WHAT ARE THE TRADE GAINS?
Even now, with the China-led commodity boom, LAC’s share of world trade clearly remains below its potential, both in volume and in diversity. Our sector-level estimates confirm that an effort to bring down import tariffs and freight rates simultaneously can substantially increase both the volume and diversity of goods traded by the region. When we isolate the impact of these costs from other trade factors, we find that a 10 percent decrease in freight costs and tariffs would boost LAC’s imports by 50 percent. But behind this average impact lies substantial variations from one sector to another. The effect ranges from 5.5 percent in the case of salt, sulfur and stones to 96.6 percent in the case of leather articles. In general, the average increase of bilateral imports brought about by a 10 percent decline of trade costs would be larger for manufacturing (48.4 percent) than for minerals and metals (47.1 percent) and agricultural products (42.9 percent). (…) We also find significant impa
