Participation in Global Value Chains in Latin America: Implications for Trade and Trade-Related Policy
An efficient integration in global value chains can have a significant impact on the productivity levels across Latin America. This paper on “Participation in Global Value Chains in Latin America: Implications for Trade and Trade-Related Policy” released by the OECD analyzes the role policies could play in order for the region to benefit from GVC participation.
The region is characterized by an interconnection of intra and extra-regional preferential trade agreements (PTAs), that might overlap and reduce the benefits of these agreements. The publication suggests that harmonization initiatives should be implemented by analyzing the impact of rules of origin (RoO) and non-tariff measures (NTMs) on GVC integration in the region.
As a matter of fact, the empirical work presented in the publication shows that RoO in PTAs of Latin American countries undo more than 15% of the positive trade effect of these agreements, especially for intermediate products (30%). A cost-efficient way of reducing these problems related to RoOs is represented by MFN (Most Favoured Nation) liberalization of tariffs on intermediate products.
Regarding NTMs, the publication shows that these measures can have unintended effects on trade. The report states that NTMs used in Latin America increase the costs of a 20% for primary intermediate products and 12% for processed intermediates. In this framework exploring the scope of mutual recognition, harmonization or conformity assessment procedures can be beneficial in terms of a considerable reduction of costs.