As I head to the 9th BRICS Summit on trade & investment, scheduled to be held in Xiamen from 3rd to 5th September, 2017, the resolution of the Dokalam standoff makes the environment increasingly conducive for multilateral engagement. As India and China, the two leading nations of the BRICS alliance, demonstrate their intentions to engage in a positive multilateral dialog, the hope is that other countries will walk in tandem.
In a highly dynamic global economic scenario, where multilateral blocs have either fallen through or not made much headway, the BRICS nations continue to forge ahead together. Brazil, Russia, India, China and South Africa, five countries representing three continents, have come a long way since they were clubbed together in 2005, as the future economic front runners. Today, as these nations look to ushering in the second ‘golden decade’ of cooperation, the importance of the BRICS nations to global economic growth cannot be undermined.
There’s no doubt that Jim O’Neill, Chief Economist of Goldman Sachs in 2001, who coined the acronym BRIC, has been proven right, with some of these economies becoming the fastest growing in the world. In a scenario, where the developed economies have been struggling to find growth, India and China have grown at over 6% per annum; Russia and Brazil are also expected to achieve sustained growth over the next year. By 2020, the nominal GDP of BRICS economies is projected to reach USD 23 trillion and its share in world GDP is expected to increase to 25.2%.
While these economies are expected to continue to play an important role in the global economy, the question is, are they really leveraging their true trade potential amongst themselves? As the developed economies increasingly focus on inward looking policies, will these nations be able to raise a collective voice against protectionism? How can these nations become influencers of future global scenario?
Balancing the Trade Dynamics
The BRICS nations together maintain a global trade surplus, with their aggregate global trade having almost doubled in a decade’s time (at USD 5.7 trillion in 2015). These markets have recorded a significant growth with a combined market size to USD16.5 trillion in 2015, supported by a large consumer base of over 3 trillion. Yet, the BRICS countries have not been able to harness the true potential offered by this regional cooperation. For instance, India’s trade deficit with rest of BRICS has increased from USD 8.7 billion in 2006, to USD 58.4 billion in 2015. India is in a position to offer several adaptable products and technologies at affordable prices, other BRICS countries would stand to gain with increased import from India. I believe that a simple mapping of needs exercise followed up by a commitment to support the member nations will improve the balance of trade situation for these nations.
Common Goal – Fight Protectionism
Apart from BRICS, several multilateral forums, such as B20/G20 and RCEP, have acknowledged the importance of reciprocal and mutually advantageous trade and investment frameworks and the principle of non-discrimination. In their declaration at Hamburg, the G20 leaders committed to fight protectionism including all unfair trade practices and strive to ensure a level playing field to encourage mutually beneficial trade relations. The basic tenets being followed by these three forums fit in well with India’s stand on multilateral trade – i.e. transparency, fairness and inclusiveness.
Fortunately, the BRICS nations, just like the RCEP nations, share a common goal and common vision for facilitating greater trade by harmonizing trade rules in the region. It is heartening to note that during their meeting in Shanghai in June this year, the BRICS Trade Ministers agreed to leverage the opportunity available to their nations. Towards this end they have pledged to deepen trade and investment relations and “safeguard and develop” the multilateral trading system. They also recognized the need to create new economic growth models, promote structural reforms and seek new growth momentum, strengthening policy coordination and enhancing cooperation. If the five nations do follow through on their commitments, favorable conditions for trade and innovation-driven economic development can be created.
Diverse Challenges, Unified Voice
The Xiamen Summit, scheduled for September 2017, is expected to bring the desired momentum to this agenda. Driven by Premier Xi, as the Chair of the Summit, the hope is that efforts will be made to deepen the BRICS cooperation. Prime Minister Modi has set the agenda to raise a collective voice against protectionism, especially in trade and movement of knowledge and professionals. To meet the challenges of an evolving global landscape, there is a need for new solutions to improve global governance and spur global economic growth.
The BRICS nations, despite their very different political and economic structures, are making an earnest effort to pursue a common goal with a unified voice. Though internally these nations face very different challenges, what is encouraging is the common view towards the need to boost global trade. I believe that the BRICS nations have an opportunity to demonstrate that, while there is no one-size fits-all growth model possible, the best way to achieve global economic growth is through multilateral cooperation. Enhancing consultations and exchanging information on macroeconomic and trade policies; supporting industrial complementarities, sustainable development and inclusive growth are some possible start points. To align itself to the common agenda, India has made a major shift in its stand by agreeing to share its investment policy making.
Challenges of governance and inefficiency of administrative procedures need to be addressed by almost all the BRICS Nations to facilitate and accelerate mutual trade and investment. Fortunately, BRICS is working together on multiple dimensions and initiatives to address these concerns. As highlighted by the Indian Deputy Sherpa Alok Dimri “The priority of BRICS is economic and financial market forum, which focuses on the reform of the economic and global governance system.”
Going Beyond BRICS
Over the decade spanning 2005 to 2016, the BRICS nations have defined a new paradigm for the developing and emerging economies to partner. Today the “gold bricks countries” (China’s interpretation of BRICS) have become the voice of the developing world. It is hoped that the Group will be able to leverage its regional influence and trade clout into wider cooperation to build new partnerships as well enhance dialog on research on economic and trade cooperation.
A significant movement towards this end was the establishment of the New Development Bank 2015. The first such Bank without membership of OECD nations, NDB is expected to become a major regional development bank. It also augurs well that all BRICS nations are also members of the G20, upon whom they are impressing the need to implement Hangzhou consensus.
In a further attempt to catalyze developing economies to partner, China invited 16 other countries to the recently concluded Seminar on Governance. The integration of these nations in to the BRICS forum would make it an effective platform to voice the demands of the developing and under developed nations.
In the last two years, and more so in the last six months, the global economic landscape has shifted irrevocably. The economic potential and demographic development combined with their high growth rates, have made BRICS a major stakeholder in global governance and economic growth. In this emerging landscape, characterized by faltering economic recovery of the developed nations, the BRICS nations have the opportunity to step up their role. Bilateral and multilateral trade relationships have the potential to pave the way for resolving political challenges spurring balanced development. For these nations to harness the opportunity, it will be important to not just align on the bilateral front, but take a holistic view of the principles of engagement on the political, economic and social fronts.
The question however is whether the BRICS can continue to align themselves to a common economic goal? Will they be able to bring in the desired level of coordination to set a common global agenda? While they attempt to expand their reach, will BRICS be an effective global voice of the developing world? I hope at the Xiamen Summit, the five nations will come to a consensus on how they can BRIC(S) up Global Economic Trade.