World Trade Organisation, available at http://stat.wto.org/CountryProfile/WSDBCountryPFView.aspx.
But why does the trade performance differ so much across the BRICS nations? What are the drivers of export growth? Econometric analysis of growth drivers across emerging market economies tends to focus on the following variables: (i) real effective exchange rate change; (ii) growth of real non-oil goods import demand of trading partners; (iii) change in most favored nations’ (MFN) tariff rates; (iv) inflow of foreign direct investment (FDI); (v) change in export diversification; (vi) change in manufacturing export quality; (vii) number of documents required for export; and (viii) change in good market efficiency score (IMF, 2017). In terms of export diversification, while China, India, and South Africa are fairly diversified, expectedly, exports of Russia and Brazil are far more concentrated.
In terms of the determinants mentioned above, the situation in China seems to be grossly distinct from its other BRICS partners. In fact, Chinese trade is comparable to other advanced countries — its share in global exports is higher than countries like the US, Japan, France, and Germany. Mathai et al. (2016) have noted:
“China has become the world’s largest trading nation and the center of the global supply chain. A negligible player in global trade just a few decades ago, China now accounts for more than 12 percent of world exports and 10 per cent of world imports, more than any other single country. Nominal exports grew by 17 per cent on average each year from 1990 to 2012, receiving a particular boost after China’s accession to the World Trade Organization in 2001. … China is now the world’s largest importer of intermediate goods and the anchor of the global supply chain trade. The number of China’s major trading partners rose several-fold over the same period …, and as trade grew, so also did foreign direct investment, of which China is now the world’s largest recipient (as well as an increasingly important source)” (Mathai et al., 2016: 6).
Table 6:Major trading partners of BRICS.
Notes: *China’s imports from China can be explained by the reimport activity. It is related to processing trade. More than 90% of China’s imports from China are produced in China, exported to Hong Kong, and then reimported to China. 73% of products reimported are used as inward processing materials and 70% are imported by the province of Guangdong, due to the geographic and logistic convenience of Guangdong with Hong Kong. Goods entering for processing trade are exempted from import duties. The business management of multinational enterprises and their distribution centres are often based in Hong Kong.
Source: Exim Bank (2016).
Future of BRICS Cooperation
Having discussed the extent of heterogeneity among the BRICS, this penultimate section looks at the possible vistas of economic cooperation among BRICS. BRICS summit declarations and official statements are normally euphoric and may not reflect compulsions of reality. Illustratively, the Government of India (2012) enumerated 13 fields of economic cooperation among the BRICS block; these include the following: (i) Intra-BRICS Trade and Investment Cooperation; (ii) Cooperation in Infrastructure Financing; (iii) Industrial Development and Cooperation; (iv) Cooperation in Transportation; (v) Cooperation in Food Security; (vi) Cooperation in Technical Education; (vii) Cooperation in Financial Market Development; (viii) Cooperation in Research and Development; (ix) Cooperation in Area of Culture and Tourism; (x) Cooperation in International Issues; (xi) Cooperation in Energy Security; (xii) Cooperation to Build Effective Institutions; and (xiii) International Development Bank for Fostering South–South Investment. While the list may appear to be quite exhaustive — the current experience tends to indicate differing degrees of success across these fields. Also, some of the developments in this regard seem to be symbolic in nature. Illustratively, there is a BRICS business council that was established in March 2013 during the Fifth BRICS Summit held in Durban, South Africa. The BRICS Business Council aims to facilitate cooperation between the five countries in various sectors as well as promote trade and industry amongst them. In its Report on the BRICS Business Council Meeting in India (held during October 12–16, 2016), the Council went over the board and recommended 16 areas of cooperation.7 Many of these areas have, till date, remained more of intention rather than of actualization.
In fact, in terms of specific instances, there are a number of issues between China and Russia on the one hand and between China and India on the other that could hinder the future of BRICS cooperation. It has been rightly observed that
“Strategic tensions between the Asian BRICS are a key factor in their relations. As Chinese economic and strategic influence increases in Asia and further afield, especially Africa and South America, these strains might increase. … Tensions also exist in China’s relations with India, partly due to growing competition between them for economic influence in states such as Nepal, Burma/Myanmar, and Cambodia. … Some Indian security analysts perceive a growing Chinese encirclement of India through its maritime influence in the region. … These tensions persist despite their involvement in the Shanghai Cooperation Organization, of which China and Russia are full members and India has observer status. Another key contemporary issue on which the BRICS have different priorities is climate Russia. … Russia has diverged from the other BRICS on key aspects of ‘post-Kyoto Protocol’ environmental negotiations in calling for binding targets for everyone, something the Chinese and Indian governments in particular reject” (Luckhurst, 2013: 257).8
Hence for the sake of tractability and focus, this section will discuss a specific issue where there has been some apparent progress, viz., the NDB.
The NDB was conceived in the fourth BRICS Summit in New Delhi (2012). Later, following the report from the finance ministers at the fifth BRICS summit in Durban (2013), the leaders agreed on the establishment of the NDB, and finally during the sixth BRICS Summit in Fortaleza (2014), an agreement establishing the NDB was signed. In the Fortaleza Declaration, the leaders stressed, “The NDB will strengthen cooperation among BRICS and will supplement the efforts of multilateral and regional financial institutions for global development, thus contributing to collective commitments for achieving the goal of strong, sustainable and balanced growth”.
There are at least two distinct ways in which one can see the genesis and rationale of the NDB. The first is clearly the dissatisfaction of the emerging economies with the governance of the Bretton Woods institutions, like the International Monetary Fund and the Word Bank, which are quota based as the quotas tended to represent an archaic global economic power structure.9 All the BRICS countries on different occasions have expressed dissatisfaction over the state of governance and democratic deficit in the IMF or World Bank. Second, and more importantly, almost all the BRICS countries have accumulated some foreign exchange reserves which are normally investment in safe assets, primarily in the form of securities of governments issuing four major currencies, US dollar, Euro, Pound Sterling, and Japanese Yen (of course, led by US dollar). Admittedly, there are differences in foreign exchange holding across BRICS countries. Illustratively, in 2017, China’s forex reserves stood at nearly US $3 trillion, as compared with little more than US $360 billion for both Brazil and Russia, little over US $400 billion for India, and around US $42 billion in South Africa. More interestingly, all these countries have experienced a steep and steady rise in their forex reserves from the late 1990s to early 2010s (Figure 5). The presence of such substantial forex reserves made the establishment of the NDB comparatively easier for the BRICS countries.
Thus, the NDB was founded during the fifth BRICS Summit in Fortaleza in July 2014 and launched on July 7, 2015, with an initial authorized capital of US $100 billion and initial subscribed capital of US $50 billion, equally shared among founding members. Effectively, it functioned as
