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

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...

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Bibliographic Details
Main Authors:	López-Córdova, J. Ernesto, Micco, Alejandro, Molina, Danielken
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ADVERSE EFFECTS AGGREGATE TRADE AGRICULTURE APPAREL APPAREL EXPORTS APPAREL GOODS APPAREL PRODUCTS AVERAGE TARIFF AVERAGE TARIFFS BILATERAL TRADE BUSINESS ENVIRONMENT CAPITAL REQUIREMENT CAPITAL REQUIREMENTS CAPITAL SHARE CENTRAL AMERICA CENTRAL AMERICAN COMMODITY PRICE COMPARATIVE ADVANTAGE COMPETITIVENESS CONSTANT ELASTICITY OF SUBSTITUTION CONSUMER PRICE CONSUMERS COUNTRY OF ORIGIN CURRENCY CUSTOMS DEMAND ELASTICITY DEMAND FOR GOODS DEMAND FUNCTION DEVELOPMENT BANK ECONOMIC EFFECTS ELASTICITY ELASTICITY OF SUBSTITUTION ELIMINATION OF TARIFFS EQUILIBRIUM EQUIPMENT EXPENDITURE EXPENDITURES EXPORT DYNAMISM EXPORT GROWTH EXPORT PERFORMANCE EXPORTERS EXPORTS FACTOR PRICES FAIR FINANCIAL SECTOR FORECASTS FREE TRADE FREE TRADE AGREEMENT FREE TRADE AGREEMENTS FREE TRADE AREA GDP GDP PER CAPITA GENERAL EQUILIBRIUM GRAVITY FRAMEWORK GROWTH RATE HOLDING IMPORT DATA IMPORT QUOTA IMPORT QUOTAS IMPORT SHARE IMPORT TARIFFS IMPORT VALUE INPUT PRICES INSTRUMENT INTERMEDIATE GOODS INTERMEDIATE INPUTS INTERNATIONAL BANK INTERNATIONAL FINANCE INTERNATIONAL TRADE INTERNATIONAL TRADE COMMISSION LATIN AMERICAN LOW TARIFFS MARGINAL COSTS MARKET ACCESS MARKET SHARE MARKET SHARES METAL PRODUCTS PREFERENTIAL ACCESS PREFERENTIAL TARIFF PREFERENTIAL TRADE PRICE CHANGES PRICE EFFECT PRICE ELASTICITY PRICE INDEX PRICE LEVEL PRICE OF IMPORTS PRICE TRENDS PRODUCER PRICE QUOTAS REGIONAL INTEGRATION SALES SOUTH AMERICA SOUTH AMERICAN SUPPLIER TARIFF ELIMINATION TARIFF EQUIVALENT TARIFF LINE TARIFF LINES TARIFF PREFERENCES TARIFF REDUCTION TEXTILE IMPORTS TRADE AGREEMENT TRADE AGREEMENTS TRADE DATA TRADE IMPEDIMENTS TRADE PARTNER TRADE PATTERNS TRADE POLICIES TRADE POLICY TRANSPORT COSTS URUGUAY ROUND UTILITY FUNCTION VALUE ADDED VALUE OF EXPORTS VALUE OF IMPORTS VOLUME OF TRADE WAGES WORLD MARKETS WORLD TRADE WORLD TRADE ORGANIZATION
Online Access:	http://documents.worldbank.org/curated/en/2008/01/8973089/sensitive-latin-american-exports-chinese-competition-market http://hdl.handle.net/10986/6378

Description
Summary:	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.

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

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