BRICS summit: Chinese flavours in an Indian curry

The Delhi Declaration and Action Plan adopted at the 4th BRICS summit in New Delhi on March 29, would have quickly laid to rest any residual anxiety in western capitals that a serious rival focus of power and influence was beginning to take shape in the Indian capital.

One look at the wholly pedestrian Action Plan and any illusion of substantive intent would be quickly dispelled. Following a Declaration which promises much, the Action Plan reads like a ‘trivial pursuit.’ It should have been billed as a tentative calendar of prospective meetings and events rather than be given the status of an Action Plan.

The Declaration bears the clear imprint of China and, to some extent, Russia on some key economic and political issues. The most notable example of this is the thinly veiled but unusually harsh criticism of the US-sponsored Trans-Pacific Partnership (TPP), which is seen as mainly directed against China.

The Declaration says: “We do not support unilateral initiatives that go against the fundamental principles of transparency, inclusiveness and multilateralism. 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 the previous rounds.” Unless India has been told it will have no place in the Partnership why close our options?

The Declaration obliquely criticises the US for causing excessive dollar liquidity. China is concerned because this reduces the value of its massive dollar assets and triggers hot money inflows. Brazil, too, has suffered as a result. But India would prefer that stimulus measures in the US continue so that export demand for its goods and services is not threatened. Despite the risks, India appears eager to receive ‘hot’ money flows at a time when investment levels are depressed.

Political positions articulated in the Declaration are on the expected lines but the language is reflective of the stronger stance taken by Russia and China both on intervention in Syria and the imposition of sanctions on Iran. In western capitals these formulations will be seen as endorsement of the Chinese and Russian positions, despite the fact that India, Brazil and South Africa have a more nuanced posture.

On UN reform, the Declaration adopts the well-known Chinese position of offering to support the aspirations of Brazil, India and South Africa “to play a greater role in the UN”, without endorsing their candidature for permanent membership of the Security Council. Russia, which had formally supported India’s candidature, has now aligned itself with China.

Currency swap

Two agreements were concluded among the Exim Banks of the five countries during the summit. The “master agreement in extending credit facility” in local currencies is to implement an essentially generalised currency swap arrangement among the participating countries. This would provide an alternative to the use of the US dollar in trade settlement. However, a serious challenge from BRICS currencies to the dollar would only emerge if and when they become truly convertible and are backed by the kind of dense and varied financial and banking infrastructure that exists in the US and other western economies.

The second agreement is the “BRICS multilateral letter of credit confirmation facility agreement”, which, too, is a trade facilitation measure. Once implemented it is likely to reduce transaction costs of intra-BRICS trade. The BRICS Business Forum, which met on the eve of the summit, recommended a target of 500 billion dollars of intra-BRICS trade by 2015 compared to 230 billion dollars currently. The issue of liberalising business visas was flagged but with no commitments.

There was strong anticipation that the summit would announce the setting up of a BRICS development bank on the lines of the World Bank but focused on financing projects in BRICS and other developing countries. However, caution seems to have won the day. The BRICS finance ministers have been tasked with examining the feasibility and viability of the proposal.

An initiative that would have been seen as a major contribution by emerging economies in promoting growth and recovery in their own and other developing countries; strengthened their hands in pushing for the reform of international financial institutions; and marked the grouping as a serious and influential player on the global stage, was instead consigned to a committee.

BRICS is here to stay as a familiar feature on the international landscape. It has the economic and political heft to play an influential role provided it is able to act together on key issues. In that sense, the Delhi Summit remained mostly a flag-waving exercise. Unlike the G-7 earlier, the group lacks a common ideological and cultural underpinning. The security perspectives of its members are not aligned. In terms of economic objectives, they have both convergent and divergent interests.

In the foreseeable future the most realistic prospect for BRICS may be their working as a coalition on issues of common interest such as reform of the international financial institutions, resisting protectionism and promoting development in developing countries.

There is no doubt that being part of this group gives each of its members that little extra room for manoeuvre vis-à-vis the established advanced countries. India and China working together in BRICS may mitigate the elements of confrontation between them. It is clear, however, that China is emerging as the preeminent partner in the group.

(The writer is a former foreign secretary)