World Economic Development Trio by James Connaughton

Brazil has the world’s eighth-largest economy.   China is the world’s largest economy.  The United States is the most technologically powerful country in the world (Index Mundi, 2018.)  China boasts a closed and centrally planned economy, while Brazil is aiming to slow the growth of government spending and decrease barriers to foreign investment.  The United States, which slipped behind China in 2014 as the world’s largest economy, allows private individuals and firms to make most of the country’s economic development decisions (Index Mundi, 2018.)

China is the United States third largest trading partner, just behind Canada and Mexico, which share a boarder with the United States, while China rests over 7000 miles away.  This doesn’t mean that the United States has a trade advantage over China, the truth is quite contrary.  The United States has lost many of its firms from agriculture, textiles, electronics and construction equipment industry sectors to many countries across the globe, but none of these foreign countries’ gains have been quite as speculated upon in recent years as those of the firms that have been lost to China.  Much of the United States’ three and a half million job losses (because of migrating U.S. firms) to China are criticized because of the Asian giant’s frequency to operate in practically unregulated environmental fashion.  China is just as often cited to violate or inadequately protect its country’s workers’ rights.  Despite the job and company losses, the United States shipped almost $120 billion USD worth of goods to China in 2016 alone.  China, in 2016, exported just under 5 billion USD worth of goods to the United States (Yu, 2017.)

It must be remembered that China and the United States are both competitors and trade partners in the global market.  Companies flocking from U.S. shores like refugees to the ports of Guangzhou cannot be dismissed as a pure loss to the United States.  Using the one-dollar, one-vote metric, both countries become winners and losers in this employment opportunity exchange program.  Within each of these economically powerful countries the import goods consumers are winners from the opposite country’s producers of exported goods.  The shift from no trade, to free trade, increases overall market price in the long run (Pugel, 2016.)

China’s currency valuation and high debt levels continue to be a concern to the global economy as well as the foreseeable outlook of China’s foreign exchange policy. (FRB of Atlanta, 2016)

That being said, different countries have different advantages in producing goods for export.  Soil differences between the United States and Brazil give the U.S. an advantage over wheat production and Brazil an advantage in the production of coffee.  This in itself gives Brazil the power to control the U.S. production level in its entirety because of Brazil’s control over the U.S.’s energizing morning beverage of choice.  Productivity humor aside, the comparative advantages of these two very differently skilled countries illustrates clearly Adam Smith’s main points in his argument for international trade enabling as opposed to trade restriction for mercantilism-style self-preservation (Pugel, 2016.)

Brazil is continuing in economic reforms begun in 2016 to strengthen the workforce and industrial sector.  China’s reforms have resulted in efficiency gains that have increased GDP tenfold since 1978.  The United States faces long-term stagnation of wages for low-income families and inadequate investments in the country’s deteriorating infrastructure.  The United States seeks to renegotiate trade agreements with its close trading partners in the region under the North American Free Trade Agreement, popularly known as NAFTA.  Brazil and China are now experiencing the high points of their involvement in their own regional trading partner grouping.  BRICS, a widely popular acronym for five major EMEs: Brazil, Russia, India, China and South America is the current trade facilitating wonder of the world.  This economic block includes over 40% of the world’s population, a staggering segment of the consumer population of humanity (Index Mundi, 2018.)

China is a key trade partner for Brazil.  Although China is currently a main provider of goods for export to the rest of the world, including most significantly to us, the United States.  The huge economic advance of China is expected to change around 2030.  At this time, much of the population of China will have aged and there will be a higher demand for imports such as agricultural products and foodstuffs.  This is a key turning point for the Brazilian economy to prosper.  Currently, China exports to Brazil double what it imports from the South American country (World Bank, 2014.)

The rising youth population in Brazil and foreign direct investment at a record high of $15.4bn are fueling calls for economic optimism and further regional development.  Jaguar Land Rover opened a new factory in Brazil in 2016 at a cost near 300 million USD.  This is despite the fact that Brazil’s economy contracted for the second straight year (Leahy, 2017.)

Brazil’s government is a concern for regional stability, reflecting upon the 2014 Lava Jato (car wash) scandal.  This was a vast kick-back scheme led to the imprisonment of oil company, meatpacking and state-owned oil company magnates along with the disgrace of most of Brazil’s political parties and leaders (Londoño, 2018.)

Another comparative advantage of interest is China’s interest in Brazil’s largest and most popular social program: Bolsa Familia, a response to decades of regressive social policies and non-inclusive growth models.  Bolsa Familia was started in November of 2003 with half a percentage of GDP and has halved the country’s extreme poverty.  This is a reported change of 9.7 to 4.3 of the population.  A country with a population the size of China dreams of this feat of economic mobility.  Bolsa Familia reaches on quarter of the population.  The main points to be considered here are that Brazil entrusts poor families with small cash transfers in exchange for keeping children in school and attending preventative health care visits.  This is how Brazil has broken the transmission of poverty to the children from their parents (Wetzel, 2013.)

When comparing the economic advantages between the United States, Brazil and China, we see that the United States is known as the international community’s most technologically advanced and powerful economy and that Brazil is known as powerful international leader in manufacturing, mining, agricultural and service sectors, while China is known as the leading exporter of commercial goods.  As the international community (China, Brazil and the United States specifically) continues to develop, the global population configurations and technology advantages are changing.  Free trade leads to a fully efficient outcome for the world and for our focus countries in the material we have covered here in brief (Pugel, 2016.)

Sources cited:

·      FRB of Atlanta, 2016, Trade Dynamics and China, https://www.frbatlanta.org/economy-matters/2016/09/20/trade-dynamics-and-china-part-three

·      World Bank, 2014, Brazil vs. China: how to avoid an economic slowdown, http://www.worldbank.org/en/news/feature/2014/07/15/brasil-china-brics-exportaciones-desaceleracion-economia

·      Leahy, J., 2017, Business bets on Brazil economic rally, Financial Times, https://www.ft.com/content/ab46f7ec-e4d9-11e6-8405-9e5580d6e5fb

·      Londoño, E, Darlinton, S, 2018, Leftist Lion and Far-Right Provocateur Vie for Brazil Presidency, The New York Times, https://www.nytimes.com/2018/01/20/world/americas/brazil-lula-bolsonaro-election.html

·      Wetzel, D, 2013, Bolsa Famíia, World Bank, http://www.worldbank.org/en/news/opinion/2013/11/04/bolsa-familia-Brazil-quiet-revolution

·      Nation Master, 2018, http://www.nationmaster.com/country-info/compare/Brazil/United-States/Economy

·      Yu, R., 2017, U.S. – China trade scorecard, USA Today, https://www.usatoday.com/story/money/2017/04/04/united-states-china-trade-relations/99989116/

·       Pugel, T, 2016, International Economics 16th edition.

·      Index Mundi, United States Economy profile, 2018, https://www.indexmundi.com/united_states/economy_profile.html

·      Index Mundi, Brazil Economy profile, 2018, https://www.indexmundi.com/brazil/economy_profile.html

·      Index Mundi, China Economy profile, 2018, https://www.indexmundi.com/china/economy_profile.html

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