The Hindu Business Line : Long road ahead for BRIC

There is no alternative now but to continue with the existing negotiating strategy of making the rich concede ground for every concession wrangled from the poor.

The Prime Minister, Dr Manmohan Singh and the Russian President, Dmitry Medvedev, at the BRIC Summit in Yekaterinburg, Russia…There is need to identify more areas of co-operation.

Ranabir Ray Choudhury

An important issue facing the international economy today — particularly in the wake of the first summit of BRIC (Brazil, Russia, India and China) at Yekaterinburg in the Urals — is the precise role the emerging economic giants will play in the years ahead.

Briefly, will they be able to provide effective leadership in the long-standing quest of the developing world to find a place in the sun generally for their diverse economies, or will these “leaders” of today only be effective in prising open areas of the international economy that have for long been dominated by the “developed countries” group?

In other words, will BRIC be more effective in fighting the battles at the WTO — on the Doha Round, for instance — and at world bodies such as the IMF and the World Bank to promote the interests of the poor than in generating more trade, and even aid, among the developing economies, not to speak of promoting higher levels of technology transfer, etc, in the developing world?

This is a complex subject (already there are trends that suggest that the South-South economic exchange is on the rise), but the immediate available evidence on the role of BRIC as a leading group relates to issues where the rich nations are involved as a bloc, where, in other words, pressure has to be used as a bargaining ploy to make the classically affluent yield ground in conformity with emerging reality at the grassroots level.

Making a mark

The two principal areas where BRIC has already made a mark are negotiations on international trade and the structure of multilateral monetary and development agencies.

As regards the former, what began as an assorted — more or less leaderless — struggle against the age-old dominance of the developed economies over the world trading system at the Seattle WTO Ministerial meeting in 1999, has today ripened into a well-coordinated battle of wits and long-term strategy between the traditionally rich and the developing countries, the latter being led by three BRIC countries (India, Brazil and China). Indeed, over much of the present decade, Brazil and India have been in the forefront of the battle being waged at Geneva with Europe, the US and Japan, among other economies belonging to the “rich” club, with China playing a crucial role — such as on the issue of the selective safeguards mechanism — which has prevented the international trade scenario from lapsing into a mould determined by the past.

In fact, so successful has been this extended campaign by Brazil, India and China on the trade front that one can say with some certainty that there will be no looking back as far as the international trade format is concerned. In other words, the industrialised nations will have to yield ground on the basis of simple parity considerations – and even more if the “development” argument governing the Doha Round is taken into account — a progression which, in fact, should have come to pass much earlier if equity and fairness had ruled trade negotiations in the past.

True, the Doha Round is being delayed unacceptably because of this basic gap in the attitudes of the opposing sides (there are in fact more than two sides in the WTO), but the point needs to be made — especially in view of the new UPA Ministry assuming office in New Delhi — that there is no alternative now but to continue with the existing negotiating strategy of making the rich concede ground for every concession wrangled from the poor.

More say for emerging economies

Issuing its first-ever communique as a group during the G20 Finance Ministers meeting in England in March this year, BRIC made the point that protectionism was “an increasingly real threat” to the global economy and that “we should avoid protectionism of all kinds and not allow it to act as a disruptive force to the global economy”.

After reminding the world that failure to do so would risk “repeating the mistakes of the past which led to the Great Depression”, it exhorted world leaders to commit themselves “to work towards a prompt and successful conclusion of the Doha Round, with an ambitious, comprehensive and balanced result”.

Curiously, at Yekaterinburg, there was hardly any mention at all of “protectionism” and other allied issues which, one would like to imagine, in no way suggests a soft-pedalling of the broad subject in view of changes in negotiating stance likely to be made in the near future.

As far as the second issue is concerned, namely, the structure of multilateral monetary and development agencies, the Yekaterinburg communique said quite explicitly that the group was “committed to advance the reform of international financial institutions, so as to reflect changes in the world economy,” adding, that the emerging and developing economies must have “a greater voice and representation in international financial institutions.” The group also said that there was “a strong need for a stable, predictable and more diversified international monetary system”.

In March, the comments on this aspect of reform were much more focussed with the group calling for “urgent action with regard to voice and representation in the IMF, in order that they better reflect their real economic weights”. It was suggested that “a significant realignment of quota should be completed not later than January 2011,” which was “necessary to enable members more equitable and fuller participation in the Fund’s efforts to play its mandate role”.

A similar reform-pitch was made vis-À-vis the World Bank, one of the objectives being “equitable representation between advanced and emerging/developing countries without dilution of any individual developing members”. To cap it all, BRIC forcefully urged that the next heads of the IMF and the World Bank “be selected through open merit-based processes, irrespective of nationality or regional considerations”.

Achilles’ heel of concept

It is instructive to note that, on the face of it, there was a lack of unanimity among BRIC at Yekaterinburg on the reserve currency issue, a point that was touted with vehemence by Moscow before the summit and followed up at the Shanghai Cooperation Organisation meeting held in the same town.

Of course, the soft-pedalling is understandable because no one wants to rock the currency boat when trillions of dollars are held in national reserves.

Coincidentally, the issue also does not figure in any campaign of the poor seeking “justice” against the rich in the way trade issues, etc. do.

In fact, the Achilles’ heel of the BRIC “concept” is that there is far less intra-group cooperation than there is a banding together to fight the rich. Perhaps precisely sensing this lacuna, the Prime Minister, Dr Manmohan Singh, suggested at the summit itself that BRIC should consider setting up a Joint Business Forum that can identify areas for cooperation such as science and technology, energy, agriculture, aviation, pharmaceuticals and services.

The fear is that this will remain just a hope; and even if there is any movement, there will be nothing of consequence to report back, which could make BRIC a strong “entity” in a very real sense of the term.

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