Small Economies' Tariff and Subsidy Policies in the Face of Trade Liberalisation in the Americas

The paper examines the fiscal issues which may arise from globalisation and trade liberalisation in the smaller economies of Latin America and the Caribbean. Their dependence on trade taxes for fiscal revenues is not only the result of history, but is also based on cost effectiveness. The complexity of implementing more trade-neutral instruments, such as value added taxes, might be a significant obstacle. Traditional tax structure of many smaller economies is being eroded, and the current trends of increased fiscal and external imbalances are not sustainable. Reforming the current situation and adapt tax and subsidies to the new standards defined in multilateral and regional trade agreements is a formidable task. National efforts should be matched by regional and international cooperation