Home > 2018 > Tenth BRICS Summit — Urging for an Open World Economy

Mainstream, VOL LVI No 33 New Delhi August 4, 2018

Tenth BRICS Summit — Urging for an Open World Economy

Tuesday 7 August 2018

by R.G. Gidadhubli

The BRICS Summit, held on July 25, 2018 in the South African city of Johannesburg, was an important event as it marked the tenth anniversary of the formation of the grouping. In fact it was 20 years back that the leaders of Russia, India and China (RIC) conceived the formation of this regional trade organisation, somewhat comparable to the European Economic Union. Subsequently, the RIC became BRIC when Brazil joined this organisation and BRICS with the addition of South Africa. This regional organisation has emerged as one of the major trading blocks in the world constituting about 40 per cent of the world population. There is close and consistent relations among the members and summit meetings are held regularly attended by the heads of all the member-states; these have strengthened this organisation. Turkey is not a BRICS member, but Turkish President Erdogan attended the Summit in his role as the Chairman of the Organisation of Islamic Cooperation (OIC). With its close relations with Russia there could be speculation whether it could be another member joining BRICS in the future.

The salient outcome of the Tenth Summit was that a formal communique was signed in which all the five countries unanimously supported for an “open world economy” based on the principles of the World Trade Organisation (WTO) and insisted that all WTO members need to abide by WTO rules. This proposal is particularly significant because there was great concern which was expressed by the BRICS members in stating “we recognise that the multilateral trading system is facing unprece-dented challenges”.

It is a matter of global importance and signifi-cance that even as the focus of BRICS was on trade and economic cooperation, the Summit Declaration stated: “We deplore the continued terrorist attacks, including in some BRICS countries. We condemn terrorism in all its forms and manifestations wherever committed and by whomsoever.” The concern of the leaders was relevant since terrorism has an impact on economy and trade. Prime Minister Narendra Modi was fully supportive of the BRICS objective of ‘open world economy’ and also assertive in condemning all forms of terrorism.

There are legitimate problems facing the BRICS members. This is evident from the fact that Russia has been facing economic sanctions by the USA and European countries since 2014 for its alleged annexation of Crimea, and this has affected its economy and also foreign trade. From the last year or so there are ongoing conflicts between the USA and China on bilateral trade. China has been facing sanctions by the USA and the American President, Donald Trump, has accused China of being “vicious” and for adopting unfair trading practices. Conflicts seem to have increased since Trump has imposed tariffs on $ 34 billion of Chinese imports a few months back and threatened to increase the amount to $ 500 billion. In response China has retaliated with tariffs on US products, including soyabeans and pork.

For promoting his own national economic interest, during the last one year Trump has put restrictions for importing steel and metal products from India, China and Russia. Hence, as speculated by some commentators, a trade war was looming even as the BRICS meeting was to be held. Thus there is genuine concern that the USA has been pursuing economic policies contrary to the objectives of promoting economic globalisation. Therefore it is important to note that as per press reports China, India and Russia have applied to the WTO to challenge the duties imposed by the United States on their countries’ products.

In the backdrop of these developments as reported by the media, Chinese President Xi Jinping was candid in his concluding statements urging for united efforts by global institutions such as the United Nations, G-7, and WTO to fight unilateralism and protectionism. Hence he urged all BRICS members: “We must work together...to safeguard the rule-based multilateral trading regime; promote trade and investment, globalisation and facilitation; and reject protectionism outright.”

As the summit concluded, the China factor has assumed importance not only among BRICS but also in global trade. This is mainly because with consistent high economic growth during the last over two decades, China has emerged not only as a major global trading country but also one that enjoys trade surplus with a majority of trading partners including members of BRICS. China has huge trade surplus with Russia and India. This is partly because China has not been fair in promoting bilateral trade, contrary to what it is sermonising to the rest of the world. This is evident from the fact that as it has been reported by the Indian media, many small and medium enterprises (MSEs) in India are losing their market and suffering due to the dumping of imported goods from China.

It seems China has its own national interest in maintaining its status in world trade which is also evident from the assertive statements of Xi at the Summit. He is highly critical of the USA and hence expressed his opposition to protectionism and “unilateralism” in the wake of threats by US President Donald Trump to impose global trade tariffs. In a highly diplomatic tone Xi asserted on July 25 that the world must decide “between cooperation and confrontation” as there “will be no winner” should a global trade war erupt.

China is a communist country retaining state control and economic benefits of that system. At the same time China has also adopted major elements of the market economy. Thus China has had the best of both the systems for promoting its own benefits. High economic growth has been achieved by partially opening up its economy for attracting foreign capital and technology. There are even allegations by some critics in the USA that China has not legally acquired some of the latest technological patents and processes. But at the same time China has not been fully opening up its own economy and restricting imports due to selective state policies and controls as has been practised under the communist system. This could be one of the reasons and apprehensions for America’s differences with China. But at the same time, as reported by media channels including AP and Reuters, China has warned against unilateralism that is gaining some acceptability in the West as it affects its economy the most.

Russia being a key figure in BRICS, Russian President Vladimir Putin has been pragmatic and optimistic at the Summit and has welcomed closer cooperation between businesses in the BRICS nations while calling for more trade within the bloc. Putin has justification that he is implementing this concept. So far as Russia-India trade is concerned, Putin has mentioned that bilateral trade between Russia and India increased by 24 per cent in 2017 and 26 per cent in five months in 2018.

The 2019 BRICS Summit is scheduled for Brazil, and the 12th gathering is tentatively scheduled for Chelyabinsk in Russia in 2020. There are legitimate expectations that leaders of BRICS will succeed in achieving the objectives of the Open World Economy.

Dr R.G. Gidadhubli is a Professor and former Director, Centre for Central Eurasian Studies, University of Mumbai.

ISSN : 0542-1462 / RNI No. : 7064/62 Privacy Policy Notice Addressed to Online Readers of Mainstream Weekly in view of European data privacy regulations (GDPR)