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 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 Chinese share in Indian total trade has increased more than 3 times over the last decade Share of total exports destinated to BRICS Share of total imports originated in BRICS

1.7. With the exception of China, BRICS economies are still not significant bilateral trade partners…  Russian Perspective Share of total exports destinated to BRICSShare 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 BRICSShare 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 BRICSShare 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 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 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;