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Working Paper

European and Chinese trade competition in third markets: the case of Latin America

While Europe continues to hold important trade powers, the rise of China in the global economy has significantly reshaped international trade and competition. In this paper, the authors show that the degree of competition between both powers in Latin America has risen in the past decade due to China's increased trade of high-quality products. They address whether China is an increasingly relevant competitor for Europe in Latin America and in which sectors China-EU competition is fiercer. These findings should be a wake-up call to Europe in its quest to remain competitive at the global level.

By: , and Date: June 7, 2018 Topic: Global Economics & Governance

China’s increasingly important role in the global economy has transformed the nature of global competition and reshaped international trade. Meanwhile, the European Union has long been the most important power in global trade and continues to run a very large trade surplus. We address whether China is an increasingly relevant competitor for Europe in third markets, and in particular in Latin America. More specifically, we empirically estimate the elasticity of substitution between European exports and Chinese exports to Latin American economies (ie how their exports to Latin America respond to the changes in relative exporting prices).

Our results show that the degree of competition between China and the EU in Latin America has increased over time. Before 2007, China and the EU competed less with each other, partly reflecting the fact that China was mainly exporting low-quality products. However, the elasticity of substitution has increased since 2007, reflecting China’s ascent up the value-added chain. We also look at competition between China and the EU in the key EU sectors that export to Latin America. We find that China-EU competition is fiercer in electrical machinery and road vehicles. This finding should be a wake-up call to Europe in its quest to remain competitive at the global level.

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External Publication

EU-China trade and investment relations in challenging times

In this report, we have focused on trade and investment relations and have not attempted to define the many other policy instruments that the EU can and should pursue to increase its leverage towards China, and to protect its domestic economy while boosting domestic investment and trade.

By: Alicia García-Herrero, Guntram B. Wolff, Jianwei Xu, Niclas Poitiers, Gabriel Felbermayr, Rolf J. Langhammer, Wan-Hsin Liu and Alexander Sandkamp Topic: Global Economics & Governance Date: June 4, 2020
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Opinion

Covid-19 and emerging economies: What to expect in the short- and medium-term

This article was originally published in the Observer Research Foundation. As Brazil, Russia, India and Mexico record the fast spread of the Covid-19 contagion, a third wave of the pandemic is reaching the emerging world. As a result, business sentiment has decreased in March and April in the region. What’s more, as emerging economies gradually […]

By: Alicia García-Herrero Topic: Global Economics & Governance Date: June 3, 2020
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Policy Contribution

COVID-19’s reality shock for external-funding dependent emerging economies

COVID-19 is by far the biggest challenge policymakers in emerging economies have had to deal with in recent history. Beyond the potentially large negative impact on these countries’ fiscal accounts, and the related solvency issues, worsening conditions for these countries’ external funding are a major challenge.

By: Alicia García-Herrero and Elina Ribakova Topic: Finance & Financial Regulation, Global Economics & Governance Date: May 28, 2020
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Opinion

COVID-19 and India: economic impact and response

This piece was published the day before India imposed one of the world's strictest lockdowns in its response to the COVID-19 response. It remains relevant in assessing the government's actions in the ten weeks that have since passed.

By: Suman Bery Topic: Global Economics & Governance Date: May 27, 2020
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Opinion

Reading tea leaves from China’s two sessions: Large monetary and fiscal stimulus and still no growth guarantee

The announcement of a large stimulus without a growth target indicates that China’s recovery is far from complete.

By: Alicia García-Herrero Topic: Global Economics & Governance Date: May 25, 2020
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Podcast

Podcast

China’s financial system: opening up and system risk

China is opening up its financial sector- What does that mean for China and the world?

By: The Sound of Economics Topic: Finance & Financial Regulation, Global Economics & Governance Date: May 22, 2020
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Past Event

Past Event

The Sound of Economics Live: China’s financial system: opening up and system risk

China is opening up its financial sector? What does that mean for China and the world?

Speakers: Alicia García-Herrero, Gary Liu and Giuseppe Porcaro Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 19, 2020
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Past Event

Past Event

The Sound of Economics Live: China’s economy after COVID-19

This episode of The Sound of Economics Live will explore the short and medium term prospects for the Chinese economy after COVID-19

Speakers: Alicia García-Herrero, Yiping Huang and Giuseppe Porcaro Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 6, 2020
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Past Event

Past Event

Keeping trade open during and after Covid-19

This event examines the impact of the Covid-19 crisis on open markets and connected supply chains globally.

Speakers: Maria Demertzis, André Sapir, Senator the Hon Simon Birmingham and Rebecca Fatima Sta Maria Topic: Global Economics & Governance Date: April 30, 2020
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Opinion

Depression, and not stagflation, could haunt China in 2020

This opinion piece was originally published in Asia Times and Medium China’s GDP in the first quarter of the year has surprised nobody but the devil is in the details. Local retail sales continued to fall in March (-16%), marginally better than during the peak of the Covid19 outbreak in January and February. The continuation […]

By: Alicia García-Herrero Topic: Global Economics & Governance Date: April 17, 2020
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Podcast

Podcast

Mythbusters: debunking economic myths

Economics seems to be full of myths that are hard to debunk. Will robots take our jobs? Are trade deficits bad? Is China such a big economy simply because of the size of its population? This week, Nicholas Barrett, Maria Demertzis, Marta Domínguez-Jímenez and Niclas Poitiers put on the detective cap and become Bruegel's own economic mythbusters.

By: The Sound of Economics Topic: Global Economics & Governance Date: April 3, 2020
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Blog Post

What the EU should do and not do on trade in medical equipment

The European Union has introduced export controls on some medical supplies. This was a mistake. It should announce that it is withdrawing the measure, and call on other countries to do the same.

By: André Sapir Topic: European Macroeconomics & Governance Date: March 25, 2020
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