This article examines the trade policy response of Latin American governments to the rapid growth of Chinese and Indian exports in world markets. To explain more protection in sectors where a large share of imports originates in China and India, the "protection for sale" model is extended to allow for region-specific degrees of substitutability between domestic and imported varieties of a good. The results suggest that more protection toward Chinese and Indian goods can be explained by the higher substitutability of Chinese and Indian goods with domestic varieties. The data support the model, which performs better than the original protection for sale framework in explaining Latin America's structure of protection. JEL classification numbers: F10, F11, F13

Trade: General (jel F10), Neoclassical Models of Trade (jel F11), Commercial Policy; Protection; Promotion; Trade Negotiations; International Organizations (jel F13),
The World Bank Economic Review
Erasmus School of Economics

Facchini, G, Olarreaga, M, Baptista da Silva, J.M.P, & Willmann, G. (2010). Substitutability and Protectionism: Latin America's Trade Policy and Imports from China and India. The World Bank Economic Review, 24(3), 446–473. doi:10.1093/wber/lhq005