Latin American and Caribbean exports to Asia could grow by 27 percent in the medium term if trade costs associated with tariffs, transportation and logistics are reduced, according to a report by the Inter-American Development Bank. (IDB), released this Monday (09.12.2019).
According to report "Harnessing Connectivity: Unlocking Latin America and the Caribbean's Trade Potential in Asia," reducing bilateral trade costs would create business opportunities worth around US$69.000 billion and contribute to improving the well-being of the population.
In nearly two decades, Asia's share of the region's goods trade has tripled from 9 percent in 2000 to 26 percent in 2018., a year in which bilateral trade between the two regions amounted to US$581.000 billion.
Most of the growth is due to trade with China, the report said. Between 2000 and 2018, the region’s exports grew at an average annual rate of 20,4 percent to China, 19,1 percent to India, 13,7 percent to the Association of Southeast Asian Nations (ASEAN), 11,8 percent to Korea and 5,9 percent to Japan, compared with 5,3 percent to the rest of the world.
However, Latin American and Caribbean economies have not sufficiently diversified their exports into higher value-added products in which they have a comparative advantage, such as processed foods. This opportunity is gaining momentum given the rise in Asian demand for food. Asia's middle class is expected to reach 3.500 billion people by 2030.
"Our entrepreneurs are more than ready and able to find new markets in Asia for your products.“said Fabrizio Opertti, manager of the IDB’s Integration and Trade Sector.The report outlines how governments can lower barriers, both tariff and non-tariff, and thus increase trade volumes. with Asian countries, which could lead to improvements in the well-being of citizens".
To achieve this potential, the report recommends that the region maximize the use of the 26 existing trade agreements, sign new treaties, lower tariffs, improve physical trade infrastructure, reduce a set of non-tariff barriers, make better use of trade facilitation measures and promote logistics connectivity reforms, among others.
Trade costs between the two regions are among the highest in the world. Exports from the region pay tariffs of almost 10 percent on average to enter Asia, while Asian shipments face rates of around 7 percent.
Investments in infrastructure and the reduction of inefficiencies in customs are priorities since, according to the report, the aggregate logistics performance index of Latin America and the Caribbean is 82 percent of that of Asia, a gap that the region must close to compete internationally.
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