Essay on the Trade Relation between Latin America and the Asia-Pacific

Trade between Latin America and the Asia-Pacific region, for the most part, the latter has had the upper edge.

Throughout the 1980s and the 1990s, exports from Latin America to Asia grew at a much “lower level than the imports from the Asia-Pacific.

In the early 1960s, several countries of Latin America and the East and South- East Asian countries adopted protectionist measures to develop their nascent industries.

But there was one important difference that ensured the dominance of East Asian countries decades later; while Latin

America adopted an import substitution strategy; East Asia went for an export-oriented strategy.

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This situation, to a certain extent, has something to do with the kind of products traded between the two regions. Imports from Asia- Pacific include advanced technological products like automobiles, appliances and electronic products, which have¹ achieved economies of scale.

On the other hand, exports from Latin America have generally included primary products such as copper, iron, steel, zinc, wood, soybeans, coffee, fish, and some semi-manufactured items.

Another cause of the imbalance is the difference in economic integration in East Asia and Latin America. One of the objectives for regional integration in Latin America has been to increase the region’s competitiveness.

But the economic processes and development policies followed regionally in Latin America have not been very conducive to increasing competitiveness. Even after renouncing the ISI strategy, regional integration there has been relatively inward- looking. In contrast, integration in East Asia has been geared especially toward increasing competitiveness globally.

In the last two decades, Latin America’s trade dependence on the United States has grown steadily. The gap between Latin America’s exports to the US and its imports has grown. Thus, the trade surplus between the US and Latin America is heavily loaded in favour of the former.

But the situation is more or less the reverse when we consider the US and the East Asian countries. These further shows how far ahead the East Asian economies are, when compared to those of Latin America.

Another distinguishing feature has been the kind of integration with the world economy experienced by the two regions. Latin American regionalism and liberalisation involves a high degree of deregulation of the foreign investment sector. This has led to imports increasing much faster than exports.

Between the two regions, trade has increased in the last two decades, but the share of Latin America in the East Asian trade has remained constant. Countries of East Asia took full advantage of the opening of the Latin American economies, but the reverse was not true.

This has meant that Latin America’s share in the East Asian exports has remained constant at about 2-3 per cent, while East Asian exports to Latin America are as much as 10 per cent.

One advantage that Latin America did have in terms of foreign direct investment (especially till its current economic problems) is that it has been increasing there a lot more than in the East Asian region.

The reason for this is that Latin America has been more open to mergers and acquisitions by foreign firms. This has been taking place in infrastructure sectors such as telecommunication, energy, and electricity.

To further promote trade between the two regions, bilateral free trade agreements have been considered, such as the Japan-Mexican FTA and a Japan-Chile FTA. But more important is the East Asia- Latin America, Forum (EALAF), now known as the Forum for East Asia-Latin America Cooperation (FEALAC). This forum aims to increase economic ties between the two regions.

The unique point with FEALAC is that almost all the Latin American countries are members of this group. In contrast, only three Latin American countries are members of the similar association-the Asia Pacific Economic Forum. And even in this (APEC), North America provides the indirect link between the two regions-Asia and Latin America.

Of course, the question arises as to where APEC fits into the scheme of things here, and whether their aims overlap and have potential for some confusion. The answer to this is that APEC is narrower in its aims-it is concerned only with economic and commercial aspects, while FEALAC’s scope is broader, extending to social and political issues.