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Trade Talks Among Brics Economies_ Mapping out Threats and

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					TRADE TALKS AMONG BRICS
ECONOMIES: MAPPING OUT
THREATS AND OPPORTUNITIES FOR
THE BRAZILIAN ECONOMY
 



       Lucas Pedreira do Couto Ferraz
       (São Paulo School of Economics – FGV)
       BRICS-TERN, New Delhi, India
MAIN TOPICS

   Part 1: Brics economies over the last decade
       Economic Growth, Trade Peformance and Bilateral
        trade performance;



   Part 2: Simulating PTAs evolving BRICS
       Main Brazilian Macro level and sectoral effects from
        each of the four PTAs:
              1. Brazil-China; 2. Brazil-India; 3. Brazil-Russia;
               4. Brazil-South Africa
PART 1. TEN FACTS ABOUT BRICS
        ECONOMIES...
1.1. High Growth performance has been occurring in
     conjunction with relative macroeconomic
stability...

  1. GDP growth (%)                        2. Investment (%GDP)




                      3. Inflation rates (%)
1.2. High economic performance has been occurring in
     conjunction with increasing (but still low) income
     per capta levels...


                    Income per capta (%)
1.3. International trade represents a significant share of GDP
     in BRICS Economies, with the exception of Brazil….

     Exports (%GDP)                         Imports (%GDP)




                                                Exp.+Imp. (%GDP)
1.4. BRICS are predominantly importers of manufactured
     products….



                Manufacturing Imports (%GDP)
1.5. China and India are the best performing exporters of manufactured
     products in BRICS. Technological content in exports is still low for
     all BRICS but increasing for China…


  Manufacturing exports (%GDP)                  High tech level products (%exp)




    Almost 100% of Chinese exports corresponds to manufactured products....
    Russia is basically a commodity exporter...
1.6. BRICS economies have become more open to trade….



  Simple Average MFN tariffs                   Weighted Average MFN tariffs




  Despite higher trade barriers from 2000 to 2008, trade performance is India has
  been much better than in Brazil, especially when imports over GDP are
  considered...
1.7. With the exception of China, BRICS economies are still
     not significant bilateral trade partners…


     Brazilian Perspective

Share of total exports destinated to BRICS       Share of total imports originated in BRICS




 Chinese relative participation in Brazilian total trade has increased more than 5 times
 over the last decade
 1.7. With the exception of China, BRICS economies are still
      not significant bilateral trade partners…


       Indian Perspective

Share of total exports destinated to BRICS       Share of total imports originated in BRICS




 Chinese share in Indian total trade has increased more than 3 times over the last decade
1.7. With the exception of China, BRICS economies are still
     not significant bilateral trade partners…


      Russian Perspective
Share of total exports destinated to BRICS       Share of total imports originated in BRICS




      Share of Chinese imports in total imports from Russia has increased 5 times
   1.7. With the exception of China, BRICS economies are still
        not significant bilateral trade partners…


         South African perspective


Share of total exports destinated to BRICS        Share of total imports originated in BRICS




  Chinese relative participation in South African total trade has increased more than 5 times
  over the last decade
  1.7. With the exception of China, BRICS economies are still
       not significant bilateral trade partners…


        Chinese Perspective

Share of total exports destinated to BRICS     Share of total imports originated in BRICS




 Chinese bilateral trade with remaining BRICS has been increasing, tough numbers are still
insignificant from Chinese perspective
    1.8. Balance of trade has been predominantly positive for
         Brazil over the last decade....



Brazilian trade balance with CHINA (US$)   Brazilian trade balance with INDIA (US$)
     1.8. Balance of trade has been predominantly positive for
          Brazil over the last decade....



Brazilian trade balance with Russia (US$)   Brazilian trade balance with South Africa (US$)
   1.9. Most of Brazilian exports to remaining BRICS
        economies corresponds to basic products...



Brazilian exports profile to CHINA (US$)   Brazilian exports profile to Russia (US$)
      1.9. Exception made for exports to India and South
           Africa…


Brazilian exports profile to SOUTH AFRICA (US$)   Brazilian exports profile to INDIA (US$)
   1.10. Most of Brazilian imports from remaining BRICS
         corresponds to manufactured products...



Brazilian imports profile from CHINA (US$)   Brazilian imports profile from INDIA (US$)
    1.10. Most of Brazilian imports from remaining BRICS
          corresponds to manufactured products...


Brazilian imports profile from SOUTH AFRICA (US$) Brazilian imports profile from Russia (US$)
PART 2. SIMULATING BILATERAL PTAs
        ENVOLVING BRAZIL AND
        REMAINING BRICS COUNTRIES
                            2.1. CGE EXPERIMENT

   4 PTAS:  (1) BRA - CHINA;  (2) BRA - INDIA; (3) BRA – RUSSIA;  (4) BRA– S. AFRICA


   50%  Horizontal bilateral  tariff cut for each PTA   (accuracy of results)


   GTAP MODEL: 153 Regions and  57 Sectors in each region;


   DATA BASE: GATAP 7 Data Base (TRAINS-UNCTAD;  ITC; WTO; CONTRADE); 


   BASE YEAR: 2004 (Most recently available);


   CLOSURE: Stocks of primary factors are fixed for each region. There is free inter-sectoral 
    mobility of labor and capital within each region; Firms are perfect competitive and technology 
    is given; 
               2.2. THE BROAD PICTURE FOR BRAZIL




•   Volume of Trade: Larger effects for a PTA with China (competitive chinese exports)

2. Terms of trade: Larger effects for India and Russia (large markets with initially higher
   barriers);

3. Return to factors: Relatively larger effects for Land due to highly competitive Brazilian agricultural
   exports (Stoper-Samuelson connection reveals terms of trade effects are biased towards agricultural
   export prices...)
                2.3. DIRECTION OF IMPORTS




•   PTA-China: Impressive growth in imports values at the expence of import
    values from the Rest of the World. More competitive exports relatively to
    the Row (Possibly a trade-creating PTA);

•   PTAs- India/Russia/ South Africa: Larger values of bilateral imports from
    trade partner and lower (but positive) values from the RoW. (less room for
    trade creation)
                2.3. DIRECTION OF EXPORTS




•   PTA-China: higher equilibrium prices for Brazilian exports stimulated by
    extra chinese demand leads to lower export values to the Row;

•   PTAs- India/Russia/ South Africa: Same effect, but stronger, because of
    a more significant shift in brazilian foreig demand (higher trade barriers)
                2.3. Bilateral Trade Effects




•   PTA-China:  Balance of trade seems favorable to the Chinese economy
    for either agriculture products or industrial ones;

•   PTAs- India/Russia/ South Africa: Balance of trade seems favorable to
    the Brazilian economy for either agriculture products or industrial ones,
    with reflecting higher terms of trade gains in the case of India and Russia
2.4. SECTORAL AGGREGATED GDP EFFECTS




•   Brazilian Industry (light and heavy manufacturing, textile and apparel)
    is worse off in all PTA scenarios;

•   Brazilian Agriculture (Grains crops, food processing and livestock) is
    better off in all PTA scenarios;

3. PTA-China/South Africa: Lower terms of trade effects imply milder
   distributive effects ;

4. PTAs- India/Russia: Significant terms of trade effects imply stronger
   distributive effects;

				
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