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Progress in the Pattern of Intra-industrial Trade between the European Union and Latin America: The Cases of Brazil and Mexico

Hamburg
Germany
16 February 2016

This study looks into the commercial and productive relationships between the European Union (EU) and Latin America and the Caribbean (LAC), with a particular focus on Brazil and Mexico and their main European trade partners (France, Germany, Italy, the Netherlands, Spain, and United Kingdom). The authors of the study have traced changes in the intra-industrial trade patterns between the EU and LAC over the past two decades, and in so doing, they have adopted a novel North-South dimension which until now has not figured prominently in analyses of intra-industrial trade.

The overall findings of the study point to a low profile of intra-industrial insertion between both regions, while simultaneously pointing to important nuances at the sectorial level, which reveal that some advances in this type of commercial exchange do exist. Generally, the researchers observe an evolving tendency towards intra-industrial trade between both regions, albeit this development has been halted by the recent global economic crisis.

A large proportion of the exchanged goods refer to a growing orientation towards intermediate consumption, reflecting thereby a high degree of extension of global value chains. In addition, from a dynamic perspective, intermediate consumption has intensified within the broader international trade flows, – a fact that confirms the advances made in the commercial and productive interpenetration of the analysed economies.

The authors observe a correspondence between Foreign Direct Investment (FDI) and intra-industrial trade, with which the thesis according to which multinatinonal enterprises contribute to the promotion of intra-industrial trade is affirmed. Thus, even though the advances in the insertion of intra-industrial trade viewed from an an aggregate level are still relatively moderate, the picture looks differently if looking inside specific sectors (transport material, equipment, electronic material, chemical products, among others) which constitute a significant share of the countries’ bilateral exchanges.

The researchers also call our attention to the changes that may affect the regulative framework in which the commercial and productive relations between both regions take place. In particular, they point to the negotiations between the United States of America with the countries of both regions in the context of the mega-agreements across the Atlantic and the Pacific, which may have profound consequences for the advancement of intra-industrial trade between the European Union and Latin America and the Caribbean.

 

Author(s): 
Emmanuel Arrazola Ovando
Jorge Alberto López Arévalo
Óscar Rodil Marzabal
María del Carmen Sánchez Carreira
Theme: 
Economic Relations
Series: 
Open Call