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29/06/2021 12:54

Publicação Preliminar - 2021 - Junho 

Economic Impacts of a Free Trade Agreement Between Brazil and Russia: A General Equilibrium Approach


Authors: Fernando J. Ribeiro, Gerlande Andrade e Alicia Cechin


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This article explores the possible economic effects of a Free Trade Agreement between Brazil (and also its Mercosur partners) and Russia (and its partners of Eurasian Economic Union, using a computable general equilibrium approach. Two scenarios were considered, one that applies only tariff reductions (100% reduction for all sectors in both countries, uniformly distributed in a 10-year timeframe, from 2021 to 2030) and another with this same tariff reduction and also a 25% reduction on non-tariff barriers for all sectors, uniformly distributed in the same timeframe. The results were presented as deviations from the baseline scenario, showing the cumulative change until 2035.

The FTA would have, in general, positive macroeconomic and welfare effects for Brazil and Russia, but the results are not straightforward. The effects on GDP would be small, though more significant for Russia, but investment and real wages would grow in Brazil and fall in Russia, the same happening to terms of trade. Welfare gains would be higher for Brazil, and for Russia they would be positive only in scenario 2.

Only few sectors in Brazil would really benefit from the agreement with growing domestic production and exports : Meat, Food and beverages and Other agricultural and forestry. The other sectors would see negative effects. In Russia, otherwise, almost all sectors would have production gains, except for Meat, Other agricultural and forestry and Food and beverages (and also Oil seed in scenario 2), and exports would grow in all sectors in both scenarios.

Bilateral trade between Brazil and Russia would grow much in all sectors, but when one considers the gains in absolute values, the sectoral growth would be concentrated on Meat and Food and beverages exports from Brazil and Chemicals and Minerals and metals products exports from Russia – in fact reinforcing the current pattern of bilateral trade.

Keywords: International trade; trade integration; general equilibrium; Brazil; Russia.

JEL: F11; F14; F15; F16


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