Prohibitive tariff and non-tariff barriers for trade between China and Latin America and the Caribbean (LAC) continue to seriously inhibit the prospects for the export of both agricultural and manufactured goods to the world’s single largest market, according to a recently concluded study done by the Inter-American Development Bank (IDB).
The study estimates that farm exports from Latin America and the Caribbean to China could increase by around 10 per cent and export of manufactured goods by as much as 37 per cent, if China’s import tariffs were reduced to the levels of the Organization for Economic Cooperation and Development (OECD), whose average is 3.6 per cent. China’s median tariff is approximately twice that of the OECD for agricultural goods and more than three times for manufacturing goods.
The findings of the recent IDB study presents regional and hemispheric organizations including the Caribbean Community (Caricom) and the Economic Commission for Latin America and the Caribbean (ECLAC) with the critical responsibility of vigorously lobbying Beijing to lower tariffs and open up greater market opportunities, initiatives that could significantly transform the agricultural and manufacturing sectors in the hemisphere.
The IDB report says that having expanded at an estimated annual average rate of 31.2 per cent between 2000 and 2011 (except for a brief interruption in 2009 during the financial crisis), the growth of China-LAC trade decelerated sharply and turned negative in 2014, on the back of marked and intertwined slowdowns in the growth of China and LAC. The recent loss of momentum notwithstanding, China remains as LAC’s second-largest trade partner, accounting for 13.7 per cent of the region’s trade in 2015.
The study, titled “Uncovering the Barriers of the China-Latin America and Caribbean Trade” asserts that efforts to alter the existing scenario will have to include initiatives by LAC countries “to invest in trade intelligence to remove barriers and maximize the potential gains from trade with China.” The report says that if this agenda is to be executed effectively, “negotiations must be, as much as possible, isolated from the political and ideological considerations that have characterized the relationship in the past.”
China’s prevailing economic outlook, not least its considerable interest in investment prospects in Latin America and the Caribbean has made ideology less of an issue in relatively recent years. China’s huge productive capacity particularly in the manufacturing sector has meant that the country’s tariff structure tends to discriminate against the importation of consumer goods, a circumstance that represents a challenge for LAC exporters seeking to reach Chinese consumers directly. The IDB report points out that the average tariff for consumer goods (11 per cent) is twice that of intermediate goods (4.9 per cent) and ten times that of the raw materials (1.09 per cent).
The IDB study also reports that over the past decade technical and non-technical non-tariff barriers in China have become an even greater challenge to external market access than tariff barriers for a significant amount of agricultural exports from LAC.
It states that in 2014, local agricultural products were on average 24 per cent more expensive than imported products, while the average weighted tariff stood at 9.2 per cent.
