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Who determines Mexican trade policy?

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

Abstract

Using a political economy approach, the authors analyze the pattern of protection in Mexico's manufacturing sector during the period of trade policy reforms (1985-89), when Mexico experienced significant trade liberalization and an important inflow of foreign direct investment. They take into account the potential effect of foreign direct investment on endogenous tariff formation. It turns out that the data support this analytic approach, in which the formulation of trade policy reflects political support, and in which the presence of foreign direct investment in the sector strongly affects the pattern of tariff protection before and after reform. In Mexican manufacturing, especially, sectors with heavy foreign direct investment received greater protection in import-competing sectors, although the move toward greater openness was associated with a reduction in the influence of industrial and foreign-investor lobbying.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2187.

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Date of creation: 30 Sep 1999
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Handle: RePEc:wbk:wbrwps:2187

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Keywords: Environmental Economics&Policies; Payment Systems&Infrastructure; Economic Theory&Research; Banks&Banking Reform; Trade Policy; Foreign Direct Investment; Economic Theory&Research; Trade and Regional Integration; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Environmental Economics&Policies;

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Citations

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Cited by:
  1. Olarreaga, Marcelo, 1999. "Foreign-owned capital and endogenous tariffs," Policy Research Working Paper Series 2205, The World Bank.
  2. Paola Conconi & Carlo Perroni, 2012. "Conditional versus unconditional trade concessions for developing countries," Canadian Journal of Economics, Canadian Economics Association, vol. 45(2), pages 613-631, May.
  3. 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.
  4. Pravin Krishna & Devashish Mitra, 2003. "Reciprocated Unilateralism in Trade Policy: An Interest-Group Approach," NBER Working Papers 9631, National Bureau of Economic Research, Inc.
  5. Bin, Sheng, 2000. "The Political Economy of Trade Policy in China," Working Papers 10/2000, Copenhagen Business School, Department of Management, Politics & Philosophy.
  6. Krishna, Pravin & Mitra, Devashish, 2005. "Reciprocated unilateralism in trade policy," Journal of International Economics, Elsevier, vol. 65(2), pages 461-487, March.
  7. 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.

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