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EU and Brics: Challenges and Opportunities For EU and BRICs: Challenges and opportunities for European competitiveness and cooperation Industrial Policy and Economic Reform Papers No. 13 Peter Havlik Roman Stöllinger Olga Pindyuk Gábor Hunya Bernhard Dachs Carolina Lennon Marcos Poplawski Ribeiro Jayati Ghosh Waltraut Urban Vasily Astrov Edward Christie Enterprise and Industry Directorate-General European Commission EU and BRICs: Challenges and opportunities for European competitiveness and cooperation Peter Havlik1 Roman Stöllinger1 Olga Pindyuk1 Gábor Hunya1 Bernhard Dachs2 Carolina Lennon1 Marcos Poplawski Ribeiro3 Jayati Ghosh4 Waltraut Urban1 Vasily Astrov1 Edward Christie1 10 July 2009 1) Wiener Institut für Internationale Wirtschaftsvergleich (wiiw), the Vienna Institute for International Economic Studies, Rahlgasse 3, A-1060 Wien. Contacts: [email protected] and [email protected] 2) Austrian Institute of Technology (AIT), Donau-City-Strasse 1, A-1220 Wien. Contact: [email protected] 3) Centre d’Etudes Prospectives et d’Informations Internationales (CEPII), rue Georges Pitard 9, F-75740 Paris Cedex 15. Contact: [email protected] 4) Centre for Economic Studies and Planning, Jawahartal Nehru University, New Mehrauli Road, 110067 New Delhi, India Contact: [email protected] Industrial Policy and Economic Reforms Papers are written by the staff of the Directorate General for Enterprise and Industry or by experts working in association with them. This publication series aims to raise the awareness and stimulate the debate on issues in the areas of industrial policy and economic reforms. Views expressed in these papers represent the positions of the authors and do not necessarily reflect those of the European Commission. Contact information European Commission Enterprise and Industry Directorate-General Unit B4 – "Economic Analysis and Evaluation" B-1049 Brussels Tel: (32-2) 295 49 39 Fax: (32-2) 297 41 23 E-mail: [email protected] Web page: http://ec.europa.eu/enterprise/newsroom/cf/itemshortdetail.cfm?item_id=3479 A great deal of additional information on the European Union is available on the internet. It can be accessed through the Europa server http://europa.eu ISBN-13: 978-92-79-10448-0 ISSN: 1831-0672 DOI: 10.2769/36796 Luxembourg: Publications Office of the European Union, 2009 © European Communities, 2009 Reproduction is authorised provided the source is acknowledged. Abstract This study explores the opportunities and competitive challenge that the BRIC countries – Brazil, Russia, India and China – represent for the EU. The BRICs show many common features (big land size, large population, fast economic growth etc.) but important differences as well, due to their different models of economic development. Examples are differences in income levels, in their degree of openness and in their economic and trade structures, which are described in detail in section two of the study. In the first section we analyse trade in goods and services, FDI and knowledge flows between the BRICs and the EU in 1995-2007. The emergence of the BRICs as major exporters on international markets is one of the driving forces behind the industrialized countries’ loss of global market shares. China has clearly become the most serious challenge to the EU’s industrial competitiveness. But the BRICs also provide formidable opportunities for exports. EU-BRICs services trade is much less important than goods trade and the BRICs seem to have only few strong advantages at the EU market in this field. Knowledge flows between the EU and the BRICs are gaining significance. Regarding FDI, the EU emerges as the main or one of the main investors in all BRICs while competitive pressure on the EU market via FDI from the BRICs is not very strong yet. In EU-BRICs energy relations, analysed in section three, rising and potentially competing demand for oil and, to a lesser extent, for gas is coming especially from China, but India as well. Russia and Brazil are relevant suppliers of energy (oil, gas, biofuel) – with Russia being a less prominent supplier of oil to the EU than of gas. Key words: competitiveness, FDI, trade in goods, trade in services, knowledge flows, energy, EU, Brazil, Russia, India, China JEL codes: F14, F21, G01, O52, O53, O54, O57, Q41, Q42 Contents Introduction .....................................................................................................................1 1 Trade in goods and services, FDI and knowledge flows..........................................2 1.1 Trade in goods............................................................................................................ 2 1.1.1 Introduction and summary ............................................................................ 2 1.1.2 Global trade in goods .................................................................................... 3 1.1.3 Bilateral trade relations between Triad countries and the BRICs................ 4 1.1.4 Country-specific patterns of EU-BRICs trade.............................................. 8 1.1.5 Sectoral composition of EU-BRICs goods trade........................................ 12 1.1.6 Specialization patterns in EU-BRICs manufacturing industry trade......... 14 1.1.7 Revealed comparative advantages of BRICs and the EU.......................... 17 1.1.8 Vertical integration of trade with China ..................................................... 24 1.1.9 Impact of the global crisis on goods trade ................................................ 29 References................................................................................................................ 30 Annex 1 .................................................................................................................... 31 1.2 Trade in services ...................................................................................................... 33 1.2.1 Summary...................................................................................................... 33 1.2.2 Introduction ................................................................................................. 34 1.2.3 Geographical structure of services trade..................................................... 35 1.2.4 Sectoral structure of services trade ............................................................. 38 1.2.5 Trade balances and specialization indices .................................................. 41 References................................................................................................................ 43 1.3 Foreign Direct Investment flows between the EU and the BRICs......................... 44 1.3.1 Introduction ................................................................................................. 44 1.3.2 FDI data analysis ........................................................................................ 46 1.3.3 Investment project database analysis.......................................................... 64 1.3.4 Impact of the crisis on the EU–BRICs FDI relations................................. 72 1.3.5 Summary and Conclusions ......................................................................... 74 References................................................................................................................ 78 1.4 Knowledge flows between the BRICs and the EU................................................. 80 1.4.1 Introduction ................................................................................................. 80 1.4.2 Royalties and licence fees ........................................................................... 82 1.4.3 Enrolments of foreign students in tertiary education ................................. 84 1.4.4 International mobility of professionals ....................................................... 87 1.4.5 Cross-border patents between the EU and the BRICs ............................... 90 1.4.6 Summary...................................................................................................... 94 References................................................................................................................ 95 2 Different models of BRICs’ economic development, implications for EU policies97 2.1 Introduction.............................................................................................................. 97 2. 2 Brazil ........................................................................................................................ 98 2. 2.1 Political, economic and social structure...................................................... 98 2.2.2 The Brazilian Development Model at a glance........................................ 101 2.2.3 Sectoral analysis ........................................................................................ 104 2.2.4 Future prospects and challenges ............................................................... 107 2.2.5 EU-Brazil relations.................................................................................... 110 2.2.6 Conclusions ............................................................................................... 112 References.............................................................................................................. 112 2.3 Russia ..................................................................................................................... 114 2.3.1 Introduction..................................................................................................
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