Picture: THINKSTOCK
Picture: THINKSTOCK

Brazil, Russia, India, China and SA (Brics), representing about 40% of the world’s population and almost a quarter of its output, think it’s time for a change in how things are done.

After a three-day summit in Johannesburg, the Brics nations said they want a fairer, more representative global order in diplomacy and trade just as China, the biggest member, faces billions of dollars of extra US tariffs. They also want reforms at the UN, the UN Security Council and the International Monetary Fund (IMF) to better represent developing nations, and have asked that members of the World Trade Organisation (WTO) — including the US — abide by WTO rules as the multi-lateral trading system faces "unprecedented challenges".

"They’re not only re-balancing the current global order, but contesting that order," Lyal White, senior director of the Johannesburg Business School at the University of Johannesburg (UJ), said on Friday. "Each of these countries can’t do that on their own — but together they’re a force to be reckoned with. This is a decisive but progressive shift."

Driving the call for multilateralism in trade at the summit was Chinese President Xi Jinping, whose US counterpart Donald Trump escalated trade tensions by threatening to impose tariffs on every one of the Asian economy’s exports. This could derail a global upswing that’s already losing momentum amid weaker-than-expected economic growth in Europe and Japan as financial markets seem complacent about the mounting risks, the IMF warned on July 16.

The recent annual gathering of the coterie of emerging economic powers, first identified by former Goldman Sachs Asset Management chair Jim O’Neill, is the 10th since its leaders started meeting and the first since the prospect of a full-blown global trade war became a real threat.

Emerging-market coalition

"The Brics summit has been extremely successful for China in terms of building a coalition of emerging markets that seek to defend the current multi-lateral trade regime," Martyn Davies, MD for emerging markets and Africa at Deloitte, said. "What we have seen is the development of an agenda for these countries, because there’s never been an agenda before. We’ve never seen Brics talking about liberalised trade as a grouping or as a coalition, but now trade is front and foremost."

Russia is pushing for better business ties between counterparts in the club, President Vladimir Putin said. All countries committed to strengthen their co-operation in energy and developing new technologies.

China pledged $14.7 billion in investment for SA, including loans to cash-strapped Eskom. The commitments are the biggest yet from the Asian nation to SA. "Are you going to say no to investment and loans that are sorely needed?" said White. "China is going to become the most dominant economy in the world. These are the rules of the game globally — SA has to learn how to play."

China benefited significantly from joining a multi-lateral, regulated liberalised regime when it became part of the WTO in 2001, Davies said. "The major component of China’s growth has been dependent on exports — of course, it’s going to defend that and [try] to bring other countries along. It’s making the point by creating these coalitions in the Brics directed against the belligerence and erratic nature of US trade policy."

Bloomberg