CENTER FOR MACROECONOMIC
ANALYSIS AND SHORT-TERM FORECASTING
Tel.: +7-499-129-17-22, fax: +7-499-129-09-22, e-mail: [email protected], http://www.forecast.ru
Potential Gains from Integration for the BRICS: Export
Growth Opportunities at the Commodity Level*
October 20th, 2016
“Evolution of International Trading System: Prospects and Challenges”
Annual International Conference at the Faculty of Economics, St. Petersburg State University
Andrey Gnidchenko
*The research was carried out with financial support of the Russian
Foundation for Basic Research, project № 16-06-00557 а. Part of this
work was written under the Basic Research Program at the National
Research University Higher School of Economics (HSE) in 2016 (ТЗ-17).
Senior expert, CMASF;
Research fellow, HSE;
Junior research fellow, IEF RAS
© Некоммерческое партнерство «Центр макроэкономического анализа и краткосрочного прогнозирования»
Plan
The aim of the paper
1. The approach: key ideas
2. The results for BRICS
Conclusion
2
The aim of the paper
• Stimulating problems
– Some commodities that may become export champions can be
hidden in industries with low average expected growth
– Conventional methods (CGE models, gravity models) are not
designed for commodity-level calculations
• The paper describes the approach to calculating the gains
from integration at the detailed level (goods & services)
– International trade data is at the heart of the approach
– The focus on the direction of structural change, not full gains
– The idea is close to “product space” (Hausmann, Klinger, 2007*)
* Hausmann R., Klinger B., 2007. “The structure of the product space and the evolution of comparative
advantage”. Harvard University CID Working Paper No. 146.
3
The aim of the paper
• “Product space” is the matrix of interrelation between all
pairs of commodities (Hausmann, Hidalgo, 2011*)
– Countries have a large number of unobservable capabilities
– They combine these capabilities to produce products
– Country’s export structure reflects its capabilities
countries
countries
capabilities
capabilities
products
products
* Hausmann R., Hidalgo C., 2011. “The network structure of economic output,” Journal of Economic
Growth, 16(4), 309-342.
4
1. The approach: key ideas
• The driving forces of expected export growth
– A country’s comparative advantage (relative trade share)
– Inter-industry technological linkages (input-output)
– World trade patterns (frequency of pairwise joint exports)
BI i   ij BI j
ij
• The idea: visualization
– From actual to expected
relative export share
– A country’s export
structure matters
– The outcome is trade value
Balassa index
1,2
1
70%
10%
0,8
0,6
0,4
0,2
20%
0
Actual (cars)
Expected (cars-plastics)
Expected (cars)
Expected (cars-trucks)
Expected (cars-metals)
5
1. The approach: key ideas
• Calculating gains from integration in the form of exports
to non-BRICS countries
– Get expected export growth for a country as a separate entity
(full X) and as a part of the union (X to the non-BRICS countries)
– Calculate the difference between the latter and the former
• The idea: visualization
– Changes in a country’s
export structure and
comparative advantage
– No gains if expected BI
drops after “joining” BRICS
Balassa index
1,4
1,2
1
0,8
10%
↓
7%
70%
↓
72%
0,6
0,4
0,2
20%
↓
21%
0
Actual (cars)
Expected (cars-plastics)
Expected (cars, full)
Expected (cars-trucks)
Expected (cars-metals)
Expected (cars, non-BRICS)
6
1. The approach: key ideas
• Calculating gains from integration in the form of exports
to BRICS countries (indirect procedure)
– Get expected drop in imports from non-BRICS countries to the
BRICS excluding and including a country (before/after “joining”)
– Calculate the difference between the former and the latter
• The idea: specific comments
– Mirror calculations for imports (expected BI for imports)
– The focus on gains that do not harm other BRICS countries
– The search for the possibilities of substituting imports from
non-BRICS countries to other BRICS countries by commodities
produced in a country under consideration
7
2. The results for BRICS
• The data
– UN Comtrade, UN Service Trade, 2013-2014
– 1221 commodities (4-digit HS 2007), 11 services (EBOPS)
– 5 BRICS countries (partners: world, other BRICS countries)
• Aggregated results: gains from integration
– In the form of exports to non-BRICS countries
• 3.5 USD bln (about 0.05% of the average exports for 2013-2014)
– In the form of exports to other BRICS countries
• 62.1 USD bln (around 1.9% of total imports from non-BRICS
countries; about 1.7% of total exports to non-BRICS countries)
8
2. The results for BRICS
• Detailed results: gains from integration (ISIC Rev. 2)
– Exports to non-BRICS countries
Gains from integration, USD mln
ISIC
Rev. 2
Industry name
Brazil
TOTAL
China Russia
South
Africa
India BRICS
133
1 209
65
292
50
1 749
34
Manufacture of motor vehicles, trailers and
semi-trailers
0
442,3
0
1,0
10,3
453,6
29
Manufacture of machinery and equipment
n.e.c.
4,6
300,3
2,8
107,1
0
414,7
24
Manufacture of chemicals and chemical
products
1,8
184,7
1,0
17,1
2,8
207,3
27
15
Manufacture of basic metals
Manufacture of food products and beverages
106,7
0
58,0
69,0
2,5
37,2
1,2
3,2
33,4
0
201,9
109,4
33
Manufacture of medical, precision and optical
instruments, watches and clocks
5,4
0
12,2
71,3
0
88,9
31
Manufacture of electrical machinery and
apparatus n.e.c.
0
0
0
52,7
0
52,7
9
2. The results for BRICS
• Detailed results: gains from integration (ISIC Rev. 2)
– Exports to other BRICS countries
Gains from integration, USD mln
ISIC
Rev. 2
(EBOPS)
Industry name
TOTAL
24
S266
34
S260
29
27
31
15
32
Manufacture of chemicals and chemical
products
Royalties and license fees
Manufacture of motor vehicles, trailers and
semi-trailers
Financial services
Manufacture of machinery and equipment
n.e.c.
Manufacture of basic metals
Manufacture of electrical machinery and
apparatus n.e.c.
Manufacture of food products and beverages
Manufacture of radio, television and
communication equipment and apparatus
China Russia
South
Africa
India BRICS
3 133 36 939 4 821
2 200
15 000 62 093
230,9
6 274
790,9
323,4
1 210
8 829
0
8 290
0
0
0
8 290
369,1
270,7
293,4
27,0
5 854
6 814
0
5 506
0
0
0
5 506
22,1
3 246
240,3
15,3
1 936
5 459
663,9
3 532
368,5
211,3
0,3
4 776
698,9
135,7
569,4
237,5
2 290
3 931
326,0
1 935
247,0
102,0
404,4
3 015
298,4
185,1
1 111
65,0
679,1
2 339
Brazil
10
Conclusion
• Natural limitations
– The results may not be used in macroeconomic context
(the impact of factors other than trade structure is isolated)
• Rather, they indicate the direction of structural change
– The calculation are limited to detecting gains (no losses)
– The timing of expected gains is undetermined
• Possible strands of further research
– Adding the aspects of product quality & prices
– Recalculating the results with different CA indices
– Considering the interrelation between imports and exports
11
Thank you very much!
12