Latin American Trade Regime Reforms and Perceptions

We examine the effects of recent reforms in trade in Latin American countries. In general, these countries have changed from the inward oriented economic attitude sponsored by the United Nations Economic Commission for Latin America (ECLAC), towards an outward looking perspective that is part of the “Washington Consensus". The paper details the changes in the level of tariffs and in quantitative restrictions, showing that there is a clear divide between the 80s and the 90s, with recent tariff structures that are flatter and lower. There has been an explosion in Free Trade Agreements (FTAs) within Latin America. Even if these agreements are not always effective and are riddled with excluded goods and services, they represent a change in perception and a willingness to trade with neighbours that did not exist previously. The effect has been a doubling in the rate of growth of exports in the last decade, coupled with an especially high growth rate in intra-LA trade. Cross-border investments have also ecome common. Nevertheless, the amounts exported by these countries are small. Even a country with low, uniform tariffs and few other forms of protection, such as Chile, did not get to export one thousand dollars of exports per capita, a quarter of the corresponding value for OECD countries. A worrying trend for the area is the growth in the new forms of protection as traditional trade barriers are lowered. A survey of the major Latin American countries and their trade partners shows an increase in the use of sophisticated methods such as the use of standards, certification procedures and antidumping and anti-subsidy measures against other countries in Latin America. Moreover, there is a willingness to fall back on administrative protection with measures that are cumbersome and protectionist. Even countries that are members of a customs union, such as MERCOSUR, can indulge in costly trade wars using these instruments. Developed countries have also stepped up their use of these measures and they appear less en husiastic in their support of free trade. It would be ironic if, when LA countries finally start to believe in the benefits of free trade, the developed countries were to close the door on their imports.