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Latin America/Caribbean and Asia/Pacific Economics and Business Association An initiative of the Inter-American Development Bank and the Asian Development Bank Institute

Fifth LAEBA Annual Meeting Singapore – July 15th, 2009

Regional Integration in LAC

Antoni Estevadeordal - IDB

Sponsored by  Inter­American Development Bank  Integration and Trade Sector  Institute for the Integration of Latin  American and the Caribbean (INTAL) 


Inter-American Development Bank Integration and Trade Sector

Regional Integration in LAC A Moving Agenda‌ Antoni Estevadeordal Manager Accelerating Regional Integration in the Asia-Pacific Region ADBI – IDB LAEBA Annual Conference Singapore, July 2009 1


Outline ‘Global Regionalism and the

Regionalism “Menu” in LAC ‘A Changing Environment for LAC Integration Strategies ‘Recalibrating the World Trading System ‘Conclusions 2


Global Regionalism and the Regionalism “Menu” in LAC

3


Global Regionalism... (RIAs notified to the WTO, 1950-2006) 25

200

~ 1994

180

20

ACRs Nuevos

140 15

120 100

10

80

ACRs Acumulados

160

60 5

40 20

0 50 19

0 55 19

60 19

65 19

70 19

75 19

ACRs Nuevos

80 19

85 19

90 19

95 19

00 20

05 20

ACRs Acumulados

4


LAC Integration in 1994‌ UR-GATT (April 94)

Canada

NAFTA Mexico (January 94) USA

Bahamas Haiti (CARICOM members but not in CSME)

Dominican Republic

Antigua & Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Lucia, St. Kitts & Nevis, St. Vincent & the Grenadines, Suriname, Trinidad & Tobago

El Salvador Guatemala Honduras Nicaragua

CACM

Costa Rica G-3

CARICOM CSME

Panama

G-3 Colombia Ecuador

ACN

Venezuela G-3

MERCOSUR (December 94)

Brazil Peru

Chile FTAA (December 94)

Bolivia Paraguay

Uruguay

ACE 35 Argentina

5


LAC Integration menu in 1994: “pizza� Canada USA Bahamas Haiti

Dominican Republic

Mexico

Antigua & Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Lucia, St. Kitts & Nevis, St. Vincent & the Grenadines, Suriname, Trinidad & Tobago

El Salvador Guatemala Honduras Nicaragua Costa Rica Panama

Venezuela Colombia Ecuador Brazil Peru

Chile

Bolivia Paraguay Uruguay Argentina

FTAA 6


NAFTA

LAC Integration menu in 1994: “ravioli” Canada USA Bahamas Haiti

Dominican Republic

Mexico

?

?

Antigua & Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Lucia, St. Kitts & Nevis, St. Vincent & the Grenadines, Suriname, Trinidad & Tobago

El Salvador Guatemala Honduras Nicaragua

CACM

Costa Rica

?

CARICOM CSME

?

Panama

Venezuela Colombia Ecuador

ACN Brazil

?

Peru

Bolivia

? Paraguay

Chile

Uruguay

?

Argentina

MERCOSUR 7


LAC Integration menu in 1994: “spaghetti bowl” NAFTA Canada-CRI

USA

Japan

CAFTA-DR

Korea China

Antigua & Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Lucia, St. Kitts & Nevis, St. Vincent & the Grenadines, Suriname, Trinidad & Tobago

El Salvador Guatemala Honduras Nicaragua Costa Rica

CACM

G-3

Venezuela Colombia Ecuador

Thailand

ACN

ACE 59

ACE 59

ACE 59 Peru

Trans-Pacific SEP

Singapore Brunei Australia

CARICOM CSME

Panama

ChileCent. Amer.

N.Z.

Chile

EU

Bahamas (CARICOM members but not in CSME) Haiti

Dominican Republic

Mexico

EU, EFTA

UM O IF AR A -C EP EU

Canada

EFTA

Brazil

Bolivia ACE 36 ACE 58

Paraguay Uruguay

ACE 35 Argentina

MERCOSUR

8


LAC Integration into the future‌EFTA EU, EFTA

NAFTA USA

Japan

CAFTA-DR

Korea

Bahamas

Dominican Republic

Mexico

China

El Salvador Guatemala Honduras

Antigua & Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Lucia, St. Kitts & Nevis, St. Vincent & the Grenadines, Suriname, Trinidad & Tobago

Haiti

CACM

G-3

EU

(CARICOM member but not in CSME)

Nicaragua Costa Rica

CARICOM CSME

Panama

ChileCent. Amer.

Venezuela Colombia

ACN

Ecuador ACE 59

Thailand

Brazil Peru

Trans-Pacific SEP

Singapore Brunei Australia

UM O IF AR A -C EP EU

Canada

N.Z.

Chile

Bolivia ACE 36 ACE 58

Paraguay Uruguay

ACE 35 Argentina

MERCOSUR

9


LAC Integration “new” menu: “lasagna” Korea

UM O IF AR A -C EP EU

Japan

Canada USA

Dominican Republic

Bahamas (CARICOM member but not in CSME)

Mexico

?

China

El Salvador Guatemala Honduras

Antigua & Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Lucia, St. Kitts & Nevis, St. Vincent & the Grenadines, Suriname, Trinidad & Tobago

Haiti Nicaragua

CARICOM CSME

Costa Rica Panama

?

?

?

Venezuela Colombia

?

Brazil Peru

Thailand

Chile Singapore Australia

Bolivia Ecuador

Paraguay Uruguay Argentina

Brunei N.Z.

10


Preferential and Multilateral Trade Liberalization in LAC‌ 50

Estevadeordal, Freund, Ornelas QJE November 2008

40

MFN Tariffs (Average for 11 countries)

30

20

10

Preferential Tariffs of 11 LAC countries to RTA partners

0 1985

1987

1989

1991

1993

1995

1997 11


RTAs Liberalization in LAC… 2009

2015

100

Share of intraregional trade Liberalized ~ 85 %

90 80 70

RTAs  Period 90 ‐ 95 95 ‐ 00 00 ‐ 07

60 50 40 30 20

2025

2023 2024

2021 2022

2019 2020

2017 2018

2015 2016

2011 2012 2013 2014

2008 2009 2010

2006 2007

2004 2005

2002 2003

2000 2001

1998 1999

1996 1997

0

1995

10

12


P H K L-> O K R- KO O > R M R- PH E > L THX->SG P TH A- JP > N THA-> JP N P A- PE ER > R N TH - Z > C A- TH L H >A A P N-> U H S M L- CH Y >J L C S- P H > N JPL-> JP C N- CHN H > N P L-> SG E JP R- KOP N> R C -> US H M A JP L- E > X JPN-> JP K N CHN O -> L JPR->PH JP N- USL > A N N-> TH ZL M A U - Y S > S U A->TH S K A A O P ->A R 3 C -> U A H CHS U L A S- ->PL U > U S- US 3 S > A K A- TH O > A C R- SG H > P U L- CH S >U L P A- S E > A C R- CH H > C L- CHL H >P L C L- E A > R U N- CA S > C A- CHN H C M L >P L A M NUEX >M ER E S -> E X A C X -> - H C > S ANMEL G U X S P-> S G H P- KO A K > R C G- US H > A S N->CH G N N P- HK ZL >J G S -> P G A P- SGN U > P S S- NZ G >S L P G -> P A U S

APEC liberalization state of play, 2008 % of product items free by 2008, by bilateral RTA relation

120

100

80

NAFTA

60

20

2008

JPN-MYS

40

KOR-PHL

0

13


P H K L-> O K R- KO O > R M R- PH E >S L THX-> G P TH A- JP >J N A TH -> P N P A- PE ER >N R TH -> Z C A- TH L H > A P N->AU H S M L- CH Y >J L C S- P H > N JPL-> JP N C N- CH H > N P L-> SG E P JP R- KO N >U R C -> S H M A JP L- E > X JPN-> JP N K - CHN O > L JPR->PH L JP N- US >T A N N -> H Z U L- MYA S > S U A->TH S K A A O P ->A R 3 C -> U A H CHS U L L A S- ->P U > U S- US 3 S > A K A- TH O > A C R- SG H > P U L- CH S > L P A- US ER >C A C - H H > C L- CHL H >P L C L- E A > R U N- CA S > C A C N C MHL ->PHL A - E M NUEX >M R E S -> E X A C X -> - H C > S ANMEL G U X S P-> S G A H P- KO K > R C G- US H > A C S N-> H G H N N P- K Z > G S L-> JP G S N A P- G U > P S S- NZ G >S L P G -> P A U S

…advances toward 2013

% of product items free by 2008 and 2013

120

100

80

2008

60 2013

40

20

0

14


…and further by 2020 % of product items free by 2008, 2013, 2020 120

100

80

2008 60

2013

40

2020

20

0 R L P N N R L A S L N N N P R A X N L L A A S A R S L 3 A A P L A L L R N L R X L X A R A N G N P L P S O PH SG JP JP PE NZ TH AU CH JP JP H SG O US E JP CH PH US TH Y TH O AU CH >P US TH SG CH US CH CH PE A CH PE E H ME US O US H K JP G NZ SG AU K > -> -> -> -> -> -> -> -> -> -> -> >C -> >K -> >M -> -> -> -> -> >M -> >K -> -> L- -> -> > -> -> -> -> -> ->C -> -> >M >C-> N >K > >C >H -> >S -> > > L- R R EX HA A HA ER A N HL YS L- N L- ER N- HL PN PN R PN N- ZL A- A P3 CH S US A- R HL SA ER HL L N SA L- X-SA CA P- P- G- N- GP ZL- GP S- PU S P H A E H O A A US KO C U P C C C U CH M U X-> SG SG HK CH S N S AU SG P K KO M T TH T P TH CH P M CH J CH P JP C J J KO J JP N US U N A E C M

15


The complex world of RTAs: Rules of Origin Number of RoO Criteria Combinations (RTAs-APEC) 80

Complex, Older, Latin…

70 60 50

Simple, Younger, Asian..

40 30 20

ASEANCHN

AUSSING

CHLCHN

CHLPER

ASEAN

P4

JPNSING

JPNTHA

THANZ

JPNMYS

CHLKOR

PERTHA

MEXJAP

AUSTHA

ANZCERTA

USAKOR

USASING

USAAUS

USAPER

CHLUSA

CHLCAN

NAFTA

0

CHLMEX

10

16


A Changing Environment for LAC Integration Strategies

17


A changing environment for LAC integration strategies‌ Increasing importance of private sector logic over state-led integration‌

18


Private Dynamics: National & Regional Production Networks Contract Manufacturers in the Electronics Sector (firms sample)

1990 s

Source: Sturgeon (2005) 19


Private Dynamics: Global Production Networks Contract Manufacturers in the Electronics Sector (firms sample)

2000s

Source: Sturgeon (2005) 20


A changing environment for LAC integration strategies… Increasing importance of private sector logic over state-led integration… Increasing importance of external forces on external integration strategies…

21


China, India, LAC‌ Shares in World Exports of Goods (%, Current US$)

10.0 8.0 6.0 LAC China & India

4.0 2.0 0.0 1980

1990

2005 22


P H K L-> O K R KO O -> R M R- PH E > L THX->SG P TH A- JP >J N A TH -> P N P A- PE ER > R TH - NZ > C A- TH L H > A P N->AU H M L- CHS Y >J L C S- P H > N JPL-> JP C N- CHN H > N P L-> SG E JP R- KOP N> R C -> US H M A JP L- E > X JPN-> JP K N- CHN O > L JPR->PH JP N- USL > A N N-> TH ZL M A U - Y S > S U A->TH S K A A P ->AOR 3 C ->CUS A H H U L A S- ->PL U > U S- US 3 S > A K A- TH O > A C R- SG H > P U L- CH S > P A- USL ER >C A C - H H > C L- CHL H >P L C L- E A > R U N- CA S > C A- CHN H C M L >P L A M NUEX >M ER E S -> E X A C X -> - H C > S A MEL G N X S P-> US G H P- KO A K > R C G- US H > A S N->CH G N N P- HK ZL > G S -> JP G A P- SGN U > P S S- NZ G >S L P G -> P A U S

Liberalization in APEC region…

% of product items free by 2008-2013-2020

120

100

80

60

40

NAFTA

Chile-Japan

Peru-Thailand 2008

2013

2020

20

0

23


Asia-LAC transport corridors: Changing patterns‌

24


“New” integration initiatives Mexico

Asia

ARCO-Pacific

Chile 25


Liberalization intra-ARCO-Asia 2009

2015

% LIBERALIZED PRODUCTS % de Líneas Libre de Arancel

100

90

80

70

Prom. Intra-Cuenca (empieza 2008)

60

--- Intra-ARCO --- ARCO-Asia

50

Prom. Trans-Pacific (empieza 2008)

40

30

20

10

19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 20 23 20 24 20 25 20 26

0

Año Calendario

Source: Integration and Trade Sector, IDB

26


A changing environment for LAC integration strategies… Increasing importance of private sector logic over state-led integration… Increasing importance of external forces on external integration strategies… Increasing importance of non-trade issues…

27


Beyond Tariffs: Trade costs in LAC‌ W eig ht ed A ve r ag e A d Va lo re n F reig h t a n d T ariff f or S e lect LA C C ou n tr ie s.

0

5

%

10

15

I n tr ar eg io n a l Exp o rt s

A RG

BO L

BR A

CH L

CO L

E CU

MEX

PE R

PR Y

URY

VE N

fr e ig h t L A C ta r iff L AC

So u rce : o w n ca l cu la t ioTrade ns ba se d o n AIDB LA D I Source: Integration and Sector,

28


Transportation cost reductions associated to: Port efficiency – Tariffs – Number of Vessels (US Levels – 2005) 45%

PERU

ECUADOR

LAC

URUGUAY

CHILE

BRAZIL

40%

35%

30%

25%

20%

15%

10%

5%

0% Peru

Ecuador

Port Efficiency

Source: Integration and Trade Sector, IDB

LAC

Tariff

Uruguay

Chile

Number of Shippers

Brazil

29


Information costs…the role of export promotion agencies… Homogenous Goods

.1 ‐.1

0

Estimated Coefficient

.2

‐.2

‐.2

0

Estimated Coefficient

.4

.2

.6

Differentiated Goods

Sectors Source: Integration and Trade Sector, IDB

Sectors 30


A changing environment for LAC integration strategies… Increasing importance of private sector logic over state-led integration… Increasing importance of external forces on external integration strategies… Increasing importance of non-trade issues… Increasing importance of overlapping agendas and “variable” geometry…

31


“Variable Geometry” of integration initiatives North America

Mexico

Europe Intra-regional

Asia

ARCO-Pacific

Regional

Chile 32


Recalibrating the World Trading System

33


Recalibrating the world trading system‌

WTO

Bilateral FTAs

Regional Blocs

34


Conclusions… ‘ Emerging New Global Dynamics (Asia…) Æ Adjust Regional Dynamics… ‘ Emerging New Regional Dynamics (RTAs..) Æ Calibrate World Trade Architecture… ‘ Emerging New Inter-Regional Cooperation (Energy, Migration, Financial Integration. Regional Infrastructure…) Æ Expand the Integration Agenda… ‘ Emerging New Private Sector Logic (FDI, Outsourcing, Global Supply Chains, Multilatinas) Æ Develop Pragmatic Approaches… 35


Inter-American Development Bank Integration and Trade Sector

Regional Integration in LAC A Moving Agenda‌ Antoni Estevadeordal Manager Accelerating Regional Integration in the Asia-Pacific Region ADBI – IDB LAEBA Annual Conference Singapore, July 2009 36


regional integration in lac