Flooding of Chinese goods and their impacts on exports of other countries: a firm-level investigation

Abstract

China’s accession to the World Trade Organization (WTO) has shifted international trade and the literature on its impact on other countries’ exports is still scant. This paper aims to contribute to this literature by investigating the impact of Chinese expansion in the international trade on the exports of three Latin-American (LA) countries: Brazil, Mexico and Peru. Considering developed and developing countries as destinations from these LA countries, results suggest that these three countries were affected by the insertion of China into the international trade. Overall, firms of these three countries lost 5.7% of their exports to the United States of America (USA) and 7.2% to the European Union due to Chinese expansion. In terms of volume, these three countries lost USD 9 billion of exports just in the US market. Comparing the outcomes between countries, Brazil seems to be the most affected compared to Mexico and Peru in relative terms. Looking at the margins and types of goods, final goods suffered more from the Chinese competition compared to intermediaries, yet it is not feasible to distinguish which margin, intensive or extensive, was mostly affected.