Connecting to global value chains: the dynamic general equilibrium effects of a PTA between China and Mercosur over the economy of Brazil

Abstract

The structure of this paper is organized as follows. Section I presents a set of stylized trade facts about the Brazilian economy, exploring some of the new information available in the 'so called' TIVA and WIOD databases. Section II discusses the extended concept of 'natural trade partners' according to the logic of global/regional value chains. Section III describes the econometric model used to estimate the ad valorem equivalents of TBTs and SPSs imposed over bilateral trade flows among China and Mercosur countries. Section IV presents the impacts of a PTA involving Mercosur and China on the economy of Brazil, tracing out bilateral trade in value added as well as bilateral trade in intermediates. Section V summarizes the main findings of this paper.