BRICS Turns To Politics

An economist for a US investment bank developed the acronym BRIC a decade ago, lumping together the solid, fast-growing economies of Brazil, Russia, India and China and arguing the four would outpace the top six Western economies before 2050. The analysis resonated, fueling confidence among the hot emerging economies, which have since added South Africa to their ranks. The BRICS agenda is expanding beyond economic matters, as revealed by the summit meeting in Sanya, explains Nayan Chanda, YaleGlobal editor in his regular column for Businessworld, and that could expose inconsistencies, straining cooperation. Uneven growth will also test BRICS solidarity. China’s undervalued currency has disrupted industry and trade for the other emerging economies as well as developed nations. To lead BRICS with any success, Chanda contends, China will be expected to cooperate, provide support and even ease its ferocious competitive drive. – YaleGlobal

BRICS Turns To Politics

China is the biggest beneficiary of the BRICS expansion, adding feathers to its world leader cap
Nayan Chanda
Tuesday, April 26, 2011

It’s a strange case of life imitating spreadsheet. The Bric (Brazil, Russia, India and China) bloc, which was conceived 10 years ago by a Goldman Sachs analyst as a clever acronym for the world’s fast-developing large economies, seems to have developed legs. A summit meeting in the Chinese city of Sanya expanded the group to include South Africa (and become Brics) and – moving beyond the boilerplate rhetoric about economic cooperation – issued a declaration expressing disapproval of the use of force in Libya. It also called for a restructuring of the post-World War II financial order. China’s media hailed the summit as a “milestone”, whereby five big emerging economies were engaged in “thinking big and doing big”.


However effective the group’s cooperation might be, the role of chief patron and spokesperson of Brics certainly offers China a new multilateral leadership hat to massage the group’s policy along its path. But it could also force Beijing to compromise on its narrow self-interest.


The 32-point Sanya Declaration contained many big ideas – though mostly clichés – and the action plan outlined a busy schedule of meetings for the year. Noteworthy for an ostensibly economic grouping, is the upcoming meeting of “High Representatives for Security Issues” in China. Following up on the serendipitous presence of all Brics as members of the UN Security Council (UNSC) and their united front on Libya, the group seems intent to push for a higher political profile. The declaration expressed support for the principle that “the use of force should be avoided”.


Russia and China did not use their veto to stop the UN resolution imposing a no-fly zone on Libya. They knew it wouldn’t be a peaceful affair as it would require bombing Libyan air defence systems. But in the face of the impending massacre of civilians by Colonel Gaddafi, they chose to abstain. Brazil and India also abstained for the same opportunistic reason. After a phone call from US President Barack Obama, Jacob Zuma’s South Africa actually voted for the resolution. The Sanya declaration does not necessarily show Brics as having clarity of principle, but rather them wanting to have their cake and eat it, too.


The volte-face on Libya aside, the attitude of Russia and China, permanent members of the UNSC, showed the limits of the group’s solidarity. While claiming to favour the desire of India, Brazil and South Africa to play a greater role in the UN, Moscow and Beijing steered clear of supporting the three countries’ candidacy for permanent membership to the Security Council.


The summit heard repeated calls for creating a “more equitable and fair world”, but the elephant in the room was China’s export juggernaut riding high on its undervalued currency. The renminbi was not on the agenda, even though in months leading up to the meeting, Brazil had complained about damage to industry and lost jobs as a result of cheap Chinese imports. South Africa’s nascent industry has similarly suffered because of lopsided trade with China. A Reserve Bank of India study on the renminbi noted that by keeping RMB undervalued, China “invariably and distinctly provides competitive advantage over its trade competitors and trade partners, including India”.


China has also treated countries such as Brazil and South Africa as colonial-type suppliers of raw material. While almost all of Chinese exports to Brazil are manufactured, a good 84 per cent of Brazilian exports to China are commodities. Brazilian President Dilma Rousseff reminded China that “more diversified trade is the only way to support long-term trade relations”. China made a gesture to Rousseff on her maiden trip to China by signing deals to purchase 35 Brazilian-made passenger jets.


Although China remains the principal beneficiary of expanding trade among the Brics, it has nevertheless helped economic growth in all countries. The concession China has made to Brazil in opening its market could be replicated with other members as Beijing seeks to strengthen its claim as a world leader. In the process, China will be forced to bring, even if slowly, its currency in alignment with its true value. The summit’s call for creating a stable, reliable and broad-based international reserve currency system will make it obligatory for China, the world’s second-largest economy, to move the renminbi towards free convertibility. Brics could certainly help cement Chinese leadership, but could also serve to restrain its relentless national drive.

The author is director of publications at the Yale Center for the Study of Globalisation and editor of YaleGlobal Online. 

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