March 19, 2013
The Durban summit should lay out a new set of recipient-friendly norms for international development co-operation
The fifth BRICS summit will be held in Durban, South Africa, on March 26-27, 2013. Despite the fact that the BRICS countries - Brazil, Russia, India, China and South Africa - account for 25 per cent of global gross domestic product (GDP) and 17 per cent of global trade, the grouping has little to show by way of any substantive achievement so far. Its focus has been on consultative engagement on issues of shared concern, but these have not led to collaborative initiatives.
The one significant proposal that could grab international attention is the establishment of a BRICS development bank. This could break the monopoly of Western-dominated international financial institutions as a source of development finance. This proposal was initially advanced by India and one hopes it is pursued with vigour at the Durban summit. In order to be credible, the proposed bank must be seeded with adequate capital. The proposed amount of $50 billion is too modest. It is also reported that China has been pitching for a larger share of the equity, hence voting power, in order to determine the bank's lending policies. This must be resisted. We should not end up creating a mere clone of the World Bank, where smaller shareholders are just bystanders.
Since the inception of BRICS, the grouping's leaders have been consistent in their calls for the restructuring of the global economic and financial order and a greater say for emerging economies in global governance. However, in their national approaches at the G20, the World Trade Organisation (WTO) and the United Nations (UN), the group's members often go their separate ways on issues on which their interests diverge. This is unlikely to change, given the considerable asymmetries among the member states and their differing political status and aspirations. As permanent members of the UN Security Council, neither Russia nor China is enthusiastic about the entry of Brazil, India or South Africa into the inner sanctum. Both Brazil and India are wary of China's mercantilist trade policies; while in Africa, India and China are often in competition for the same resources. Nevertheless, given the economic weight of the grouping, BRICS will remain a useful pressure group to nudge change in the increasingly outdated and dysfunctional global economic and financial architecture. It is also a convenient platform for some anti-West flag-waving on issues related to Iran and Syria.
The summit will see the debut of China's new leader, Xi Jinping. Russia's Vladimir Putin, too, is attending the event for the first time. It is possible that these two leaders may introduce a new dynamic into the grouping. We should know soon enough.
Global trade arrangements are experiencing far-reaching developments that could significantly impact the economic prospects of the BRICS countries. These changes could provide the trigger for their closer co-operation. A transatlantic free trade zone with the US and the European Union is already under negotiation; if successful, this would create an economic zone encompassing virtually half the world's GDP and trade flows. On the other side of the world, the trans-Pacific partnership is steadily making headway (Japan is virtually certain to join), creating another parallel and powerful trading bloc. None of the BRICS nations finds place in these emerging giant trade conglomerations. The US has championed both projects with China's relentless economic ascendance in mind, but other BRICS members will suffer heavy collateral damage as a result of their exclusion. The new groupings will set norms and standards for economic exchange with little or no input from emerging countries. They will inevitably evolve into non-tariff barriers. The serious implications of these developments should drive the BRICS nations to consider effective coping strategies. Reviving the multilateral WTO process could be one such collective response.