Discussion Paper Details

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Title: Chinese vs. US trade in an emerging country. The impact of trade openness in Chile

Author(s): Andrés Rodríguez-Pose and Alexandra Sotiriou

Publication Date: June 2021

Keyword(s): Chile, China, free trade, Import penetration, Manufacturing and USA

Programme Area(s): International Trade and Regional Economics

Abstract: This paper explores the effects of import competition on the manufacturing sector in Chile following the implementation of the country's two largest Free Trade Agreements (FTA) (with the USA and China). Exploiting cross-industry variation in import exposure, we analyse the effects on manufacturing sales, employment and labour productivity at the finest level of industrial classification (4 digit ISIC level). We detect an overall negative effect of increased Chinese import penetration, owing to substitution effects from low and medium tech imports and a less pronounced effect from USA imports. By introducing interaction effects, we find that the levels of foreign ownership and the export intensity of the domestic industries reverse the negative effect due to the opportunities offered via participation in global value chains. An IV strategy is applied to address standard endogeneity concerns and confirm the robustness of our estimates.

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Bibliographic Reference

Rodríguez-Pose, A and Sotiriou, A. 2021. 'Chinese vs. US trade in an emerging country. The impact of trade openness in Chile'. London, Centre for Economic Policy Research.