Not Just Another BRICS on the Wall!
The Fourth BRICS Summit was held in New Delhi on March 29, 2012. The one day summit ended with the Delhi declaration which discussed global governance and sustainable development and to coordinate their stands on major world and regional issues, under the theme of BRICS Partnership for Global Stability, Security and Prosperity. Plurality of their approach to develop adequate economic cooperation to generate political clout in global agendas was key to the future of the summit.
The five major emerging economies of BRICS — Brazil, Russia, India, China and South Africa — injected greater economic momentum into their grouping by signing pacts for promoting intra-BRICS trade at the fourth summit of their leaders in New Delhi on 29 March.
The summit aimed at addressing several important issues and initiate new plans for the group. Such initiatives included economic ones like forming a group bank, cross-linking of stock exchanges, energy and currency, and political issues involved between the member nations. The summit was held amidst tight security and faced numerous controversies, most prominently anti-China protests carried out by Tibetans in Delhi and Tibet that also involved attacks on Hu.
Global challenges to tackle international terrorism, climate change, food and energy security, developmental issues and the international financial crisis dominated the agenda of the fourth BRICS Summit
The summit focussed on a cluster of global issues, including finding ways of sustainable recovery from the festering global downturn, reforms of international financial institutions, the UN reforms, inclusive growth, food security and energy security. The BRICS leaders discussed the creation of joint institutions, particularly a common development bank that can help to mobilise savings between the countries.
The BRICS summit was preceded by a meeting of trade ministers of the five countries and a business forum of leading corporates of these countries.
The countries signed two pacts to spur trade in their local currencies and agreed on a joint working group to set up a development bank that will raise their economic weight globally. The bank is being envisaged to mobilise “resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, to supplement the existing efforts of multilateral and regional financial institutions for global growth and development”, said the BRICS’ Delhi Declaration. The development banks of the five countries also signed a master agreement on extending credit facilities in the local currency and the BRICS multilateral letter of credit confirmation facility agreement.
The two pacts for promoting intra-BRICS trade are expected to scale up trade which has been growing at the rate of 28% over the last few years, but at 230 billion dollars, remains much below the potential of the five economic powerhouses. BRICS has set a target of $500 billion by 2015. The setting up of such an international financial institution will pave the way for a stronger clout for the BRICS countries in international bodies such as the IMF and the World Bank. World Bank President Robert Zoellick, underscoring the importance of the emerging world’s biggest economies with his own trip to India, welcomed the idea of a new development bank. The aim is to promote trade in local currencies to upstage dependence on US dollar. Goldman Sachs has argued that, since the BRICS countries are developing rapidly, by 2050 their combined economies could eclipse the combined economies of the current richest countries of the world. These countries, combined, currently account for more than a quarter of the world’s land area, more than 40% of the world’s population and quarter of its economy at $13.5 trillion.
Seeking to reinforce their growing economic heft with global diplomatic clout, the Delhi Declaration warned the West against allowing the Iran situation to “escalate into conflict” and underlined that dialogue was the only way to resolve the Iranian issue and Syria crisis. While Delhi had voted against Syria in UN, the BRICS declaration, however, saw the leaders voicing “deep concern at the current situation in Syria” as they called for “an immediate end to all violence and violations of human rights in that country”. They backed efforts to stabilize Afghanistan.
China hopes to remove mistrust with New Delhi over a variety of thorny issues viz border disputes and Dalai Lama to launch 2012 as a year of “friendship and cooperation” with India. A range of geopolitical issues discussed bilaterally on the sidelines of the summit helped improve clarity among nations, especially China and India. The Tibetan curfews were a highlight of Hu Jintao’s reception, though India managed to keep the agitators away from the venue of the summit. But at what cost?
Brazil’s President Dilma Rousseff said in an opinion piece in the Times of India that it had changed “the axis of international politics.” Or has it?
If the BRICS has to become more than a gossip club, it would have to seal its agreements on the common bank which would provide it the requisite leverage in presenting an alternate international mechanism. While this may promote the renminbi, the arrangement would reduce dependence on dollar as the reserve currency thereby providing more flexibility to the group. China indeed has cast a lengthening shadow over the group, openly seeking, for example, to control the proposed common development bank – something that India and Russia, in particular, find tough to digest.
Brahma Chellaney in a pre summit article had suspected that:
“If the BRICS countries are to jell as a pressure group in international relations, they must agree on what they believe to be attainable political and economic objectives. For example, they are generally united in their frustration with – but not in their proposed response to – the dollar’s status as the world’s reserve currency. Indeed, the most important bilateral relationship each BRICS country has is with the United States.”
Success of BRICS is largely a function of China aligning itself with the needs of the other four members in geopolitical and economic terms. With its cash rich treasury it wants to push in renminbi as the alternate currency. A devalued and manipulated Chinese currency undermines intra group trade specially affecting India. If aim of the group is to make the international order more plural it must deliver on the economic and political agendas. The bilateral discussion between Mr Hu Jintao and Dr Man Mohan Singh must thus clear the air on this count for the grouping to take constructive steps forward.
BRICS countries are evolving from being ‘followers’ of the West to ‘rule makers’, a Chinese expert Du Youkang wrote in China Daily on Thursday. But he warned that intra-BRICS trade will see tensions too. He further added that ”Given the current international situation, BRICS countries need to further strengthen cooperation, so as to cope with the various challenges and safeguard the interests of developing countries,”.
Finally, BRICS must convert its growing economic strength into collective diplomatic clout. The first step is economic integration otherwise all the positive steps planned may fall on the wayside. There will be more as the dust settles on the follow-up of action plan and responses of the West and the BRICS countries in turning these initiatives to reality.
- The cracks in the BRICS (globalpublicsquare.blogs.cnn.com)
- BRICS meet will address mistrust, says China (thehindu.com)
- BRICS discussing joint bank, stock exchange tie-up (business.financialpost.com)
- BRICs mull rival to IMF, World Bank (cbc.ca)
- BRICS countries on Syria crisis (laaska.wordpress.com)
- India endorses BRICS bank (cbc.ca)
- BRICS agree to local currency credits to ease dollar dependency (rt.com)
- West and World Bank are no longer in with the Brics (scotsman.com)
- The price of minding Mr Hu’s delicate sensibilities(acorn)