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The growth of China and India in world trade : opportunity or threat for Latin America and the Caribbean?

Author

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  • Lederman, Daniel
  • Olarreaga, Marcelo
  • Soloaga, Isidro

Abstract

This paper studies the relationship between the growth of China and India in world merchandise trade and Latin American and Caribbean commercial flows from two perspectives. First, the authors focus on the opportunity that China and India's markets have offered Latin American and Caribbean exporters during 2000-2004. Second, empirical analyses examine the partial correlation between Chinese and Indian bilateral trade flows and Latin American and Caribbean trade with third markets. Both analyses rely on the gravity model of international trade. Econometric estimations that control for the systematic correlation between expected bilateral trade volumes and the size of their regression errors, as well as importer and exporter fixed effects and year effects, provide consistent estimates of the relevant parameters for different groups of countries in Latin America and the Caribbean. Results suggest that the growth of the two Asian markets has produced large opportunities for Latin American and Caribbean exporters, which nevertheless have not been fully exploited. The evidence concerning the effects of Chinese and Indian trade with third markets is not robust, but there is little evidence of negative effects on Latin American and Caribbean exports of non-fuel merchandise. In general, China's and to a large extent India's growing presence in world trade has been good news for Latin America and the Caribbean, but some of the potential benefits remain unexploited.

Suggested Citation

  • Lederman, Daniel & Olarreaga, Marcelo & Soloaga, Isidro, 2007. "The growth of China and India in world trade : opportunity or threat for Latin America and the Caribbean?," Policy Research Working Paper Series 4320, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4320
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    Citations

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    Cited by:

    1. Iacovone, Leonardo & Rauch, Ferdinand & Winters, L. Alan, 2013. "Trade as an engine of creative destruction: Mexican experience with Chinese competition," Journal of International Economics, Elsevier, vol. 89(2), pages 379-392.
    2. Guerrero, Pablo & Lucenti, Krista & Galarza, Sebastián, 2010. "Trade Logistics and Regional Integration in Latin America and the Caribbean," ADBI Working Papers 233, Asian Development Bank Institute.
    3. Jenkins, Rhys, 2008. "China?s Global Growth and Latin American Exports," WIDER Working Paper Series 104, World Institute for Development Economic Research (UNU-WIDER).
    4. Ferrari, Tatiana & Biage, Milton & Da Silva, Sergio, 2011. "Impacts of China’s growth on the Brazilian trade," MPRA Paper 29283, University Library of Munich, Germany.
    5. Mendez, Oscar, 2015. "The effect of Chinese import competition on Mexican local labor markets," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 364-380.
    6. Pablo Guerrero & Krista Lucenti & Sebastián Galarza S., 2009. "Trade Logistic and Regional Integration in Latin America & the Caribbean," IDB Publications (Working Papers) 2549, Inter-American Development Bank.
    7. 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. 0(1), pages 149-193, January.
    8. Pablo Guerrero & Krista Lucenti & Sebastián Galarza S., 2009. "Trade Logistic and Regional Integration in Latin America & the Caribbean," IDB Publications (Working Papers) 9331, Inter-American Development Bank.

    More about this item

    Keywords

    Economic Theory&Research; Free Trade; Currencies and Exchange Rates; Trade Policy; Markets and Market Access;

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