Trade Integration in Latin America and the Caribbean

Below is the executive summary of a new IMF report:

“This cluster report takes stock of and explores opportunities for trade integration in Latin America and the Caribbean (LAC). Drawing on a set of 12 analytical studies that will be issued as working papers, the report examines the determinants of trade, explores the potential to enhance LAC’s trade integration, and assesses the associated economic and social effects. To deepen understanding of the region’s policy options and trade strategies, the report also incorporates the views of LAC country authorities based on responses to a survey. This provides an opportunity to examine the alignment of recommendations based on the analytical findings with the region’s current trade policy priorities, with the caveat that the survey was conducted between late 2015 and mid-2016, prior to the most recent developments in the global trade landscape.

The report finds that LAC can reap important growth benefits from further trade integration. With trade integration below that of other regions, there is scope for LAC to increase trade as an engine of growth and help offset the weaker economic outlook without adversely affecting overall income inequality. While there is potential to enhance both inter- and intra-regional trade integration, renewed political momentum within LAC in support of greater trade openness could provide an important impetus to further intra-regional trade integration in particular. In this context, regional trade integration could be promoted through a regional trade agreement, convergence of trade rules and regulatory standards, and measures to support trade facilitation. Strategies to bolster the region’s inter-regional integration could be centered on unilateral liberalization as a complement to existing efforts to expand LAC’s network of trade agreements.

This report also emphasizes the importance of complementary policies. Continued regional efforts to strengthen infrastructure and human capital would be useful as part of a broad growth strategy. But they can also enhance trade integration, including by facilitating participation in global value chains which may offer new opportunities for technology transfer, and are critical to diversifying and upgrading the complexity of LAC’s exports. Finally, strengthened social safety nets can help lessen adjustment costs linked to further integration and promote an equitable distribution of gains from trade.”

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Posted by at 11:45 AM

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