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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. Conconi, Paola & Perroni, Carlo, 2011. "Conditional versus Unconditional Trade Concessions for Developing Countries," CEPR Discussion Papers 8253, C.E.P.R. Discussion Papers.
  2. Yushi Yoshida & Hiro Ito, 2005. "Distance on FDI and Trade: The Roles of China and Mexico in the Pacific Basin," Discussion Papers 24, Kyushu Sangyo University, Faculty of Economics.
  3. Bin, Sheng, 2000. "The Political Economy of Trade Policy in China," Working Papers 10/2000, Copenhagen Business School, Department of Management, Politics & Philosophy.
  4. Olarreaga, Marcelo, 1999. "Foreign-owned capital and endogenous tariffs," Policy Research Working Paper Series 2205, The World Bank.
  5. Pravin Krishna & Devashish Mitra, 2003. "Reciprocated Unilateralism in Trade Policy: An Interest-Group Approach," NBER Working Papers 9631, National Bureau of Economic Research, Inc.
  6. Krishna, Pravin & Mitra, Devashish, 2005. "Reciprocated unilateralism in trade policy," Journal of International Economics, Elsevier, vol. 65(2), pages 461-487, March.

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