Competing with the Dragon: Latin American and Chinese Exports to the US Market

How sensitive are Latin American exports to the impact of Chinese competition in the United States, their main market? This chapter calculates US import-substitution elasticities and uses them to estimate changes in Latin American and Chinese market shares under three scenarios: a substantial appreciation of the Chinese currency, regional free trade in the Americas and full elimination of US import quotas on textiles and apparel. The first two of these international policy shifts would benefit Latin American exports in US markets, and the third would not, but all three effects are not as large as one might imagine. External events cannot suffice to redress Latin America’s relatively poor trade performance vis-a-vis China. The authors suggest attention throughout the region to policies that could boost its productivity performance.