Content
By Raphael Gomes da Silva and Lia Nogueira
Trade agreements are a common policy instrument for liberalizing trade among countries. Over time, the scope of these trade agreements has expanded considerably. Initially focused primarily on reducing tariffs, they gradually began addressing non-tariff measures, including sanitary and phytosanitary requirements and technical barriers to trade. Subsequent agreements incorporated areas such as services, intellectual property rights, investment and dispute resolution. Modern trade agreements may extend even further, covering issues such as digital commerce, environmental standards, and labor regulations.
As the number of provisions included in trade agreements increases, so does the level of commitment required from each member. Accordingly, we define the depth of a trade agreement as the extent of integration among its members, measured by the number of provisions negotiated. More provisions generally require deeper commitments and closer integration among members. Deep agreements therefore indicate that countries are willing not only to facilitate trade but also to coordinate policies and harmonize standards.
This expansion in scope, and consequently depth, of trade agreements has been largely led by developed countries. Developed countries initially introduced new provisions into agreements negotiated with partners at similar levels of development. Once such provisions became established, developed countries were better positioned to promote the inclusion of new provisions in subsequent negotiations with other partners, eventually extending them to agreements with developing countries.
What is the issue?
These new provisions are particularly important for Latin American countries. Many of these economies depend heavily on exports and, as developing countries, often have limited bargaining power in trade negotiations. Latin American countries also pursue different trade policies that affect both their choice of trading partners and their decisions about which domestic sectors to protect. Are Latin American countries keeping pace or falling behind their developed peers? Understanding how Latin American countries negotiate modern trade provisions in their trade agreements is therefore essential to assessing their long-term competitiveness and development.
Objective
Our objective is to determine whether Latin American trade agreements have deepened over time and whether countries in the region have negotiated agreements that keep pace with global trends in trade provisions.
Approach
We analyze agreements signed by countries in the Americas between 1970 and 2019. To measure each agreement’s depth, we create the Depth Index of Trade Agreement (DITA). We divide the continent into five regions: North America, the Caribbean, Central America, the Pacific Alliance, and South America. This division allows us to examine differences among the continent’s subregions. We use North America as the benchmark because the United States and Canada are developed countries and have the deepest agreements.
What did we find?
All regions experienced an increase in the depth of their agreements from the 1970s to the 2010s, although the pace of this increase varied. North America has the deepest agreements, followed closely by Central America and the Pacific Alliance. The Caribbean and South America lag considerably behind, by approximately two to three decades relative to North America.
We also analyze the role of partner choice, as the regions falling behind have fewer agreements with developed countries. When we differentiate between agreements among developing countries (South-South) and agreements between developed and developing countries (North-South), we find that North-South agreements are generally deeper.
The average depth of South-South agreements appears to increase after countries enter into North-South agreements, suggesting a process of learning or adaptation. Consequently, although the provisions included in the agreement are important, the choice of trading partner and that partner’s level of development also influence the agreement’s depth.
Finally, we examine why deeper agreements matter by testing whether agreements of varying depths have different effects on trade. Using a gravity model, we estimate the effects of agreements with higher and lower DITA values. We conduct this analysis for both the full global sample of agreements and a subsample comprising only agreements involving countries in the Americas.
Our results show that only high-depth agreements have positive effects on trade. In the Americas, high-depth agreements increase trade by 46.9%, compared with 38.3% globally. None of the models identify positive trade effects from low-depth agreements.
We also estimate how these effects develop relative to the year in which an agreement enters into force. In the global sample, trade begins responding positively a few years before implementation and grows steadily thereafter, reaching a long-term increase of 45.3%. The results for the Americas follow a similar pattern, with the long-term effect twice the magnitude of the medium-term effect.
We conclude that an agreement’s depth matters for its ability to increase trade. The design of the trade agreement, including the modern trade issues covered by its provisions, is therefore essential to its success. Signing a trade agreement alone is not enough. The choice of trading partner and the provisions included in the agreement play a significant role in determining the trade agreement outcome.
For additional information:
da Silva, R. G., F. A. Silva, and L. Nogueira. 2026. “Keeping Pace or Falling Behind? The Depth of Latin American Trade Agreements.” Applied Economic Perspectives and Policy 1–20. https://doi.org/10.1002/aepp.70100.
Raphael Gomes da Silva
Graduate Student
Department of Agricultural Economics
University of Nebraska-Lincoln
rgomesdasilva2@huskers.unl.edu
Lia Nogueira
Associate Professor
Department of Agricultural Economics
University of Nebraska-Lincoln
402-472-3401
lia.nogueira@unl.edu
1The Pacific Alliance consists of the South American countries: Chile, Colombia, and Peru. We separate this bloc from the rest of South America because they have trade policies that differ strongly from those of the other countries in the region.