Trade and Investment

What can Latin America gain from global trade talks?

Anabel González
Vice-President, Countries, Inter-American Development Bank
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Latin America

A lot is happening in trade negotiations in almost every corner of the world. If current talks are successful, new rules will shape trade and investment flows and will underwrite global governance on 21st-century trade issues. As elsewhere, the impact on Latin America will be significant. A strengthened World Trade Organization (WTO) would serve to mitigate any  potential negative impact.

Countries have been quite active and prolific at the bilateral and regional levels for some time – the WTO has been notified of 432 regional trade agreements (RTAs). But the key ongoing negotiations are of a different dimension: they involve more partners, from different levels of development and different regions, cover larger volumes of trade, and aim at reaching agreements of a deeper nature on a wider range of issues. These are the mega-regionals, of which the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) are in a category of their own.

Things have also been moving at the multilateral level, if at a different pace. Bali was host to the Trade Facilitation Agreement (TFA), the first multilateral pact since the establishment of the WTO 20 years ago, raising hopes that more can be done in this forum. Plurilateral negotiations, related to the WTO in one way or another, are taking place among interested members in the areas of trade in services (the Trade in Services Agreement, TiSA) and information technology (the expansion of the Information Technology Agreement, ITA). Soon they will focus on liberalizing trade in environmental goods.

Most Latin American countries are supportive of negotiations at the multilateral level – though a few were among the last to agree to Bali’s TFA. The situation is more nuanced as regards plurilateral, mega-regional and regional negotiations, where political economy and ideological reasons drive countries’ positions. These positions are as follows:

  • Brazil and Argentina do not participate in either plurilateral or mega-regional negotiations. Since establishing Mercosur in 1991, they have not concluded any other regional agreement.
  • Paraguay and Uruguay, by virtue of their membership of Mercosur, have held similar positions (except in the case of the TiSA negotiations, where the former has joined and the latter is seeking to participate). The two have also become observers of the Pacific Alliance.
  • Chile, Mexico and Peru are part of the TPP – facilitated by their membership in the Asia Pacific Economic Cooperation forum – and have an extensive network of regional trade agreements with countries in the Americas, Europe and Asia.
  • Colombia and Costa Rica, and to a lesser extent Panama, have expressed interest in the TPP and have also negotiated a large number of regional agreements.
  • As to the plurilaterals, they are all part of TiSA, while Colombia and Costa Rica are participating in the ITA negotiations. Costa Rica is the only Latin American country to have joined the launch of the trade in environmental goods negotiation.
  • The Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua are part of RTAs with the United States, the European Union and other countries, but have a more reserved position towards plurilaterals and oppose TPP because of its potential impact on their textile and apparel trade with the US.

One very important development in Latin America is the Pacific Alliance, an ambitious and forward-looking integration scheme between Colombia, Chile, Mexico and Peru, which Costa Rica and possibly Panama are expected to join soon. This agreement aims to liberalize the movement of goods, services, people and capital among participating countries, as well as to serve as a platform to further strengthen trade relations with Asia Pacific countries. Its vision and boldness has attracted the attention of nations worldwide.

Though Latin American countries may benefit from the additional growth that these negotiations – if successfully concluded – may bring to the global economy, the impact on each country will vary. It depends on the extent to which a country is connected to global value chains or how reliant it is on exports of natural resources or on its own domestic market. Whether a country opts to resist or embrace these changes will also define its future standing in global trade.

All countries in the region would gain from a strengthened and effective WTO, to help mitigate the friction and fragmentation that may result from the mega-regionals. Prompt and full implementation of the TFA and the other items agreed in Bali is key to solidify the WTO’s centrality in the future. A renewed work program that would include both Doha Round issues and new topics relevant to the global economy, as well as an enhanced monitoring and surveillance role for the WTO, are also essential. It is in Latin America’s interest to make a decisive contribution towards moving this agenda forward.

Author: Anabel González is Minister of Foreign Trade of Costa Rica. She is participating in the World Economic Forum on Latin America 2014 in Panama City.

Image: Presidents of the Mercosur trade bloc have a meeting at Uruguayan Presidential building in Montevideo to participate in the Mercosur trade bloc summit December 8, 2009. REUTERS/Miraflores Palace

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