Intra-regional trade weakens in Latin America
In the region, intraregional trade was 15 percentage points lower in its growth rates than interregional trade.
Intraregional trade in Latin America and the Caribbean was the weakest during the pandemic among all world regions, according to a report by the United Nations Conference on Trade and Development (UNCTAD).
Globally, intra-regional merchandise trade was more resilient during the pandemic on average, declining less than world average trade in 2020 and increasing more than world average trade-in 2021.
However, that resilience is largely due to intra-East Asian trade, where the growth rate exceeded that of intra-East Asian trade by about 8 percentage points in 2020 and by about 12 percentage points in 2021.
In contrast, in Latin America and the Caribbean, intraregional trade decreased more substantially than interregional trade and was about 15 percentage points lower than interregional growth rates in both 2020 and 2021.
UNCTAD stated that this trend is consistent with the fragmentation of regional integration efforts in Latin America and the Caribbean and the growing focus of many economies on commodity exports and extra-regional trade, particularly with China and the United States. For example, there is little trade-related interdependence between the two largest economies in the region, Brazil and Mexico.
UNCTAD also highlighted that there has been a lot of discussion about relocation and near relocation, but there is little evidence-based on data indicating systemic changes in the disposition of global production.
Rather, he added, the initial success of East Asian economies in mitigating the economic effects of the pandemic may have resulted in greater reliance, in global value chains, on manufacturing production originating in East Asia.
Despite the challenges brought by the pandemic, the restructuring of global production processes has been less frequent than initially expected by UNCTAD and has been largely in line with long-term trends driven by technological changes (robotization, automation, and digitization); increased protectionism and regionalization; and the need to achieve sustainable development goals.
Global strategies of efficiency and cost reduction continue to be the primary objective of global companies. Economies of scale, geographic location of resources, long-term investments in production facilities, and investments required to build new trade and logistics infrastructure can make significant modifications to current global production patterns costly.
The most recent trade statistics from the European Union show an indication of the persistence of offshoring practices. On average, around 70% of imports of intermediate inputs for the European Union’s manufacturing industries originate within the European Union, while East Asia contributes around 15%.
Source: The Economist