Export competition between China and Latin America and the Caribbean in the United States market

Abstract

We investigate export competition between China and Latin America and the Caribbean (LAC) in the United States market between 2002 and 2022. Using a sample of 33 exporters and 10‐digit Harmonised Tariff Schedule (HS) level trade data, we estimate a structural gravity model using an instrumental variable constructed from Chinese exports to eight other industrialised nations. We use a first‐order Taylor‐series expansion à la Baier and Bergstrand (Journal of International Economics, 2009a, 77, 77) to approximate the multilateral price terms pointed out by Anderson and Van Wincoop (American Economic Review, 2003, 93, Article 1). The results show that the impact of Chinese exports on United States imports from LAC is negative and statistically significant across several model specifications, levels of aggregation, and sectors. A percentage increase in imports from China decreased imports from LAC by ca. 0.75%. The displacement effect is ca. 0.32 for manufacturing products, 1.01 for resource‐based products, 1.33 when estimated only for South America, 0.25 for the Caribbean, and not significant for Central America.