Advancing the System of Economic Indicators for Monitoring Cooperation within BRICS

In order to analyze the development of relations between the BRICS countries, experts from the countries of the association are working on defining a set of indicators to monitor the effectiveness of cooperation in various fields. Along with the analysis of statistical information and the construction of econometric models, researchers identify the use of trade indices. Taking into account the growing importance of trade within the association, and taking into account the directions and goals of cooperation within the BRICS, the proposed indicators may be relevant for assessing the dynamics of trade, investment and financial ties. The results of calculations of trade indices will be useful not only for monitoring the development of the association, but can also be used in shaping the trade policy of the BRICS member countries.

The use of trade indices to monitor the development of cooperation between the BRICS countries has several advantages over other indicators.

First of all, trade indices calculated on publicly available official statistics, for example, the International Trade Center or UNCTAD, allow you to get clear, reliable results. Considering that the member countries of the association at this stage are not aimed at deepening the integration of economies through the conclusion of trade agreements, the use of sophisticated econometric models with many prerequisites and assumptions, including partial equilibrium models, seems impractical.

Secondly, the calculation and comparison of trade indices can make it possible to analyze the trends of interaction simultaneously with all BRICS partners, as well as to compare them with the global trend. For example, the index of importance of an exporting partner (t he E xporting P artner S ignificance I ndex) allows you to track not only the dynamics of export growth (an indicator of the volume of exports from country to country) or a change in relative export orientation towards a particular partner (the ratio of export volume in relation to a particular partner to the volume of exports of the countries), but to assess whether the orientation of supplies to a specific partner increases over time, taking into account the general trend of a country's exports in a particular year or period. Thus, the indexes make it possible to more clearly specify the difference between general trends and changes in relation to a particular trading partner.

Thirdly, the use of trade indices, in addition to deepening the analysis of economic interaction with trading partners, allows you to quickly track changes, which distinguishes this tool from, for example, using regression models to assess economic effects, where a time lag is often necessary. Thus, the analysis of the importance index of the exporting partner, the trade intensity index and the trade introversion index revealed the stabilizing effect of regional trade agreements not only during the global financial crisis of 2008-2009, but also during the COVID-19 pandemic. A comprehensive analysis of the three indices made it possible to determine a decrease in trade interaction to a lesser extent or a faster recovery in trade volumes for the EU, the Republic of Korea and Chile during these crises. Similarly, an analysis can be carried out to assess the impact of external and internal factors on the mutual trade of the BRICS countries.

It is necessary to note separately the expediency of using a set of trade indices as part of the analysis, which is another advantage of using the index method. Thus, based on the analysis of the index of propensity to export towards a specific partner country and the index of trade intensity, the least developed countries (LDCs) with the potential to increase exports to the BRICS countries were identified. Together with the analysis of other indicators, the trade indices made it possible to develop a clustering of LDCs and identify 13 countries that are promising in terms of developing trade with the BRICS countries.

This implies the following advantage of using the index method, namely the possibility of clustering all the countries of the association according to their predisposition to strengthen economic cooperation. Thus, based on the analysis of the index of importance of the exporting partner from 2005 to 2022 (to 2021 for Russia due to the lack of publication of official statistics), clusterization of the five BRICS countries was carried out according to the level of their interest in exporting towards the partner countries of the association (Table 1).

 

Table 1. Clustering of BRICS countries by export potential 
to the partner countries of the association

The available results can serve as a basis for developing recommendations for the governments of the member countries of the association. So, it can be noted that for some countries additional mutual measures may be needed to increase exports in order to realize the existing potential, for example, for Brazil and South Africa. Moreover, using an integrated approach, other trade indices can also be calculated and analyzed to specify the results, for example, the trade intensity index, which makes it possible to characterize the mutual interest of trading partners in the growth of exports and imports of goods.

The development and formation of a set of trade indices for analyzing trends in mutual trade between the BRICS countries can also serve as a tool in the framework of the procedure for joining new members when deciding whether to expand the membership of the association. An analysis of the dynamics and status (in comparison with other trading partners) of trade indices will help identify the most promising countries for expanding mutually beneficial economic cooperation.

The analysis of other indices, such as the trade dependence index, the import penetration index, and the export propensity index, will enrich the analysis of the specifics of economic development and the characteristics of the trade profile of potential BRICS member states. Also, the index method provides an opportunity for the BRICS countries to identify the most promising countries in the world in terms of the potential for developing economic cooperation. This approach can be used both when considering the issue of joining new members to the association, and when deciding on the intensification of foreign trade relations with countries around the world, allowing you to pinpoint partners with whom efforts to intensify will be more effective.

Another attractive consideration of using the index method is the possibility of analyzing the interaction of countries at the level of product groups. For example, indexes such as the export coincidence index, the index of revealed comparative advantage, and the index of regional orientation can be calculated using HS codes. Using a combination of several index approaches will make it possible to identify specific groups of goods for which negotiations on unification and, possibly, simplification of trade policy measures are promising for the growth of mutually beneficial trade turnover.

The indicated characteristics of the index method application will make it possible to develop practical recommendations for the Governments of the BRICS member countries to achieve their goals: from increasing trade in specific products with the members of the association, to justifying the choice of new members during the expansion of the BRICS. An integrated approach to the calculation and analysis of the proposed set of trade indices will make it possible to form clusters of countries to develop specific trade policy measures that take into account the specifics of economic relations between states. The use of trade indices is not only consistent with the BRICS goals of intensifying efforts in areas of mutual interest, primarily in trade, but also allows them to focus their efforts on those areas where the potential to achieve their goals is highest.