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Substitutability and Protectionism: Latin America’s Trade Policy and Imports from China and India

Author

Listed:
  • Giovanni Facchini
  • Marcelo Olarreaga
  • Peri A. Silva
  • Gerald Willmann

Abstract

This paper examines the trade policy response of Latin American governments to the rapid growth of China and India in world markets. To explain higher protection in sectors where a large share is imported from these countries, we extend the ‘protection for sale’ model to allow for different degrees of substitutability between domestically produced and imported varieties. The extension suggests that higher levels of protection towards Chinese goods can be explained by high substitutability between domestically produced goods and Chinese goods, whereas lower levels of protection towards goods imported from India can be explained by low substitutability with domestically produced goods. The data supports the extension to the ‘protection for sale’ model, which performs better than the original specification in terms of explaining Latin America's structure of protection.

Suggested Citation

  • Giovanni Facchini & Marcelo Olarreaga & Peri A. Silva & Gerald Willmann, 2007. "Substitutability and Protectionism: Latin America’s Trade Policy and Imports from China and India," CESifo Working Paper Series 1947, CESifo.
    • Handle: RePEc:ces:ceswps:_1947
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ganeshan Wignaraja & Dorothea Ramizo & Luca Burmeister, 2012. "Asia-Latin America Free Trade Agreements : An Instrument for Inter-Regional Liberalization and Integration?," Governance Working Papers 23332, East Asian Bureau of Economic Research.
    2. Silva, Peri, 2011. "The role of importers and exporters in the determination of the U.S. tariff preferences granted to Latin America," Journal of Development Economics, Elsevier, vol. 94(2), pages 207-219, March.
    3. Aboushady, Nora & Zaki, Chahir, 2023. "Are global value chains for sale? On business-state relations in the MENA region," IDOS Discussion Papers 17/2023, German Institute of Development and Sustainability (IDOS).
    4. Elena Paltseva, 2014. "Protection for Sale: The case of oligopolistic competition and interdependent sectors," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(4), pages 1195-1216, November.
    5. Lourenço S. Paz & Kul Prasad Kapri, 2019. "The Effects of the Chinese Imports on Brazilian Manufacturing Workers," Economies, MDPI, vol. 7(3), pages 1-22, August.
    6. repec:lic:licosd:28511 is not listed on IDEAS
    7. Masahiro Kawai, 2009. "PRC-Latin America Economic Cooperation: Going beyond Resource and Manufacturing Complementarity," Working Papers id:1961, eSocialSciences.
    8. Daniel Lederman & Marcelo Olarreaga & Guillermo Perry, 2007. "Latin America´s response to China and India: overview of research findings and policy implications - Observatorio de Política," Revista de Economía y Estadística, Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas, vol. 45(1), pages 149-193, Junio.
    9. Lourenço S. Paz, 2022. "The China Shock Impact on Labor Informality: The Effects on Brazilian Manufacturing Workers," Economies, MDPI, vol. 10(5), pages 1-19, May.
    10. Hylke VANDENBUSSCHE & Christian VIEGELAHN, 2011. "No Protectionist Surprises: EU Antidumping Policy Before and During the Great Recession," LIDAM Discussion Papers IRES 2011021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    11. Lourenco Paz, 2022. "Does age modulate the impact of import competition on job type?," Economics and Business Letters, Oviedo University Press, vol. 11(4), pages 161-171.

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    More about this item

    Keywords

    Latin America; protectionism;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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