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New Regional Mega Deals –Effects on the BRICS and South African Trade
Policy:Insights from New Quantitative Trade Theory
Dr. Benedikt Heid1
1University of Bayreuth, Germany
Economic Policy Forum RoundtableDrivers of Regional Integration
November 25-26, 2014
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 1
TTIP, TPP, RCEP, AFTZ,. . . —How should BRICSreact?
EU and US are negotiating TTIP.RCEP and TPP are potentially changing Asian and trans-pacifictrade.Africa is heading towards a AFTZ /Tripartite Free Trade Area.Topic of this talk:
• What are the implications for South African and BRICS+ tradepolicy?
• Put some numbers on Kornegay (2014) and Sandrey (2014),SAIIAOccasional Papers 191, 195
Note: Detailed results for all countries in the final paper!
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 2
Stylized facts: South African exports
0 10 20 30 40 50
CanadaRussian Federation
MexicoKenya
NigeriaSingapore
BrazilAustraliaMalaysiaTanzania
FranceSwitzerland
SpainAngolaTurkey
NetherlandsThailand
MozambiqueKorea, Rep.
ItalyBelgiumZambia
ZimbabweNamibia
BotswanaHong Kong SAR, China
GermanyJapanIndia
United StatesUnited Kingdom
China
Source: author's calculations using UNCOMTRADE data
top export destinations, billion US-$, 2012
0 10 20 30
CanadaRussian Federation
MexicoKenya
NigeriaSingapore
BrazilAustraliaMalaysiaTanzania
FranceSwitzerland
SpainAngolaTurkey
NetherlandsThailand
MozambiqueKorea, Rep.
ItalyBelgiumZambia
ZimbabweNamibia
BotswanaHong Kong SAR, China
GermanyJapanIndia
United StatesUnited Kingdom
China
Source: author's calculations using UNCOMTRADE data
top export destinations, share of total, 2012
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 3
Stylized facts: South African imports
0 5 10 15
PolandFinland
VietnamIreland
CanadaAustriaMexico
IndonesiaSwitzerland
ArgentinaSpain
BelgiumSingapore
MozambiqueMalaysiaAustraliaSweden
BrazilNetherlandsKorea, Rep.
FranceItaly
ThailandAngola
United KingdomNigeria
IndiaJapan
United StatesSaudi Arabia
GermanyChina
Source: author's calculations using UNCOMTRADE data
top import destinations, billion US-$, 2012
0 5 10 15
PolandFinland
VietnamIreland
CanadaAustriaMexico
IndonesiaSwitzerland
ArgentinaSpain
BelgiumSingapore
MozambiqueMalaysiaAustraliaSweden
BrazilNetherlandsKorea, Rep.
FranceItaly
ThailandAngola
United KingdomNigeria
IndiaJapan
United StatesSaudi Arabia
GermanyChina
Source: author's calculations using UNCOMTRADE data
top import destinations, share of total, 2012
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 4
Stylized facts: trade shares, percent of world trade
0 5 10 15share of world trade in percent
South AfricaNorway
Czech RepublicAustria
SwedenTurkeyPoland
IndonesiaThailandMalaysia
BrazilAustralia
SwitzerlandSaudi Arabia
SpainSingapore
Hong Kong SAR, ChinaIndia
MexicoBelgium
Russian FederationCanada
ItalyNetherlandsKorea, Rep.
United KingdomFranceJapan
GermanyUnited States
China
Source: author's calculations using UNCOMTRADE data
share of world trade (imports + exports), 2012
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 5
Stylized facts: trade shares, percent of world trade
0 10 20 30 40share of world trade in percent
TurkeyPoland
IndonesiaThailandMalaysia
BrazilAustralia
SwitzerlandSaudi Arabia
AFTZSpain
SingaporeHong Kong SAR, China
IndiaMexico
BelgiumRussian Federation
CanadaItaly
NetherlandsKorea, Rep.
United KingdomFranceJapan
GermanyUnited States
ChinaTPP
RCEPEU
TTIP
Source: author's calculations using UNCOMTRADE data
share of world trade (imports + exports), 2012
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 6
Frameworknew quantitative trade models: state of the art to evaluatepreferential trade agreements, see Egger, Staub, Larch,Winkelmann, 2011, Costinot and Rodríguez-Clare (2014)
• . . . take into account trade creation and diversion effects• . . . have a sound theoretical underpinning• . . . focus on key determinants of trade: market size and geography• . . . in addition, cultural factors (language, colonial history etc.)• . . . allow to quantify non-tariff barriers• . . . allow to quantify preferential trade agreements• . . . fit the data very well (>75% of the variation in the data explained)
model with extensive country margin from Egger and Larch(2011), EERhas recently been used to evaluate TTIP and other new regionalmega deals in Felbermayr, Heid, Larch, Yalcin (2014), CESifo WP5019I use their baseline results as a starting point.
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 7
Real income per capita effects of TTIP (percent)
source: Felbermayr, Heid, Larch, Yalcin (2014)
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 8
Other regional mega deals I: Regional ComprehensiveEconomic Partnership Agreement (RCEP)
consolidation of already existing PTAscurrently discussed between
• ASEAN: Brunei, Cambodia, Indonesia, Lao PDR, Malaysia,Myanmar, the Philippines, Singapore, Thailand, Vietnam
• ASEAN free trade partners: Australia, China, India, Japan, Korea,New Zealand
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 9
Real income per capita effects of RCEP (percent)
source: map based on results from Felbermayr, Heid, Larch, Yalcin (2014)
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 10
Other regional mega deals II: Transpacific Partnership(TPP)
also consolidation/extension of already existing PTAscurrently discussed between
• TPSEP: Brunei, Chile, New Zealand, Singapore• want to join: Australia, Canada, Japan, Malaysia, Mexico, Peru,
United States, Vietnam.
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 11
Real income per capita effects of TPP (percent)
source: map based on results from Felbermayr, Heid, Larch, Yalcin (2014)
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 12
Other regional mega deals III: African Free Trade Zone(AFTZ)/ Tripartite Free Trade Area (TFTA)
also consolidation of already existing PTAsscheduled for 201826 countries:
• SADC: Angola, Botswana, DR Congo, Lesotho, Madagascar,Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa,Swaziland, Tanzania, Zambia, Zimbabwe
• EAC: Burundi, Kenya, Rwanda, Tanzania, Uganda• Comesa: Comoros, Burundi, Djibouti, DR Congo, Eritrea, Ethiopia,
Egypt, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda,Seychelles, South Sudan, Sudan, Swaziland, Uganda, Zambia,Zimbabwe
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 13
Real income per capita effects of AFTZ (percent)
source: own calculations
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 14
How does TTIP affect these negotiations?
Imagine a world where TTIP were already in place. How does thisaffect likely effects of other potential trade agreements?In other words: Does TTIP imply a need for reorienting SouthAfrica’s trade policy?
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 15
Real income per capita effects of AFTZ with TTIP inplace (percent)
source: own calculations
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 16
AFTZ without TTIP
Real income per capita effects of AFTZ with TTIP inplace (percent)
source: own calculations
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 17
AFTZ with TTIP already in place
South Africa, SACU, and the United States
Talks for a PTA between SACU and the US have failed.Now, (the shallow) Trade and Investment Framework Agreement(TIFA) between South Africa and the US has been signed.Reauthorization of (African Growth and Opportunity Act) AGOA inSeptember 2015 looms large: 86% of all South African productlines enter the US without any tariff, see Williams (2014).Should South Africa or SACU try another attempt at a preferentialtrade agreement with the US?
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 18
Real income per capita effects of South Africa-USFree Trade Agreement vs. SACU-USA FTA (percent)
source: own calculations
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 19
PTA between South Africa and the US
Real income per capita effects of South Africa-USFree Trade Agreement vs. SACU-USA FTA (percent)
source: own calculations
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 20
PTA between Southern African Customs Union and the US
Comparing South Africa’s options under differentscenarios
scenariosGDP p.c. change ZAF (%) GDP p.c.
change of majorpartner (%)alone after TTIP
TTIP -1.7 -1.7 -0.5 (China)RCEP -0.5 -0.6 4.9 (China)TPP -0.5 -0.4 -0.9 (China)AFTZ 0.4 0.4 -0.0 (China)ZAF - India 1.2 1.3 0.2 (India)ZAF - China 4.7 5.1 0.2 (China)ZAF - Russia 1.6 1.7 0.3 (Russia)ZAF - United States 10.0 9.1 0.1 (USA)
detailed results for PTAs between South Africa (ZAF) with China, India, Russia
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 21
Thank you very much for your attention!
I am looking forward to your questions andcomments.
Benedikt [email protected]
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 22
Real income per capita effects of ZAF-CHN with TTIPin place (percent)
source: own calculations
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 23
FTA between ZAF-CHN without TTIP
Real income per capita effects of ZAF-CHN with TTIPin place (percent)
source: own calculations
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 24
FTA between ZAF-CHN with TTIP already in place
Real income per capita effects of ZAF-IND with TTIPin place (percent)
source: own calculations
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 25
FTA between ZAF-IND without TTIP
Real income per capita effects of ZAF-IND with TTIPin place (percent)
source: own calculations
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 26
FTA between ZAF-IND with TTIP already in place
Real income per capita effects of ZAF-RUS with TTIPin place (percent)
source: own calculations
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 27
FTA between ZAF-RUS without TTIP
Real income per capita effects of ZAF-RUS with TTIPin place (percent)
source: own calculations
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 28
FTA between ZAF-RUS with TTIP already in place
Costinot, A. and Rodríguez-Clare, A. (2014). Trade Theory withNumbers: Quantifying the Consequences of Globalization. InGopinath, G., Helpman, E., and Rogoff, K., editors, Handbook ofInternational Economics Volume 4, pages 197–261. North-Holland,Amsterdam.
Egger, P. and Larch, M. (2011). An assessment of the Europeagreements’ effects on bilateral trade, GDP, and welfare. EuropeanEconomic Review, 55(2):263–279.
Egger, P., Larch, M., Staub, K. E., and Winkelmann, R. (2011). TheTrade Effects of Endogenous Preferential Trade Agreements.American Economic Journal: Economic Policy, 3(3):113–143.
Felbermayr, G., Heid, B., Larch, M., and Yalcin, E. (2014).Macroeconomic potentials of transatlantic free trade: A highresolution perspective for Europe and the world. CESifo WorkingPaper 5019.
Kornegay, F. A. J. (2014). BRICS, Mega-Regional FTAs and SouthAfrica’s Trade Strategy. SAIIA Occasional Paper Number 191.
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 29
Sandrey, R. (2014). Mega-regional Trade Agreements and SouthAfrica’s Trade Strategy: Implications for the Tripartite Free TradeArea Negotiations. SAIIA Occasional Paper Number 195.
Williams, B. R. (2014). African Growth and Opportunity Act (AGOA):Background and Reauthorization. Congressional Research ServiceReport R43173.
Benedikt Heid (University of Bayreuth): New Regional Mega Deals 30