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Who Determines Mexican Trade Policy?

Author

Listed:
  • 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.

Suggested Citation

  • de Melo, Jaime & Grether, Jean-Marie & Olarreaga, Marcelo, 1999. "Who Determines Mexican Trade Policy?," CEPR Discussion Papers 2176, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2176
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    References listed on IDEAS

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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," Canadian Journal of Economics, Canadian Economics Association, vol. 45(2), pages 613-631, May.
    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. Ferdinand Eibl & Adeel Malik, 2016. "The Politics of Partial Liberalization: Cronyism and Non-Tariff Protection in Mubarak's Egypt," CSAE Working Paper Series 2016-27, Centre for the Study of African Economies, University of Oxford.
    5. Olarreaga, Marcelo, 1999. "Foreign-owned Capital and Endogenous Tariffs," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 14, pages 606-624.
    6. Kozo Harimaya & Koichi Kagitani & Hirofumi Tominaga, 2010. "Political Economy Of Government Spending For Trade Liberalization: Politics Of Agriculture Related Government Spending For The Uruguay Round In Japan," The Japanese Economic Review, Japanese Economic Association, vol. 61(2), pages 159-174.
    7. Pravin Krishna & Devashish Mitra, 2003. "Reciprocated Unilateralism in Trade Policy: An Interest-Group Approach," NBER Working Papers 9631, National Bureau of Economic Research, Inc.
    8. Josh Ederington & Jenny Minier, 2008. "Reconsidering the empirical evidence on the Grossman-Helpman model of endogenous protection," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 501-516, May.
    9. 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.
    10. Changyuan Luo & Jun Zhang, 2010. "China Trade Policy Review: A Political Economy Approach," The World Economy, Wiley Blackwell, vol. 33(11), pages 1390-1413, November.
    11. Krishna, Pravin & Mitra, Devashish, 2005. "Reciprocated unilateralism in trade policy," Journal of International Economics, Elsevier, vol. 65(2), pages 461-487, March.

    More about this item

    Keywords

    Endogenous Protection; Foreign Direct Investment; Mexico;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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