BRICS Looking to Formalise Growing Economic Influence

Discussion in 'Economy & Infrastructure' started by LETHALFORCE, Apr 21, 2011.


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    Feb 16, 2009
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    Heads of state from Brazil, Russia, India, China and South Africa - the so-called BRICS countries - concluded their third summit meeting in as many years on China’s southern resort island of Hainan on 14 April, calling for a reshuffling of the global and financial political order.

    Trade naturally featured on the agenda, with the BRICS reaffirming a commitment to a “rule-based multilateral trading system embodied in the World Trade Organization and a successful, comprehensive and balanced conclusion of the Doha Development Round.” Brazil, India, China and South Africa further extended their full support of Russia’s accession to the WTO, which Russia hopes to complete by the end of this year.

    Sanya Declaration calls for reforms

    The one-day summit resulted in the Sanya Declaration, named after the host city. The declaration addressed the groups “broad vision” for “shared prosperity” and echoed calls for reform made during previous summit meetings. BRICS leaders, for instance, reiterated their view that the UN Security Council should be more representative, while supporting Brazil’s, India’s, and newly-joined South Africa’s aspirations to play a greater role in the multilateral institution. The declaration also repeated calls for reform of the Bretton Woods institutions - the World Bank and International Monetary Fund - that constitute the international monetary system. Specifically, the statement called for a larger role for emerging and developing economies in those institutions, which have been dominated by developed countries since their emergence after World War II.

    Unlike previous summits, however, the group addressed specifics on changes to the world financial system other than greater representation at the IMF. Among the recommendations listed in the declaration were an agreement for development banks in BRICS countries to open mutual credit lines in local currencies and a call for “a broad-based international reserve currency system providing stability and certainty.” This constituted a knock on the current dollar-based system and Washington’s monetary policy, which the BRICS leaders think has allowed the dollar to depreciate. While failing to cite specifically what the new reserve currency would be, the members mentioned the currencies that comprise the Special Drawing Rights (SDR), the IMF’s reserve asset, supporting continued debate over the composition of the SDR basket of currencies. The declaration noted that the reforms stem in part from concerns about the potential for “massive” capital flows that can have a destabilising effect on emerging economies.

    In addition, the countries called for cooperation on climate change measures and support for the development and use of renewable energy. The leaders also found common ground in expressing their concern for the situation in the Middle East and North Africa, urging all parties to resolve their differences peacefully.

    Emerging economies

    The five BRICS countries together represent around $12 trillion in value, compared to the $15 trillion US economy, but are on pace to surpass the US by 2020, economists say. More importantly, they represent the engines of growth in the global economy, with China expected to grow by 9.5 percent a year and India 8 percent, while Russia and Brazil are expected to grow at 4 percent.

    Given their position as the engine for global growth, BRICS leaders have come together to demand a greater voice on the world stage. Nevertheless, the five countries represent divergent political and economic systems and are often competing instead of cooperating. Brazil and India have been worried about the negative effects of an undervalued Chinese currency on their exports. Russia, on the other hand, has been benefiting from soaring oil and commodities prices while China, a major importer, has been criticising those prices. In fact, the declaration calls for a stabilisation of commodities prices through regulation of derivatives markets for commodities, among others.

    Despite their differences, the five countries, at least in statements, have agreed to “continue further expanding and deepening economic, trade and investment cooperation” between each other.

    The Sanya Declaration clearly communicates that these countries, which all share the common trait of historically being left out of the group of world economic decision makers, want to translate their growing position in the world into a more representative stake. In particular, some commentators argue that the BRICS forum provides China with a new international vehicle to push its agenda. “The economic size of BRICS countries accounts for about 18 percent of GDP,” said Jin Conrong, a professor of international studies at Beijing’s Renmin University. “But these countries are not the decision makers in the international economic system. They are only the athletes. The Western countries are the rulemakers and judges. Right now, the BRICS countries want to join the judging committee, too.”

    The meeting brought together Brazilian President Dilma Rousseff, Russian President Dmitry Medvedev, Indian Prime Minister Manmohan Singh, Chinese President Hu Jintao, and South African President Jacob Zuma.

    ICTSD reporting: “Full text of Sanya Declaration of the BRICS leaders Meeting,” ENGLISH.XINHUANET.COM, 14 April 2011; “China, other developing BRICS nations seek change in global economic order,” THE WASHINGTON POST, 14 April 2011; “BRICS in search of a foundation,” THE ECONOMIST, 16 April 2011.

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