The Emergence of China and the Evolution of International Trade in Brazil

We take advantage of a novel dataset that incorporates the technological content of each product and its quality to unveil some features of Brazil-China’s trade flows and challenge the view that the emergence of China would imply the deindustrialization of Brazilian exports. We show that Brazil increasingly exports to China products with lower technological content and increasingly imports products with higher technological content. The quality dimension of the dataset reveals that both countries export to each other basically low-quality goods. We show that from 1994 to 2007 the number of products in which the two countries have comparative advantage declined and that both countries increased their advantage in the products in which they already had advantage in 1994 and lost advantage in the sectors in which they had small advantage in producing by then. Brazilian exports of commodities increased significantly due to the emergence of Asian countries. However, Brazilian exports of high technological content and high quality increased more than the average and more than low technological and low quality exports. Overall, the emergence of China has been supporting a displacement of Brazilian exports not only towards natural-based products but also to goods with higher quality and higher technological content.