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Who determines Mexican trade policy?

  • Grether,Jean-Marie
  • De Melo,Jaime A. P.
  • Olarreaga,Marcelo

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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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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