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  • This paper investigates the evolution of the Brazil EU bilat

    2018-11-15

    This paper investigates the evolution of the Brazil-EU bilateral trade in the period 2002–2012 and identifies trading opportunities resulting from a trade agreement of Brazil with the EU. The paper employs a computable general equilibrium model, using the 8th version of the standard Global Trade Analysis Project (GTAP) database, based on perfect CEP-37440 and constant returns to scale. The simulation measures the impacts of the agreement on welfare, trade and production on both regions and the rest of the word. With initial equilibrium in 2007, the original 57 aggregated sectors were classified according to the technological intensity to perform the simulation in which the import tariffs between Brazil and the EU were removed. The period covered by this study, 2000–2012, justifies itself by a greater role of the so-called emerging economies, including Brazil, in the world economic scenario. Such role has been boosted mainly, by higher economic growth of these economies in the period. Alongside, the decade was marked by a strong recovery in commodity prices, the main component of Brazil\'s export, accounting, in 2012, according to MDIC (2014b), by approximately 45% of total exports.
    Brazil–EU trade The European Union (EU) origin dates back to 1957, when the creation of the European Economic Community (EEC), by the Treaty of Rome, established the free trade of goods, services and labor between country members. In 1994, with 15 country members, the block became known as the EU. The European block, currently with 28 nations, is Brazil\'s second largest trading partner. In 2012, 61.3 per cent of EU trade was intra-block, according to MDIC (2014b), and the main EU partners outside the block were the United States of America (USA), accounting for 6.2% of EU trade volume, and China with 3.2%. Table 1 shows that in the period 2000–2012, trade between Brazil and the EU has more than tripled, moving from, approximately, USD 30 billion in 2000 to nearly USD 97 billion in 2012. According to Carvalho (2009), Brazil is the EU\'s main economic partner in Latin America. However, Hoffmann (2012) points out the fact that Brazil is responsible for less than 1% of total European exports and imports, suggesting that there is still great potential in commercial relationships by Brazil. The EU exports largely, capital goods and services in exchange for Brazilian commodities. While Brazil is a major supplier of raw materials and food, European companies meet the Brazilian demand for machinery, equipment and chemical products. It must be stressed the fact that, although approximately 50% of Brazilian exports of goods to the EU are commodities, Brazil also exports to Europe machinery, aircraft, iron, steel, among other manufactured goods (HOFFMANN, 2012). In the period studied, it is clearly noted the evolution in trade relations. Despite predictions that there is still room for growth in trade with the EU, Tomazini (2009) discusses the fact that Brazil is part of Mercosur, which prevents it, for example, from taking unilateral trade liberalization measures. However, the author highlights the fact of negotiations between Mercosur and the EU are taking place, which, according to the author, would ensure Brazil greater trade opportunities with the European block. The recent loss of the GSP preferential treatment with the European block is forcing Brazil to accelerate negotiations with the EU. Using a classification based on technological intensity, Negri (2012) points out that approximately 50% of Brazilian total exports to the EU are primary products, followed by products of average-technological intensity, with 20% of the total. In comparison, the participation of commodities in world exports is only 13%. Table 2 presents the Brazilian trade and the trade balance with the rest of the world by technological intensity, as well as the percentage variation for the period 2000/2012. As it is observed, during the period of the study, the country increased its exports of primary products in almost 1000%, while the exports of high-technological intensity grew only 48%. Imports, on the other hand, showed a similar growth for all sectors, except those of high-technology, which grew a little less, or approximately 200%.