Evolving Patterns of Trade between Brazil and the European Union 1994–2005

Abstract

The evolution of trade patterns is of major importance for trade negotiations, since changes in trade patterns have important implications for the formulation of trade policies. The goal of this paper is to provide a dynamic test to evaluate the evolution of trade patterns between Brazil and the European Union following (2000) in calculating transition probabilities to measure mobility across export sectors. In addition, a structural change test in the sense of (2006) is used to verify if the patterns of trade are constant in the 1994–2005 period. The results of this analysis reveal a typical North-South trade pattern between the EU and Brazil. Trade specialization is primarily based on factor endowment although some evidence of increasing intra-industry trade and trade diversification appears.