Risk or Opportunity: Do Trade Shocks Affect Brazilians' Views about China?

• In Event: Trade Preferences in Developing Countries

Abstract

Despite the relevance of China as a trading partner and rich anecdotal evidence suggesting that winners and losers respond differently to the prospects of increasing economic integration with the country, academic research examining Brazilians' preferences in this respect is still tentative at most. Nevertheless, understanding these preferences is arguably crucial to anticipating the future of the relations between the two countries, even more so in the context of a recently elected president who has proved extremely skeptical of Brazil's economic ties with China.

Our paper begins filling this gap by examining Brazilians' views about China at both individual and elite levels; following the Open Economy Politics paradigm (Lake, 2009), our initial expectation is that economic interests should drive these views to a large extent (Colantone & Stanig, 2018; Milner & Tingley, 2011; Rho & Tomz, 2017). Rather than adjudicating between factoral (Hecksher-Olin) and sectoral (Ricardo-Viner) models, as most studies on the politics of trade do (Hiscox, 2002), our analyses take advantage of a recently published dataset that encompasses import and export shocks per worker at the municipal level in Brazil (Costa, Garred, & Pessoa, 2016).

With these data in hand, we ran a national survey that allowed us to test whether individuals' exposure to these shocks influence their views of China as a risk or an opportunity. We posit that individuals experience import and export shocks both directly—as they are more likely to work in the economic activity prevailing in their area—and indirectly through the effects that these shocks have on their surroundings. It follows that those who live in municipalities that have experienced an export boom associated with China should be more likely to see the country as an opportunity than as a threat. Conversely, those living in mostly industrial municipalities that have been exposed to increased competition should perceive China in the opposite way. We further explore whether perceptions of China as a competitor, investor, supplier or potential market influence these views.

Next, we explore legislators' responses to Chinese integration. The size of the trade shocks associated with China, their geographic concentration, and the sectoral distribution of winners and losers are strong reasons to expect that legislators' views about China are driven by the aggregate impact of these shocks on their electoral constituencies. Considering that most relevant legislation has yet to pass through Congress, we explore alternative pieces of evidence that allow us to gather legislators' perceptions of China as being a risk or an opportunity. First, we replicate our individual-level survey, which explicitly asks about these perceptions. Next, we examine legislators' propensity to enter the Brazil-China front, which reveals the intention to influence the direction of bilateral relations. Finally, we conduct a content analysis of legislator speeches about China, which arguably reflects stronger preferences than the survey or even the participation in the front and observe whether speeches also follow a winner/loser logic.

Results suggest that economic interests influence Brazilians’ views about China, but only in the case of losers. Brazilians that live in municipalities that experienced large import shocks tend to see China as a risk, whereas residents in winning municipalities are not particularly more inclined to see it as an opportunity compared to our control group (that received neither shock). In regard to perceptions of China as an economic partner, those that identify the country as a major competitor are more likely to view it as a threat, whereas those that perceive China predominantly as an investor are the most likely to consider relations with the country to be an opportunity.

Economic interests of electoral constituencies also influence legislators’ views about China. Although we do not find any consistent result in our legislative survey, we observe that having an electoral constituency that suffered import shocks increases the probability that a legislator has joined the Brazil-China legislative front. This evidence suggests that the front, allegedly created to strengthen ties between the two countries, may prove to be more oriented towards protectionist initiatives. Finally, these results are reinforced by patterns observed in parliamentary speeches about China. Legislators from losing regions—mostly manufacturing such as shoemakers and textile industrials in the state of São Paulo, or the processed garlic industry in Rio Grande do Sul—openly express their resistance to import competition from the country.

Authors

• Daniela Campello, Getulio Vargas Foundation

• Francisco Urdinez