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Who Determines Mexican Trade Policy?

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  • de Melo, Jaime
  • Grether, Jean-Marie
  • Olarreaga, Marcelo

Abstract

This paper uses a political economy approach to analyze the pattern of Mexican manufacturing sector protection during the period of trade policy reforms between 1985 and 1989 when Mexico experiences both an important inflow of foreign direct investment (FDI), and a significant trade liberalization. The approach takes into account the potential role of FDI on endogenous tariff formation. It turns out that the data are coherent with the proposed approach in which trade policy formulation reflects political support and in which the sectoral presence of FDI has a strong influence on the determination of the pattern of tariff protection before and during the reform. In particular in Mexican manufacturing, FDI-intensive sectors received higher protection in import-competing sectors, though the move towards greater openness was associated with a reduction in the influence of industrial and FDI lobbying.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2176.

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Date of creation: Jun 1999
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Handle: RePEc:cpr:ceprdp:2176

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Keywords: Endogenous Protection; Foreign Direct Investment; Mexico;

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References

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Citations

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Cited by:
  1. Paola Conconi & Carlo Perroni, 2012. "Conditional versus Unconditional Trade Concessions for Developing Countries," ULB Institutional Repository 2013/98541, ULB -- Universite Libre de Bruxelles.
  2. Yushi Yoshida & Hiro Ito, 2005. "Distance on FDI and Trade: The Roles of China and Mexico in the Pacific Basin," Discussion Papers, Kyushu Sangyo University, Faculty of Economics 24, Kyushu Sangyo University, Faculty of Economics.
  3. Pravin Krishna & Devashish Mitra, 2003. "Reciprocated Unilateralism in Trade Policy: An Interest-Group Approach," NBER Working Papers 9631, National Bureau of Economic Research, Inc.
  4. Olarreaga, M, 1996. "Foreign-Owned Captial and Endogenous Tariffs," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva, Institut d'Economie et Econométrie, Université de Genève 96.17, Institut d'Economie et Econométrie, Université de Genève.
  5. Krishna, Pravin & Mitra, Devashish, 2005. "Reciprocated unilateralism in trade policy," Journal of International Economics, Elsevier, vol. 65(2), pages 461-487, March.
  6. Yasar, Mahmut, 2013. "Political Influence of Exporting and Import-Competing Firms: Evidence from Eastern European and Central Asian Countries," World Development, Elsevier, vol. 51(C), pages 154-168.
  7. Bin, Sheng, 2000. "The Political Economy of Trade Policy in China," Working Papers, Copenhagen Business School, Department of Management, Politics & Philosophy 10/2000, Copenhagen Business School, Department of Management, Politics & Philosophy.

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