Do the BRICS make a Bloc?


Editorial by Michael Emerson

No actually. But the BRICS (Brazil, Russia, India, China, South Africa) have achieved such an impact in the global media that that one might think so, and a deeper comment is warranted.

The initial branding of the acronym by Goldman Sachs for the purpose of marketing investment vehicles has been followed enthusiastically by the governments forming a joint pressure group to achieve more power in international affairs. Their political branding is also clear: an alternative leadership group to the old West, and a protest over the old hegemony of the US and disproportionate rank of Europe in multilateral organizations.

Having now admitted South Africa to their company the BRICS evidently seek to further enhance their brand image and claims to represent the world outside the old West. The addition of South Africa makes for more coherence with the IBSA group (India, Brazil, South Africa Dialogue Forum), which is a less conspicuous group branding themselves as the 'vibrant democracies' of all three continents – Africa, Asia, Latin America - of the developing world, and thus marking a first differentiation with the BRICS.

Both groups declare intentions to institutionalise themselves by underpinning annual summit s with many ministerial or senior official meetings and cooperation activity, but here IBSA is more operational than the BRICS so far.

But what do these groups really have in common? The BRICS together have weight, for sure. Their economies added up in 2011 to an amount ($13.2 trillion GDP) close to each of the US ($15.1 trillion) and EU ($17.6 trillion) or Eurozone ($13.1 trillion). In a few years they will be bigger. The IBSA add up to considerably less ($4.6 trillion), also compared to China alone ($7,298).

The striking fact to emerge is that whereas the IBSA countries have a lot in common, in the case of the BRICS this is much less the case. None of the BRICS are in the top rank of GDP per capita, but Russia is hardly a developing country. The IBSA on the other hand are all developing countries, all democracies, all with current account deficits and net debtor positions, all with floating exchange rates, and all without permanent seats on the UN Security Council, as opposed in all these respects to both China and Russia (except that only China has a controlled exchange rate).

These simple facts reveal their significance when one examines the recent summit declarations of the BRICS and IBSA. At their fourth summit in Delhi on 29 March 2012 the BRICS adopted a long Declaration, with much language that all can agree to but which have little operational significance. So much for the BRICS's objectives of 'peace, security and development in a multi-polar, inter-dependent and increasingly complex globalising world' ... 'on the basis of universally recognized norms of international law and multilateral decision making' (although this multilateral aspect sits ambiguously alongside their championing of multi-polarity).

At their fifth summit in Pretoria on 18 October 2011, the IBSA Declaration was most strikingly different in its statement of their objectives, as 'three large pluralistic, multi-cultural and multi-racial societies', which have 'a shared vision ... that democracy and development are mutually reinforcing and key to sustainable peace and stability'. Their leaders are willing 'to share, if requested, the democratic and inclusive development model of their societies with countries in transition to democracy'; which the EU will heartily encourage.

The BRICSs admonish the 'advanced economies to adopt responsible macroeconomic and financial policies'. Yes indeed as a general proposition. But then the BRICSs move the argument on with much more specific and dubious propositions, criticizing the 'excessive liquidity from the aggressive policy actions taken by central banks' (presumably they have in mind the QE of the Fed and Bank of England, and the LTRO of the ECB, although they do not say so directly). In the absence of these measures there would surely be a global depression and financial disruption of cataclysmic proportions. So here the position of the BRICS is disingenuous, since it entirely evades the core global issue of Chinese super-competitivity and the distortions to the global economy that result from its controlled exchange rate. One can understand why the BRICS could not agree to address these issues, but that hardly solves the problem. IBSA countries have a common interest in Chinese exchange rate appreciation, as does the EU.

The BRICS lament the slow pace of quota and governance reforms in the IMF and World Bank, while welcoming 'the candidatures from developing world for the position of President of the World Bank' (of course this is the text dating from mid-March). Their argument about the slow pace of quota reform can be objectively justified and the EU is undeniably overweight. The complaint of the BRICS is now heightened by the financial contributions of countries outside the EU to the recent doubling (by $430 billion) in IMF resources that are intended as a firewall against the Eurozone crisis. The new major financial powers claim to be heard over the conditions for the use of this money, and doubly so since the US and Canada have contributed nothing.

As regards the World Bank's recent election of its new president, the developing world produced two serious candidates, from Nigeria and Colombia, and as the selection process advanced the Colombian desisted in favour of the Nigerian as a token of solidarity in the developing world. The African continent voted en bloc for the Nigerian, and Brazil added its support. But then China, India and Russia voted for the Asian-born American candidate. So the BRICS were divided, and their majority voted for the American. Even if the voting power of the West assured election of the American candidate the BRICS here failed over an opportunity to make an impressive political statement together, and the IBSA also failed to be united.

Turning to trade policy the BRICS join company with G20 and the EU in expressing ritual hopes for 'the successful conclusion of the Doha Round', while showing a willingness to explore outcomes in specific areas. However within the BRICS the striking divergence of interest is seen in the level of surpluses experienced by China and Russia on current account over the last 7 years (6.6% of GDP on annual average in both cases), whereas the three IBSA are all deficit economies importing capital.

Like so many other summit declarations, the BRICSs go through the standard current list of security concerns, with advocacy of peaceful outcomes for the Arab-Israeli conflict, Syria, Iran, Afghanistan, etc, but without substantial positions of note. However on Syria both China and Russia initially adopted blocking positions in response to draft resolutions put to the UN Security Council, which was seen especially as regards Russia as protecting Assad. The BRICSs are struggling uneasily with the tensions between the doctrines of 'non-interference' and 'responsibility to protect (R2P)'. However Brazil currently takes an initiative in the UN under the heading of 'Responsibility while protecting' to try to refine R2P, and this could become an example of norm building that both IBSA and the EU might work towards together.

The BRICS 'reaffirm the need for comprehensive reform of the UN, including its Security Council ...'. 'China and Russia reiterate the importance they attach to the status of Brazil, India and South Africa in international affairs and support their aspiration to play a greater role in the UN'. However China and Russia could not declare explicit support for the concrete demands of the three IBSA states for permanent membership of the Security Council. China presumably remains reticent towards India's claims. Unsurprisingly the IBSA explicitly advance their own claims for permanent Security Council membership.

There are two fields, concerning trade and development finance, where the BRICS prepare or discuss concrete action. Trade ministers have made a Master Agreement on Extending Credit Facility in Local Currency, which is diplomatic language for extending the use of the renminbi in their mutual trade. The setting up of a development bank for infrastructure and sustainable development projects is being considered, with finance ministers tasked to explore its feasibility and to report back to the next summit to be hosted by South Africa in 2013. This development bank idea poses the strategic question for China over how it is going to deploy its financial power in the world, and over the balance between backing up the global multilateral institutions versus developing institutions in which it will be the major actor.

The open question is how far the BRICS and/or IBSA will strengthen their activity in operational terms, or discover increasing divergences when trying to move beyond declarations. The EU has natural political affinities with the IBSAs, but this has not translated so far into any special political relationship, and this is a question for the future. The IBSA have a plausible future as a de facto leadership group of democratically oriented developing countries. However the IBSA will for their part not want to break with the huge economic and financial clout of China, which may become the glue holding the BRICS together notwithstanding their many divergences.

It is going to take time for these various cross-cutting positions to shape up. There is a complex process of diplomatic exploration and testing now underway. The EU can do this through its comprehensive set of so-called Strategic Partnerships with each of the BRICS bilaterally. It would be premature to regard either the BRICS or the IBSA as a bloc. However the BRICS are likely to be united over their complaint about under-representation in multilateral organizations as long as it remains unsatisfied. If these demands are not met one can expect that ideas such as the BRICS development bank to advance as alternatives. Indeed the mere discussion of the idea can be seen as a negotiating gambit over power in the global multilateral institutions. This is a strategic reality that confronts EU member states who wish to conserve their overrepresented national positions in the global institutions. The case for consolidated EU seats in the major multilateral institutions, with a lower aggregate voting weight compared to the present, has an obvious logic. What begins to become clearer is how in practice the conservative denial of this logic by EU member states will in due course work against the EU's declared interests in vibrant multilateralism.

This is just one more instance where some real European leadership is now needed. The BRICS and IBSA may not be blocs, but they do pose concrete strategic issues for the EU.

Michael EMERSON, CEPS Senior Research Fellow

CEPS European Neighbourhood Watch. Issue 81

№5(66), 2012

№5(66), 2012