International Trade Outlook for Latin America and the Caribbean: Recovery in an uncertain context

International Trade Outlook for Latin America and the Caribbean • 2017
Chapter I
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The digital revolution poses unprecedented challenges for the regulation of global
trade. The trade agreements of the 1990s are not up to the task of governing today’s
exponentially expanding cross-border digital flows. While the leeway for formulating
traditional industrial policy has been sharply reduced as a result of WTO agreements and
North-South trade and investment arrangements, the digital economy remains largely
unregulated. This means that governments have room to implement measures such
as blocking specific Internet sites, imposing network location server requirements or
compelling foreign providers to reveal the source code of their software. In this context,
actors such as China, the United States and the European Union are competing to
influence the regulation of global digital trade, with widely divergent visions and models.
Megaregional agreements —in particular, the TPP, the TTIP and the Regional
Comprehensive Economic Partnership (RCEP)— were one first response to the emergence
of the digital economy and e-commerce. These multilateral agreements are characterized
by their significant economic and demographic weight, their reduction of non-tariff
barriers through regulatory harmonization and their adoption of new standards to govern
digital commerce (ECLAC, 2016). These initiatives are in addition to the negotiations
for the Trade in Services Agreement, which involve 23 WTO members —including the
European Union acting together as one— that account for 70% of the global trade in
services (European Commission, 2017). In addition to establishing binding rules for
the countries involved, these agreements could create de facto global standards for
the new issues of the twenty-first century, particularly e-commerce. Indeed, one of
the hallmarks of the TPP was its emphasis on the regulation of the digital economy, in
response to the interest of the United States in preserving its position of leadership
over emerging competitors: particularly China, which in recent years has deployed an
aggressive digital industrial policy (Azmeh and Foster, 2016).
The election of Donald Trump as President of the United States in November
2016 and his new “America First” trade policy has increased uncertainty regarding the
governance of world trade, at a time when it was already undergoing comprehensive
restructuring. The country’s new trade policy is characterized by openly protectionist
rhetoric, a shift from multilateralism to bilateralism, a focus on reducing trade deficits
and efforts to bring about the reshoring of industries and jobs. In that context, the new
Administration withdrew the United States from the TPP and the Trade in Services
Agreement, indefinitely suspended the TTIP negotiations, has been openly critical of
WTO and has embarked on negotiations to modernize NAFTA. It has also intimated that
the agreements with Chile, Colombia, Panama, Peru and the Central America countries
and the Dominican Republic could be renegotiated once the NAFTA negotiations are
concluded (Inside U.S. Trade, 2017).
Unlike the United States, other key players in world trade —including China, Japan
and the European Union— have publicly reiterated their commitment to openness and
multilateralism. In Asia, for example, negotiations for the Regional Comprehensive
Economic Partnership remain ongoing between the member countries of the Association
of Southeast Asian Nations (ASEAN), Australia, China, India, Japan, New Zealand and
the Republic of Korea. This process is expected to conclude in 2018, creating a free
trade area with a membership covering half of the world’s population, 38% of its GDP
(measured in purchasing power parity), 31% of world goods exports and 26% of imports.
Likewise, in 2013 China announced its “One Belt, One Road” initiative, an ambitious
infrastructure project that seeks to establish global overland, maritime, air and digital
connectivity to foster economic integration and balanced development.
In turn, the European Union has continued with its intense trade negotiations agenda,
announcing in July 2017 an agreement in principle with Japan on the contents of an
ambitious free trade agreement. In addition to reducing barriers to trade and establishing