“The Vital Wave Consulting” blog has an interesting post from June 26 – “Is the Rest of the World Ready for a Unified BRIC?” – about last week’s summit in Moscow of the four “BRIC” countries: Brazil, Russia, India, and China. The article ponts out that trade among the four countries is too small to justify talk of a new trading bloc, but remarks that they have some common interests with respect to world trade, notably reducing reliance on the U.S. dollar. The BRIC countries are hard to overlook. Together they comprise about 43% of the world’s population and 15% of its GDP, and hold over 40% of the world’s gold and foreign exchange reserves. Their economies are growing at more than double the pace of developed economies. That they are holding a summit at all indicates that they are looking for ways to throw their combined weight around for mutual benefit.
Talk of unification, however, is premature. Though their interests may coincide and overlap in some cases – as happens within any grouping of countries – they also diverge in many important respects. Brazil, of which Charles de Gaulle once said”It is the country of the future. And it always will be,” finally seems to be realizing its potential. Its huge and productive agriculture sector, sophisticated manufacturing base, liberal market-oriented reforms, and new discoveries of big offshore oil deposits all but guarantee Brazil an important place in any new economic and geopolitical landscape. Russia is past its peak. Its economy depends on primary resources no less than Saudi Arabia’s. Strip out the oil and gas and minerals – as well as the nuclear weapons – and Russia is of no more consequence than Saudi Arabia. I am willing to bet that within 50 years, and possibly much sooner, Russia will be less of a player on the international stage than Nigeria. India has undertaken profound economic reforms and has escaped from what used to be called the “Hindu rate of growth.” Its sixty years of nearly-unbroken democratic governance are an inspiration. But its bureaucracy stubbornly resists change, ethnic tensions and conflict with Pakistan remain close to the boiling point, and for all its reforms India still maintains one of the most protectionist trade regimes on the planet. China’s potential seems limitless, provided the rest of the world can provide the raw materials it needs to grow.
How much do these countries really have in common? True, they have issued joint statements calling for increased representation in international organizations and institutions like the World Bank and the IMF, though it is hard to see China and Russia, with their permanent seats on the U.N Security Council, agreeing to admit Brazil and India to the club. India’s farmers are inefficient and highly regulated and subsidized, hence its then- Trade Minister’s insistence on wrecking the 2008 Doha Round trade talks in order to keep the right to impose swingeing tariffs on agricultural imports. In this it was supported by China, which has a hugely inefficient agriculture sector of its own, and resolutely opposed by Brazil and other big agricultural exporters in the “Cairns Group,” which includes Australia, Argentina, Canada, Chile, New Zealand, South Africa, and Thailand. Russia, which was close to final WTO accession talks, has just shelved its application, promising to re-submit a joint application with Belarus andKazakhstan.
Vital Wave is half right when it says that for global businesses the BRIC countries “are an essential factor – as a group and individually – when setting growth strategies.” They are an essential factor, but individually rather than as a group, and there is little to suggest that this will change in the near to medium term.