Mobilizing Aid for Trade in Latin America and the Caribbean
that require urgent attention.9 It is vital to improve trade performance, particularly in a global context marked by the emergence of new trading powers such as China and India, and by the erosion of preferences that many countries are experiencing as a result of changes in multilateral and preferential trade policy. Some trade programs directly benefiting LDCs have placed an additional strain on LAC’s export efforts, since they affect relative market access conditions for many of the region’s exporters. Complementary policies are at an early stage of development. In the last two decades, trade liberalization was not systematically accompanied by complementary policies to help countries maximize the benefits of trade reform. Under pressure to implement increasingly demanding trade agreements, some LAC countries—particularly those that engaged in North-South bilateral trade accords—have started to focus on the wide array of beyond-the-border domestic reforms needed to take full advantage of trade integration. As the region advances towards deeper integration into the world economy, the mobilization of political, technical and financial resources to design and implement complementary domestic reforms may become crucial. Distributional concerns may spur reform fatigue. During the reform process, concerns about the distributional impact of trade liberalization were overshadowed by efficiency considerations. As a result, with a few exceptions, governments did not consistently promote broad trade adjustment programs to address liberalization-induced disruptions to local industries and labor markets. Such disruptions, along with perceptions of insufficient public consultation, have tested LAC countries’ continued support for trade liberalization. In some countries, reform fatigue has heightened the risk of a backlash to more liberalization. At a time when further reform is needed to boost competitiveness, waning support for trade opening is a serious challenge. As the scope of global trade integration broadens, a comprehensive strategy that seeks to make trade work for the majority of the population, particularly the poor, is ever more urgent. Even middle-income countries face resource constraints. Many LAC countries have limited technical and financial resources to manage their trade-related agenda, particularly as the agenda expands. Debt overhangs, sluggish economic growth in the past decade, loss of tariff revenue, difficulties in securing alternative revenue sources, and growing social demands have all put severe pressure on internal fiscal resources to fund trade-related policymaking and adjustment. LAC countries are also hampered in their access to external funding for trade-related assistance: some by the limitations of indebtedness, others because they fall into a higher-income category that, while not high enough to assure plentiful resources for trade adjustment, precludes them from accessing funds aimed at LDCs and other low-income countries.
For the period 2000–2005, LAC’s average export growth of 6.3 percent a year was below the world annual average of 6.8 percent, and far below East Asia’s record 17 percent. As regards GDP growth, from 2000 to 2005, LAC ranked last of all world regions, with an average annual growth of 2.6 percent, compared to the world average of 3.0 percent, 8.2 percent for East Asia, 6.1 percent for South Asia and 5.4 percent for Europe and Central Asia (World Bank, World Development Indicators Online Database).
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...