Transcript Trade Talks Among Brics Economies: Mapping out Threats and

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)
Crescimento do PIB (% a.a.)
Investimento em FBCF (% PIB)
20
50
15
40
10
30
5
0
2000
-5
20
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
10
0
-10
-15
Anos
África do Sul
Índia
Rússia
China
Brasil
África do Sul
3. Inflation rates (%)
Inflação (CPI)
30
25
20
(%)
Brasil
Anos
15
10
5
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-5
Anos
Brasil
África do Sul
Índia
Rússia
China
Índia
Rússia
China
1.2. High economic performance has been occurring in
conjunction with increasing (but still low) income
per capta levels...
Income per capta (%)
Renda per capta (PPP)
21000
US$
16000
11000
6000
1000
Anos
Brasil
África do Sul
Índia
Rússia
China
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
Parcela das Importações totais Brasileiras com origem nos
Brics
Parcela das Exportações do Brasil destinadas aos Brics
15
15
12
(% total imp.)
(% total export.)
18
9
6
3
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
África do Sul
China
India
Rússia
12
9
6
3
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
África do Sul
China
India
Rússia
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
Parcelas das exportações da Índia destinadas aos Brics
Parcela das importações da Índia com origem nos
Brics
9
6
(% total imp.)
(% total exp.)
15
3
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
África do Sul
Brasil
China
12
9
6
3
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
Russia
África do Sul
Brasil
China
Russia
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
7
6
5
4
3
2
1
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
África do Sul
Brasil
China
Índia
Parcela das Importações da Rússia com origem nos Brics
18
15
(% total imp.)
(% total exp.)
Parcela das Exportações da Rússia destinadas aos
Brics
12
9
6
3
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
África do Sul
Brasil
China
Share of Chinese imports in total imports from Russia has increased 5 times
India
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
Parcela das importações da África do Sul com origem
nos Brics
12
18
10
15
(%) total imp.
(%) total export.
Parcela das exportações da África do Sul destinadas
aos Brics
8
6
4
2
12
9
6
3
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
Brasil
China
Índia
Rússia
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
Brasil
China
India
Russia
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
Parcela das exportações da China destinadas aos Brics
Parcela das importações da China com origem nos
Brics
4
3
(% total imp.)
(% total exp.)
6
2
1
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
África do Sul
Brasil
India
Russia
4
2
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
África do Sul
Brasil
India
Russia
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$)
Evolução do Comércio Brasil x China
US$
3,0E+10
4,5E+09
5,0E+09
4,0E+09
1,0E+09
4,0E+09
3,5E+09
5,0E+08
3,0E+09
0,0E+00
2,5E+09
-5,0E+08
2,0E+09
-1,0E+09
1,5E+09
-1,5E+09
-2,0E+09
1,0E+09
-2,0E+09
-3,0E+09
5,0E+08
-2,5E+09
2,5E+10
3,0E+09
2,0E+10
2,0E+09
1,0E+09
1,5E+10
0,0E+00
1,0E+10
-1,0E+09
5,0E+09
Evolução do Comércio Brasil x Índia
6,0E+09
US$
3,5E+10
Brazilian trade balance with INDIA (US$)
1,5E+09
-4,0E+09
0,0E+00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-3,0E+09
0,0E+00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
Anos
Exportações Br.
Importações Br.
Saldo Comercial
Exportações Br.
Importações Br.
Saldo Comercial
1.8. Balance of trade has been predominantly positive for
Brazil over the last decade....
Brazilian trade balance with Russia (US$)
Brazilian trade balance with South Africa (US$)
Evolução do Comércio Brasil x Rússia
5,0E+09
3,0E+09
4,5E+09
Evolução do Comércio Brasil x África do Sul
1,8E+09
2,5E+09
4,0E+09
1,4E+09
1,2E+09
1,6E+09
3,5E+09
2,0E+09
1,4E+09
1,0E+09
3,0E+09
1,5E+09
1,2E+09
8,0E+08
2,5E+09
2,0E+09
1,0E+09
1,5E+09
5,0E+08
1,0E+09
US$
US$
2,0E+09
1,0E+09
8,0E+08
6,0E+08
6,0E+08
4,0E+08
4,0E+08
0,0E+00
5,0E+08
2,0E+08
2,0E+08
0,0E+00
-5,0E+08
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
0,0E+00
0,0E+00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
Anos
Exportações Br.
Importações Br.
Saldo Comercial
Exportações Br.
Importações Br.
Saldo Comercial
1.9. Most of Brazilian exports to remaining BRICS
economies corresponds to basic products...
Brazilian exports profile to CHINA (US$)
Brazilian exports profile to Russia (US$)
Perfil das Exportações do BRASIL para a CHINA
Perfil das Exportações do BRASIL para a RÚSSIA
3,0E+10
2,5E+10
2,5E+09
2,0E+10
2,0E+09
US$
US$
3,0E+09
1,5E+10
1,5E+09
1,0E+09
1,0E+10
5,0E+08
5,0E+09
0,0E+00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
0,0E+00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
Ano
Básicos
Semimanufaturados
Manufaturados
Básicos
Semimanufaturados
Manufaturados
1.9. Exception made for exports to India and South
Africa…
Brazilian exports profile to SOUTH AFRICA (US$)
Brazilian exports profile to INDIA (US$)
1,6E+09
1,4E+09
1,2E+09
1,0E+09
8,0E+08
6,0E+08
4,0E+08
2,0E+08
0,0E+00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Perfil das Exportações do BRASIL para a ÍNDIA
2,0E+09
1,5E+09
US$
US$
Perfil das Exportações do BRASIL para a ÁFRICA do
SUL
1,0E+09
5,0E+08
0,0E+00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
Anos
Básicos
Semimanufaturados
Manufaturados
Básicos
Semimanufaturados
Manufaturados
1.10. Most of Brazilian imports from remaining BRICS
corresponds to manufactured products...
Brazilian imports profile from CHINA (US$)
Brazilian imports profile from INDIA (US$)
Perfil das Importações do Brasil com origem na Índia
Perfil das Importações do Brasil com origem na China
3,0E+10
5,0E+09
2,5E+10
4,0E+09
US$
US$
2,0E+10
1,5E+10
3,0E+09
2,0E+09
1,0E+10
1,0E+09
5,0E+09
0,0E+00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
Básicos
Semimanufaturados
Manufaturados
0,0E+00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
Básicos
Semimanufaturados
Manufaturados
1.10. Most of Brazilian imports from remaining BRICS
corresponds to manufactured products...
Brazilian imports profile from SOUTH AFRICA (US$) Brazilian imports profile from Russia (US$)
Perfil das Importações do Brasil com origem na Rússia
Perfil das Importações do Brasil com origem na África do
Sul
3,0E+09
6,0E+08
2,5E+09
5,0E+08
2,0E+09
US$
US$
4,0E+08
3,0E+08
1,5E+09
2,0E+08
1,0E+09
1,0E+08
5,0E+08
0,0E+00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
0,0E+00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Anos
Básicos
Semimanufaturados
Manufaturados
Básicos
Semimanufaturados
Manufaturados
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
1. 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
1. 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);
2. 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
1. PTA-China: higher equilibrium prices for Brazilian exports stimulated by
extra chinese demand leads to lower export values to the Row;
2. 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
Impact on bilateral volumes of trade (in %)
Sector
PTA
China
India
6.30
244.7
Agriculture exports
23.60
28.85
Agriculture imports
Industry exports
Industry imports
8.83
48.17
68.60
34.75
Russia
South Africa
51.92
26.16
33.58
31.87
51.15
16.66
42.91
33.84
1. PTA-China: Balance of trade seems favorable to the Chinese economy
for either agriculture products or industrial ones;
2. 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
1. Brazilian Industry (light and heavy manufacturing, textile and apparel)
is worse off in all PTA scenarios;
2. 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;