China's and India's Challenge to Latin America

Opportunity or Threat?

Daniel Lederman, Marcelo Olarreaga, Guillermo E. Perry

• Publisher: World Bank Publications
• Year: 2008
• eBook ISBN: 9780821373095
• Edition: 0
• Topic: Politics & International Relations
• Subtopic: Globalisation
• Index: Politics & International Relations

The economic successes of China and India are viewed with admiration but also with concern because of the effects that the growth of these Asian economies may have on the Latin American and Caribbean (LAC) region. The evidence in 'China's and India's Challenge to Latin America' indicates that certain manufacturing and service industries in some countries have been negatively affected by Chinese and Indian competition in third markets and that LAC imports from China and India have been associated with modest unemployment and adjustment costs in manufacturing industries. The book also provides substantial evidence of positive aggregate effects for LAC economies associated with China's and India's greater presence in world exports, financial flows, and innovation. Chinese and Indian growth is creating new production possibilities for LAC economies, particularly in sectors that rely on natural resources and scientific knowledge.

Table of contents

• Contents
• Foreword
• Acknowledgments
• Abbreviations
• PART I: Introduction
• PART II: The Growth of China and India Is Not a Zero-Sum Game for Latin America and the Caribbean: Short- and Long-Term Effects
• PART III: The Negative Impact of Chinese and Indian Competition in Some Industries and Some Regions
• Index
• Box 1.1 Public Opinion in LAC about China’s Growth
• Figure 1.1 LAC, China, and India: Output Comovement (10-Year-Rolling Correlations), 1981–2003
• Figure 1.2 Explaining the Rising Output Correlation between LAC and China, 1995–2004 versus 1985–94
• Figure 1.3 LAC’s Comparative Advantage in Natural-Resource-Intensive Products, 1990
• Figure 1.4 China and India: Impact on Commodity Prices, December 2001–December 2005
• Figure 1.5 Share of China in World Markets: Selected Commodities, 1990 and 2004
• Figure 1.6 China’s and India’s Contribution to Growth in World Demand: Selected Commodities, 1990–2004
• Figure 1.7 Share of LAC Exports to China and India, 1990 and 2004
• Figure 1.8 Imports of Services by the United States, by Subregion, 1994–2004
• Figure 1.9 Relative Export Prices of Apparel, 1989–2004
• Figure 1.10 Is LAC Competing in the Same Products as China and India? (1990–2004)
• Figure 1.11 Share of China and India in Latin American Imports, 1990 versus 2004
• Figure 2.1 Output Comovement: 10-Year Window Rolling Correlations
• Figure 2.2 China and India: Impact on Commodity Prices, December 2001–December 2005
• Figure 2.3 Trade Integration of LAC with China and India, 1985–2004
• Figure 2.4 Intra-Industry Trade in Latin America with China and India, 1985–2004
• Figure 2.5 Asymmetries in Production Structures in Latin America Relative to China and India, 1985–2004
• Figure 2.6 Asymmetries in the Structure of Exports in Latin America Relative to China and India, 1985–2004
• Figure 2.7 Asymmetries in the Structure of Imports in Latin America Relative to China and India, 1985–2004
• Figure 2.8 Export Similarity Index between Latin America, India, and China with Respect to the U.S. Market, 1985–2004
• Figure 2.9 Contribution of Trade Integration, Output Specialization, and Demand Spillovers to Predicted Changes in Output Correlation, 1995–2004 Compared with 1985–94
• Figure 2.10 Contribution of Trade Integration, Export Specialization, and Demand Spillovers to Predicted Changes in Output Correlation, 1995–2004 Compared with 1985–94
• Figure 2.11 Contribution of Trade Integration, Output Specialization, and Demand Spillovers to Predicted Changes in Output Correlation, 1995–2004 and 1985–94: Evidence for Selected Latin American Countries
• Figure 3.1 Share of China and India in LAC Exports, 1990 and 2004
• Figure 3.2 Share of China and India in LAC Imports, 1990 and 2004
• Figure 5.1 Estimated Sector-Country Exporter and Importer Coefficients, 1995, 2000, and 2004
• Figure 5.2 Sectoral Exporter Coefficients for Four Latin American Countries and U.S. Sectoral Trade
• Figure 5.3 Changes in Four Latin American Exporter Coefficients and Changes in U.S. Sectoral Trade
• Figure 5.4 Sectoral Exporter Coefficients, China and Four Latin American Countries
• Figure 5.5 Annual Changes in Sectoral Exporter Coefficients, China and Four Latin American Countries
• Figure 5B.1 Exporter Coefficients in Argentina and China by Sector, 1995–2004
• Figure 5B.2 Exporter Coefficients in Brazil and China by Sector, 1995–2004
• Figure 5B.3 Exporter Coefficients in Chile and China by Sector, 1995–2004
• Figure 5B.4 Exporter Coefficients in Mexico and China by Sector, 1995–2004
• Figure 6.1 Change in LAC’s Market Share of World Exports versus Change in China’s Market Share of World Exports, 1995–2004
• Figure 6.2 Change in LAC’s Market Share of Exports to North America versus Change in China’s Market Share of Exports to North America, 1995–2004
• Figure 7.1 U.S. Imports and Exports of Private Services, 1994–2004
• Figure 7.2 Growth in U.S. Imports and Exports of Private Services, 1994–2004
• Figure 7.3 Growth in U.S. Imports and Exports of Travel Services, 1994–2004
• Figure 7.4 Growth in U.S. Imports and Exports of Passenger Fares, 1994–2004
• Figure 7.5 Growth in U.S. Imports and Exports of Other Transport Services, 1994–2004
• Figure 7.6 Growth in U.S. Trade in Royalties and License Fees, 1994–2004
• Figure 7.7 Growth in U.S. Trade in Other Private Services, 1994–2004
• Figure 7.8 Growth of U.S. Total and Unaffiliated Other Private Services Trade by Region or Country, 1994–2004
• Figure 7.9 Growth in U.S. BPT Services Trade, 1994–2004
• Figure 7.10 Broad Indexes of U.S. Service Trade Similarity with India, 1994–2004
• Figure 7.11 Broad Indexes of U.S. Service Trade Similarity with China, 1994–2004
• Figure 7.12 Index of Similarity of U.S. OPS Trade with India, 1993 and 2003
• Figure 7.13 Index of Similarity of U.S. BPT Trade with India, 1993 and 2003
• Figure 8.1 Input Varieties
• Figure 8.2 Output Varieties
• Figure 8.3 NAFTA and Export Variety
• Figure 8.4 Nontariff Measures Affecting China’s Imports, 1996
• Figure 9.1 Employment in the Argentine Industrial Sector, 1980–2003
• Figure 9.2 Share of Argentine Manufacturing Imports from China and India, 1980–2003
• Figure 9.3 Share of Argentine Manufacturing Imports from Brazil, the EU, the United States, and the Rest of the World, 1980–2003
• Figure 10.1 Share of China and India in Uruguay’s Imports and World Markets
• Figure 10.2 Adjustment Functions for Skilled Labor: Impact of Imports from China, 1982–95
• Figure 10.3 Adjustment Functions for Unskilled Labor: Impact of Imports from China, 1982–95
• Figure 10.4 Adjustment Functions for Capital: Impact of Imports from China, 1982–95
• Figure 10.5 Adjustment Functions for Skilled Labor: Impact of India’s Imports, 1982–95
• Figure 10.6 Adjustment Functions for Unskilled Labor: Impact of India’s Imports, 1982–95
• Figure 10.7 Adjustment Functions for Capital: Impact of Imports from India, 1982–95
• Table 1.1 Impact of China’s (and LAC’s) GDP Growth on LAC’s Non-Fuel Exports to China
• Table 1.2 OECD, U.S., and U.S. Manufacturing Stocks of FDI in LAC Relative to Stock of FDI in China and India, Controlling for Host-Country Economic Size, 2003
• Table 1.3 Counterfactual Decomposition of Latin American Export Growth
• Table 2.1 Basic Statistics
• Table 2.2 Correlation Analysis
• Table 2.3 Baseline Regression: Least Squares
• Table 2.4 First Stage Regressions: Gravity Model of Bilateral Trade
• Table 2.5 Baseline Regression: Instrumental Variables (IV) Estimation
• Table 2.6 Augmented Regression: Instrumental Variables (IV) Estimation
• Table 2.7 Effects on Business Cycle Synchronization of Higher Integration with China and India
• Table 2.8 Explaining Changes in Output Correlation for Latin America and the Caribbean with Respect to China
• Table 2.9 Explaining Changes in Output Correlation for Latin America and the Caribbean with Respect to India
• Table 2A.1 Economies Included in Regression Analysis
• Table 3.1 Trade Demand and Supply Elasticities of GDP for LAC-China Trade: Non-Fuel Merchandise Trade Data
• Table 3.2 Trade Demand and Supply Elasticities of GDP for LAC-India Trade: Non-Fuel Merchandise Trade Data
• Table 3.3 Impact of China’s Trade Flows on LAC Non-Fuel Exports to Third Countries
• Table 3.4 Impact of India’s Trade Flows on LAC Non-Fuel Exports to Third Countries
• Table 4.1 FCS in Latin America Relative to China, China including Hong Kong, and India, 2003
• Table 4.2 Normalized FCS in Latin America Relative to China, China including Hong Kong, and India, 2003
• Table 4.3 Ratio of Relative FCS in 2003 versus 1990
• Table 4.4 Ratio of Relative FCS in 2003 versus 1990, with FCS Normalized
• Table 4.5 Ratio of Relative FCS in 2003 versus 1997
• Table 4.6 Ratio of Relative FCS in 2003 versus 1997, with FCS Normalized
• Table 4.7 Conditional Relative Means, 1990, 1997, and 2003
• Table 4A.1 Results from the Estimation of the Knowledge-Capital Model of Multinational Enterprises: Little Evidence of Substitution Effects
• Table 5.1 Average Coefficient Estimates on Trade Cost Variables, 1995–2004
• Table 5.2 Decomposing Export Growth for Four Latin American Countries, 1995–2004
• Table 5.3 Counterfactual Decompositions of Export Growth for Four Latin American Countries
• Table 5A.1 Average Exporter Coefficients
• Table 5A.2 Average Country Importer and Exporter Coefficients
• Table 5B.1 Harmonized System Industry Code Descriptions
• Table 6.1 Determinants of LAC Export Growth
• Table 6.2 Determinants of LAC Export Growth: Isolating Markets
• Table 6.3 Determinants of LAC Export Growth: Isolating Periods and Exporters
• Table 6.4 Determinants of LAC Exports: Isolating Year, Market, and Exporter Effects
• Table 6.5 China’s Effects on Exports from Mexico, Central America, and the Caribbean
• Table 6.6 Industries for Which China’s Export Growth Is Significantly Correlated with Lower LAC Growth
• Table 6.7 Relatively High-Growth LAC Industries
• Table 6.8 Relatively Low-Growth LAC Industries
• Table 6.9 Low-Income and High-Income Industries
• Table 6.10 The Average PRODY of Exports
• Table 6A.1 Determinants of LAC Exports: Two-Digit Industry Effects
• Table 6A.2 Determinants of LAC Exports: Two-Digit and Period Effects
• Table 7.1 Main Services Industries
• Table 7.2 Share of Trade between Affiliated Firms, 1994 and 2004
• Table 7.3a Growth in Latin American BPT Trade with the United States
• Table 7.3b Growth in Latin American BPT Trade with the United States, Using Weighted Indian Export Growth
• Table 7.4a Determinants of U.S. Imports of BPT Services from Latin America by Industry
• Table 7.4b Determinants of U.S. Imports of BPT Services to Latin America by Industry, Using Weighted Indian Export Growth
• Table 7.5a Determinants of U.S. Exports of BPT Services to Latin America by Industry
• Table 7.5b Determinants of U.S. Exports of BPT Services to Latin America by Industry, Using Weighted Indian Export Growth
• Table 8.1 Mexico’s Trade with the United States, 1990 and 2001
• Table 8.2 China’s Trade with the United States, 1990 and 2001
• Table 8.3 Dependent Variable—Log of Industry Export Variety
• Table 9.1 Total Import Penetration and Changes in Industry Share in Total Industrial Employment, 1980–2003
• Table 9.2 Argentine Import Penetration from China, 1980–2003
• Table 9.3 Argentine Import Penetration from India, 1980–2003
• Table 9.4 Regression Results from Base Model
• Table 9.5 Regression Results from Augmented Model, 1991–2003
• Table 9.6 Regression Results from Augmented Model, 1991–2003
• Table 9A.1 Summary of Data: Available Years and Sources
• Table 10.1 Share of Imports from China and India by Industry, 1984, 1994, and 2004
• Table 10.2 Estimated Parametric Adjustment Functions and China’s Imports, 1982–95
• Table 10.3 Estimated Parametric Adjustment Functions and India’s Imports, 1982–95