OREANDA-NEWS. September 28, 2016. Agricultural exports from Latin America and the Caribbean (LAC) to China could increase by almost 10 percent, and those of manufacturing goods could jump by 37 percent, if China’s import tariffs were reduced to the levels of the Organization for Economic Co-operation and Development (OECD), whose average is 3.6 percent.

China’s median tariff is approximately twice that of the OECD for agricultural goods and more than three times for manufacturing goods.

After expanding at an annual average rate of 31.2 percent 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.

Despite this recent loss of dynamism, China remains as LAC’s second-largest trade partner—accounting for 13.7 percent of the region’s trade in 2015. Additionally, the most likely medium- to long-term scenario for its demand for LAC commodities is one of a robust growth, though not as epic as in the last decade.

These are some of the conclusions of the study “Uncovering the Barriers of the China-Latin America and Caribbean Trade” produced by the Inter-American Development Bank (IDB) through its Integration and Trade Sector (INT).

“Leaving behind a decade of prosperity and facing a new economic environment, governments and the private sector in Latin America will have to invest in trade intelligence to remove barriers and maximize the potential gains from trade with China”, points out Mauricio Mesquita Moreira, Principal Economic Advisor at the IDB’s Integration and Trade Sector, and author of the report.

“To carry out this agenda effectively, negotiations must be, as much as possible, isolated from the political and ideological considerations that have characterized the relationship in the past”, added Mesquita Moreira.

Another important finding is that the Chinese tariff structure tends to discriminate against the imports of consumer goods, which represents a challenge for LAC exporters looking to sell their products directly to Chinese consumers. For example, the average tariff for consumer goods (11 percent) is twice that of intermediate goods (4.9 percent) and ten times that of the raw materials (1.09 percent).

In the last decade, technical and non-technical non-tariff barriers in China have become an even greater impediment than tariffs barriers for a significant amount of agricultural exports from LAC.

For instance, in 2014, local agricultural products were on average 24 percent more expensive than imported products, while the average weighted tariff stood at 9.2 percent. This difference can only be explained by other measures of government intervention. Beef, pork and poultry are the most affected products, with price differentials well above their import tariffs.

Meanwhile, China also suffers the consequences of trade barriers in most LAC countries, especially those in MERCOSUR. This, however, does not seem to have stopped the major increase of Chinese exporters to the region.

Reducing LAC tariffs to OECD levels would increase exports of Chinese manufactured goods to the region by 10 percent, an increase that would range between 7 percent and 28 percent. It is estimated that the median LAC tariff is almost double that of the OECD average.

About the IDB

The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.