Conclusion and policy implications

Additional challenges are associated with the constant monitoring of legal or regulatory changes, ensuring they do not go against or contradict commitments. And this can be complicated by the multiple and varied institutions regulating and intervening in the heterogeneous world of services.

Timing of implementation

The time for implementing commitments presents another relevant question (ADB 2008). Identifying preparedness to assume specific obligations starts before negotiations, but sometimes these challenges appear during negotiations when governments are facing the implications of accepting new commitments. This is particularly relevant for services trade negotiations since they tend to consolidate only the status quo for obligations such as market access, nondiscrimination, and other protection commitments.

As members of the WTO, Latin American and Caribbean countries have internalized the types of commitments associated with GATS. After 1995, they received the support of the WTO Secretariat in this process. The process is usually reflected in the commitments’ broad application, beyond any limited consolidation in the schedules. The risk of noncompliance is reduced by the constant monitoring of all parties by the WTO.

In most cases, the implementation of commitments is associated with the entry into force of PTAs. But some agreements establish specific times for the implementation and enforcement of particular regulations. And agreements can incorporate time frames for revising specific commitments, including the eventual negotiations.

The development of trade after an agreement’s entry into force entails constant monitoring, consultation, and the administration of disputes. Because access to international markets depends on effective implementation of other parties’ commitments, enforceability is essential. This aspect of implementation is highlighted in high-income countries (EU 2018; Luff 2011). Trade diplomacy ensures that the guarantees offered by agreements are correctly implemented. And the support of export promotion agencies should not be underrated, since their market intelligence activities monitor the real access and conditions that countries provide to foreign services and service suppliers.

Ultimately, implementing commitments depends on leadership and the availability of resources, normally those of the ministries in charge of trade. Leadership often requires coordinating different entities and working with the legislative branch and with regulatory agencies. It also requires interacting and regularly consulting with other stakeholders, including private sector agents and civil society associations.

CONCLUSION AND POLICY IMPLICATIONS

Evidence shows that Latin American and Caribbean countries’ integration into GVCs through services is greater with extraregional partners than with intraregional ones. This result is somewhat unusual, since GVCs typically have a strong regional focus because trade costs determine the location of economic activity (ITC 2017).

Where Latin America and the Caribbean has its strongest GVC linkages in services, forward linkages rather than backward ones are prevalent—that is, supplying inputs for the production of partner country exports rather than the sourcing of intermediate services for Latin American and Caribbean firms’ own production of exports. For intraregional trade, by contrast, backward linkages play a stronger role. So, the intraregional services trade is somewhat unusual, both because of the relatively underdeveloped nature of the region’s GVC linkages in services and because its pattern of integration is different from its extraregional interactions.

A quantitative trade model suggests that, to the extent that PTAs reduce trade costs, they both boost aggregate trade flows and also shift the character of that trade modestly toward increased GVC linkages. Although trade diversion is weak in Latin America and the Caribbean, it has potential, both in the traditional sense of shifting supply from globally efficient producers to regional partners and in the sense of disrupting extraregional GVCs while deepening regional GVC linkages. But PTAs would have to make significant reductions in trade costs, with consequent large changes in recorded trade, before a substantial change occurred in the relative composition of trade in favor of GVC linkages.

Recent research shows that the agreement structure and, particularly, the ambition to increase GATS modes 3 and 4 trade are crucial for ensuring trade promotion through deep PTAs and for supporting production sharing and GVC integration. Although Latin American and Caribbean intraregional agreements have nondiscrimination rules basically like those in agreements with external partners, the available data suggest that the intraregional agreements are much less ambitious on modes 3 and 4 than the agreements with other regions. Even for mode 1 trade, using the specific example of digital trade, coverage tends to be more ambitious in extraregional than in intraregional agreements. This may be holding back the development of regional value chains in services.

This result is surprising given the prevalence of more ambitious provisions for mode 3 and mode 4 trade, as well as for digital trade, in the agreements Latin American and Caribbean countries have signed with external partners. The provisions indicate that, in the presence of partner demands, the region’s countries are open to bindings in those terms. Given that Latin American and Caribbean countries have already signaled their willingness to abide by such provisions in PTAs with external partners, there is a clear case for revisiting intraregional agreements and importing, if not improving on, such provisions. More empirical evidence is required, but there are suggestions in the data that moving forward in these areas can boost GVC integration in services. Why intraregional agreements tend to be less ambitious is unclear, but a likely possibility is the absence of a large economy pressing Latin American and Caribbean partners on issues such as modes 3 and 4 or digital trade.

How far are agreements put into practice on the ground, and how far does practical liberalization go, even when legal policy bindings may be similar to existing WTO