The Political Economy of Used Automobile Protection in Latin America

N the wake of the debt crises of the early 1980s, Latin America embarked upon a process of trade liberalisation. The levels of both average tariffs and tariff dispersions fell throughout the region, as did the coverage of non-tariff barriers.1 In the case of used automobiles, however, this liberalisation has not, in general, taken place. Many Latin American countries retain significant restrictions on the imports of used automobiles even as liberalisation has occurred in the new automobile sector. From a factor proportions standpoint, these restrictions are difficult to justify. For a number of reasons elucidated by Sen (1962), used machinery should be imported relatively intensively into labour- abundant countries such as those of Latin America. Further, this insight was specifically applied to the case of used automobiles by Grubel (1980). The key factor identified by Grubel is the lower repair costs of used automobiles in developing countries. Importantly, Grubel's analysis suggests that the bulk of the gains from trade in used automobiles would accrue to the developing countries.2 Explaining Latin American protection against imports of used automobiles requires an exploration of the political economy of the protective measures. In this paper, we make a preliminary attempt at this exploration. We begin in the following section by presenting the degree of used passenger automobile protection in 24 Latin American and Caribbean countries. This is followed by a