The emergence of large BRICS nations has complicated the trade landscape for smaller, surplus-labor developing countries. This study theorizes that SSPTAs serve as a response to being overshadowed by these economic giants.
Context:
Our findings indicate China poses the most significant challenge among all BRICS nations.
Evidence & Method:
Countries initiating the most South-South agreements are those suffering from the greatest export displacement due to Chinese competition. Importantly, this effect is specific to China;
Other BRICS countries do not have a similar impact on SSPTA formation.
We confirm these results with multiple measures of 'China shock' intensity.
Significance:
This research helps explain two trends: the decline in trade between developing nations and rich countries, coupled with an increase in South-South preferential agreements. It demonstrates that China's economic ascent has tangible consequences for global trade patterns.
