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Friday, May 4, 2012

Rumors of BRICS' recent rise are exaggerated

Special to The Japan Times

LONDON — Representing around 40 percent of the world's population and nearly a quarter of its economic output, Brazil, Russia, India, China and South Africa — the so-called BRICS countries — came together for a day in New Delhi in March to show off their growing global heft.

This is a period when the tectonic plates of global politics are shifting with new global and regional arrangements emerging thick and fast as states try to come to terms with the complexities of change.

It was just a decade ago that the term "BRIC" was coined by Goldman Sachs economist Jim O'Neill. The first BRIC summit was held in 2009 in Russia; when South Africa joined the group in 2010, BRIC became "BRICS."

Last year China surpassed Japan to become the second-largest economy in the world and more recently Brazil overtook the United Kingdom to emerge as the sixth-largest economy.

The economic profile of BRIC nations continues to grow with some suggesting that BRIC collectively could become bigger than the United States by 2018 and, by 2050, could even surpass the combined Group of Seven economies.

Last year's summit of BRICS in China was focused on the governing structure of international financial institutions. The summit communiqué demanded that the global financial architecture "should reflect the changes in the world economy, increasing the voice and representation of emerging economies and developing countries." This was in line with the long-standing demand of these rising economic powers for the restructuring of the global financial architecture to make it more representative.

At this year's meeting a proposal to create a joint development bank that could finance investments in developing nations was mooted. BRICS nations have signaled their commitment to setting up a potential counterweight to other multilateral lenders such as the World Bank and the Asian Development Bank.

A BRICS development bank, if properly funded and run, could play a role in helping developing countries learn from each other's economic experiences. But China's clout in the proposed venture and the unease about this among the other four states will prevent the realization of this rather ambitious plan.

There is certainly an attempt by the emerging economic powers to coordinate their efforts on the global stage, and as the U.S. under the Obama administration looks perpetually preoccupied with its internal troubles, a vacuum is being felt in the international system. Great-power politics is a murky business.

For all the bonhomie at the Hainan summit, there are serious differences among the BRICS. First, there is the structural disparity between China and the rest. China's rise has been so fast and so spectacular that others are still trying to catch up. The dominance of China makes the very idea of a coordinated BRICS response to the changing global balance of power something of a nonstarter.

The overweening presence of China makes others nervous, leading them to hedge their bets by investing in alternative alliances and partnerships. Given the leverage that China enjoys in BRICS, it should not come as a surprise that China has suggested that the IBSA democracy grouping of India, Brazil and South Africa be shut down.

Moreover, there are significant bilateral differences among the BRICS. Brazil is worried about the influx of Chinese investment and cheap Chinese imports, and it has been very vocal in criticizing China for its undervalued yuan. Brazilian manufacturers are losing market share to their Chinese counterparts. Brazil is also wary of China's growing profile in South America, a region that Brazil has come to consider as its own sphere of influence.

Russia is worried about its growing economic disparity with China. Russia's failure to develop its Far East not only has allowed China a toehold in this strategically important region but has also pushed Beijing into the driver's seat in defining the Asian security landscape.

Russia's Finance Minister Aleksei Kudrin has openly warned that if Russia fails to become a "worthy economic partner" for Asia and the Pacific Rim, "China ... will steamroll Siberia and the Far East."

Even though China is the largest buyer of Russian conventional weaponry, many in Russia see this as counterproductive because China might emerge as the greatest potential security threat to Russia — worse than what the U.S. could ever become.

The saga of the recent decline in Sino-Indian ties is well-known. Despite the two sides deciding to resume defense ties during the Indian prime minister's trip to China, New Delhi remains skeptical of Chinese intentions.

China's refusal to acknowledge India's rise and lack of sensitivity on core security issues is leading to pushback, with the prime minister himself acknowledging that "China would like to have a foothold in South Asia and we have to reflect on this reality. ... It's important to be prepared."

It is difficult to see a productive future for BRICS together. The rise of BRICS is as exaggerated as the decline of the U.S. The tectonic plates of global politics are certainly shifting, but they may not be shifting in predictable ways, at least not yet.

Harsh V. Pant teaches at King's College London.

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