Trade and Investment Among BRICS: Analysis of Impact of Tariff Reduction and Trade Facilitation Based on Dynamic Global CGE Model

So far, there are few researches based on GTAP model focusing on the inter-regional trade activities among BRICS countries. Specifically, few studies have paid special attention to tariff exemption or trade facilitation scenario analysis. On the other hand, these topics broadly exist in global, multilateral and bilateral trade agreements and dialogues. One of the most prominent issues calling for in-depth study is the dynamic changing characteristics of emerging economies’ trade activities. BRICS countries differ greatly with respect to their trade volume, structure, dependence and environment, which lead to diversified sensitivities to tariff and trade facilitation. As the largest export-oriented emerging economy, China is more sensitive to tariffs and trade facilitation due to its large trade volume of manufactured goods and primary goods. Brazil and Russia are traditional resources exporter and thus they are less sensitive to tariffs and trade facilities because of the monopoly power. India is more dependent on service trade and commodity trade market is usually protected. However, since all of the BRICS counties have joined WTO and the global trade context is transforming, we need to involve the political and economic dynamics into global trade model to simulate the economic impacts. In this paper, we established a dynamic global CGE model to analyze the effects of free trade and trade facilitation in BRICS countries. In the settings of our model, we use adaptive expectation other than pure rational expectation to reflect the situation that BRICS countries are in the midst of transformation. The results show that the dynamic trade changing paths of these countries are quite different from those of developed countries. When trade facilitation increases, the results of China show that China’s agricultural products will see a huge growth in the future. One reason is that agricultural products are very sensitive to trade facilitation, especially sensitive to factors like custom clearance time. Car trade will also see a huge growth under the scenario that car tariffs are reduced.