5 Reasons Why Trade Agreements in Latin America and the Caribbean Matter


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Trade agreements cover 70% of all trade in Latin America and the Caribbean (LAC). Of the 270 free trade agreements (FTAs) currently in effect around the world, more than 70 include LAC countries.

Caribbean countries have a long history of pursuing regional economic integration and have made ambitious commitments towards a single market and economy.  However, despite progress in removing barriers to trade with one another, and substantial reductions in the tariffs of major trading partners, Caribbean countries and businesses still face important obstacles in fully taking advantage of the opportunities presented by trade. Non-traditional trade costs, including those related to information, transport and logistics, customs and border procedures, and navigating an increasingly complicated network of trade agreements, create new challenges for traders.

In order to understand the impact of these agreements on the region, the Inter-American Development Bank (IDB) will launch a Massive Open Online Course (MOOC) on how they work and what they mean for governments, businesses, and people in LAC.

The course is free of charge, starts on October 25, and lasts for six weeks. Sign up for it here.

In the meantime, let’s follow the MOOC syllabus a bit and look at five reasons why trade agreements matter to LAC.

  • Trade has enormous potential for economic development and poverty reduction.

Latin America is a recent example of this success: it took advantage of high commodity prices to boost economic performance and generate higher-paying jobs. The region experienced a period of strong growth, with significant progress in its economic and social indicators, largely driven by international trade. Trade liberalization, particularly generated by the multilateral reduction of tariffs and facilitated by the growing number of regional trade agreements, served as a catalyst for those trends.

  • It is crucial to assess the impact of trade and design optimal strategies for implementing existing agreements.

Rules of origin, for instance, set out the conditions under which an importing country considers a product to have originated in an exporting country that receives preferential treatment. These rules are often restrictive and vary not only by product, but also by agreement, complicating trade for companies and other actors involved.

  • Issues behind the border affect trade.

Some issues in business processes are essentially internal to countries — such as the liberalization of trade in services, the elimination of barriers and the establishment of mechanisms to protect foreign investors, competition policy and government procurement, and labor and environmental standards. It is essential to address these issues to create an enabling environment for companies to participate in regional or global value chains — something the IDB has described as “Synchronized Factories.” In the past two decades, international trade has undergone a fundamental change in these processes.

  • Pioneering trade agreements work as laboratories for innovation in international trade policy.

Some pioneering agreements already address intellectual property rights, electronic commerce, and state-owned enterprises (SOEs). These issues have become increasingly prominent in the latest generation of agreements. The bilateral agreements between LAC countries and the United States, for example, all include provisions that regulate e-commerce because it is changing the nature of how we shop and trade internationally, which also has implications for customs.

  • Recent economic and political developments open up new scenarios for the future of trade agreements.

To make the most of trade and trade agreements in LAC, complementary policies are needed to lower trade costs, such as upgrading transport and logistics, facilitating trade and making it more secure, and overcoming information barriers through export promotion. Such policies are particularly important for fostering SMEs so that they can thrive as the next generation of exporters in the region.

You can now learn how trade agreements work and what they mean for governments, businesses, and people in Latin America and the Caribbean. In this course – New Trend in Trade Agreement in Latin America and the Caribbean – you will also analyze in depth the provisions of regional and multilateral trade agreements, and discover why Latin American and Caribbean countries face significant obstacles using them.

This course is aimed at private sector professionals, public officials, and university students interested in learning the practical aspects of how trade agreements work, and how to make the most of them. It is free of charge, starts on October 25, 2016, and lasts six weeks.

This blog post was originally published in the blog “Beyond Borders” of the IDB.

September 28, 2016

This course start date has been postponed to October 25.

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