Emad Mekay

WASHINGTON, Dec 19 2001 (IPS) — Trade among countries of the Americas has sharply declined over the past year reversing a ten-year trend and threatening to further dampen an already weak global trade picture.

The Washington-based Inter-American Development Bank (IDB) said in a new report that trade within the 35 countries in the Americas declined by almost four percent over 2001 and by more than two percent with the rest of the world.

The report, which was released here Monday is based on data and for January-September of 2001- compared to data for the corresponding period in 2000.

The IDB said that although efforts were made to factor in the possible effects on trade of the tragic events of September 11, the unavailability of data for the last quarter of 2001 made it difficult to gauge the full economic impact of these events. When the impact of the attacks are factored in, “estimate of a three percent drop in the hemisphere’s global exports may turn out to be somewhat optimistic,” according to the report.

The bank said that contrary to previous years, intra-hemispheric exports performed worse than the continent’s exports to the rest of the world. “This is in stark contrast to a decade-long trend that saw intra- hemispheric trade expand by more than double the rate of extra-hemispheric exports.

Total exports grew by a healthy eight percent a year on average,” said the Periodic Note on Integration and Trade in the Americas published by the IDB’s Integration and Regional Programs Department.

The news is likely to further diminish the prospects of a better economic performance in the continents since exports were already among few bright spots in the area, particularly Latin America, over the past decade.

In November the IDB’s report on competitiveness said that in the 1990’s Latin America had the most dynamic exports in the world, except for the category of Asian countries that excludes East Asia and the Middle East.

The authors of Monday’s report attributed this year’s decline to mainly a worldwide economic slowdown, due chiefly to the sudden slump in the United States, and to the hit some Latin American countries received by wild price drops in key commodities like oil, sugar and coffee.

“One can see that the economies and trade in Latin American countries are mostly tied to the health of other economies like the US and Japan which are big clients for Latin countries,” Peter Bate, press officer at the IDB told IPS.

This is true particularly in the case of Mexico. While the fall in exports has been especially sharp for some Andean and Central American countries, the region’s exports were dragged down by the more modest four percent decline in Mexican exports – after many years of rapid growth. The country has a dominant role in Latin America’s total trade.

Mexico’s dominant trade position was won by the country’s profitable access to markets in the US and Canada as a member of NAFTA, the North America free Trade Association. The country has largely managed to export medium or high technology goods, increasing total technology exports to North America to 40 percent out of total exports from Latin America.

Slower growth in Latin America’s domestic economies has also led to a drastic slowdown in intra-regional trade, which grew by only one percent this year after expanding by 20 percent in 2000, said the 10-page report.

Compared to a three percent decline in Latin America’s exports to the rest of the world, the intra-regional market has further complicated the negative impact of declining extra-regional exports.

For one reason, Argentina, beset by a stalling economy and financial difficulties, has recently begun to levy tariffs on previously duty-free imports from other MERCOSUR members.

Of all Latin American countries, Venezuela and Costa Rica witnessed the strongest decline in their exports. Venevuela’s slide was due to the fall in oil prices and Costa Rica’s to a sharp drop in US demand for technology-related manufactured goods (Intel has a branch in Costa Rica) and a collapse in coffee prices.

Brazil showed the best performance, increasing its global exports by seven percent despite a drastic decline in its sales to neighbouring countries.

NAFTA countries (US, Mexico and Canada) saw their trade with the rest of the world – down two percent in 2001- also suffered less than its intra-group trade, which dropped five percent. As international prices for primary commodity exports such as coffee, cotton, sugar, minerals and oil have stagnated, declined or fluctuated wildly, many Latin American and Caribbean economies have come to bear the brunt.

The suffering has led some non-governmental organisations like The Canada-based Hemispheric Social Alliance, which groups several anti-free trade organisation from the Americas, to suggest that their dependence on these exports is a brake on the region’s economic development, as it prevents countries from seizing new opportunities in high-tech, knowledge industries.

At the same time, disturbing trends in job quality over the last decade have prompted some observers to suggest that trade opening has resulted in the creation of mostly low-wage, low-skilled jobs, accompanied by a growing informal sector, according to some anti-globalisation activists.

But Latin American countries are seemingly not standing still. Many countries continue to open their trade and investment regimes unilaterally. The US and 33 other countries have established a timetable for negotiations to form a Free Trade Area of the Americas by 2005.

The European Union has recently concluded free trade agreements with Mexico and launched trade talks with the MERCOSUR countries in South America. “It’s a busy front out there,” said Bate. “It doesn’t make headlines because they are not complete yet. That’s why they (trade talks) go unnoticed. But they will.ö