Saturday, September 12, 2009

Intra-BRIC Competition on the Horizon: Brazil and India Versus China and Russia?

Among traditional developed states elites, and their media outlets, it is not unusual to think about the so-called BRIC (Brazil-Russia-India-China) states as some sort of monolith. Each serves as a separate strand that together is bound to do any number of things with or to developed states. This includes everything from undoing the global trade arrangements so meticulously cultivated since 1944, to taking over global financial institutions (principally the International Monetary Fund), and dismantling the privileges the current globalized trade system vests in developed states.

One thing that BRIC countries do not do, however, is compete against each other. They appear to manage to stay out of each other's way in their efforts to overtake and perhaps replace the West as the privileged leading nations of the globe. This is a view that is cultivated deliberately and to good effect.
Trade is the cement with which President Luiz Inacio Lula da Silva aims to consolidate Brazil's alliance with the other heavyweights of the developing South. The three-day visit he just made to India marked progress in that strategy, which is based on specific economic interests and a shared attitude of pragmatism, unlike the efforts made within the Third World of the past. The aim is to construct a "new trade geography" in the world, said Lula, but stressed that this does not mean playing down the "fundamental" importance of exchange with rich countries. Instead, it means creating new alternatives, reducing dependence, and uniting developing countries to negotiate in equal conditions all global or regional agreements, the president said. Maria Osava, India-Brazil: Cementing the South-South Alliance, Global Policy Forum, Jan. 31, 2004.
Moreover, "After having led the way for re-energising of the World Trade Organisation (WTO) Doha Round negotiations, India is now on the verge of forming yet another ‘formidable trading triangle’ consisting of Brazil, India and South African Customs Union (SACU) to fully accelerate the South-South engagement." India-Brazil-SACU trade triangle soon, The Hindu, Sept. 8, 2009 ("Brazil had, in 2007, floated the idea of IBSA forum which links India, Brazil and South Africa together eventually paving the way for a bigger economic space eventually leading to forming of a big economic space with the South American common market, Mercosur and SACU. This is now all set to become a reality and put in place another formidable trading block." Id.).

The reporting of China Russia trade is usually served up as a model of this sort of relationship--strategic and synergistic relationships, in which the BRIC countries aggregate their power to augment inter-group trade and present something of a united front against the traditional elite nations. See, e.g., Pan Yunzhao and Hu Tao, China-Russia Trade Faces Challenges But Bright Prospects Remain, China View (Xinhua), March 19, 2009 ("Despite the current difficulties, the global financial crisis would not change the long-term growth prospect for the China-Russia trade, Yang acknowledged. The professor noted that the crisis has not affected the Sino-Russian strategic partnership of cooperation, a driving force for the bilateral economic and trade cooperation. "From a long-term perspective, there is huge growth potential for the bilateral trade and economic cooperation," he said." Id.)

A few recent stories suggest that this view is overly simplistic. At the very least, it suggests a split within BRIC, pitting Brazil and India, against China and Russia.

First, it appears that Brazil has become willing to be more aggressive in the protection of its own economic interests, even at the cost of political advantage. "The Ministry of Development, Industry and Foreign Trade announced today (9th) the placing of antidumping regulation on the import of shoes and tyres from China. According to the Ministry, the decisions were taken by the Foreign Trade Board (Camex) and published in the Federal Official Gazette." Brasil places antidumping measures against Chinese tyres and shoes, Brasil-Arab News Agency, September 9, 2009 (Mark Ament, trans.). In both cases, the government moved swiftly to protect the interests identified by powerful industry associations. "According to the Ministry, the investigation regarding dumping practices was opened in December last year, at the request of the Brazilian Association of Shoe Manufacturers (Abicalçados). . . . [The tire] investigation, according to the Ministry, began in July 2008, at the request of the Brazilian Tyre Industry Association (Anip)." Id. But the Brazilians may be playing it safe here, at least in part. The Americans also have also annouced the imposition of similar retaliatory tariffs against Chinese tires. Jerry Zremski, Tariffs on Tires From China Cheered, The Buffalo News, Sept. 13, 2009. Ironically, and unlike Brazil, pressure for the tariffs came from workers rather than from industrialists in the U.S. Still, there is a hint of solidarity here as well. The Chinese Ministry of Commerce appeared to strike out at the Americans rather than the Brazilians. "The Chinese Ministry of Commerce issued a statement saying Obama had 'compromised to the political pressure of the U.S. domestic trade protectionism.' And Chen Deing, the Chinese trade minister, vaguely threatened retaliation." Id. Yet, the Brazilians have appeared to embrace something less nefarious than protectionism in their own actions.

Second, India and China, on the other hand, continue to challenge each other politically and militarily, through which they test each other's will. The context of this competition is sfae, in a way, reduced for the moment to the symbolic body of the Dalai Lama. This reduces the conflict to manageable levels, transforming what could be a disastrous hot conflict into a virtual one. The Times of India reported that "India is not likely to stop the Dalai Lama from visiting Arunachal Pradesh in November, even after China's public whinge." This time, India won't stop Dalai Lama, The Times of India, September 13, 2009. This symbolic battle, at the frontier of a disputed border area hides the real conflict, one over trade. "The Indian embassy in Beijing made the strongest statement against Chinese trade practices than has been seen in recent times. MEA openly dismissed a Chinese blogger's wishlist of dismembering India. And the Dalai Lama is still scheduled to visit Arunachal. " Id.

This conflict actually erupted earlier in 2009. "India and China are gearing up for a showdown, one that might go all the way to the World Trade Organization, over India's increasing reluctance to allow Chinese imports to flood the Indian market." Mehul Srivastava, India-China Trade Tensions Rise; China threatens to bring its opposition to India's toy import ban to the WTO, while India seems poised to restrict other Chinese products, Business Week, Feb. 11, 2009.
But underneath what seems like a traditional and simple trade dispute—India protecting its growing toy market from cheap foreign imports—lies nearly a decade of Indian and Chinese mistrust, envy, and even complex geopolitics, say experts. Although India and China are still growing, both economies are hurting badly from the global recession. Sino-Indian trade grew as much as 33% in 2008, to nearly $52 billion, according to data maintained by China's General Administration of Customs, but that's tiny compared with the $425 billion bilateral trade between China and the European Union, or the $333 billion trade between China and the U.S. As both countries experience growth rates of 7% or less, compared with 9% for India and over 10% for China before the financial crisis hit, there is an increased rivalry between them, especially when it comes to sectors where both have strong domestic manufacturers, such as steel, petrochemicals, and textiles. Id.
Lastly, India and Russia appear to have entered a period of stagnated trade relationships. These remain based on Cold War staples. Even there, relations have been cool in the wake of disputes over delivery of weapons. And the United States has been doing an excellent job of courting India, a state of affairs that might concern China. And, indeed, the Chinese remain intensely interested on this point. See, Yu Maofeng, Lu Jingli (Xinhua), Indian President Visits Russia to Smooth Ties, China View Sept. 5, 2009. On the other hand, along with Brazil and South Africa, India mat be seeking to challenge Chinese penetration of the rest of the African continent. The idea of a South-South trading axis has been pursued since the early part of this century. See, e.g., Ranjit Devraj, POLITICS: India, Brazil, South Africa Ready to Lead Global South,, March 5, 2004. At its 2009 "sixth ministerial meeting of the India-Brazil-South Africa (IBSA) forum agreed Tuesday in Brasilia to strengthen the dialogue between the three emerging powers in order to establish common positions on regional and international matters and boost South-South cooperation." Fabiana Frayssinet, Brazil, India, South Africa to Broaden 'Voice of the South',, September 1, 2009. The Chinese likely see the writing on the wall.

The irony, of course, is that BRIC does remain united in one respect--in their efforts to unseat and disadvantage developed states. "India's stand that protectionism remains a real threat to the global economy and emerging economies need to guard against tendencies in some developed nations to extend it beyond trade to Financial markets and investment has been endorsed by Russia, China and Brazil. A joint communique issued at the end of the two-hour meeting of the BRIC (Brazil, Russia, India, China) countries' Finance Ministers here last evening asserted that 'protectionism remains a real threat to the global economy and should be avoided, both in direct and indirect forms.'" Russia, China, Brazil endorse India's stand on protectionism, The Economic Times, Sept. 5, 2009. The great incentive also remains the same--wresting substantial control of the current economic system for themselves. "The communique also emphasised that the reform of international financial institutions is crucial to ensuring a stable and balanced global economy. 'For the IMF and the World Bank Group, the main governance problem, which severely undermines their legitimacy, is the unfair distribution of quotas, shares and voting power. Priority should be given to a substantial shift of quotas and shares in favour of emerging markets and developing countries,' the communique said. " Id.

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