BRICS Push to Redress Power Imbalances at New Delhi Summit
Heads of state from Brazil, Russia, India, China, and South Africa - collectively known as the BRICS countries - concluded their fourth annual summit meeting in New Delhi on 29 March, with officials signing an accord to promote intra-BRICS trade in local currencies and proposing the creation of a new development bank to mobilise resources in the five-country group.
The one-day summit resulted in the Delhi Declaration, named after this year’s host city. The heads of state gathering was the second since the original BRIC grouping took on a fifth member, South Africa, and the fourth since Brazil, Russia, India, and China began meeting collectively in 2009.
World Bank race
A major overhaul of the Bretton Woods institutions has long been a goal of the BRICS countries, with the issue drawing additional relevance now that the race for a new World Bank head is underway in earnest. At the summit, the five heads of state reiterated earlier pleas for the World Bank and International Monetary Fund (IMF) chiefs to be selected through “an open and merit-based process.”
Historically, the United States has picked one of its own to head the World Bank, while the IMF chief has always been European. The trend continued last year, when former French Finance Minister Christine Lagarde was selected to replace Dominique Strauss-Kahn as the IMF’s new managing director.
The US has nominated Jim Yong Kim - a global health expert who is currently president of a US university - as a candidate to fill outgoing World Bank President Robert Zoellick’s spot. Kim is competing for the post with Nigerian finance minister Ngozi Okonjo-Iweala - backed by South Africa, among others - and former Colombia finance minister José Antonio Ocampo.
Despite calls for a more open process, however, the BRICS countries have yet to coalesce behind either of the candidates vying against Kim for the post, which some analysts note is an indication of a broader difficulty to foster unity among the five emerging economies.
BRICS development bank?
The heads of state also put forward the possibility of their own development bank, one that would be charged with “mobilising resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries.”
BRICS finance ministers have been directed to explore such an initiative’s feasibility, and report back to leaders at next year’s summit.
The suggestion of a BRICS development bank was backed by Zoellick, who promised that his institution would support a BRICS bank, though he acknowledged that such an initiative might not be easy to implement.
If the BRICS countries “decide they want another financing vehicle - fine. Let’s figure out how to work with it… I’m enough of an economist that I’m not a monopolist,” the World Bank chief told the Financial Times.
Trade and development
With the WTO’s Doha Round of trade talks having been declared at an impasse last year, the BRICS leaders pledged to continue efforts for the round’s successful conclusion, “based on the progress made and in keeping with its mandate.”
“Towards this end, we will explore outcomes in specific areas where progress is possible while preserving the centrality of development and within the overall framework of the single undertaking,” the group said.
Long-standing disagreements between developed economies - such as the US and EU - and major emerging economies - such as Brazil, China, and India - on non-agricultural and agricultural market access have widely been faulted for putting the Doha negotiations on hold.
In light of the Doha stalemate, trade ministers agreed in December to explore “new negotiating approaches” that would allow for members to advance the trade talks in areas where progress might be achieved.
However, at last week’s meeting, the BRICS leaders stressed that members should be wary of pursuing plurilateral initiatives in the absence of movement in the Doha talks.
“We do not support plurilateral initiatives that go against the fundamental principles of transparency, inclusiveness, and multilateralism,” they said. “We believe that such initiatives not only distract members from striving for a collective outcome but also fail to address the development deficit inherited from previous negotiating rounds.”
A subgroup of 16 WTO members - including the US, EU, and Australia - has recently begun holding “exploratory talks” on the possibility of a services liberalisation agreement. The prospect of this services initiative has not received a warm welcome from all WTO members, with emerging economies being among those that have questioned the systemic implications of adopting a plurilateral approach to negotiations (see Bridges Weekly, 7 March 2012).
Speaking to reporters in February, US Ambassador Michael Punke noted, however, that “everyone’s preference is for the emerging economies to be part of all the [services] discussions we have in Geneva because those are the markets that everybody is most interested in.”
Officials from the BRICS countries also signed two agreements to provide credit lines to the business community - pacts that are seen as a step toward fulfilling the five countries’ long-standing goal of eventually replacing the dollar as the main unit of currency between them and increasing intra-BRICS trade.
Rich country monetary policy under fire
Monetary policy featured prominently in the joint statement, with the group lambasting “aggressive policy actions” taken by developed countries to protect their domestic economies, which have been blamed for releasing global liquidity that spills over into emerging markets, such as Brazil, causing currency appreciation and affecting export competitiveness.
Speaking to Reuters prior to the event, Brazilian Trade Minister Fernando Pimentel said that Brazil - which has been hard-hit by the appreciation of its currency, the real - would be pushing its emerging market peers, including China, to denounce what it calls unfair monetary policies by the US and the euro area.
Before the five-country meet, China had been concerned that language on global monetary imbalances could make it seem like Brazil “could be indirectly referring to them,” Pimentel said, given that Brazil and India have traditionally been worried about the negative effects of an undervalued Chinese currency on their exports.
However, “today’s [problem] doesn’t have to do with China,” the Brazilian trade minister continued. “It has to do with the dollar and the euro.”
The upcoming Rio+20 conference also featured in the final summit declaration, with leaders calling the event a “unique opportunity” for the international community to renew its commitment to supporting sustainable development.
However, the heads of state cautioned, “the concept of a ‘green economy’, still to be defined at Rio+20, must be understood in the larger framework of sustainable development and poverty eradication and is a means to achieve these fundamental and overriding priorities, not an end in itself,” referring to the ongoing debate among countries over whether the concept of a ‘green economy’ could be synonymous with green trade protectionism and conditionalities.
“We resist the introduction of trade and investment barriers in any form on the grounds of developing green economy,” they added, calling instead for flexibility for governments to “define their paths towards sustainable development based on the country’s stage of development, national strategies, circumstances, and priorities.”
Together, the BRICS countries represent over 40 percent of the world’s population and approximately a quarter of the global economy at US$13.5 trillion. The next BRICS summit will be hosted by South Africa in 2013.
ICTSD reporting; “Brics nations threaten IMF funding,” FINANCIAL TIMES, 29 March 2012; “Zoellick throws support behind BRICS bank,” FINANCIAL TIMES, 1 April 2012; “College President Is Obama’s Pick for World Bank Chief,” NEW YORK TIMES, 23 March 2012; “Exclusive-UPDATE 1-Brazil to rally BRICS against rich countries,” REUTERS, 28 March 2012.
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