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4 Trade

4.1 Importance of Trade

In 2000, the total trade in goods and services in Latin America comprised 37% of the current GDP, and the total exports of goods and services12 comprised 20.66% of GDP. The total imports of good and services comprised 21.31% of GDP. This tendency is also observed in the total the trade in goods of Latin America and the Caribbean (LAC) where the total trade represented, 37.7% of LAC GDP, the total exports of goods and services was 17.3% of LAC GDP and the value of imports of good and services 18.3% of LAC GDP (World Bank, 2002).

The relative importance of trade in each of the Latin American countries is illustrated in Table 6. The five largest economies13 in Latin America are namely: Brazil; Mexico, Venezuela, Colombia (G-3); and Chile. Trade in goods, as a percentage of GDP comprises 18 to 61% in the aforementioned economies. The most remarkable case in this group is Mexico with 60% followed by Venezuela by 40%. Small economies such as Guyana, Suriname and Nicaragua have more than 100% of trade respect to their GDP, possibly because these are “island economies” which depend almost entirely on imports of food and other goods as it is the case of Guyana. These five countries are also the main traders in Latin America, where Mexico accounts for 50% of the total LA trade; Brazil 16% and Argentina, Chile and Colombia collectively , 16%.

4.2 Importance of forestry sector for trade in Latin America

The five major economies of the region and 11 of the 20 countries analysed in this document are part of ALADI (Latin American Integration Association). Therefore, this group will be used as an indicator for the whole of Latin America. Forestry is not a major trade sector for the majority of ALADI countries; as it represents 1,7% of ALADI total exports for 2000 and for the period 1996-2000 and 0,7% and 0,6% of imports for the same periods. However, forestry is an important export sector for Chile and Paraguay, representing 9,7% and 7,4%, respectively, for the period 1996-2000 (Table 5).

Brazil, Chile, Paraguay, Ecuador and Bolivia are net exporters of forest products (1996-2000) (ALADI, 2002). There is a great difference between Brazil and the rest of ALADI countries in terms of value of exports for the same period; Brazil alone exports US$ 2 250 million or 48,8% of ALADI forest exports. The second major player in forest exports is Chile with US$ 1593 million or 34,5%. Mexico and Argentina are the next two main exporters with 5,7% and 4,4% respectively. The rest of countries account for 6,6% of ALADI forest exports.

Mexico, Colombia and Venezuela are net importers for the period 1996-2000 (ALADI, 2002). Mexico accounts for 56,4% of ALADI forest imports, followed by Brazil, Argentina and Venezuela, 15%, 9,8% and 7,5% respectively. The rest of countries account for 11,2% of ALADI forest imports.

Table 4 Importance of trade for Latin America, 2000

Country

Exports of goods and services
(% of GDP)

Imports of goods and services
(% of GDP)

Trade in goods
(% of LA Trade in goods)

Trade in goods
(% GDP)

Trade in goods
(US$ billion)

Trade in goods and services
(US$ billion

Trade in goods and services
(% GDP)

Argentina

11

11

7

18

51.30

63.3

22

Belize

50

68

0.1

78

0.61

0.91

117

Bolivia

18

25

0.4

36

2.98

3.53

43

Brazil

11

12

16

19

113.00

138

23

Chile

32

31

5

51

36.20

44.2

63

Colombia

21

20

4

30

25.20

34.3

41

Costa Rica

48

46

2

77

12.30

15.0

94

Ecuador

42

31

1

61

8.31

9.96

73

El Salvador

28

43

1

59

7.82

9.28

70

Guatemala

20

28

1

39

7.46

9.10

48

Guyana

96

111

0.2

173

1.23

1.47

207

Honduras

42

56

1

71

4.20

5.86

99

Mexico

31

33

50

61

352.00

372

64

Nicaragua

..

..

0.3 a

101

2.09

2.44 a

118

Panama

33

38

1

43

4.29

7.13

71

Paraguay

20

35

0.4

40

3.04

4.18

56

Peru

16

18

2

30

15.80

1.81

34

Suriname

17

17

0.1

116

0.98

0.29

35

Uruguay

19

21

1

29

5.86

8.02

40

Venezuela

28

16

7

40

48.20

54.3

45

Latin America

20.66

21.31

100

37

702.00

801

42

Source: World Development Indicators, 2002.
a Calculated with GDP from 1998.

Table 5 Forestry sector participation in forest exports and imports

Country

2000

1996-2000

Exports

(%)

Imports

(%)

Exports

(%)

Imports

(%)

Argentina

0,9

0,7

0,8

0,7

Bolivia

2,5

0,3

3,8

0,2

Brazil

5,1

0,5

4,3

0,5

Chile

10,6

0,3

9,7

0,2

Colombia

0,2

0,9

0,1

0,6

Ecuador

1,3

0,3

1,5

0,3

Mexico

0,1

0,7

0,2

0,7

Paraguay

7,7

0,1

7,4

0,0

Peru

1,0

0,6

0,8

0,5

Uruguay

2,2

0,9

1,8

0,9

Venezuela

0,0

1,1

0,0

1,0

ALADI

1,7

0,7

1,7

0,6

Source: (ALADI, 2002)

Table 6 Forest trade in ALADI countries, average 1996-2000

Country

Exports(US$ 1000)

Imports(US$ 1000)

Balance(US$ 1000)

% ALADI exports

% ALADI imports

Argentina

202 153

177 416

24 737

4.4%

9.8%

Bolivia

49 850

3 830

46 020

1.1%

0.2%

Brazil

2 250 565

273 468

1 977 097

48.8%

15.0%

Chile

1 593 443

35 002

1 558 441

34.5%

1.9%

Colombia

13 572

84 417

- 70 845

0.3%

4.6%

Ecuador

71 292

12 331

58 961

1.5%

0.7%

Mexico

260 754

1 027 260

- 766 506

5.7%

56.5%

Paraguay

71 889

1 182

70 707

1.6%

0.1%

Peru

52 659

35 031

17 628

1.1%

1.9%

Uruguay

44 511

32 190

12 321

1.0%

1.8%

Venezuela

2 610

135 638

- 133 028

0.1%

7.5%

ALADI

4 613 298

1 817 765

2 795 533

100.0%

100.0%

Source: (ALADI, 2002)

4.3 Trade partners

LAC main trade partners are the US and Canada who have increased their share of LAC trade from 45% in 1991 to 57% in 2000. The EU was the second trade partner in 1991 but in 2000, LAC itself became its second main partner revealing that intra-LAC trade has grown faster than trade with the EU. However, as showed in Figure 15, Table 7 , total LAC trade has increased by 2,6 times between 1991 and 2000. The above trends differ from those of MERCOSUR who have stronger trade links with Europe. In general, trade flows between the European Union and Latin America and the Caribbean grew 60% during the past decade, rising from US$ 50.6 billion in 1991 to nearly US$ 81 billion in 2000. LAC exports to the EU rose 25% during the 1990s, from US$ 28.5 billion in 1991 to US$ 35.6 billion in 2000. In contrast, EU exports to LAC grew by 105%, from US$ 22.1 billion in 1991 to US$ 45.3 billion in 2000. However, the growth rate of trade between LAC and the US and Canada was much more significant, 230% during the 1990s and US$ 396 billion in 2000. (IDB, 2002)

Figure 15 LAC main trade partners, 1991 and 2000

Source: Adapted from IDB, 2002. Integration and Trade in the Americas, Periodic Note, p. 9.

Table 7 LAC Trade with the World and main trade partners, 1991and 2000

LAC Trade

1991

US$ million

2000

US$ million

Exports

135 333

339 680

Imports

130 965

352 324

Total Trade

266 298

692 004

Exports to LAC

19 585

35 630

Imports from LAC

19 842

45 315

Trade with LAC

39 427

80 945

Exports to US + Canada

58 441

210 312

Imports from US + Canada

62 065

186 043

Trade with US + Canada

120 507

396 355

Exports to EU

28 482

35 630

Imports from EU

22 103

45 315

Trade with EU

50 585

80 945

Source: Adapted from IDB. 2002. Integration and Trade in the Americas, Periodic Note, Annex III, table 2. IDB, Integration, Trade and Hemispheric Issues Division, based on data from INT/STA. IDB.

Exports towards the US and Canada have also increased dramatically between 1991 and 2000, both in relative (+19%) and absolute terms (+ US$ 151 880 million). EU share of LAC exports has decreased from 21% to 11%; Asia share from 8% to 4% and the rest of the world (ROW) from 13% to 7%. Intra-LAC exports have grown by 1% for the same period (Figure 16).

Figure 16 Destination of LAC exports 1991 and 2000

Source: IDB, 2002. Integration and Trade in the Americas, Periodic Note, p. 9.

LAC imports from US and Canada, Asia and intra-LAC have increased from 1991 to 2000 in both relative and absolute terms, and imports from EU have decreased in relative terms only, from 17% to 13% (Figure 17 Origin of LAC imports, 1991 and 2000) and increased in absolute terms from in about US$ 23 213 million, this means that they have more than doubled in 2000 respect to 1991 Table 7 .

Figure 17 Origin of LAC imports, 1991 and 2000

Source: IDB, 2002. Integration and Trade in the Americas, Periodic Note, p. 10.

4.4 Structure of trade

LAC exported mainly manufactured goods, fuels and food items in 1991 and 2000 (Table 8). The exports towards Asia showed a different structure, the main exported goods were manufactures and ores and metals. There has been an increase of manufactured goods in the structure of LAC exports towards the EU, the FTAA, the LAC itself and notably, towards US and Canada, where the relative value of manufactured goods to this destination group rose from 51,7% to 70,6%.

Table 8 Structure of international trade of Latin America 1991- 2000 (% of total trade to destination group)

Product

Destination Group

Asia

EU

FTAA

US + Canada

LAC

Total

 

1991

2000

1991

2000

1991

2000

1991

2000

1991

2000

1991

2000

All Food Items

15.5

23.6

41.2

37.6

15.3

8.9

15.4

7.2

18.6

17.3

22.8

15

Agricultural Raw Materials

5.1

6.8

4.5

5.4

2.1

1.3

1.7

1.2

3.7

1.8

3.1

2.2

Ores and Metals

28

26.8

17.8

14.4

10.3

5.9

3.8

2.3

6.3

5.1

9.9

6.1

Fuels

9.1

4.9

12.7

9.9

22.5

18.1

27

18.5

14.9

19.4

19.6

17.4

Manufactured Goods

42.2

38

23.9

30.6

49.6

65.6

51.7

70.6

56.2

56.4

44

58.7

Goods Not Elsewhere Specified

0

0

0

0.4

0.3

0.2

0.3

0.2

0.3

0

0.6

1

Source: IDB, Integration, Trade and Hemispheric Issues Division, based on IDB/STA (2002)14

4.5 Trade agreements

4.5.1 Multilateral trade agreements

All of the Latin American countries analysed here are members of the World Trade Organization (WTO) and the General Agreement on Trade and Tariffs (GATT)15. These agreements set the rules for international trade. Other two important agreements which have a direct relation with animal and plant species trade are the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)16 and the International Tropical Timber Agreement (ITTA)17 (WTO, 2000).

Problems are likely to occur when relevant agreements say signatory countries should take action against non-signatory countries. This could create problems with non-signatories within and outside the region, e.g. for Paraguay, a non-signatory of ITTA. According to the WTO, if this kind of problem occurs, then the principle of lex specialis or the more specialized treaties should prevail. This is a matter of concern for the Trade and Environment Committee (CTE) of the WTO. (WTO, s/f)

Within the WTO, the Agriculture Agreement allows governments to support their rural economies, but preferably through policies that cause less trade distortion. Domestic policies that have a direct effect on production and trade have to be cut back according to this agreement. Also, developing countries do not have to cut their subsidies or lower their tariffs as much as developed countries, and they are given some grace period to complete their obligations. Since the new rule for market access in agricultural products is “tariffs only”, the WTO members have to reduce their subsidized exports.18

Other agreements within the WTO include:

From these agreements, the SPS and the TBT are of special interest for the future of forest products trade since they could represent non tariff barriers.

4.5.2 Regional and sub-regional trade agreements

The Latin American Integration Association (LAIA/ALADI) is composed of 12 Latin American countries: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela since 1980 and Cuba since 1999 (SICE, 2002). The LAIA fosters trade through sub-regional and regional mechanisms of Regional Tariff Preferences (RTP) which countries grant one another a reduction on the tariff applicable to its members; trade recovery and expansion and duty free concessions to less-developed members (Appendix 7).

Sub-regional associations such as the Customs Unions of the Andean Community (CAN), the Southern Common Market (MERCOSUR), the Central America Common Market (CACM) and the Caribbean Community Common Market (CARICOM) have gone far beyond the LAIA RTP. They look for “deep integration”. This means not only stimulating trade but also promoting policy related access to the market services, competition policies and regulatory environment (CEPAL/ECLAC, 2002).

A general overview of the main trade agreements in Latin America (Table 9) leads to the conclusion that its main impact has been the increase of trade, in all of the cases, the value of exports within trade associations (intrasubregional) and with LAC (intraregional) and the world (total) has increased from 1990 to 2000. The relative value of exports has also increased, except for CARICOM, where the relative value of exports towards LAC decreased while the total value increased. The increase in trade can be attributed to a number of factors including the reduction in the cost of communication and transportation, as well as other socioeconomic factors which have lead to higher worldwide disposable income (DOTD, 2001).

Table 9 Socio economic indicators of main trade associations within Latin America

Trade association

Exports

Population
2000

GDP
2000

Signatories

1990
million US$

2000
million US$

MERCOSURa

Intra-subregional

Intraregional

World

MERCOSUR/LACb

MERCOSUR/World

4 127

7 959

46 430

51,9%

8,9%

17 741

28 093

84 863

63,2%

20,9%

216 million

US$ 906 billion

Argentina

Brazil

Paraguay

Uruguay

Chilec

Boliviac

G-3a

--

--

164 million

US$ 785 billion

Colombia

Mexico

Venezuela

CANa

Intra-subregional

Intraregional

World

CAN/LAC

CAN/World

1 324

4 624

31 759

28,6%

4,2%

5 179

13 195

57 208

39,3%

9,1%

113 million

US$ 280 billion

Bolivia

Colombia

Ecuador

Peruf

Venezuela

CACM

Intra-subregional

Intraregional

World

CAN/LAC

CAN/World

624

903

3 922

28,6%

4,2%

2 538

3 370

11 235

75,3%

22,6%

33 million

US$ 56,2 billion

Costa Rica

El Salvador

Guatemala

Honduras

Nicaraguad

CARICOMe

Intra-subregional

Intraregional

World

CARICOM/LAC

CARICOM/World

514

640

4 345

80,4%

11,8%

1 276

1 794

6 615

71,1%

19,31%

6,47 million

US$ 27,9 million

Antigua and Barbuda

Bahamas

Barbados

Belize

Dominica

Grenada

Guyana

Jamaica

Montserratg

St. Kitts-Nevis-Anguilla

St. Lucia

St. Vincent and the Grenadines

Suriname

Trinidad and Tobago

Virgin Islands c

Turkish Islands c

Source: (CEPAL/ECLAC. Baumann, 2002); Population and GDP from WDI 2002.

a Part of LAIA
b LAC includes: Argentina, Bolivia, Brazil, Chile, Ecuador, Mexico, Paraguay, Peru, Uruguay, Venezuela, Costa rica, El Salvador, Guatemala, Honduras, Nicaragua, Haiti, Panama, Dominican Republic, Antigua and Barbuda, Bahamas, Barbados, Belice, Grenada, Guyana, Dominica, Jamaica, St. Kitts and Nevis, St. Vincent and Grenadines, St. Lucia, Suriname, Trinidad and Tobago.
c Associated but not members of the group
d Nicaragua GDP of 1998
e CARICOM: Export statistics from Bahamas, Barbados, Grenada, Jamaica, Trinidad and Tobago and Suriname only.
f Not part of Customs Unions; will join FTA in 2005.
g ontserrat to Sign revised treaty.

Table 10 Bilateral agreements trade agreements and understandings between selected Latin America countries

 

BO

BR

CO

Dom. Rep.

CH

EC

MEX

PAR

PER

UR

VEN

AR

FTA 2007

CU 1995 MERC

Selective agreement. Vo. FTA MERC/CAN

 

FTA 2006

Selective agreement. Vo. FTA MERC/AC

Selective agreement. Vo. ECA

CU 1995 MERC

Selective agreement. Vo. FTA MERC/CAN

CU 1995 MERC

Selective agreement.

Vo. FTA MERC/CAN

BO

-

FTA 2007

CU 1995 AC

 

Selective agreement. Will FTA

CU 1995 CAN

FTA 2009

FTA 2007

Selective agreement. FTA 2005 (CAN)

FTA 2007

CU 1995 CAN

BR

 

-

Selective agreement. Vo. FTA MERC/AC

 

FTA 2006

Selective agreement. Vo. FTA

Selective agreement. Vo. ECA

CU 1995 MERC

Selective agreement. Vo. FTA

CU 1995 MERC

Selective agreement. Vo. FTA

CO

   

-

 

FTA 1999

CU 1995 AC

FTA 2007 (G-3)

Selective agreement. Vo. FTA

Selective agreement. FTA 2005 (CAN)

Selective agreement. Vo. FTA

CU 1995 CAN

CR

     

FTA 2002

FTA 2002

 

FTA 1995

       

CH

       

-

FTA 2000

FTA 1999

FTA 2006

FTA 2004

FTA 2006

FTA 1999

EC

         

-

Selective agreement. Vo. ECA

Selective agreement. Vo. FTA

Selective agreement. FTA 2005 (CAN)

Selective agreement. Vo. FTA

CU 1995 CAN

HOND

           

FTA2001 (NT)

       

GUAT

           

FTA2001 (NT)

       

EL SAL

     

FTA2001

FTA 2002

 

FTA 2001 (NT)

       

MEX

           

-

Selective agreement. Vo. ECA

Selective agreement. Vo. ECA

Selective agreement. Vo. ECA

FTA 2007 (G-3)

NIC

           

FTA 1998

       

PAR

             

-

Selective agreement. Vo. FTA

CU 1995 MERC

Selective agreement. Vo. FTA

PER

               

-

Selective agreement. Vo. FTA

Selective agreement. FTA 2005

UR

                 

-

Selective agreement. Vo. FTA

Source: (ALADI, 2002); (SICE, 2002); FTA Free Trade Area, CU Customs Union, MER Mercosur, CAN Andean Community, ECA Economic Complementation Agreement, Vo. Volunteer to negotiate, NT Northen Triangle.

Table 11 Other trade and general agreements within Latin America

Free Trade bilateral and multilateral agreements

Preferential Agreements

General Association and Cooperation

CARICOM-Dominican Republic (1998)

Central America-Chile (s. 1999)

    -Costa Rica-Chile (2002)
    -El Salvador-Chile (2002)

Central America-Panama (s.2002)

CARICOM-Colombia (1995)

CARICOM-Venezuela (s.1992)

Plan Puebla-Panama (2002):

      Belize
      El Salvador
      Honduras
      Nicaragua
      Costa Rica
      Guatemala
      Mexico
      Panama

Source: (SICE, 2002); (date of entry in force); s:signed only.

A negative impact of trade agreements is the increase of vulnerability to intraregional trade and external crisis. For example, the recent Argentinean crisis caused a decrease of 6% in Brazil and two thirds of Paraguay exports to Argentina during the first months of 2002 (Tomaselli, 2002). The US recession has also caused a dramatic decrease on Mexican exports in 2001 and the Asian crisis (1997) also caused a dramatic decrease in trade volume in 1998 (CEPAL/ECLAC., 2000).

Table 12 North-South Agreements which includes Latin America countries

Agreement

Population
2000

GDP
2000

APEC

      Mexico

      Chile

      Peru

      United States of America

      Canada

      Other Asia-Pacific countriesa

2 560 milliond

US$ 19 293 billiond

NAFTA

      United States

      Canada

      Mexico

410 milllion

US$ 11 110 billion

EU-MERCOSUR

520 million

US$ 6 950 billion

EU-Chile (FTA s.2002)

Chapter 44 and 48 liberalized, except for particle boards 3.5%***

319 million

US$ 6 120 billion

ACP-EU (Cotonou Agreement)

      Belize

      Guyana

      Suriname

      Other African and Central American countriesb

   

Mexico-EFTA

(Iceland, Norway, Liechtenstein and Switzerland) (FTA 2001)

110 million

US$ 990 billionc

Mexico-Israel (FTA 2000)

   

Mexico-EU (FTA 2000)

   

Canada-Chile (FTA 1997)

46 million

US$ 758 billion

Canada-Costa Rica (FTA 2002)

34,6 million

US$ 704 billion

    CAFTA-Central America (in negotiations 2003): El Salvador, Guatemala, Honduras, Nicaragua and United States.

--

--

CBI (Caribean Basin Inititative): US-Caribbean and Central Americae

   

ATPA (Andean Trade Preference Act): US-CAN

--

--

Source: (CEPAL/ECLAC 2002); *(IDB, 2002); WDI 2002; (APEC, 2002).

a Australia, Brunei Darussalam, China, Chinese Taipei, Hong Kong, China Indonesia, Japan, Korea, Malaysia, New Zealand, Papua New Guinea, Philippines, Russia, Singapore, Thailand, Vietnam.
b South Africa, Angola*, Antigua and Barbuda, Bahamas, Barbados, Benin, Botswana, Burkina Faso, Burundi*, Cameroon, Cape Verde, Comores, Congo*, Cook Islands, Ivory coast *, Djibouti, Dominica, Erythrée, Ethiopia, Fidji, Gabon, Gambia, Ghana, Guinée, Guinea Bissau, Guinea Equatorial, Haiti*, Jamaica, Kenya, Kiribati*, Lesotho, Liberia*, Madagascar, Malawi, Mali, Marshall Islands, Maurice, Mauritania, Micronesia, Mozambique, Namibia*, Nauru*, Níger, Nigeria*, Niue, Uganda, Palau, Papouasie- Nouvelle Guinée, République Centrafricaine, Dominican Republic, Rwanda, Salomon, Samoa, Sao Tome & Principe*, Senegal*, Seychelles, Sierra Leone, Somali, Sudan, St Kitts et Nevis, St Lucia, St Vincent and the Grenadines, Suriname, Swaziland, Tanzania, Tchad, Togo, Tonga, Trinidad and Tobago, Tuvalu, Vanuatu, Zambia, Zimbabwe.
c EFTA European Free Trade Association: Liechtenstein not included in the statistics.
d Statistics for 2001(APEC).
e Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Costa Rica, Dominica, Dominican Republic, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles, Nicaragua, Panama, St. Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Trinidad and Tobago, and British Virgin Islands.

North South agreements (Table 12 ) have a direct relation with the increase of trade. For example, between 1991 and 2000 trade increased from US$ 22.7 billion to US$ 36.3 billion between EU and MERCOSUR. Similarly, EU exports to MERCOSUR increased from US$ 7.9 billion to US$ 19 billion and MERCOSUR exports to EU from US$ 14.8 billion to USD $ 17.3 billion. The NAFTA has also had a major impact for the second main economy of Latin America, Mexico. However, North-South agreements could not produce important advances in the regional negotiations if they are not significant changes in the multilateral side e.g. respect to subsidies and agriculture protectionism or antidumping measures. (CEPAL/ECLAC. Baumann, 2002).

Free Trade Area of the Americas

The FTAA could turn into the biggest free trade area with 800 million people. However, it has some detractors as the Worker’s Party (PT) in Brazil has argued that this agreement is not a free-trade agreement but a process of “economic annexation” of Latin America by the United States. The biggest striking point for the FTAA is agriculture. The Americas have insisted that tariff reductions during the transition period towards full free trade should vary country by country. However, in global trade negotiations, the “most favored nation” principle normally applies, meaning that market access offered to one country must be offered to all (The Economist, 2002).

The Andean Community (CAN) and MERCOSUR have decided to have one voice in the last FTAA negotiations, therefore strengthening their position. The FTAA has also increased the interest of the EU to sign treaties with Latin America as the EU-Mexico, EU-Chile and EU-MERCOSUR agreements (CEPAL/ECLAC. Baumann, 2002).

Apart from trade, some issues within the FTAA are services, investment, competition, policy and intellectual property, business facilitation schemes, labor and environmental issues.

4.6 Trade barriers

Trade barriers create a distortion of relative prices across countries and consequently, distort individual consumption patterns and lower individual welfare (DOTD, 2001). Formal institutional measures affecting trade have traditionally been divided in two categories: Tariffs and non-tariff measures (also called non-tariff barriers). There are also some restrictions related to environmentally oriented concerns called impediments to trade e.g. CITES. (Bourke, 1998)

4.6.1 Tariffs and Duties

Both, taxes and duties19 have similar effects. They raise the price of goods and allow certain domestic producers to produce at higher levels. Therefore, resources may be diverted from industries for which a country has a competitive advantage to industries for which the country does not have a competitive advantage. Tariffs could also be tricky since some importers could take advantage of exceptions as “zero tariff” to import other goods under the exempted goods denomination.

In the short run, the removal of import barriers lessens forest cutting if increased imports of finished or semi-finished products substitute for domestic processing of logs. This favors consumers, but displaces processing workers. Often, import liberalization generates a demand for new processing technology to compete with the inflow of imports (J.Laarman, 1999).

Tariffs on wood products

Chile and Bolivia have a uniform import tariff. Chile applies 7% for wood products and Bolivia, 10%. Peru has the most complex tariff structure, with a clear tendency to allocate exceptions for each item applying a tariff of 12%. This strategy could sound logical if the goods are able to be well differentiated at within subcategories. However, a clear example of the disadvantage of this system is distinguishing between different kinds of pulp for paper.

MERCOSUR show a very similar external tariff structure. Remarkable exceptions are found in the in the casks, barrel, vats and tubs of Quercus spp (Section 41.16), where Argentina applies 0% percent and the rest apply 3.5% tariff. Newsprint is an exception for Brazil, which applies 6% and 12% instead of the 7.5% and 12% of the rest of MERCOSUR countries. Imports of rolls of cigarette paper also have a different tariff for Paraguay (8%) where the other MERCOSUR countries apply 13.5%. Paraguay also tries to protect its internal industry for furniture, stationery and packing containers, applying an extra 10% on the tariff.

Mexico shows a general higher tariff on wood products than the rest of Latin American countries analysed here: 13%, 18% and 23% for the goods in Chapter 44 (of the Harmonized System), with the exception of barrels of Quercus spp. (0%); 3%, 5% and 13% for pulp and waste paper (chapter 47); 13%, 18%, 20% and 25% for the goods in paper (chapter 48). In general, the lowest tariffs of the whole group are for pulp and waste paper and the highest for furniture. Moreover, most of the MERCOSUR countries imports are fully liberated. This is not the case of capital goods, though. This is also the case for CAN countries.

Tariffs on capital goods

Capital goods (BK) have been specially classified by some countries and lower tariffs are applied to them, as it is the case of Argentina, which applies 0% tariff for dryers and machinery for making pulp and paper, chainsaws and presses for the manufacture of particle board or fibreboards. On the other hand, it applies a high tariff on tractors and trailers (28.4%). Brazil also tries to protect its own vehicle industry applying tariffs as high as 35%.

Bolivia applies three tariff levels, 0%, 5% and 10% for capital goods, 0% for machinery for making pulp and paper, chainsaws, tractors and 10% for its parts; 5% for semi-trailers, dryers and mother vehicles for the transport of goods between 6 and 20 Tons. Mexican tariffs are in the range of 13% to 23% for capital goods, except for machinery for making pulp and paper and dryers where the tariff is 3%. Chile applies 7% for all capital goods.

A general conclusion of the analysis of the tariff structure is that countries as Argentina and Bolivia are stimulating pulp and paper industry, through the elimination or reduction of tariffs. Some countries such as Brazil and Mexico are protecting their vehicle industry allocating high tariffs for their imports. Also, Chile has a strong forestry oriented industry and applies a common tariff for their forestry-related imports (wood, pulp and paper and capital goods).

MERCOSUR has deadlines to adjust their exception on capital goods and converge into a Common External Tariff (CET). Paraguay and Uruguay will do so on 2006 whereas Argentina and Brazil are applying it since 2001(Table 13). However each country has sensitive goods which are exempted and countries are allowed to apply their own import tariff.

Table 13 MERCOSUR Common External Tariffs on capital goods

Date

Action

Country

1.1.2001

CET 14% for Capital goods

Argentina and Brazil

1.1.2006

CET 14% for Capital goods

Paraguay and Uruguay

1.1.2006

CET 16% for Informatics and Telecommunications

All countries 

1.1.2006

End of convergence of AEC from the Exceptions List

Paraguay

Source: Secretaría General del MERCOSUR. (MERCOSUR, 2001)

Non tariff measures

These include a set of different rules and procedures, ranging from health and technical standard to measures influencing prices. They are much more complex to recognize and therefore, difficult to assess than tariffs especially in quantitative terms (Box 1).

Other measures

From the large list of other measures that limits trade (Box 2), subsidies are the one with the biggest consequences for forestry. Subsidies are provided by a government to provide financial benefits on the production, manufacturing, and distribution of goods or services to foreign markets. They distort the relative prices of goods and individual consumption patterns. It is an anti-competitive practice that restricts the ability of foreign producers to compete in a worldwide market. They are widely used in the agriculture industry (DOTD, 2001).

Subsidies applied to agriculture by the United States have a direct impact on exports of the FTAA countries and also a delay on multilateral negotiations of agricultural products. (CEPAL/ECLAC. Baumann, 2002). One of the major impacts of US subsidies on agriculture e.g. through preferential loan agreements and tariff-rate quotas on sugar (Groombridge, 2001) is that as they lower the prices of commodities, they lower farmer’s incomes in developing countries and therefore their “willingness to invest” in agriculture. To make agriculture profitable in the short term, they need to use extensive practices, i.e. forest clearing by slash-and-burn. EU subsidies through the Europe’s Common Agriculture Policy (CAP) which favours EU farmers, is seen as many LA countries as a major obstacle for some of their most competitive agricultural products. (IDB, 2002). Colombia applies “industrial” subsidies to exports and has been allowed by the OMC to keep them until 2006 (CAN, 2002). America’s subsidies to its soya farmers hurt Brazil and Argentina. Many other Latin American farm exports, such as sugar, cotton or orange juice, are politically sensitive in the United Stated. What is worse is that the United States is already trying to wriggle out of an agreement made with Mexico under the North American Free Trade Agreement that allows unrestricted sugar imports by 2008. (The Economist, 2002).

Export restrictions

Export restrictions are also of considerable significance for trade. Export controls include total bans, export quotas, or selective bans based on species. They may be imposed primarily as a revenue generating instrument, especially if this method of collection is more efficient than other instruments to capture resource rent (Bourke, 1998). Peru tried to apply an export restriction on S. macrophylla in 2000; however, the great amount of logs that harvest before the ban was so high that an emergency decree approved the immediate export of these logs. Of course, many took advantage of the decree and exported even S. macrophylla logs.

Box 1. Non tariff measures

Quotas: Is also referred as a quantitative restriction, is a policy tool to restrict trade by placing a ceiling on the amount of a product that can be imported during a given period. (DOTD, 2001). The EU imposes quotas on board and panel products and has also tariff quotas or tariff ceilings on newsprint, fibre-building boards, builder's woodwork and some furniture items that could affect their forest product trade with Latin America.

Technical standards and plant health standards:

Environmentally related technical standards: Some of these are specified on the basis of the physical characteristics of products and the material used in their manufacture; other related to the production processes themselves e.g. restrictions on wood panels which use formaldehyde glues, a glue with human health risks; controls of processing methods (pulp bleaching); and packaging regulations.

Phytosanitary regulations: Trade in NWFPs such as rattan, rubber, Brazil nuts, oils and medicines, seems more likely to be affected by health standards and phytosanitary rules since many are used in food or pharmaceutical industries. A United States District Court has applied restrictions on the importing of logs from Chile, New Zealand and Siberia. But it is discriminatory since it doesn't include imports from Canada and Mexico, for example in/since 1997.

Source: (Bourke, 1998)

Box 2. Other measures

Import licensing: Import licensing is used for a variety of reasons including statistical purposes, monitoring and quota control. They may be legitimate requirements or may be misused and act as barriers to trade.

Customs procedures: Customs procedures can present difficulties, particularly to smaller firms. Problems include the complexity of documents, difficulty to obtain necessary authorizations, complex inspection procedures, etc. An indicator of customs efficiency which has not been studied is the time that determined forest products and capital goods last to be taken out from customs and the cost of it (extra-tariff cost).

Domestic policies: Domestic policies on subsidies, tax concessions, financial assistance, export encouragement schemes also act as trade barriers.

Domestic-content rules: They require a certain portion of a product to be made domestically. This tactic is often used by the automobile industry. (DOTD, 2001).

Exchange Rate policies: In order to protect the domestic industries, third world countries will often create exchange rate barriers to reduce the influx of foreign currency, which reduces the ability of a country to purchase imports. Therefore, residents will be forced to purchase goods from domestic producers which create an artificially diversified domestic economy. (DOTD, 2001)

Dumping Policy: Dumping occurs when the producer sells a product in a foreign market at prices below that of their own domestic market. I could be a strategy of a producer or it could be the result of foreign government subsidies. (DOTD, 2001)

Price bands: Price band is a policy instituted by the government that calculates the price range of a product from a time series analysis of international prices for that product. These are used to restrict the importation of agriculture products.

Impediments to trade

Bans and boycotts

This could be done through local authority restriction or “buyers groups”. Examples of these are a proposal in NY city (1997) to ban the purchase of tropical hardwoods and products in future city contracts unless they are certified by the FSC; and the “buyers groups” promoted by WWF in the United Kingdom that have committed themselves to buy only products approved by FSC (Bourke, 1998).

Certification of forest products

Interest for forest certification or eco-labelling is greatest in important importing countries in Europe as Germany, the Netherlands and the United Kingdom, where environmental groups are active and where some retails interest see a potential market advantage from providing certified products (Bourke, 1998). The WTO points that labelling requirements and practices should not discriminate between trading partners or between domestically-produced goods and services and imports.

Fair Trade Practices

The CITES

CITES regulate wildlife trade through controls and regulations on species listed in three appendixes:

Swietenia humilis and Swietenia mahogoni (or S. mahogani) are listed in Appendix II of the CITES (CITES, 2002). Swietenia macrophylla (Bigleaf mahogany) was listed in Appendix III; however, Nicaragua supported by Guatemala suggested its inclusion into Appendix II during the 12th meeting of the Conference of the Parties (COP) in Santiago de Chile. This amendment was adopted on the 12th of November of 2003, after one year of the end of the COP (IISD, 2002). The listing in Appendix II means that range states will now have to provide export permits for shipments of logs, sawn wood, veneer, and plywood.

4.7 Trade Outlook

Trade liberalization and the expansion of trade agreements within and outside of Latin America will continue for at least the next decade and they will be a significant factor of economic growth. Regional trade integration through organizations such as MERCOSUR and the likely conclusion of a FTAA will boost trade and therefore income growth in Latin America.

Currently, NAFTA is the biggest free trade area in the continent. Although it does not include only Latin American countries, the impact on Mexico, the second main economy in Latin America is remarkable. Mexico has also subscribed a commercial agreement for preferential access to China, a key world market (CEPAL/ECLAC., 2002).

New trade agreements are to be signed or put into force: By 2004 Chile and Peru will have a free trade area; by 2005, Peru will have a free trade area with CAN; by 2006, Chile will have a free trade area with MERCOSUR and Bolivia will do so by 2007. It is important to remark that both Chile and Bolivia have already signed economic complementation agreements with MERCOSUR. By 2007, the G-3 (Mexico, Colombia and Venezuela) will have a free trade area. By 2009, Mexico and Bolivia will have a free trade area (ALADI, 2002).

The MERCOSUR/CAN agreement is important since it will increase its political strength in the FTAA negotiations. However, problems are likely to occur within the Latin American trade blocks if the differences between countries widen, therefore, to accomplish macroeconomic convergence goals is necessary for the further development of trade agreements and growth (CAN, 2002).

APEC is seeking to liberalize trade in the Asia-Pacific region and has set a target of free trade by about 2010 for the developed nations (USA, Canada), 2015 for the newly industrialized countries (e.g. Chile and Mexico) and 2020 for the developing countries (Peru) (Bourke, 1998). The tendency for tariff barriers is to decline or be completely eliminated, while non-tariffs barriers may expand and have a significant impact in some markets or market segments. NTB are also declining, and future improvement is likely to occur from the Agreement on Application of Sanitary and Phytosanitary Measures (SPS) and Technical Barriers to Trade (TBT) of the WTO.

Impediments to trade such as Certification of forest products could remain limited to a few markets and a few segments. In the long term, they could cease to have any significant impact e.g. in the hypothetical case that all the wood is certified, it would not be a commercial advantage for the producer anymore. The main factor in any case will be the consumer reaction to products. Therefore, research in consumer preferences will offer some clues to answering this question.

12 Good and services include the value of all goods and other market services provided to the rest of the world, including merchandise, freight, insurance, transport, travel, royalties, license fees, and other non factor services. Labour and property income (formerly called factor services) is excluded, as are transfer payments (World Bank, Organisation for Economic Co-operation and Development, United Nations) (World Bank, 2002).

13 Economy size measured as current GDP (2000).
14

Category definitions by HS (Harmonized System) classification:

1 - All Food Items (0,1,22,4)

2 - Agricultural Raw Materials (2 -(22,27,28))

3 - Ores and Metals (27, 28, 68)

4 - Fuels (3)

5 - Manufactured Goods (5,6,7,8 -(68))

6 - Goods Not Elsewhere Specified

15 Panama is not part of the GATT.
16 Explained in point 7.5.3 Trade impediments.
17 ITTA signatories – as producers (1994): Bolivia, Brazil, Colombia, Ecuador, Guyana, Honduras, Panama, Peru, Suriname and Venezuela.
18 More information available at: http://www.wto.or./english/thewto_e/whatis_e/tif_e/agrm3_e.htm.
19 A tariff is a tax placed on goods imported into a country. A duty is a tax on imported goods imposed by the customs authority. It is often applied as an ad valorem tax and it is either based upon the value of the good or the weight or quantity of the good.

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