Costa Rica: Trade opening, FDI attraction and global production sharing

Costa Rica has managed to combine an active agenda in the Multilateral Trade Negotiations (MTNs) at the WTO with the negotiation of several Preferential Trade Agreements (PTAs). Such PTAs, most notably those with the US, China and the EU, will boost the share of total exports benefiting from preferential access in the destination markets from 24% to over 83%. Along this path of trade liberalization, the country has placed a strong emphasis on the attraction of Foreign Direct Investment (FDI) in high-tech manufacturing and services activities, producing a substantial transformation in the structure of its exports and inserting a fair share of the economy into Global Value Chains (GVCs) . As a result, about 43% of the country's total exports are related to GVCs, with an average of 36% of such exported value being added domestically. Labor and capital employed by GVC-participating firms account for about 40% of the domestic contribution to exports, while locally-provided services and supplies account for almost one sixth and one tenth, respectively. In turn, the relative importance of different services is quite variable across the GVCs identified.