Local impacts of trade liberalization: evidence from the Chilean agricultural sector
Felipe González; J.I. Cuesta; F. Gallego
Economic Policy in Emerging-Market Economies
Protectionist trade policies aim at shielding some sectors— typically, but not exclusively, manufacturing—from international competition. In doing so, they may produce unintended consequences. In particular, they tend to create some taxed sectors that use protected inputs, usually in the agricultural sector, which end up facing a negative effective rate of protection (ERP hereafter). In this way, protectionism distorts the allocation of resources and creates disincentives for the production of some goods. This was the case of the tariff structure in Chile before the massive process of economic and trade liberalization that began in the mid-1970s. Before the liberalization reform, average tariffs were as high as 220%, aggravated by high dispersion and several non-tariff barriers This tariff structure created a lot of heterogeneity in the ERPs between and within sectors. For instance, according to Hachette (2011), while agriculture had negative ERPs of about 27% in 1960-1969, sectors outside agriculture had high positive ERPs of about 73%.
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Etiquetas: Chile, protectionism, trade policies