Academic journal article Brazilian Political Science Review

Divergences between New Patterns of Global Trade and Brazil/Mercosur *

Academic journal article Brazilian Political Science Review

Divergences between New Patterns of Global Trade and Brazil/Mercosur *

Article excerpt

In the 2000s, South America was experiencing its best economic performance in 40 years, with reasonable rates of growth and macroeconomic stability, and important social advances such as the reduction of poverty thanks to a combination of domestic reforms and a favorable international context (ECLAC, 2014). However, the region seems to have advanced little in international competitiveness and export sophistication, continuing far behind the world's great centers of production (ECLAC, 2014; HERNÁNDEZ et al., 2014). The catch is that, in the medium- and long-term, this delay may even threaten the socio-economic achievements of the last decades, especially given the complex challenges of globalization, the digital revolution, and an international context that is less favorable for exporting.

At the same time, the region still needs large-scale productive integration, which could be a boost to regional development despite the enormous logistic, infrastructural, and political challenges to be faced. In this sense, Brazil - as the largest country in the region in terms of area, population, and economy- officially made regional integration its top foreign policy priority in the 2000s. However, the literature on the integration of production networks, as well as our analysis of empirical evidence, show that Mercosur, the most ambitious bloc of economic and political integration in the world among nondeveloped countries, does not resemble value chains focused on encouraging joint global competitiveness. Our emphasis is on the cases of Brazil and Argentina, the most industrialized countries in South America.

A series of structural changes in the global economy in recent decades, combined with political and economic decisions, has produced new patterns of international trade that require states to readapt their instruments of regional integration. Some of these standards are global and regional value chains, outsourcing, and offshoring, among other concepts. What these concepts have in common is the fragmentation of production processes into various stages dispersed throughout various different countries and regions. They also result in the asymmetry of gains, such as financial gains, technological spillovers, employment, or value added, according to each country's specialization within a production chain.

On the one hand, some studies associate increasing value-added trade participation with greater technology absorption, wider market access and productivity gains (BALDWIN, 2011; CANUTO, 2014; OECD, 2013; OECD, WTO, and UNCTAD, 2013; WORLD BANK, 2015). On the other hand, caution should be exercised concerning strategies of engagement, whether in regional or global value chains. The benefits of value chains are asymmetric, and the most beneficial steps tend to be focused on intangible services and the production of higher value-added products. Likewise, ongoing technological revolutions can make global value chains even more regional, which tends to increase the importance of joint strategies with neighboring countries.

Insofar as Mercosur is an ambitious integration bloc, we ask whether the trading pattern of Mercosur countries aligns with the regional value-chain-based approach. If not, then how does it differ and why? We show that there has been a decrease in Brazil's trade with Mercosur, with manufactured exports being the main reason for the decline. We show that, besides the effect of China in the 2000s, there has been a structural movement of Mercosur economies, mainly regarding Brazil, which supports a hypothesis of primarization or deindustrialization. We stress that the logic of value chains sees regional integration as an important source of industrialization, as has been the case with the three major regions that have already become integrated: the European Union, North America, and East Asia. Our results, however, show that Brazil and Argentina are both relatively closed to foreign trade, as well as global and regional value chains, making them even more poorly integrated with one another. …

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