Study shows high cost of trade between China, region

A new study released by the Inter American Development Bank (IDB) has found that high trade costs are curtailing business opportunities between China and Latin America and the Caribbean (LAC).

The two "must lower trade costs and increase investment and cooperation to deepen and diversify the trade relationship," according to the new IDB study released on Monday.

Titled Ten Years after the Take-Off, the report looked into the evolution of trade, investment and cooperation between China and LAC over the past decade.

It argues that policymakers should join forces to cut tariffs, transportation costs and other barriers to diversify the composition of the bilateral trade between China and the region.

Over the last 10 years, trade between the two regions was built on the sheer complementarity of their resource endowments: China has a scarcity of natural resources while LAC has an abundance of these resources. This led to a classical exchange of commodities for manufacturing goods.

The relationship has brought gains for both sides, but has benefited only a handful of sectors and a limited number of countries in Latin America and the Caribbean, the IDB said.

Mining products account for nearly half the region's exports to China, followed by agriculture commodities, with a 35 per cent share.

"Trade costs are still high enough to constrain trade opportunities on both sides of the relationship and, as such, they call for government action," said Mauricio Mesquita Moreira, principal economist of the IDB's Trade and Integration Sector and the author of the study.

"Both regions also must strengthen investment and cooperation to pave the way for more export diversification and ease any disruptions brought about by greater trade liberalisation."

The study says both regions need to reduce tariffs and transport costs to be able to diversify and expand trade, and that China should diversify its regional investment portfolio.

- CMC