The global economic system is facing serious headwinds due to the spectre of retaliatory protectionism between China and the US.
By Rajan Kumar and Bappaditya Mukherjee
The forthcoming summit of BRICS at Brasilia on November 13-14 will be an opportunity for the members to conduct a decennial assessment of their cooperative and collaborative activities thus far. These nations can be justifiably pleased with the tangible results of their BRICS-related diplomatic efforts: first, they have established financial institutions that are influential enough to pressurise the Bretton Woods institutions; second, the grouping has advanced a shared vision of global governance that prioritises the interests of emerging economies; and finally, the organisation has become a platform for meaningful transnational civil society interactions.
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The global order, nonetheless, has undergone momentous changes since the first formal summit meeting of the BRICS in the Russian city of Yekaterinburg in 2008. The BRICS economies have slowed down, and there is a rising wave of protectionism led by the US. The BRICS was conceived in the backdrop of the financial crisis and the collapse of the Doha Round of WTO negotiations in 2007. This was a sign that the incremental progress towards a global free trade regime may be harder than previously thought. However, the subsequent setbacks in global trade liberalisation have surprised even the most pessimistic prognosticators.
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The global economic system is facing serious headwinds due to the spectre of retaliatory protectionism between China and the US. Given the centrality of the US-China dynamic for the global trading system, China’s disputatious relationship with the US is having downstream adverse effects on other BRICS nations as well. Although trade liberalisation continues to be the stated objective for the BRICS nations, it is increasingly becoming politically difficult for policymakers to justify economic openness to their domestic constituencies. For example, India has recently refused to sign the Regional Comprehensive Economic Partnership (RCEP) treaty, a free trade forum that includes China, Australia, Japan and the ASEAN countries. India’s further turn towards protectionism has to be viewed in the larger context of the virtual abandonment of the liberal trading order by the US under President Trump. Trump merely exploited the long-term concern within the US that it’s trading partners were responsible for deindustrialisation, particularly in the electorally important rust belt states. Trump has made reducing the trade deficit the chief goal of US foreign economic policy.
Consequently, under Trump US market access has become harder for its traditional trading partners. For three BRICS nations, Trump’s actions carry colossal significance. China is directly impacted by retaliatory tariffs by the US. On the other hand, an aggressive and transactional US trading policy could not have come at a worse time for Brazil and India. Both nations are seeking to boost their export volume for which access to the US market continues to be important. This is why one of the chief concerns of the BRICS group is to ameliorate the negative consequences of the global beggar-thy-neighbour protectionism triggered by the US-China trade dispute.
The good news is that although BRICS nations have struggled to maintain their pre-2008 growth rates in the post-crisis decade, they continue to be the most dynamic components of the global economy. The contribution of the BRICS nations to the global GNP per capita was 5.7 per cent during 2008-2017. This compares very favourably to 1.7 per cent, the share of the rest of the world over this period. The current trajectory of the relatively superior economic performance of the BRICS bloc of nations vis-a-vis the rest of the world is likely to stay the course in the coming years. Irrespective of the results of the next years’ presidential elections, the US retrenchment of its leadership of the liberal international order is likely to continue. Absent US leadership and resources, the long-term decline in the legitimacy and effectiveness of the global institutions — the International Monetary Fund (IMF), the World Trade Organization (WTO) and the World Bank — to perform their mandated and assumed functions are likely to accelerate.
In this uncertain environment, the BRICS can offer a multilateral model of institutional leadership to enable stable economic and political governance. The diplomatic and resource coordination displayed by the BRICS nations to create the New Development Bank and the Contingent Reserve Arrangements in such a short period has to be lauded.
A more robust BRICS will also strengthen the legitimacy and effectiveness of the United Nations and the WTO. In broad terms, the BRICS nations are aligned with some of the broad principles of the sovereignty, non-intervention norm, territorial integrity and a rules-based global economy based on the international division of labour that these International organisations are meant to institutionalise. They are in general agreement that these Westphalian principles are useful in delegitimising interventions by US-led multilateral coalitions or unilateral US sanctions on Iran and Russia that they oppose in unison. These sanctions have impacted many of the BRICS nations, and Russia and China are likely to call out this issue in the BRICS summit.
The participation of China and Russia underscores the centrality of BRICS as an important forum of international security diplomacy. Russia is deeply involved in West Asia and Eurasia, while China is a regional hegemon in East and South-East Asia, though contested by Japan, Vietnam and other countries. Given the strategic interests of some BRICS nations in Syria, Afghanistan and North Korea, this grouping can play an important role in stabilizing these international flashpoints.
Apart from undermining the existing global free trade regime, the retrenchment of the US from its international leadership responsibilities under Trump has also seriously retarded the existing system of global environmental regulation. Following the withdrawal of the US from the Paris accords on climate change, the BRICS nations have no choice but to forge a transnational consensus on reducing emissions and developing alternatives to fossil fuels.
On the issue of global terrorism, the national interests of individual BRICS members often collide in building a coherent response to this menacing transnational problem. India and China diverge on whether diplomatic pressure should be brought to bear on Pakistan to assuage Indian concerns regarding cross-border support for terrorist groups that target India. For example, Indian efforts to declare Masood Azhar as a global terrorist through a United Nation Security Council Resolution was blocked for a long time due to a technical hold placed by China. A symbolically significant advance in intra-BRICS coordination on global terrorism occurred at the Xiamen Summit in China in 2017 when Pakistan-based Lashkar-e-Taiba (LeT), Jaish-e-Mohammed (JeM), and Haqqani network were jointly classified as global terror outfits. This was deemed as a major diplomatic victory for India because China had prevented a similar declaration at the BRICS summit Goa just a year ago. In this context, it is noteworthy that President Bolsonaro of Brazil, the host of the next BRICS summit, recently announced that the fight against organized crime and money laundering would be core agenda items of this meeting at Brasilia. This is a good opportunity for India to advance its counter-terrorism diplomatic agenda through BRICS. India has always maintained that curbing money laundering, terrorist finance, supporting the ranking system of countries instituted by the Financial Action Task Force (FATF) are vital components of a global anti-terror regime.
While the combined size of the population of its members, regional spread across five continents and market size make BRICS a serious group actor in the world affairs, its effectiveness remains hobbled due to failure of its members to resolve some seemingly irreconcilable bilateral differences. In a small organisation of just five members, the border dispute between India and China poses a terminal risk to the viability of this institution. This became quite evident during the Doklam crisis between the two neighbours in 2017 when India threatened to boycott the next summit to be hosted by China. As the power asymmetry between China and the other BRICS nations is likely to increase further, in the future, deft diplomatic manoeuvring will be required by all the stakeholders to manage the internal contradictions within this grouping. China’s economic rise is likely to motivate grander ambitions to expand its influence in the South China Sea and Indo-Pacific. China’s BRI has also raised concerns because the interests of other countries were not properly addressed before its implementation. The success of BRICS to a large extent will depend on how India and China manage to resolve the border and trade disputes. China’s continued diplomatic and material support to Pakistan is likely to remain an issue between the two countries.
In the final assessment, BRICS has made significant achievements in the last decade. It has acquired an institutional status from being an informal talk-shop. The Brasilia summit is occurring at a time when three non-excludable governance challenges are threatening international stability — retaliatory protectionism between US and China, rapid deterioration of the environment, and transnational terrorism. The relevance of the BRICS depends on its ability to coordinate policies on these issues and persuade non-BRICS members to join its efforts.
(Prof Kumar teaches at School of International Studies, Jawaharlal Nehru University, Delhi. And Bappaditya Mukherjee is ex-faculty at the State University of New York, Genesco, US. Views expressed are personal.)