Regional Trade and Cooperation
in Latin America and the Caribbean

Robert Devlin, Antoni Estevadeordal, and Juan Jose Taccone

Over the past twenty years, multilayered trade policy has been a core component of Latin America and the Caribbean's structural reforms. The first step was a very substantial unilateral opening, illustrated in the decline of average tariffs from over 40 percent in the mid-1980s to about 12 percent today. This has been combined with a strategy of reciprocal opening through active participation in multilateral trade negotiations and regional integration initiatives. The latter have been especially prolific with nearly thirty regional trade and integration agreements being launched since 1990 and many more in different stages of negotiation.
This opening contributed to Latin America and the Caribbean's trade expanding faster than world trade during the 1990s. However, the fastest growth by far occurred in intra-regional trade, mostly linked to formal regional integration agreements that ranged from free trade areas to customs unions and common market projects in the sub-regions. In some agreements, such as Mercosur, the level of trade grew dramatically and reached relatively high levels of around 25 percent of total exports.

While regional trade expanded markedly in the context of regional integration, so did cooperation in a broader sense of the term. Cooperation between governments can be defined as a mutual adjustment of policies to achieve an outcome that all prefer to the status quo. It requires some degree of subordination of the members' sovereignty to the interests of the group. Mutually-beneficial regional cooperation is possible in practically any single field of public policy, ranging from security matters to environmental and labor standards, and includes bundles of cooperation arising out of formal regional integration-a form of cooperation itself. Trade agreements are invariably the point of departure for more comprehensive regional economic integration for several reasons…

Robert Devlin is Deputy Manager of Integration and Regional Programs and Antoni Estevadeordal is Senior Economist for Integration and Regional Programs at the Inter-American Development Bank, and Juan Jose Taccone is Director of the Institute for the Integration of Latin America and the Caribbean (INTAL).