GRACELIN BASKARAN: Better for Brics and G7 to collaborate rather than compete

There’s an abundance of discourse on the Brics summit, but with a long list of countries seeking to join the bloc an important question lingers: what are the implications for economic relations with the Group of Seven (G7)? 

Adjusted for purchasing power parity, the developed economies of the G7 contribute 30.3% of global GDP, while the Brics bloc contributes 31.7%. Twenty years ago the Brics countries contributed just 20%. 

However, the economic ascent of Brics has largely been shaped by China, which accounts for 71.6% of the bloc’s GDP. Excluding China, Brics would contribute just 8.9% of global GDP. China’s GDP is $17.7-trillion, compared with India’s $3.2-trillion, Russia’s $1.8-trillion, Brazil’s $1.6-trillion and SA’s $419bn. 

The bloc is now facing the possibility of significant expansion — 22 countries have made formal approaches to become full members. However, China’s urge to position Brics as a geopolitical rival to the G7 has been met with hesitancy by India’s Narendra Modi and Brazil’s Luiz Inácio Lula da Silva. Rightly so. China’s approach will created a more polarised world, which is short-sighted at best.

The G7 and existing Brics countries have seen the value of collaboration. India recently joined the Minerals Strategic Partnership (MSP), the first developing country to do so. Other MSP countries include Australia, Canada, Finland, France, Germany, Japan, South Korea, Sweden, the UK, US and EU. The partnership aims to strengthen critical minerals security through joint support to increase extraction, processing and recycling. 

Indonesia, which is hoping to join Brics, has proposed a limited free trade agreement with the US that would cover critical minerals required to run electric vehicles, including nickel, graphite, manganese, cobalt and lithium. This would allow batteries that have minerals sourced in Indonesia to benefit from Inflation Reduction Act tax credits. Likewise, Argentina, another Brics hopeful, recently signed a deal with the EU to work with it on critical metal supply chains. 

SA has sent a high-level delegation to the US in the hope of keeping its African Growth and Opportunity Act preferential trade benefits. It’s also a happy beneficiary of the Southern African Development Community-EU economic partnership agreement, which provides preferential access to the EU market for 98.7% of SA goods. 

I’m not against Brics expansion. It gives economies that have long operated on the global periphery access to the main stage (though it is worth noting that not all Brics hopefuls are developing economies: oil giants Saudi Arabia, Kuwait and the United Arab Emirates, for example). 

Most Brics and Brics hopefuls would presumably not want to have to choose between strong economic relations with the G7 or Brics, the obvious exceptions being countries such as Russia, Iran, Venezuela and Cuba.

China, on the other hand, has 50%-85% of the processing capacity for a number of important critical minerals that are required for national and energy security. The rest of the world is scrambling to reduce its reliance on China for these minerals, including India. But as long as China retains its dominant position it will wield disproportionate geopolitical power, including over G7 countries. 

Iran would benefit from being part of a strong Brics economic alliance given that it is subject to an almost total US economic embargo, including sanctions on firms doing business with Iran, a ban on Iranian-origin imports, and sanctions on Iranian financial institutions. The EU has narrower ballistic missile sanctions. 

But a Brics bloc with anti-US and/or anti-EU add-ons would likely shift the bloc into a more anti-G7 position, which would be economically self-defeating for many Brics and Brics hopeful countries.

The US is the biggest importer of Indian exports, for example, more than triple those of China. It is also by far the biggest importer of Egyptian and Vietnamese goods, the second-biggest importer of Ethiopian, Argentinian and Brazilian goods, and third-biggest importer of Nigerian goods. The G7 as a whole imports 70% of Morocco’s exports and 40% of SA’s.

International relations & co-operation minister Naledi Pandor said recently that Brics is not in competition with the G7, and it is “extremely wrong” to see a potential Brics expansion as an anti-Western move. She’s correct — if the Brics bloc remains true to its initial purpose. But the introduction of a growing number of strongly anti-G7 countries would threaten this position.

The bloc will need to evaluate the effect these countries might have before making decisions about adding new members. Collaboration between the G7 and Brics would create a far more harmonious global economic landscape. The rhetoric of being competitors is like the Brics shooting their own economies in the foot. 

• Dr Baskaran (@gracebaskaran), a development economist, is a non-resident fellow at the Brookings Institution in Washington DC.