The Role of Importers and Exporters in the Determination of the U.S. Tariff Preferences Granted to Latin America

Abstract

Silva investigates the role played by domestic importers and foreign exporters in improving preferential access to the domestic market. To this end, the framework he uses extends the protection for sale analysis to explicitly model the role of domestic importers and foreign exporters in determining preferential trade treatment. The author tests the predictions of the model using data on preferential trade between the United States and Latin American countries. The results suggest that Latin American exporters and U.S. importers' lobbying efforts have a significant and important role in determining the extent of preferential access granted by the United States. More interestingly, these findings also show that U.S. importers capture a substantial share of the rents generated by tariff preferences. These results therefore shed a pessimistic view on preferential trade schemes as a reliable source of gains for developing countries. This paper - a product of the Trade Team, Development Research Group - is part of a larger effort in the group to understand the political economy determinants of preferential trade.