The BRICS Introduction 2: Brics and the New World Order

INTRODUCTION Since the mid-1990s, a gradually expanding literature has evolved on the evolution of regional powers that appear to pose a challenge to the current global order. Countries such as China, India, Russia, and Brazil (and to some extent South Africa, Argentina, Turkey, and Indonesia) have been a driving force behind a more balanced global governance (i.e. one that includes greater participation of the developing world and, more importantly, one that would draw more attention to the views and suggestions its representatives). The desire of regional powers for increased participation and respect of their views have been based on the growing economic influence of these states within the international arena. In addition, their requests for an increased profile are also supported by global events that stress the need for wider cooperation initiatives than those that currently exist. The growing importance of regional economies and the number of global issues that require global solutions have given regional powers the opportunity to challenge the current structure of global governance. For example, global issues such as international terrorism and environmental degradation have revealed to major world powers such as the US, the EU, and Japan their need for the support of other countries in order to bring in results. Undeniably, countries such as Brazil and the People’s Republic of China have been expressing their views on regional and international issues and have been assuming a new, upgraded, position in international organizations and forums for some time. The influence of Brazil and China, among others, is reflected through new unilateral policies and through some recent attempts to coordinate actions among some of these emerging regional powers. One of the most highlighted cases of such coordinated action has been among the nations of the newly established BRICS grouping, which consists of Brazil, India, Russia, China, and, at times, South Africa. This new initiative of coordinated action among developing regional powers has become one of the main vehicles for opening up consultations between emerging powers from different world regions (i.e. South America, South Asia, Central Asia, East Asia, and Sub-Saharan Africa) with the aim of achieving greater cooperation and coordination when global issues are discussed within global forums and institutions. The already recorded gradual transfer of power from the North (or West) to the South and from global players such as the US and the EU to developing countries such as China, Brazil, and India appears to be leading to an eventual transformation of the global political environment. As argued by Abramo Organski in his book titled World Politics (1958), which laid the foundations of the Power Transition Theory, a redistribution of power among different countries in the world creates the conditions for the destabilization of any existing system and might lead to interstate tensions and possible conflict. Roland Tammen (2000) also supported the idea that the 21st century is expected to see major changes in world politics, the most significant of which likely being the increase of power from emerging nations such as China (Lemkea & Lemkeb, 2003; Chan, 2008). This write-up assesses the importance of the development of new regional powers in view of a rising academic debate over the role of emerging powers in global governance and their impact on specific issues concerning global governance such as legitimacy, developing world representation, and effectiveness. Before analyzing the potential role of the BRICS in global governance, an attempt to answer a bothering and a central question must be answered: Why have these particular countries been selected as influential regional powers? Undeniably, the very idea of the existence of an influential group of regional powers that includes Brazil, Russia, India, and China—and possibly South Africa—has been received with much skepticism. The acronym BRICS was originally coined by a Goldman Sachs associate as a means of referring to new potential heavyweight players in the global economy. There are analysts, however, for whom this grouping of particular states represents nothing more than a catchy acronym. Such individuals assert that no common interests among the BRIC(S) members can be identified, and they question the inclusion of South Africa (instead of more likely players such as Mexico, for example). It is true that the BRICS group, if assessed from a purely economic analytical framework, may not necessarily appear to demonstrate indisputable coherence and, thus, may seem to be of questionable durability over time. Indeed, the economies of China, Brazil, Russia, India, and especially South Africa do have significant differences. Likewise, if BRICS’ nations are assessed by the most commonly understood features for identifying state power (i.e. military personnel, population, and land area), the BRICS counties appear to lack cohesive commonality. Nevertheless, the five countries have a series of similarities both in their political and the economic spheres that provide an acceptable level of common interests for going forward with institutionalizing a joint forum, and this paper argues that while no guarantee can made regarding the ultimate influence of the BRICS nations, with a whole that may be more powerful than the sum of its parts, BRICS is likely to directly influence the course and shape of global governance. Despite not appearing to be an undisputed political or economic dream team, there are reasons that this particular group of players has been thus far successful in their collaborative efforts. First, BRICS countries may not be of the same economic or political importance on a global level, but they are leaders within their respective regions. China, besides being a massive economic power, is also the developing country which indisputably exerts the most control over East Asia. Likewise, Russia exerts significant control over the former Soviet Union area, and Brazil is the uncontested leader in South America, while South Africa controls much of Southern Africa. The inclusion of Mexico or Indonesia, as many suggest should have been considered, would not have provided this feature. Second, all BRICS countries perceive themselves as existing outside the current global governance structure to more or less the same extent and have, on many occasions, confronted the representatives of the old power (the so called ―West, in general, and the US, in particular). Russia and China have long been fighting Western interests within the Security Council and other international fora; Brazil has confronted the US on the Free Trade Area of the Americas (FTAA) and other issues, and India still recalls the West’s support of Pakistan (although the new US-India relationship has decreased any bitter sentiments), while South Africa has defended its region’s sovereignty against Western interference in the recent Zimbabwe issue. These common experiences create a significant perceived division between ―us (i.e. the BRICS countries) and the ―them (i.e. the ―West), thus formulating a conceptual common ground among the BRICS members. Finally, the BRICS nations share a common goal that underpins their formation as an entity: that of attaining a global governance structure that reflects the new developments in the global political and economic scene based on the principle of multipolarity. Such a cause could not be promoted more convincingly than by a group of emerging developing countries that represent all world regions and that have increased their importance since the end of World War II. It is of a truth that although the common features of the BRICS countries are significant, these features alone do not necessarily guarantee the group’s longevity. Nonetheless, it is the claim of this write-up that the collaborative efforts of the BRICS nations will likely have a significant and enduring impact on global governance and economics. Indeed, the fact that the BRICS meetings have already been institutionalized to a degree is expected to enhance the group’s coherence, at least in the short run, and it is the aim of this paper to undertake an analysis of the influence that BRICS has already demonstrated as well as the likely coherence and potential longevity of BRICS over time. THE NEW GLOBAL AMBIENCE/ NEW WORLD ORDER The global financial crisis of 2008 has been recorded as a major incident that exposed the inefficiency of existing structures of international financial governance due in part to the underrepresentation of rising developing economies. The crisis was initiated by developments within the American financial system but then spread worldwide (Asian Development Outlook, 2010). The collapse of Lehman Brothers represented the peak of the crisis, with money lending literally coming to a halt until the world’s most powerful central banks began channeling money into the global financial system in an effort to reboot it. The international community reacted slowly to the global financial crisis, taking action only as it became apparent that increased coordination between the main global financial centers would be necessary in order to facilitate recovery. Discussions between developed economies did not seem sufficient in scope, however, and, thus, G-7 meetings were followed by G-20 meetings. Since November 1st 2008, when the first G-20 meeting was launched in Washington, another five such meetings have taken place— two in the same year (June 2010 in Toronto and November 2010 in Seoul) These meetings were generally successful enough to reach their main aim which was to coordinate efforts to combat the financial insecurity that followed the collapse of Lehman Brothers. The global debt crisis that followed the Lehman collapse affected economic recovery, especially in the Western hemisphere and in the Eurozone (World Bank, 2010). Due to this economic turbulence, credit rating agencies such as Fitch, Standard & Poor's, and Moody’s issued warnings to formerly top world economies such as Spain, Italy, France, and even Germany (BBC, 2012; Moody’s, 2012). This new development further affected the international economic environment, as it sharply increased global financial insecurity. Moreover, the disagreements between the United States and the European Union regarding which economic policies would best provide control over the situation and reboot the global economy increased the importance of the views of regional powers such as Brazil, Argentina, South Korea, and especially China (Ahn, 2010). (Powers such as China and Brazil have supported the U.S strategy of the stimulation of investment and consumption, favoring it over the E.U strategy of implementing austerity measures—though new balances within the European Union might alter the region’s fondness for austerity measures). The BRICS The agreement giving birth to the notion of BRIC(S) can be traced back to the initial meeting of Russia, Brazil, India, and China in Yekaterinburg, Russia during June 2009, during which time several low level meetings among these nations had already taken place. The first use of the acronym ―BRIC, however, is attributed to Goldman Sachs’ analyst Jim O'Neill in his report titled "Building Better Global Economic BRICs" in 2001. (It should be noted, however, that while financial analysts understand BRICS as a term attributed to specific developing countries with significant weight over the international economic environment, the institutionalization of the BRICS’ meetings relates more to an attempt to diagnose any common political ground for cooperation between its members.) Coordination between the four emerging powers (and South Africa, after its inclusion in the BRIC(S) meetings during December 2010) has been widely accepted as an expected outcome of a new world order (one that reflects the increased participation of developing countries in the discussions of finding solutions to global issues). Many (mainly financial and international economics) analysts regard the formulation of the BRICS as a positive development in light of the need for concrete and coordinated actions towards combating the economic turmoil. What is certain is that most recent major global issues could not have been handled within a framework that excluded Brazil, Russia, India, South Africa, and most of all, China. With its more than 40% of the world’s population, more than 25% of the global land area, and a combined GDP of more than US$11 trillion, the BRICS economies are without question a significant group of states. In addition, most of these countries are achieving significant yearly trade surpluses, which in turn create noteworthy foreign currency reserves. For example, it is estimated that China holds more than 4 trillion dollars’ worth of reserves that are invested in numerous ways—mainly in the purchase of U.S bonds. Indisputably, these figures render the BRIC(S) countries comparable to the most significant world powers such as the U.S (which represents only 4.5% of the world’s total population and 22% of global GDP) or the E.U (which represents around 7.5% of the total population and 20% of global GDP). Four BRIC(S) summits have taken place since the inception of the group. The first summit, organized during June 2009, focused on the global financial crisis, which was still evolving at that time. In their joint declaration, Brazil, Russia, India, and China called for increased economic reform to combat the irregularities of the global financial system as well as a greater voice and increased representation for members of the developing world, in general, and the BRIC nations, in particular, within various international financial institutions. They also recalled the world food price crisis of 2007–2008 and declared the need to act urgently to minimize further global food insecurity. The group not only addressed economic matters but also tackled political issues such as the expansion of the U.N’s Security Council in order to include Brazil and India as permanent members. The group also called for the overcoming of the deadlock on the Doha Round 6 negotiations. During the second BRIC summit on April 2010, BRIC leaders focused on the global economy, the development of the G-20, and the needed reforms over international financial institutions. Again, discussions expanded to non-economic issues, with the Iranian nuclear issue being in the center of the relevant talks. Perhaps the most significant development of this second summit was the expressed willingness to further increase cooperation among the four emerging powers and the articulated will to collaborate on the implementation of agreements reached before and after the summit (BRIC Summit Joint Statement, 2010). The third summit took place in April 2011. It was the first meeting in which South Africa was invited to join, which led to the amendment of the original BRIC acronym to BRIC(S). Discussions focused on increased cooperation between the five countries over issues of common interest. A great part of the discussion focused on increasing financial cooperation and trade flows between BRIC(S) members, particularly between China and the other countries. Of great significance was the agreement that each country will use its national currency (instead of the US dollar) for their bilateral trade and for funding of development projects. Politics were also part of the agenda, with discussions covering issues such as the UN decisions on international terrorism, the need for appointing permanent UN seats to India, Brazil, and South Africa, and the necessity of quickly terminating the Libyan conflict and NATO operations (BRICS Sanya Declaration, 2011). Finally, the fourth BRIC(S) meeting took place at New Delhi, India on the 29 March 2012. It can be regarded as the most important BRIC(S) meeting since the formulation of the group, as discussions included the first talk of the creation of a BRIC(S)-level institution, the BRIC(S) bank. Such an institution would act as a development bank, funding development and infrastructure projects throughout the developing world. In addition, the new bank would be expected to offer lending during future global financial crises as well as issue convertible debt, which would be available to all five members’ central banks. The political cooperation among the BRICS members has been followed by a further increase in their cooperation in the economic sector as well, particularly as far as trade is concerned. More specifically, since 2000, the percentage of imports from BRICS countries as a percentage of total imports rose in all cases: from 4.3% to 8.5% (2011) for China; from 4.1% to 18.9% for Brazil; from 6.8% to 15.7% for India; from 5.7% to 19.6% for Russia; and from 6.1% to 20.1% for South Africa. Likewise, exports to BRICS economies as a percentage of total exports during the same period also rose significantly: from the mediocre though important increase from 2.4% to 7.1% for China to the incredible increase from 3.7% to 20.9% for Brazil (OECD 2012 data, author analysis). Such development can be regarded as evidence that the five BRIC(S) economies are not only converging politically but also, to a degree, economically, reinforcing the group’s coherence. IMPLICATIONS FOR GLOBAL GOVERNANCE Unquestionably, the evolution of BRIC(S) has already significantly altered the global political scene. The economic size of its members guarantees that their opinion matters – at least when the global economy or soft political issues are concerned. This has been a reality since at least the mid 2000’s. One clear example of the increased importance of these emerging powers and the need for international cooperation between the developed world and emerging countries has been the Copenhagen Meeting for Global Warming. During that meeting and at a point at which hopes of any successful outcome were fading (with the US on one side, facing the united front of Brazil, India, China and South Africa on the other), an agreement was ultimately reached, some say, as a result of the persistence and the negotiating power of BRIC(S) (COP15 Joint HighLevel Segment of COP/CMP National Statements, 2009; BBC, 2009). The agreement drafted was called the ―Copenhagen Accord, and it recognized the need to limit the global temperature rise to no more than 2°C and specified the need for developed countries to channel US$ 30 billion to the developing world over the subsequent three years (reaching US$100 billion by 2020) to assist with climate change adaptation and control projects, two critical issues during multilateral negotiations. Similarly, the global influence of BRIC(S) was also clearly demonstrated during the financial crisis of 2007-2008, which exposed the inability of the usual suspects (i.e. US, the EU, and Japan, or even the G7 in its entirety) to unilaterally solve an international financial issue of such magnitude. The cooperation among the central banks of the most advanced countries and the G7 meetings were not sufficient to curtail the crisis; the further cooperation of the G-20 (a group which has now met seven times since the start of the crisis, including once in 2009 and once in 2010) was needed to create some stability within the global financial system. Furthermore, the announcement of the Chinese Governmental Support Package on November 2009 and the growth rates of the Chinese economy drew more global media attention than did the various EU and US announcements at the time (National Development and Reform Commission, 2011). As such, while all emerging powers have enhanced their position in the global arena as a result of the global financial crisis, the increased cooperation and the formulation of BRIC(S) in particular must be regarded as a certain ―power multiplier. The power of the BRIC(S), as a combined entity, appears to be more powerful than the sum of its parts. The leverage that BRIC(S) apparently wields creates expectations that in the near future and, at least with respect to issues of common interest, BRIC(S)’ opinions and proposals will be given more attention from the developed world. The coordination of the BRIC(S) countries is expected to lead to the furthering of their importance in world politics, especially over financial matters. Evidence of BRIC(S)’ influence includes their successful participation in international discussions of how to combat the financial crisis and their successful call for increased voting rights for BRIC(S) economies within the IMF. Such evidence clearly demonstrates that the post-World War II distribution of power no longer reflects the new global state of affairs. Moreover, the expressed devotion of the BRIC(S) leaders to further their cooperation could signal the articulation of many BRIC(S)’ positions in the future regarding global and regional issues ranging from international economics and currency matters to politics and security. As theories of regional integration suggest, increased cooperation in one sector could eventually lead to spill-over effects, thus steadily expanding the points of cooperation and coordination and, ultimately, the power of the BRIC(S) nations, resulting in their inclusion within international institutions. Indeed, their successful leveraging of increased voting rights within IMF and their securing of permanent Security Council seats for India, Brazil, and South Africa indicate the developing world’s increased representation in global governance structures (BRICS Sanya Declaration, 2011). Despite these very real gains on behalf of the developing world, it must be stressed that all BRIC(S) members are ultimately pursuing their own national agendas and are, as one would expect, more interested in supporting their own gains than those of the developing world as a whole. For example, China and Brazil’s position during the Copenhagen Meeting included the developing world’s request for developed countries to channel considerable funding to developing countries to combat global warming and its effects but left out the Tuvalu Plan’s inclusion of actual targets for CO2 reductions, which would have articulated requirements that BRIC(S) cap their own emissions by a particular percentage as well. (COP15 Joint High-Level Segment of COP/CMP National Statements, 2009; BBC, 2009). Moreover, the call for the provision of a Security Council seat for South Africa was only developed after South Africa joined the BRIC group and requested such a seat, no matter how much sense it would have made to include a Sub-Saharan African representative before that time. Hence, it seems that the BRIC(S) members express pro-developing world positions to the degree that these coincide with their own interests. In light of both the strengths and limitations of the BRIC(S) collaboration, the question remains as to the extent to which the new emerging powers challenge the current global governance environment, institutions, and structures. The answer, it seems, is that the strengths of the BRIC(S) nations, particularly when combined, is considerable. Even before the formal formulation of the BRIC(S), the influence of the BRIC(S) nations was demonstrated. For example, prior to 2010, there were attempts, mainly by Brazil and China, to challenge the current procedures for providing the much needed capital to the developing world. For example, Brazil is one the main contributors to the Bank of the South, an IMF/World Bank equivalent for the countries of South America, established in September 2009. This regional banking institution, which had an initial capital of $20 billion, represents the South American view that providing funding to economies in need should not be constrained by specific conditions. The bank was founded to cover the need for lending money to nations across the American continent for undertaking programs directed at social policies and infrastructure (Brazilian Ministry of External Relations, 2011; MercoPress, 2009). Similarly, China maintains a conditionalities-free approach to its official development assistance, a policy which is rather different from those of the IMF/World Bank and most bilateral Official Development Assistance (ODA) practices, under which any funding is accompanied by the enforcement of specific rules and conditions to the recipient countries (Lum et al, 2009). More specifically, China seems not to tie its aid to any special conditions related to implementing economic and institutional reforms, unlike the US, which, when offering aid, includes specific conditions regarding the use of the aid money. The political implications of this difference are clear: If aid from China and other emerging powers can be understood to be an attractive alternative to the aid provided by the US, it would decrease the longterm ability of the Western world to enforce unwanted economic conditions and reforms and would strengthen the relative influence of emerging powers such as China and Brazil. As emerging powers’ financial capabilities gradually increase, we are witnessing cases of even developed economies attempting to agree to capital infuses in the form of loans from non-Western sources – see for example the Greek efforts to sign various financial agreements with China during 2010 (China Daily, 2010) or the more recently declared intention of Cyprus to discuss potential financial aid not only from the IMF/EU but also from Russia and China (Bloomberg, 2012). As such, it appears that the new emerging powers very clearly challenge the current global governance environment, institutions, and structures. The recent BRIC(S) initiative towards the creation of a development bank to finance projects across the South seems also to challenge the core role of the World Bank and the IMF. While the Bank of the South initiative only concerns the South American region, and the China ODA relates to bilateral capital lending, the BRIC(S) bank initiative has the same scope as the two major existing instruments of global financial governance, the IMF and World Bank. On past occasions, such a development would have created significant opposition from major powers such as the US and the EU, which have always advocated tackling financial issues through the existing (and pro-capitalistic) international organizations, (i.e. the IMF and the World Bank). For example, during the 1996-1997 Asian Financial Crisis, several calls – especially from Malaysia and (initially) Japan – for creating an Asian fund led by Japan to deal with the urgent financing needs received strong opposition from the U.S, which wanted the direct involvement of the IMF (Stubbs, 2002 and Sohn, 2007). Based on such history, the BRIC(S) initiative to create a development bank should have received serious criticism and objections. On the contrary, however, the initiative has not met with much resistance despite the fact that it could be construed as a move by BRIC(S) to directly challenge the current state of affairs, given that the new bank could be conceived of as an alternative to IMF operations. Indeed, the significance of the proposal for a development bank – even if never realized – cannot be overstated. Such a bank could form a protective shield against Western interests’ and Western interference in the agendas of developing nations. It has been argued that Western intervention has often exacerbated conditions in nations receiving Western aid. (See, for example, Russia’s 1998 collapse, South America during the 1980s and the late-1990s, and East Asia during the mid-1990s, etc.). Despite the clear and growing political and economic influence of BRIC(S), the countries that comprise the entity are certainly not omnipotent. Direct challenges to established global governance structures are still initially being made only in areas in which the challengers (in this case, BRICS) feel most comfortable. For example, in all BRIC(S) meetings, statements call for enhancing the position of the five members within the various international institutions (IMF, World Bank and the UN), which in itself projects the willingness of the BRIC(S) members to undertake a greater role in the already existing structures. (They are not suggesting, for instance, that existing structures be dismantled or that existing powers be removed.) In fact, the fourth BRIC(S) meeting statement explicitly expressed the view that the new initiatives should not be interpreted as a sign of abandonment of existing global financial institutions but instead as a response to current economic necessities. Nevertheless, BRIC(S) have very clearly signaled the world that new structures challenging the post-World War II international arrangements could be formulated if they are denied greater involvement within the existing structures based on their new and enhanced economic position in the global arena. CONCLUSION During the last two decades, the world has witnessed a gradual change of the post-World War II state of affairs. The collapse of the Soviet Union during the early 1990s was not only followed by the enhancement of American power asymmetry vis-à-vis other players but also by the gradual emergence of several regional powers from the developing world, the importance of which has reached a historical peak. Moreover, global events such as the financial crisis of 2008 have had the effect of accelerating and enhancing the influence of emerging powers within the international system. This influence is frequently reflected in statements, policies, and initiatives of countries such as Brazil, China, and Russia targeting regional and global issues. The gradual emergence of new players in global politics has been mainly based on the excellent economic performances of these states. In a highly competitive global environment, these countries have achieved high growth rates, supported by significant trade surpluses and steadily increasing foreign currency reserves. Hence, they have acquired a central role in the global economic scene, as they both contribute significantly to global economy growth rates and fund the fiscal deficits of developed economies in (mainly) North America and Europe. As the current debt crisis is mostly directly affecting the developed world, the relative position of countries with massive funding capabilities such as China vis-à-vis other countries is improved. This development has been followed by an additional event with significant importance in global politics: the institutionalization of a forum dedicated to increasing cooperation and coordination and formulating common positions among emerging powers. More specifically, Brazil, Russia, India, and China agreed during 2009 to regularly meet to discuss global issues and coordinate their activities. To this group of states, South Africa was added in 2011, giving life to the BRIC(S) grouping, first articulated by a Goldman Sachs’ analyst during 2001. Within this new forum, the five participating countries not only discuss and agree on common positions over financial issues, but they also touch on global political issues such as the Iranian case and the reform of the United Nations Security Council. The formulation of BRIC(S) and the repetition of its yearly meetings have created mixed feelings within the global arena. Evidence suggests that the international monetary and financial system requires enhanced cooperation among major powers to maintain stability, and, in this sense, the formation of the BRICS should render global governance more efficient, a crucial element in times of crisis. In this way, the BRICS meetings are getting these five emerging powers more involved with major global issues. On the other hand, many analysts understand BRIC(S) as a potential vehicle for emerging powers to challenge the current global status quo. The continuation of the BRIC(S) meetings could lead to an ongoing expansion of common positions, they say, which would pose a challenge to the long-established pattern of the advanced world leading the decision-making charge with respect to finding solutions to global and regional issues. This is partly derived from the fact that the BRICS members have often articulated different points of view regarding how issues should be resolved (e.g. see Iranian nuclear case). As emerging powers tend to project a different understanding of world politics and are following somehow different principles, it could be seen as inevitable that some tensions with ―old‖ key players of global governance could arise in the future. Indeed, such tension could be the result of a very recent development: the initiation of the process of creating a BRIC(S) development bank. This could be seen as a challenge to current international institutions such as the World Bank and the IMF – although official statements from BRIC(S) members argue that this is not the intention of the bank. Even if the new initiative functions in parallel (or even in coordination) with the so-called Bretton Woods organizations, its creation can be used as a point of pressure towards achieving greater involvement of the BRICS members in existing organizations, thus providing them an upgraded position in global political arena not only in an ad hoc but also in a de jure basis. 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