Menu Close

BRICS Plus in prime position for a new trading system

Add to my bookmarks
ClosePlease login

No account yet? Register

Share This Article:

Picture: GCIS / August 19, 2023 – BRICS heads of state from left, Lula da Silva, Brazil; Xi Jinping, China; Cyril Ramaphosa, South Africa; Narendra Modi, India; and Russia’s Foreign Minister, Sergei Lavrov, representing Russian President Vladimir Putin, who did not attend the Summit held in South Africa, August 19 to 24, 2023. As the World Trade Organisation falters, BRICS Plus is in a unique position to shape a new order, as its core members have the populations, technology, currency clout, new institutions and Developing World power status in major institutions from G20 to WTO to the UNSC and regional institutions, the writer says.

By Ashraf Patel

The Globalisation consensus is in crisis. As the World Trade Organisation (WTO) concludes its 13th Ministerial Conference (MC) in Abu Dhabi this week, there has been little agreement on the Development agenda and discussions reviving its apex Appellate body has been blocked by the US. As the WTO system faces a multiple of disagreements, the ‘Plurilateral model’ has little scope for actual trade agreements.

Already the much-touted investment agreement and climate-trade frameworks are fluttering at the WTO. In addition, major disagreements on E-Commerce treaty, so crucial for national data economies and MSMEs [medium small micro enterprises] of the global South have stalled. The Covid vaccine nationalism experience and lack of any promised commitment to IP access for medicines is another scar on the Global South at the WTO.

The inability to deal with trade disputes as well as marginalisation of the Development Agenda the Global South and the rules-based trade order in line with the Marrakesh treaty, points to a new void in Global trade governance. Further challenges in the post-Covid world such as the supply chain constraints and wars leading to food and fuel inflation have opened a pandoras box in the global political-economy.

Trade and climate policy fragmentation resulting from unco-ordinated national carbon markets, unilateral environmental standards enforced at the border, and green industrial subsidy races, risk reducing the climate and economic benefits from trade, while making effective climate policies unnecessarily costly and reinforcing international economic inequities.

Nations of the Global South decry this new form of ‘green colonialism’ whereby the climate change agenda is misused by powerful Northern nations to raise tariffs and increase their own state directed industrial policies, while at the same time making it mandatory through donor programmes to push Developing nations to stop investments in coal, oil and gas.

The very foundational values of the UN Climate Change COP’s Common and Differentiated Treatment are being eroded in these ‘new green issues’ at the WTO and hence the opposition.

Towards a BRICS Trading and Commodity system model

In a rapidly eroding WTO global trading system, BRICS Plus nations are in prime position to build a new trading commodity architecture based on equity and common development pathways.

BRICS nations are already in the prime position in developing new systems of trade, payments and funding models. The New Development Bank NDB is in development finance and a new BRICS payment system is developing.

Contours of new trading system led by BRICS Plus

Local and regional currency trade amidst talk of de-dollarisation:

Trade and finance – and mode of currency are the soft infrastructures of global trade and relations between nations, in the core and periphery alike. Financialisation of global trade and the speculation of commodities (i.e. futures, spot markets etc.) has for decades created volatility and major income loss for the Global South.

Trading in local and regional currency as proposed by BRICS currency initiative shall have the dual benefits of cheaper trade transaction costs, reduce volatility in commodity markets. Furthermore, the new BRICS Payment system is developing and can be the new architecture for such an evolving trading system.

Russia and India are already trading oil and fuel in bilateral currencies, thus reducing volatility. Brazil and China are already trading agriculture commodities in their respective currencies.

Ragy el Etreby, economic advisor for Egypt, a new BRICS member also supporting trading in local currency, earlier this month indicated that dealing in national currencies would alleviate the rising costs of using foreign currencies as a result of the high global inflation. The ambassador said he has been directed by the presidency to promote industrial, agricultural and service co-operation between the bloc’s nations. El-Etreby also assumed responsibility as the personal representative of the Egyptian president at the Group of 20 (G20). During the G20 meetings, Egypt will seek to highlight the priority issues in Egypt, Africa, and other developing nations, El-Etreby said.

“Among these topics will be enhancing food and energy security, developing international debt governance, ensuring international financing for development, and reforming the multilateral financial, monetary, and trade system.”

For Africa such as system would have immense benefits as sub-Saharan Africa faces multiples headwinds; the debt repayment crisis, high food and fuel inflation and vulnerabilities such as ‘new generation carbon trade barrier frameworks’ in the North such as the EU’s Carbon Border Adjustment Mechanism (CBAM) programme and the US’s Inflation Reduction Act (IRA) kick in.

2. Towards a BRICS Agriculture and Fisheries, Fertiliser club

Agriculture subsidies was a key reason the Doha developmental round didn’t succeed as powerful Agri industries collapsed talks and refused to acknowledge that their Agri subsidy system was a major issue for fair trade. Today, in a post Covid world especially, nations are Public Stockpiling food for disasters (drought and floods) etc.

For India, Indonesia, Nigeria and other large population nations, agriculture public stocktaking is central to food security and viability for local farmers. For Russia, hit by sanctions, diamond trade leads to gluts in world markets and price elasticities and income losses and volatility and quality.

Access to fertiliser and wheat play a key role in food security globally and in Africa, and Russia as lead for BRICS 2024 has already shipped 200,000 tons of grain to Africa, and committed to provision of wheat and grain to African nations and new agricultural technologies that will ensure food security as part of the broader BRICS agriculture framework.

3. Towards a BRICS Mining and Commodity club

Already the core of OPEC member states Saudi Arabia, Iran, UAE, Russia, are part of BRICS, and the OPEC model of ‘commodity club’ with its system of trade, price setting and other elements can be expanded to other commodity categories such as wheat, iron ore and diamonds. In diamonds both South Africa and Russia are major exporters and through trading in BRICS currency, can export diamonds to India as a cutting and polishing centre, using a BRICS payment system. Such a system can include a new certification system and go global and reach economies of scale, thus ensuring the value of the commodity is captured in the producing and value adding countries, and avoid external risks (i.e. high marketing costs, sanctions, etc., etc.).

Furthermore, the global commodity markets are volatile, and Africa has a huge commodity sector and reserves. As much of Africa and the Global South nations are commodity exporters and are integrated in the volatile financial circuits of global Capital, they are also subject to commodity speculation, together with high interest on debt repayments that eat into social expenditure.

These Commodity Clubs can mitigate commodity trading speculation risks. In the long term, they can potentially and gradually replace the WTO model, especially the so-called ‘Plurilateral model’, which is a non-committal negotiation regime that plagues the WTO and where powerful nations have asymmetrical power.

BRICS Plus nations have the dynamic market, youthful populations, product, technology and payment systems to move towards a ‘Cluster of Commodity Clubs’.

During the post-Cold War era, when the ‘international liberal order’ emerged victorious and neoliberal Globalisation dominated, the formation of the WTO symbolised the globalisation consensus of the era. But it also spurned the global financial crisis of 2008-9 of which the global South is still paying the debts.

BRICS Plus is in a unique position as its core members have the populations, technology, currency clout, new institutions and Developing World power status in major institutions from G20 to WTO to the UNSC and regional institutions to shape a new order.

Today this ‘Globalisation consensus is dying’ and a new, more equitable order for the Global South is emerging – with BRICS Plus as a core anchor, building the new global trade-investment-financial systems and cultural architecture for the 21st century.

Ashraf Patel is senior research associate at the Institute for Global Dialogue (IGD)