3 Keys to BRICS, and What It Means to Decision Makers
By Andrew Hupert
The big takeaway from the BRICS (Brazil, Russia, India, China, South Africa) summit is that the US-led G7 is still the primary driver of international trade and economic policy, and will probably continue to be for the foreseeable future. In 2017, the demise of the Western-led trade regime seemed to be just a matter of time. In 2023, the US and Europe have somehow ended up looking like the only grown-ups in the room. Russia’s war in Ukraine is destroying its economy. China is juggling so many existential crises that there’s no room to list them all in a single post. India just seems to want to be left alone.
Interest in expanding BRICS comes mostly from marginal economies seeking no-strings mega-loans and the powerful nations that want to exploit their need. India and Brazil, of the original BRIC lineup, have been much less enthusiastic about committing funds or political capital to BRICS expansion or “de-dollarization” efforts. China and Russia are the drivers behind the sputtering “Global South” non-movement.
3 Key Points on BRICS:
1. In 2017, the idea of a re-invigorated, expansionist BRICS may have made some sense. Right now, in the aftermath of Covid, a hot war in Europe (the R in BRICS is Russia), and a trade war between China (the C) and the US, this BRICS summit looks like a Saturday Night Live (SNL) skit that was cut for time. There is no sensible rationale for vulnerable economies to hitch their wagons to two of the most distressed economies in the world right now.
2. The anti-dollar currency idea is dead on arrival, again. China pays for Brazilian soybeans in yuan. India and Russia use rupees. There’s vague talk of using more local currency to settle trade. This is probably a good thing, but it is neither innovative nor a threat to the US dollar.
3. BRICS – and the “Global South” – are not organic, grass-roots groupings. BRICS started as an “investor theme” marketing campaign for top-tier institutional investors by Jim O’Neil of Goldman Sachs in 2001. Goldman Sachs. The “Global South” is just an invention. I’ve been living in the “Global South” for 10 years – Thailand, Vietnam, and Mexico. They all look to the US for markets, technology, and policy. Outside of ASEAN, there are few examples of working trade agreements between developing economies.
US Leadership of Global Trade – Again and Still
Businesses have to go with the winner, and the US/G7 are clearly the undisputed leaders of the global economy. This Summit proves it. BRICS makes up 2/5 of the world population and only 1/5 of the global GDP. It’s an unfortunate, frustrating situation for smaller economies, especially since globalization has fallen out of favor in Western media. But that doesn’t change the facts on the ground. US Still #1 Global Economy isn’t a very grabby headline. BRICS to Challenge US Leadership will bring the clicks.
US vs China in a Soft Power Battle of Values
China does great in the soft power battle until you examine its policy, history, culture, and track record. Fortunately or unfortunately, no one is doing that. You can attack Western values all you want – there’s a lot of material to work with here. But if the Russia/China alliance looks like it’s the answer to your economy’s problems, then you probably have bigger issues than “Western values are hypocritical”.
Key Takeaways for Front-Line Decision-Makers
1. Frustration with Western trade regimes is running high – especially in sub-Saharan Africa and the Middle East and North Africa (MENA). It’s not a new situation, but it will add to the risks your business faces during this time of re-globalization. There may be good reasons for this – but you can’t do much about it. What you can do is tailor your negotiations with “Global South” partners to emphasize market access, training, and innovative payment terms. There is obvious discontent with the old order, and existing trade institutions aren’t responding. Good negotiators will position themselves as the “fresh alternative”.
2. The demise of the West is a dead meme. Are Western nations morally bankrupt, sclerotic, and biased? Sure. They still are. Do China, Russia, or India offer a viable alternative? Nope. Had Russian troops stayed home and Xi Jinping championed “Made in China 2050” instead of “China 2025,” then we might be having a different conversation right now. But even after Brexit, January 6th, and Europe’s swing to right-wing populism, the G7 still looks like the trade bloc that can get things done in a Globalism 2.0 environment. You should definitely pay attention to the BRICS criticisms and complaints about Western trade practices. Use them to enhance the deals you are negotiating in developing markets.
3. Continue bulletproofing your supply chains as global trade gets more politicized and riskier. A quick scan of BRICS summit headlines reveals widespread discontent with G7 leadership. When you read the actual facts, it becomes clear that there are no credible solutions or innovations being floated. If economists & trade experts can’t come up with sensible solutions, then politicians will come up with non-sensible solutions – like trade restrictions.
China and Russia are not beacons of hope for troubled MENA economies. They are major world powers prosecuting their own agendas, using BRICS as a soft-power ploy to harm US interests. We’ll read a lot of exciting headlines this week, predicting death to the West, but the reality is that BRICS is another communique-shop that will not accomplish anything useful.
As international negotiators, you are getting to peek behind the curtain at the complaints and problems developing nations have with Western incumbents. Savvy negotiators can translate these into deal points and partnership proposals when sourcing overseas or expanding markets.