Aid for Trade in LAC: Past Experience and Lessons Learned
rade liberalization has been at the center of structural reforms in LAC over the last two decades. In parallel with the upsurge of multilateral, regional and bilateral trade initiatives, there have been incipient moves towards aligning technical and financial assistance with a demanding trade agenda. Trade reforms, however, have not yet fully delivered the expected results: stronger, sustained export growth and economic development. Meanwhile, the impact of trade-related assistance has been constrained by a number of factors, not least its focus on the short-term needs determined by trade negotiations, rather than on a long-term strategy to achieve international competitiveness. This section considers LAC’s commercial challenges, how traderelated assistance has helped address them, the gaps in the delivery of such assistance, and how to use lessons learned from past experience in order to implement the aid-for-trade initiative in the region. 2.1. Making Trade Work for Development: An Unfinished Business Economic development crucially depends on trade. Trade accounts for more than 50 percent of GDP in all but five LAC countries, and for more than 100 percent of GDP in smaller Central American and Caribbean countries. Even in larger economies such as Brazil and Mexico, domestic market size is constrained by the low income levels of large sections of the population. LAC countries therefore need export income to create and sustain jobs, finance imports, service foreign debt and maintain a healthy balance in their external accounts—all of which are necessary to achieve sustainable levels of economic growth. They also depend on the supply of competitively priced imports to support local production and satisfy consumer demand. Sustained growth in LAC thus demands that global economic integration be ranked very high on the development agenda. LAC trade integration displays vulnerabilities. While LAC’s openness coefficient has nearly doubled as a result of the reforms, it remains below the levels of other regions. Most importantly, there are deficiencies in the quality of trade integration: LAC exports have not diversified significantly, and most exports are commodities and resource-based manufactures that are low in technology content. Although LAC has enjoyed a few years of healthy export-led growth driven by high international commodity prices, the region’s trade performance displays some weaknesses
Published on Sep 14, 2007
this report was prepared by the integration and trade sector (int) as a contribution to the regional meeting on mobilizing aid for trade: la...