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Revealed Comparative Advantage A Study on BRICS

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ISSN: 2223-5833

Research Article Open Access

Revealed Comparative Advantage and Competitiveness: A Study on BRICS

Raghuramapatruni R*
Associate Professor in International Business and Economics, GITAM School of International Business, GITAM University, Visakhapatnam, India

Abstract
The BRICS have emerged as a major global force in the global economic arena, with the balance of economic
power shifting dramatically towards Asia over the next decades. With 43 percent of the world’s population, 46%
of the global labour force, 30% of the earth’s landmass and 25% of the world share of GDP, the BRICS countries,
apart from complementing their respective economies in terms of resource exchange are also the major suppliers
to the industrial world. With a cumulative global trade of 20 per cent and generating more than 40 per cent of global
economic growth, the BRICS countries, and India specifically as a prominent global leader in trade, are poised to
strengthen their relationship through intra-BRICS trade. Between 2001 and 2014 intra-BRICS trade increased nearly
15 times. It is increasing at an average rate of 28 percent annually and currently for USD 300 bn and also the bilateral
investment flows among BRICS countries are also on rise - the total FDI inflows into BRICS reached a peak of US$
322 billion in 2013. In this context the present paper makes an attempt to assess the intensity of trade relations
between the BRICS countries and further hypothesize the potentiality of commodity trade among them with respect
to 14 distinct sectors. The Study observes that the BRICS countries are complimentary rather than competitive to
each other in the various sectors analyzed and presents a greater potential of multilateral trading regime among
them which could accelerate the South-South trade.

Keywords: Global economics; Trade relations; Commodities; BRIC relations among BRICS, commodity trade potential (SITC Rev.3. as per
countries Untad classification) between BRICS countries and the prospects for
future trade [2].
Introduction
Objectives of the Study
In 2001, Jim O’Neill Chief Economist of the American bank,
Goldman Sachs, in a report “Building Better Global Economic BRIC” To analyze the trends and pattern of growth among BRICS
first coined the phrase ‘BRIC’ which stands for Brazil, Russia, India, countries.
and China-the four of the fastest growing emerging economies of the To estimate the extent of Intensity of trade relations among BRICS.
world [1]. Looking at the features like size of population, demographic
dividend and rate of globalization, Goldman Sachs (GS) forecasted that To identify the commodities with trade potential, which could
these four countries had the growth potential to replace the European further enhance the trade relations between the BRICS countries?
economy in terms of market size. GS also predicted that China, India, Need for the Study
Brazil and Russia would become the first, third, fifth and sixth largest
economies respectively, by 2050. However, ‘BRIC’ as an international The world has experienced a massive transformation in terms
forum was formalized with the first meeting of the foreign ministers of geo-politics, economic and in organization and distribution of
of Brazil, Russia, India, and China in New York on the margins of the production. For several reasons, emerging economies of Brazil, Russia,
UN General Assembly in September 2006. Later during April 2011, in India and China and South Africa have acquired important role in
the third BRIC summit, South Africa joined this forum and “BRICS’ the world economy as producers of goods and services. The BRICS
was formed. Since then it has become well-known worldwide, and countries apart from complementing their respective economies in
researchers, investors, economists, politicians and many others have terms of resource exchange are also the major resource suppliers to
focused their attention on these five leading emerging economies of the industrialized world. The formation of the BRICS was rooted in
the world. Today the BRICS countries are widely seen as the pistons the long-term common economic interests of the member nations,
powering the 21st century global economy as the five BRICS countries which include reforming global financial and economic architecture,
together account for 43 percent of the world’s population, 46 percent strengthening the principles and standards of international law and
of the global labour force, 20 percent of the earth’s landmass, and 25 supporting the complementarities of many sectors of their economies.
percent of the world’s share of global gross domestic product. BRICS And as Prime Minister Sri. Narendra Modi quoted in his speech in the
countries have been credited with nearly 50 percent of the world’s
economic growth. Their share is expected to increase further, as
member’s growth rates surpass the average annual growth rate of the
world economy. As we look back on the last decade, it is clear that *Corresponding author: Raghuramapatruni R, Associate Professor in International
Business and Economics, GITAM School of International Business, GITAM University,
the BRICS countries have already begun to play a significant role in Visakhapatnam, India, Tel: 0891 279 0101; E-mail: [email protected]
the global economy and on the world stage. Virtually unscathed from
the recent global economic crisis, these countries are poised for a Received June 08, 2015; Accepted July 17, 2015; Published July 29, 2015
strong long-term, growth. Between 2001 and 2012 intra-BRICS trade Citation: Raghuramapatruni R (2015) Revealed Comparative Advantage and
increased 15 times. It is increasing at an average rate of 28 percent Competitiveness: A Study on BRICS. Arabian J Bus Manag Review 5: 152.
doi:10.4172/2223-5833.1000152
annually and currently stands at USD 230 bn and bilateral investment
flows among BRICS countries are also on rise. By 2015, a substantial Copyright: © 2015 Raghuramapatruni R. This is an open-access article distributed
under the terms of the Creative Commons Attribution License, which permits
surge is expected in the BRICS’ share of world GDP and exports. In this
unrestricted use, distribution, and reproduction in any medium, provided the
background the paper attempts to explore the intensity of intra-trade original author and source are credited.

Arabian J Bus Manag Review

ISSN: 2223-5833 AJBMR an open access journal Volume 5 • Issue 5 • 1000152
Citation: Raghuramapatruni R (2015) Revealed Comparative Advantage and Competitiveness: A Study on BRICS. Arabian J Bus Manag Review 5:
152. doi:10.4172/2223-5833.1000152

Page 2 of 7

recent BRICS summit at Brazil [3], the BRICS is a unique international Methodology
institution because for the first time it brings together a group of nations
on the parameter of ‘future potential’, rather than existing prosperity The study is carried on the basis of secondary data. The data was
or shared identities. In this background it would be extremely useful collected through a wide variety of sources viz., journals on international
to assess the intensity of trade relations between the economies and trade, yearbooks publishing statistical data with respect to trade viz.,
explore the potential for future trade as BRICS can become the most World Bank, UN, Unescap, IMF, WTO, and Uncomtrade and through
potential regional block in the world economy in line with EU, ASEAN, different online data sources, web sites, text books, magazines etc.
G6 and G8 in the near future. The analysis was done by adopting the following trade indices.
Review of the Earlier Studies • Trade Intensity Index
The emergence of BRICS represents an important change in the • Revealed Comparative Advantage Index
global political economy and there is anticipation that the BRICS-
building on their own lessons and initiatives will play a progressive role • Trade Dependency Index
on the economic and social issues at regional and global levels. Then Trade intensity index
there is a critical view on the doubts about the nature and coherence of
the group, despite these concerns, the debate on poverty and inequality Trade Intensity Index (TII) is popularly used to determine the total
is integral to any engagement with the BRICS, given its focus on value of trade that exists between any two countries. It can be defined as
growth and infrastructure. BRICS-led aid and investment activities are the share of one country’s exports going to the partner country which
expected to have a significant bearing on issues such as the exploitation is divided by the share of world exports going to the same partner. This
of natural resource, land garbs, agriculture and food security across can be expressed as:
regions [4]. BRICS countries, apart from complementing their TII: xij/xit / xwj/xwt
respective economies in terms of resource exchange, are also the
major resource suppliers to the industrialized world. However, these Xij is the country’s ‘i’s total exports to ‘jth country. Xit is the total
countries have very little cultural or political similarity; and their levels value of ‘i’country’s exports. Xwj is the total value of the world’s exports
of development differ widely. Given that there were no significant to ‘jth’ country i.e. partner and xwj is the total value of the world
prior economic ties among these countries, the creation of BRICS exports. The TII value ranges between o and 1. A value of ‘0’ indicate a
was a major step towards an alternative global economic landscape. lower degree of Trade Intensity Index (TII) between the countries and
As many studies present that the formation of BRICS was rooted in ‘1’ a higher Trade Intensity Index TII value.
the long-term common economic interests of the member nations, Revealed comparative advantage index
which include reforming global financial and economic architecture,
strengthening the principles and standards of international law and The paper used the Revealed Comparative Advantage Index (RCA)
supporting the complementarities of many sectors if their economies as proposed by Balassa’s Index [8] to identify the commodity trade
[1]. The five key emerging market economies of Brazil, Russia, China, potential between the countries. The RCA indices have been calculated
India and South at SITC-2 digit level classification. The RCA index is used to identify
the commodity trade potential between countries and also indentifies
Africa has been lauded for their spectacular economic growth potential of trade between new partners. The RCA measures at a higher
and resilience they have shown through 2008-2009 financial turmoil. level of product disaggregation can provide useful information about
However one significant observation made during the study is the trading with nontraditional products between the countries. The RCA
enormous rise of income inequalities in many of these emerging can be expressed as:
markets–specifically with respect to China, India and South Africa
though Brazil has enjoyed a reduction in the same [5]. Though there is RCAij= xij/xit / xwj/xwt
an increased participation of BRICS countries in the global sphere and Where,
have emerged as a potential regional group but has a limited influence
on global monetary policies and world economic and political forum xij: Exports of ith country in ‘j’th product
[6]. Also an overview of the philosophies and modalities of BRICS Xit: Total Exports value of the ith country.
financing presents that the philosophies of most BRICS countries for
development financing differ from traditional donors in three main Xwj: Total World Exports of ‘j’th product
ways: BRICS, with the exception of Russia, provide financial assistance
Xwt: Total World Exports
based on the principle of ‘mutual benefits’ in the spirit of South-South
co-operation, while Russia and traditional donars emphasize the role of The RCA index ranges between o and 1, an RCA index equals to 0
aid in poverty reduction. Second BRICS particularly China view policy indicates a disadvantage of a country in exports a commodity category
conditionality as interfering with recipients’ sovereignty and tend and a RCA value 1 indicates a higher degree of advantage for the
to provide noncash financing as a means to circumvent corruption, country in the exports of the products.
whilst traditional donors view policy conditionality as a means to
Revealed import dependence index
ensure efficient use of aid. Third, different emphasis is placed on how
to ensure debt sustainability, with some BRICs giving a greater weight The Revealed Import Dependence Index (RID) expresses the import
to micro sustainability and growth while traditional donors paying dependency of a country on a particular product category [9]. As RCA
more attention to long-run macro sustainability and emphasis is placed presents the comparative advantage, the RID presents comparative
on how to ensure debt sustainability, with some BRICS giving a great disadvantage of a country in the particular product category which can
weight to micro sustainability and growth while traditional donors be expressed as follows:
paying more attention to long run macro sustainability [7].
RID i = (Mia/Ma)/ (M iw /Mw),

Arabian J Bus Manag Review

ISSN: 2223-5833 AJBMR an open access journal Volume 5 • Issue 5 • 1000152
Citation: Raghuramapatruni R (2015) Revealed Comparative Advantage and Competitiveness: A Study on BRICS. Arabian J Bus Manag Review 5:
152. doi:10.4172/2223-5833.1000152

Page 3 of 7

Where Mia is equal to imports of commodity ‘i’ from a country ‘a’, potential to rank among the world’s largest and most influential
economies in the 21st century. In the last two decades there has been
Ma is equal to total imports of a country ‘a’,
phenomenal growth in the intra-BRICS trade. Intra-BRICS trade is
Miw is equal to total value of the world imports of commodity i and about USD 300 billion and has the potential of more than doubling to
USD500 billion by the end of 2015 [13-15]. Table 1 presents the Intra-
Mw is equal to total world imports.
BRICS trade share.
As in the case of RCA index, an RID index exceeding one suggests
The observed growth of intra BRICS trade is largely based on
a strong dependence of the country on the import of a specific item in
exports of low technology natural resources and largely driven by
a reference period and vice-versa.
Chinese demand for inputs goods. Off late India, Brazil and South
While an RCA analysis explains about the comparative advantage Africa have switched to China as their main trade partner. With respect
that a country enjoys in the export of a certain commodities in general, to Intra-BRICS trade, the share of India has always been significantly
it does not necessarily tell us about the specific import requirements of high. India has remained an important market for Brazil and South
the countries being focused for exports. So, although one country may Africa while becoming more important for Russia. In the year 1995 the
have a comparative advantage in a specific commodity category the share of Intra-BRICS trade of India was 7.18%, this has been gradually
other country may not have an important requirement therefore RCA on rise to 17.38% by the year 2012. For India, China has emerged as the
among the BRICS countries is compared with the RID for the same largest trading partner with largest importation source and third largest
commodities among them as this will give a more reliable picture of the export destination since last two years. For Brazil too, the Intra trade
export potential of the commodity trade among them. has been on rise after the year 2001, which is known for its agricultural
exports and imports of manufacturing items. China ranked the largest
The RCA and RID values for 14 distinct product category were export and importer country for Brazil in 2013. The share of Russia
shown in Annexure 1 (SITC Rev.3. as per untad classification). BRICS is 4.18% in the year 1995 and this rose to 4.69% in the year 2000 and
countries are calculated and matched to assess the trade potential 12.25% by the year 2012. The main trading partners of Russia have been
between the nations. the non-BRICS countries.
Trade Share The Intra-trade share of China is 4.2% in the year 1995 and this rose
The paper calculates trade share of individual BRICS countries to 7.3% by the year 2012. A close analysis of Intra BRICS trade indicates
as the percentage of trade with the partner country to the total trade that China has become the main source of imports to all the countries
of a country/region. It is calculated as the value of the total trade of a at the expense of other traditional trading partners. With respect to
country ‘i’ with the partner country ‘j’, expressed as a percentage share South Africa the Intra-trade with BRICS has been significantly on rise
of the dollar value of the total share of the country ‘i’ with the world as aid for the other BRICS countries and promotes their trade and
[10-12]. A higher value of trade indicates a higher degree of integration investment, but the BRICS continue to support Africa’s development
among the countries and vice versa. The following Table 1 presents the through project aid-aimed at improving infrastructure concessional
Intra-BRICS trade as a percentage of individual BRICS countries total and soft loans as well as credit grants. The Intra-trade of South Africa
trade. increased from 34% in the year 1995 to 10.2% by the year 2012. India
and China are the largest stake holders in the total intra- trade among
BRICS as drivers of global economic growth BRICS and account for 80 percent of exports and imports to all other
The five BRICS countries are distinguished from a host of other BRICS countries.
promising emerging markets by their demographic and economic Trade Intensity Index
Year Brazil Russia India China South Africa The BRICS economies have been increasing their economic weight
1995 2.178 4.184 7.185 4.210 3.420 over the past decade, consolidating external linkages and capitalizing
1996 3.374 3.982 5.868 4.978 3.524 on their unique competitive positions in export-import markets
1997 3.325 4.609 7.061 4.246 3.640 [16]. Intra-BRICS trade flow has increased exponentially from a
1998 3.201 5.138 6.911 3.566 3.983 total volume of USD 27 billion in 2000 to the current level of USD
1999 3.058 5.870 9.020 3.406 4.856 230 billion. The countries have also committed to increase their trade
2000 3.680 4.692 8.556 3.697 4.131
volume to USD 500 billion by 2015 [17]. In this context it is useful
2001 3.988 5.996 9.654 4.387 4.639
to assess the Intensity of trade relations among the BRICS countries.
The present study investigates the Trade Intensity Index (TII index)
2002 4.513 6.682 12.348 4.294 4.962
between the individual BRICS countries and aggregate of rest of the
2003 5.133 7.716 12.516 4.501 5.887
BRICS together for the period 1995 to 2012 and analyzed to assess the
2004 6.234 7.857 13.158 4.585 7.112
intensity of trade [18]. Since the average of intensity index is 1.0, the
2005 7.295 8.806 13.940 4.796 7.954
computed index being greater than one would indicate a higher degree
2006 8.905 8.706 14.218 4.511 8.765
of trade intensity between the two given countries. In cases where the
2007 11.099 10.875 15.969 4.555 8.153 results of the computation moves closer to zero it would imply a lesser
2008 13.778 10.111 16.554 5.318 7.254 degree of trade intensity between the countries. The study illustrates
2009 13.011 9.485 20.240 5.692 8.910 greater degree of trade intensity among the BRICS countries.
2010 16.010 11.847 19.456 5.990 9.589
2011 16.795 11.650 17.592 7.210 9.373
Over the past few years Brazil has emerged as an important player
2012 17.963 12.256 17.385 7.342 10.282
in the World market alongside of the BRICS regional grouping (Figure
1). Brazil during the last decade has exhibited a greater integration of
Table 1: Intra-BRICS Trade as Percentage of Individual BRICS Countries Total trade with the rest of the BRICS countries in terms of exports and also
Trade.

Arabian J Bus Manag Review

ISSN: 2223-5833 AJBMR an open access journal Volume 5 • Issue 5 • 1000152
Citation: Raghuramapatruni R (2015) Revealed Comparative Advantage and Competitiveness: A Study on BRICS. Arabian J Bus Manag Review 5:
152. doi:10.4172/2223-5833.1000152

Page 4 of 7

registered at 0.86. China’s imports from Russia are especially Oil and
Russia
India
China
fossil fuels, as China is largest oil consumer among BRICS along with
1.600 South Africa
BRICS
India whereas Russia and South Africa are oil producers [19,21]. The
1.400 TII values of Russia with South Africa presents a smaller index, for the
1.200 initial period of study it is 0.09 and by the year 2000 it is 0.10 and also
1.000
the index is 0.099 for the year 2012. Russia is the small trader among
TII Values

BRICS. Africa’s exports are mainly food products to it represent only

0.800
1 percent of the BRICS total and in the other direction the exports
0.600
equivalent figure is only 7 percent although growing. Russia has been
0.400 mainly investing in South Africa in the fuel and energy and bilateral
0.200
and focuses mainly on food security and education [22].
0.000 India presents greater intensity of trade with rest of the BRICS
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
countries as the Intensity Index value exhibits greater than one with
Year
Brazil, Russia (except two years), China (except for initial two years)
Source: Author’s Calculations based on data from unctad.org
and South Africa for the whole period of study (Figure 3). South Africa
Figure 1: Trade Intensity Indices between Brazil and rest of the BRICS.
has been emerging as one of the most important export destination
and 6th largest investment source for India especially with respect to
importation of consumer goods [23,24]. Similarly with Brazil, the
traditional trade partner to India also presents a greater intensity
Brazil
of trade. India’s exports to BRICS countries was highest to Russia
2.500 India
followed by China during 1999-00, this scenario completely changed
2.000
china
during 2005-06 as China occupied the first place followed by South
South
Africa
Africa. It was lowest to Russia (733.04 USD mil) in 2005-06. During the
1.500 BRICS year 2011-12 India’s exports to China increased to USD 16416.82 mil
TII Values

followed by Brazil and South Africa. India’s overall exports to BRICS

1.000
countries is 36759.52 USD mil, which doubled in 63886.49 USD mil in
0.500
2005-06 and then to 19456 USD mil in 2011-12.

0.000
The Figure 4 presents Chinese trade with rest of the BRICS. China
the most happening economy among the BRICS countries holding
95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

the largest amount of forex reserves and growing on an average of 10

19

19

19

19

19

20

20

20

20

20

20

20

20

20

20

20

20

20

Year
percent since the last ten years. The investigation of the intensity index
Source: Author’s Calculations based on data from unctad.org with the rest of the BRICS presents that the TII of China is on rise for
Figure 2: Trade Intensity Indices between Russia and rest of the BRICS.
Brazil from the year 2002 the TII is greater than one for all the years
under study as China has intensified its trade relations with Brazil the
overall trade increased from USD6.5 billion to USD 77 billion between
imports. During the year 1995 the TII of Brazil with Russia stands at 2003 and 2012. The Intensity index of China with India is lower than
0.17, India at 0.275 and for China and South Africa it is 0.675 and 0.783 one presenting a lower trend throughout the period of study. The
respectively [19]. The study observes that its TII of Brazil is high with average index for the whole period has been 0.62 which is lower than
China for most of the period under study as for 2007 (1.03) till the year one though in the recent years China emerged as a largest source of
2012 (1.38), and China has emerged as the largest trading partner with importer for India and top the three export destination to the Indian
Brazil. The Asian country had already surpassed the United States in exports, this has been less when compared with other BRICS partners
terms of importing, and in 2012, also excelled the North Americans in of China. There has been a gradual rise of China’s exports to South
exporting. The Intensity Index with other BRICS countries were lower
than one for the whole period of study, for the year 2012 the TII Index
value stands as with Russia (0.499), India (0.951), South Africa (1.162).
Whereas with the whole BRICS as a group the TII index presents a
value of 1.162 for the same period [20].
Russia, in addition of holding the largest gas reserves and
production globally, also plays a dominant role as oil producer as its
oil companies locate and exploit new reserves. The TII of Russia with
individual BRICS countries and aggregate value presents that with
India and Brazil it exhibits a greater Intensity Index (Figure 2). For
India, Russia has been a traditional trading partner as important source
of imports and slowly it has been replaced by China and East Asian
economies. With Brazil too Russia exhibited a greater Intensity Index
from the year 2001 till the year 2007; the index value is greater than one.
Thereafter there was a decline and the TII index of Russia with Brazil
registered at 0.46 for the year 2012 but still Russia was ranking among
Source: Author’s Calculations based on data from unctad.org
the top 10 importing nations for Brazil, especially with petroleum
Figure 3: Trade Intensity Indices between India and rest of the BRICS.
exports followed by China with average TII value for the study period

Arabian J Bus Manag Review

ISSN: 2223-5833 AJBMR an open access journal Volume 5 • Issue 5 • 1000152
Citation: Raghuramapatruni R (2015) Revealed Comparative Advantage and Competitiveness: A Study on BRICS. Arabian J Bus Manag Review 5:
152. doi:10.4172/2223-5833.1000152

Page 5 of 7

followed by Russia and India. The Intensity Index exhibits South

Russia
India
Africa’s Index with Brazil has been greater than one since the year 2000
3.000
Brazil as Brazil emerged as one of the largest source of imports especially with
2.500
South Africa respect to food products and also ranked among the important export
BRICS
destinations. Two key features of Chinese trade stand out with South
2.000
Africa. First, China’s export shares of South African oil exporters are
TII Values

1.500
substantial and second the African countries import heavy shares of
their manufactured goods from South Africa from the year 2010 the
1.000 TII index of South Africa is greater than one. The TII index of China
0.500
is the highest with Russia, it has registered on an average of 1.5 for the
whole period of the study, As Russia holds the largest oil reserves over
0.000 74 barrels billion and emerged as an important export destination for
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Year the other BRICS economies.

Source: Author’s Calculations based on data from unctad.org Revealed Comparative Advantage an Analysis
Figure 4: Trade Intensity Indices between China and rest of the BRICS. The individual composition of exports reflects the diverse resource
endowments present within BRICS. This presents a significant
opportunity for leveraging existing trade ties and cooperation while
Brazil serving the economic growth and development agenda, a necessary
Russia
4.000
India
precursor to faster socio-economic convergence with advanced
3.500
China economies. Trade in goods and services provide multiple sectoral
3.000 BRICS opportunities for cooperation among the BRICS countries, which can
2.500 be mutually beneficial. For the purpose, the Revealed Comparative
TII Values

2.000
Advantage Index (RCA) and Revealed Import Dependency Index
1.500
(RID) were calculated for each of the BRICS countries [13,27]. The
RCA of each country is matched with the RID of the corresponding
1.000
other BRICS countries to explore the potential for commodity exports.
0.500
As RCA presents competitive advantage of the country in the export of
0.000
an item RID presents the import potential of the partner country for
95 9 96 9 97 9 98 9 99 0 00 0 01 0 02 0 03 0 04 0 05 0 06 0 07 0 08 0 09 0 10 0 11 0 12
19 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 the same. So for each BRICS countries the products where the RCA>1
Year
are matched with products where the RID>1 this would present the
Source: Author’s Calculations based on data from unctad.org
products with significant trade potential among BRICS (Table 2).
Figure 5: Trade Intensity Indices between South africa and rest of the BRICS. Brazil is currently a major producer of bio-fuels and may eventually
be a major energy producer to the Chinese and Indian economies,
Africa, its exports of goods to China have grown faster than imports which have significant energy demands. Brazil also dominated the
and Chinese companies continue to allocate resources to grow their export of the agrochemical products, which feature prominently in the
presence in South Africa. The TII value of China with South Africa for import basket of Russia, India and China. Also it exhibits a significant
the initial period of study is 0.781 and this has gradually increased to export potential for Food, Fuels and Mining and Iron and Steel, when
1.397 for the year 2012 as China-African trade volumes have grown this is matched with partner countries Revealed Import Dependency
accordingly there, the total volume of trade was at USD 198.5 billion Index (RID) of Russia, India, China and South Africa it is observed that
in 2012. The research from Standard Chartered estimates that trade Brazil and Russia have two commodities (Food and Fuels) which are
between China and Africa will cross USD385 billion by 2015. China feasible for trade among them [28]. Similarly Brazil and India has two
has been importing oil and raw materials from Russia over an eight- commodities (Fuels and Mining, Iron and Steel) and between Brazil
year period ending in 2012, direct foreign investment by Chinese and South Africa the products category Fuels and Mining is feasible
companies in Russia increased 40 times to reach USD 4.9 billion. While for trade. One significant observation is no commodity is identified
trade reached a record high of USD 88 bn (£54 bn) in 2012, the two for trading with China among the product category analyzed as China
countries plan to raise the volume to USD100 bn by 2015 and $200 bn has emerged as largest importing source to BRICS at the cost of their
by 2020, this could be seen in the TII values between China and Russia traditional partners and Intra-BRICS trade is asymmetrical as it is
as the TII value on an average recorded an index above 1. driven largely by Chinese demand for inputs (Supplementary Data).
Co-operation between South Africa and the BRICS has gained new Russia exhibited greater potential in the area of Fuels and Mining,
momentum and generated much interest in the recent years (Figure Fuels, Iron and Steel and this is matched with the import dependency of
5). This is because these countries–Brazil, Russia, India, China and the other BRICS countries it is observed that two commodities has been
South Africa are playing an increasingly prominent role in global identified for trade, Fuels and Mining and Fuels for Brazil and South
trade, investment and finance within this trend Africa has deepened Africa. Also in the same line South Africa and India has been observed
its engagement, with these countries not only in trade, investment and to have trade potential with Russia for the product category Fuels and
finance but also in diplomatic and cultural relations [25,26]. The initial Mining, Fuels and Iron and Steel. And China could not be identified
TII index for the year 1995 is 0.54 and this gradually is on rise and for trade feasibility under any product category taken for study.
further the index has been exhibiting a value greater than 1 since the India exhibited competitive advantage for (RCA>1) for eight distinct
year 2005 (1.06) till the year 2012 (1.25). Among the BRICS countries product category group Food, Fuels and Mining, Fuels, Manufactures,
South Africa revealed a greater intensity of trade with Brazil and China Iron and Steel, Chemicals, Pharmaceuticals, Textiles and Clothing and

Arabian J Bus Manag Review

ISSN: 2223-5833 AJBMR an open access journal Volume 5 • Issue 5 • 1000152
Citation: Raghuramapatruni R (2015) Revealed Comparative Advantage and Competitiveness: A Study on BRICS. Arabian J Bus Manag Review 5:
152. doi:10.4172/2223-5833.1000152

Page 6 of 7

Brazil and Russia Brazil andIndia Brazil and China Brazil and South Africa
Food Fuels and Mining Nil Fuels and Mining
Fuels Iron and Steel

Russia and Brazil Russia and India Russia and China Russia and South Africa
Fuels and Mining Fuels and Mining Nil Fuels and Mining
Fuels Fuels Fuels
Iron and Steel
India and Brazil India and Russia India and China India and South Africa
Fuels and Mining Food Nil Fuels and Mining
Food Pharmaceuticals
China and Brazil China and Russia China and India China and South Africa
Machinery and Transport Machinery and Transportation Iron and Steel Telecommunications
Telecommunications Telecommunications
Textiles Automotive Products
Clothing
South Africa and Brazil South Africa and Russia South Africa and India South Africa and China
Fuels and Mining Agricultural Products Fuels and Mining Nil
Chemicals Food Iron and Steel
Pharmaceuticals Pharmaceuticals
Automotives Automotives

Source: Feasibility data based on Annexure 1.

Table 2: Commodities feasible for trade among BRICS countries.

for 3 products it exhibited RID>1 i.e. dependency index. When this Fuels and Mining and Iron and Steel category and no commodity is
RID>1 is matched with the RCA>1 for other BRICS countries it was found feasible for trade with China.
observed that for Fuels and Mining, Food they matched with Brazil,
Conclusion
with Russia for Food and Pharmaceuticals and for South Africa, Fuels
and Mining. Like others between India and China has no commodity The analysis presents that the BRICS countries are complementary
has been identified for trading [29]. rather than competitive to each other with respect to commodity trade
in the 14 categories analyzed for the study, among the 14 categories,
Commodities feasible for trade among BRICS countries is Brazil could trade with rest of BRICS in 5 categories, Russia in 7
shown in Table 2. China has been observed with RCA>1 for 8 categories, India in 5 categories, China in 9 and South Africa could trade
product category as it is currently dominating the world with its low in 10 commodity categories with the other BRICS partners presenting
cost manufactured commodity exports. Iron and Steel, Machinery a greater potential to intra BRICS trade. The BRICS grouping could
and Transport Equipment, Office and Telecommunications evolve as a powerful platform to intensify south- south co-operation
Equipment, Electronic data processing and Office Equipment, Tele in trade and investment activities instead of dependence on the West,
Communications Equipment, Integrated Circuits and Electronic and off late this has already proven to be the right platform to voice
components, Textiles and Clothing. No commodity has been observed the needs of the developing world and with the evolution of BRICS
under the RID> 1 category. When commodities RCA>1 are matched Development Bank on July 1st, 2014 at the Brazil Summit, the world
with commodities RID>1 of individual BRICS countries it is observed economy is closing watching this group which could soon pose a
that for Brazil 4 commodities Machinery and Transport Equipment, challenge to the developed world and evolve into powerful regional
Tele Communications, Textiles and Clothing are feasible for trade, group in the near future. Further the new development bank would
with Russia machinery and transportation, telecommunication, not only cater to the infrastructure and financial needs of the member
automotive products are feasible for trade. It has been identified that countries but also act as an important catalyst to accelerate trade and
only one product category among 14 product categories Iron and sustainable development of the region.
Steel is feasible for trade between India and China and one product
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