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Who Determines Mexican Trade Policy?

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

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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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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  1. Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
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  6. Jaime MELO DE & Olivier CADOT & OLARREAGA, 1996. "Lobbying and the Structure of Protection," Working Papers 199634, CERDI.
  7. Barrell, Ray & Pain, Nigel, 1999. "Trade restraints and Japanese direct investment flows," European Economic Review, Elsevier, vol. 43(1), pages 29-45, January.
  8. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-87, December.
  9. de Melo, Jaime & Tarr, David, 1993. "Industrial Policy in the Presence of Wage Distortions: The Case of the U.S. Auto and Steel Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(4), pages 833-51, November.
  10. Konishi, Hideo & Saggi, Kamal & Weber, Shlomo, 1999. "Endogenous trade policy under foreign direct investment," Journal of International Economics, Elsevier, vol. 49(2), pages 289-308, December.
  11. Schweinberger, Albert G & Vosgerau, Hans J, 1997. "Foreign Factor Ownership and Optimal Tariffs," Review of International Economics, Wiley Blackwell, vol. 5(1), pages 1-19, February.
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  14. Azrak, Paul & Wynne, Kevin, 1995. "Protectionism and Japanese direct investment in the United States," Journal of Policy Modeling, Elsevier, vol. 17(3), pages 293-305, June.
  15. J. Michael Finger & Ann Harrison, 1996. "The MFA Paradox: More Protection and More Trade?," NBER Chapters, in: The Political Economy of American Trade Policy, pages 197-260 National Bureau of Economic Research, Inc.
  16. Olarreaga, Marcelo, 1996. "Tariff Reductions in the Presence of Foreign Direct Investment," Review of International Economics, Wiley Blackwell, vol. 4(3), pages 263-75, October.
  17. Braillard, S. Lael & Verdier, Thierry, 1994. "Lobbying and adjustment in declining industries," European Economic Review, Elsevier, vol. 38(3-4), pages 586-595, April.
  18. Rodrik, Dani, 1995. "Political economy of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 28, pages 1457-1494 Elsevier.
  19. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implications for Growth," NBER Working Papers 3530, National Bureau of Economic Research, Inc.
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  21. Blonigen, Bruce A & Figlio, David N, 1998. "Voting for Protection: Does Direct Foreign Investment Influence Legislator Behavior?," American Economic Review, American Economic Association, vol. 88(4), pages 1002-14, September.
  22. Baldwin, Robert E., 1984. "Trade policies in developed countries," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 12, pages 571-619 Elsevier.
  23. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
  24. Levinsohn, J., 1991. "Testing the Imports-As-Market-Discipline Hypothesis," Working Papers 272, Research Seminar in International Economics, University of Michigan.
  25. Marcelo Olarreaga, 1998. "Tariff Reductions under Foreign Factor Ownership," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 830-836, November.
  26. Gene Grossman & Elhanan Helpman, 1994. "Foreign Investment with Endogenous Protection," NBER Working Papers 4876, National Bureau of Economic Research, Inc.
  27. Bilal, Sanoussi, 1998. "Why Regionalism May Increase the Demand for Trade Protection," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 30-61.
  28. Bhagwati, Jagdish N & Dinopoulos, Elias & Wong, Kar-yiu, 1992. "Quid Pro Quo Foreign Investment," American Economic Review, American Economic Association, vol. 82(2), pages 186-90, May.
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  32. repec:cup:cbooks:9780521477185 is not listed on IDEAS
  33. Ten Kate, Adriaan, 1992. "Trade liberalization and economic stabilization in Mexico: Lessons of experience," World Development, Elsevier, vol. 20(5), pages 659-672, May.
  34. Jean-Marie Grether, 1997. "Estimating the pro-competitive gains from trade liberalization: an application to Mexican manufacturing," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 6(3), pages 393-417.
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