains have made international trade a major source of economic growth. In this regard, it argues that the region continues to face major challenges to improve its insertion into global trade by promoting a greater productive transformation, the modernization of its logistics infrastructure, the elimination of non-tariff barriers and greater harmonization of regulatory frameworks.

It also underscores the need to make decisions to mitigate and possibly eliminate existing asymmetries in the region, which have historically disrupted the integration process in Latin America and the Caribbean. For this reason, emphasis is made on the importance of achieving higher levels of cohesion and coordination, which may contribute to reach deeper agreements that allow for taking full advantage of the benefits associated with trade integration.

In this connection, there is no doubt that Latin America and the Caribbean would substantially benefit if national and subregional decisions directly related to key issues concerning productive and commercial integration could converge into a regional vision.