How Sensitive are Latin American Exports to Chinese Competition in the U.S. Market?

38 Pages Posted: 20 Apr 2016

See all articles by J. Ernesto Lopez-Cordova

J. Ernesto Lopez-Cordova

affiliation not provided to SSRN

Alejandro Micco

University of Chile

Danielken Molina

University of California, San Diego

Date Written: January 1, 2008

Abstract

This paper estimates the elasticity of substitution of U.S. imports using detailed trade data over the 1990-2003 period. The authors use a two-stage least squares framework in order to identify the elasticity parameter of interest. The authors use the elasticity estimates to assess the extent to which Latin American and Chinese goods compete in the U.S. market by providing forecasts of how alternative policy scenarios may affect exports to the United States. The analysis considers the following scenarios: (i) currency revaluation in China; (ii) elimination of U.S. tariffs on Latin American exports under a hemispheric free trade agreement; and (iii) the elimination of quotas on apparel and textile exports under the Multi-Fiber Agreement. The findings show that a 20-percent appreciation of the renminbi reduces Chinese exports to the United States by a fifth, although since other regions increase sales to that market (0.5 percent for Latin America), U.S. imports decline by only 1.7 percent. Hemispheric free trade would increase Latin America's exports to the United States by around 3 percent. The removal of the quotas would lead to a sharp increase in Chinese sales to the United States (40 percent), but Latin America would see its share of the U.S. market decline by around 2 percent (2.5 percentage points). China's gains would come mainly at the expense of other regions of the world.

Keywords: Economic Theory & Research, Free Trade, Markets and Market Access, Trade Policy, Debt Markets

Suggested Citation

Lopez-Cordova, J. Ernesto and Micco, Alejandro and Molina, Danielken, How Sensitive are Latin American Exports to Chinese Competition in the U.S. Market? (January 1, 2008). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2008. Available at SSRN: https://ssrn.com/abstract=1089268

J. Ernesto Lopez-Cordova

affiliation not provided to SSRN

No Address Available

Alejandro Micco

University of Chile ( email )

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421
Chile

Danielken Molina (Contact Author)

University of California, San Diego ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

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