There has been much discussion regarding the collapse in global trade. Considering trade values in US dollars, global trade fell by around 20% from 2014 to 2016 and has only increased marginally from the low in January of that year. Global trading arrangements have become a key focus for policymakers given Brexit, the US decision not to enter into the Trans Pacific Partnership, and ongoing discussions regarding renegotiating multinational trade agreements such as NAFTA.
Furthermore, it is argued that the uncertainty and likely negative environment for large global trading arrangements add a further reason why countries need to act on the regional integration agenda. The region has only to gain by having a stronger, more efficient and fully-integrated domestic market.
The gains from further integration relative to the status quo, are even greater in a more extreme scenario of global trade frictions, in which the region’s exports are likely to fall on average by at least 13%.
The arguments in favor of deeper integration are valid independent of how the global trade environment may develop. However, they become even more important if global trade frictions start to grow. If the rest of the world remains open and willing to sign trade agreements with Latin America and the Caribbean, then integration at home will help.
However, if the world becomes more protectionist and reticent to entering into agreements, then deepening integration in the region has an even larger payoff. It may not provide full protection against the negative impacts of increased global trade frictions but can serve as an important insurance device.
A recurring question is, how can Latin America and the Caribbean, a group of small and open economies constantly buffeted by global economic shocks, find a reliable and robust route to sustainable growth? The IDB report argues that adopting a set of macroeconomic policies, including sensible fiscal and monetary policies, to maintain economic stability, and taking concrete actions to deepen and improve the way in which countries trade within the region, may provide a cost-effective answer.
The large, but incomplete current network of Preferential Trade Agreements (PTA) is a powerful platform from which to launch an overhaul of regional integration. It is suggested that the objective should be a “plain vanilla” free trade zone, with a focus on goods and services.
A critical starting point would be a high-level political commitment and would include making sure that all aspiring members are integrated through bilateral or sub regional PTAs, setting up the institutional framework to manage the negotiation and address the market access negotiations, covering tariff phase-outs, rules of origin and nontariff barriers in addition to trade facilitation provisions.
Latin America and the Caribbean has a long history of trial and error, and successes and failures, pursuing regional integration, but it has to be acknowledged that as a group of small open economies, what happens in the rest of the world is critically important for the 26 regional members. Latin America and the Caribbean faces a new world with likely growing trade protectionism, higher interest rates and commodity prices below those of the previous decade. World growth may be on the rise, but the region faces the challenge of adapting to lower commodity prices, higher interest rates, and a potential backlash against the trend towards greater globalization.
Fixing regional integration is not a panacea to solve all the region’s growth problems, nor is it a full insurance policy against escalating global trade frictions. However, enhanced regional integration can offer tangible gains at modest costs; it is a low-hanging fruit in a world with few obvious alternatives.
In the context of Trinidad and Tobago, this regime is in its second year of office. There is no way a long term economic plan can be presented since we have elections in three years. Any plan will either have to be a three-year plan, or a long-term plan made up of several three-year (medium term) plans.
Our economic planning has to involve several caveats, these include increasing the value added by moving away from the sale of raw material or low level production and move to much higher up the international value chain of products.
To facilitate this we must develop an industrial policy that seeks to encourage our entrepreneurs to enter the upper trough of new product cycles. This can only make sense if placed within the context of an export strategy (we do not have a large population therefore cannot develop the internal dynamic to achieve self-sustaining growth).
Here integration is critical for us to provide an enhance market to be exploited by our export industrialist.