Trade: The Undervalued Driver of Regional Integration in Latin America

Abstract

Many regional organisations in Latin America are currently in crisis. Trade agreements, however, have made progress in the region. Today, 80 per cent of intra-regional trade is already under preferences. In March 2017 several international financial organisations - the World Bank, the International Monetary Fund (IMF), and the Inter-American Development Bank (IDB) - each independently proposed the creation of a Latin American and Caribbean free trade area. Although ideological polarisation and the economic crisis led to a stagnation of high-flying regional cooperation projects, regional projects with more pragmatic and issue-specific objectives, such as the Pacific Alliance (PA), are gaining ground. In contrast to Trump's protectionist policies, an overwhelming majority of Latin Americans support free trade with neighbouring countries and regional economic integration. Tariffs are no longer the main obstacles to increasing trade in Latin America. The existing network of preferential trade agreements in Latin America provides a platform for the implementation of a regional free trade area. The elimination of non-tariff measures, the harmonisation of rules of origin, and the lowering of transport costs by improving the infrastructure and the interoperability of national customs systems can increase intra-regional trade. Pragmatic regionalism strives for a harmonisation of rules and standards but does not aspire to create supranational institutions. The advances of Latin American economic regionalism have been underrated; they should be more capitalised because the economic strength of a country's region conditions the success of global integration strategies. Hence, Latin America needs to develop a policy that combines efforts to integrate both at the regional level and globally. The European Union should both support Latin American economic integration and open its markets to competitive Latin American export products.