June 2018c

14 15 OPENING LINES A ccording to a new study released, recently, by the Inter-American Development Bank (IDB), “Con- necting the Dots: A Road Map for a Better Integration of Latin America and the Caribbean”, there is an estimated US$11.3 billion in trade value that can be maximized if the Latin America and Carib- bean (LAC) region were to form more cohe- sive trade partnerships that can lead them on the road to a full-scale free trade agree- ment (FTA) for the LAC. The report, which offers a roadmap to- ward maximizing significant trade gains by promoting a path of convergence among the existing preferential trade agreements (PTAs), emphasizes that the increase and strengthening of those PTAs would eventu- ally lead to a Latin American and Caribbean free trade agreement and subsequently boost trade region-wide. Citing previous challenges with existing PTAs in the region, specifically noting the failure of the Caribbean Single Market and Economy (CSME), the South-American trade bloc (Mercosur), and the Central American Common Market (CACM), the study urges more political cooperation between coun- tries to increase the level of trade within these PTAs and also use that as a start- CARIBBEAN AND LATIN-AMERICA “FREE-TRADE” DEAL WOULD REAP $11 BILLION, SAYS IDB STUDY ing-point to focus on a more encompassing LAC-FTA. Since coordination can happen at both the regional level, in the case of CSME, CACM and other PTAs within the region, and at the multilateral level, particularly with regard to the World Trade Organization (WTO), in which most countries are already members, the case for a regional approach must go beyond the need for reciprocity, the study cautioned readers. More importantly in this regard, a LAC-FTA must find ways to strategize the importance of leveraging PTAs currently under execution between member states, primarily with plac- ing an emphasis on the need for greater sim- plicity and speed of regional negotiations and for that to be seen as a priority for enhancing trade competitiveness and value. Also, the LAC should appreciate the poten- tial of PTAs to minimize the disadvantages of country size relative to scale, in order to cap- ture welfare and growth-enhancing sectors with increasing returns for member states and citizens. This the study suggests would go a long way in appreciating the potential for minimizing adjustment costs, while max- imizing overall trade-value gains by giving members more time to adjust to new infra- structural, tariff distorting, and administrative