The Growth of China and India in World Trade : Opportunity or Threat for Latin America and the Caribbean?

Olarreaga, Marcelo; Lederman, Daniel; Soloaga, Isidro

The Growth of China and India in World Trade : Opportunity or Threat for Latin America and the Caribbean?

Autores

Olarreaga, Marcelo

Lederman, Daniel

Soloaga, Isidro

Editor

World Bank, Washington, DC

Descripción

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.

Palabras clave

ABSOLUTE VALUE, AGGREGATE TRADE, AGRICULTURE, BILATERAL IMPORTS, BILATERAL TRADE, CENTRAL AMERICA, COMMODITY PRICES, COMPETITIVENESS, CONTROL VARIABLE, COUNTRY DUMMIES, COVARIANCE MATRIX, DEMAND ELASTICITIES, DEMAND ELASTICITY, DEMAND GROWTH, DEMAND SHOCKS, DEVELOPING COUNTRIES, DUMMY VARIABLE, DUMMY VARIABLES, ECONOMETRIC ESTIMATES, ECONOMETRIC EVIDENCE, ECONOMIC GROWTH, ECONOMIC SIZE, ELASTICITY, EXPECTED VALUE, EXPLANATORY VARIABLES, EXPORT GROWTH, EXPORT MARKETS, EXPORT OPPORTUNITIES, EXPORTER, EXPORTERS, EXPORTS, FACTOR ENDOWMENTS, FEDERAL RESERVE, FEDERAL RESERVE SYSTEM, FIXED EFFECTS, GDP, GDP PER CAPITA, GLOBAL ECONOMY, GLOBAL FACTORS, GLOBAL TRADE, GRAVITY APPROACH, GRAVITY EQUATION, GRAVITY FRAMEWORK, GRAVITY MODEL, GRAVITY MODELS, GRAVITY VARIABLES, GROWTH RATE, IMPORT DEMAND, INDUSTRY TRADE, INEQUALITY, INTERMEDIATE INPUTS, INTERNATIONAL FINANCE, INTERNATIONAL PRODUCTION, INTERNATIONAL TRADE, LATIN AMERICAN, MACROECONOMIC CRISES, MARGINAL PROPENSITY TO IMPORT, MARKET SHARE, MARKETING, MERCHANDISE, MERCHANDISE EXPORTS, MERCHANDISE TRADE, MULTINATIONAL ENTERPRISES, POLITICAL ECONOMY, POSITIVE EFFECTS, PRICE INDEX, PRODUCER PRICE, PRODUCER PRICE INDEX, RAPID GROWTH, RATE OF GROWTH, REGIONALISM, SPECIALIZATION, SUBSTITUTION, SUBSTITUTION EFFECT, SUPPLY CAPACITY, SUPPLY RESPONSE, TELECOMMUNICATIONS, TERMS OF TRADE, THIRD MARKET, THIRD MARKETS, TOTAL EXPORTS, TRADE DATA, TRADE DEFICIT, TRADE EFFECTS, TRADE FLOWS, TRADE POLICIES, TRADE STATISTICS, TRADE SURPLUS, TRADE VOLUMES, TRADING PARTNER, TRADING PARTNERS, TRANSPORT COSTS, TRINIDAD AND TOBAGO, UNCERTAINTY, VALUE ADDED, WEIGHTS, WORLD DEVELOPMENT INDICATORS, WORLD MARKETS, WORLD TRADE