From unilateral liberalization to regional free trade agreements: a Latin America perspective

Abstract

This paper provides an overview of changes in Latin American trade regime. The inward-looking import substitution industrialization (ISI) approach to development was replaced in the 1990s by an outward-looking strategy. The protectionist policies of the ISI strategy generated an anti-export bias, but unilateral trade liberalization (UTL) reduced this bias considerably. An issue discussed is why the pro-ISI consensus of the 1960s was replaced by the pro-export consensus of the 1990s? There has been a surprising proliferation of (bilateral) free trade agreements (FTAs) during the 1990s. In the paper it is argued that UTL and FTAs are complementary strategies. Latin America has comparative advantages in natural resources. A new debate over the development strategy has emerged. Information and communication technologies (ICT) are seen as crucial to a country’s growth in the twenty-first century. So, how can Latin American countries incorporate such technologies into their economies. Is it possible to make the leap from producing natural resources to producing ICT? In today’s globalized world, it is essential for Latin American countries to increase its exports. This paper reviews actions on different fronts; some that should be carried at the domestic level, and also, measures at the external level which require that the developed countries provide better market access to Latin American exports.

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Notes

  1. 1.

    This excludes the special case of Venezuela.

  2. 2.

    In the Chilean case, trade reform in the 1970s have resulted in the loss of around 10% of all manufacturing jobs (see Meller 1992).

  3. 3.

    In making this statement, one is implicitly assuming that different countries are homogeneous in size and per-capita income.

  4. 4.

    If raw materials represent one-third of the final price of the good, and (these raw materials) have zero tariff, the effective rate of protection of the final good would be 50% higher than the nominal tariff (of the final good).

  5. 5.

    The French newspaper Le Canard Enchané (June 4, 2003) provides the following numbers: European cows receive two euros per day provided by EU Government subsidies; three billion people of developing countries live with two euros per day.

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Correspondence to Patricio Meller.

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Meller, P. From unilateral liberalization to regional free trade agreements: a Latin America perspective. Econ Change Restruct 42, 85–103 (2009). https://doi.org/10.1007/s10644-008-9061-5

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Keywords

  • Latin America
  • Import liberalization
  • Free trade agreements