BRICS: Friend or Foe for the European Union?

Indian Prime Minister Narendra Modi, Chinese President Xi Jinping, President Cyril Ramaphosa, Russian President Vladimir Putin and Brazilian President Michel Temer pose for a family picture at the 10th Brics summit in Johannesburg. Picture: SIYABULELA DUDA

‘Construction and support of the multilateral institutions based on the liberal ideas can enhance the cooperation in the world politics’, emphasized Robert Keohane in an article in 2012.' [1]

Does it mean that the multipolar world system is the only possible and efficient system in the current world order? The main role of states as the main actors on the international arena has changed, becoming substituted by the interaction of different groups of countries and organizations on the multilateral level. In this case, the formation of cooperation and integration blocks of countries is one of the tools for economic and political development and partial domination of the one or another group in the new changing world. BRICS (standing for Brazil, Russia, India, China and South Africa) is one of the best examples of such cooperation, aimed mainly on mutual economic benefits of its member-states. The European Union is another example, as the highest existing form of integration within the region.

Could the progressing development of the BRICS economies be a threat for the EU or does the rise of BRICS give new opportunities for the cooperation with the EU in the spheres of overlapped interests? The aim of the proposed article is a critical estimation of the consequences of the further development of BRICS countries for the EU.

Reasons for the rise of BRICS

from the economic perspective

Some practitioners often suppose the BRICS forum nowadays to be rather a political platform for international cooperation than economic and financial, though its agenda is mostly focused on the attaining balanced global growth and reforming financial system.

The acronym of BRIC countries (excluding South Africa that time) was first introduced focusing mainly on the economic potential of these countries. In the research of Goldman Sachs, Jim O’Neill created a category for the fast-growing developing countries (with high demographic and economic indicators: GDP growth rates, GDP per capita, population size).[2] In 10 years from 2004 the GDP of China increased in 159 %, the GDP of India in 109 %. During the same period the growth in the GDP of the US was only 16.8 %.[3] The cooperation between these countries was and still is economically relevant. China remains the global exporter of manufactured goods, Brazil and Russia have domination in the field of raw materials, India exports services.

From the political perspective

From the official perspective, EU has higher international status than BRICS, as from 2009 it has officially gained the status of international organization whereas BRICS remain the informal club of countries’ leaders. However, it doesn’t specifically mean that the real status on the international arena of BRICS countries is lower. For instance, in the UN Security Council, Russia and China, as representatives of BRICS countries have more power (vetoing power) than the only representative of the EU and permanent member of the UNSC – France (if excluding UK from the EU).[4]

Secondly, BRICS countries are highly influential on the Summits of G20 as well as the members of G77. Apart from the cooperation with international organizations in political field, BRICS cooperates with regional business organizations and research centers addressing relevant issues. In 2009-2016 BRICS countries were focused on joint priorities including Libyan, Syrian, Afghan conflicts, Iranian nuclear program.

Why might the rise of BRICS be a threat for the EU?

1. BRICS countries are becoming more influential actors in the international financial institutions: WB (World Bank) and IMF (International Monetary Fund). Nowadays they have 13.24% of World Bank voting power and share 14.91% of IMF quotas. BRICS proposed projects aimed on reforming WB and IMF and redistribution of quotes for developed and developing countries.[5] The creation of BRICS Interbank Cooperation Mechanism and the establishment of BRICS Exchange Alliance have become the results of BRICS program of 2009-2016.

2. Exponential economic growth in the early 2000-s. BRICs economies (according to Goldman Sachs forecasts, the research took into consideration 4 economies of BRICS - excluding South Africa) could amount to the half of the GDP of G6 (US, Germany, Japan, UK, France, Italy) in US dollars BY 2025 and in less than 40 years they could become even larger than G6 GDP.[6] With the inclusion of South Africa, this number can be even higher.

3. High rates of population growth of BRICS. Together in 2012 these 5 countries amounted to 40 % of the world population, 30 % of land mass and 25 % of GDP, which rise every year.[7]

4. Syndicate regionalism, with further formation of integration blocks in the local region, is one of the main strategies of BRICS countries for the future. Russia is the leading economy in the EAEU (Eurasian Economic Union), Brazil in MERCOSUR, India dominates in SAARC (South Asian Association for Regional Cooperation), China represents SOC (Shanghai Organization for Cooperation) and South Africa SADC (South African Development Community).

5. High role of BRICS countries in the international negotiations, taking into the consideration contradictions in the positions of EU and BRICS on some issues. Possible exclusion of Russia from the Summit of G20 in 2014 wasn’t successful because the BRICS member - states insisted that ‘the custodianship of the G20 belongs to all Member States equally and no one Member State can unilaterally determine the exclusion of another Member State from the Summit’.

Might BRICS be an opportunity of cooperation for the EU in the new multipolar order?

1. EU has strong bilateral cooperation with some of the BRICS countries, which is more efficient nowadays than multilateral for the EU. Heterogeneous characters of the BRICS countries and different political regimes make it impossible for the EU to pose the same policy responses for all these countries.[8] There is an opportunity of implementation of general approach to cooperation with BRICS in some spheres (e.g. economic sphere).

2. Cooperation of EU and BRICS on the particular issues could provide both with a higher influence in international organizations (UNSC, IMF, WTO, WB). But there is a lack of Multilateral negotiations of BRICS countries with the EU, which mainly take place on the platform of G20 Summits.

3. Stronger influence of the EU in G20 format. EU is participating in the G20 as an individual actor whereas all other countries are participating from the state’s level. In this case the interests of EU and interests of 5 different countries of BRICS are not counterbalancing in quantitative measure. However, both EU and BRICS have its’ alliance countries in G20 format for supporting their own mutual interests. Participation of the EU and BRICS in G20 Summits is highly beneficial for both parties as they achieve a high-level expertise in the areas of regulation of the financial markets, economic recovery there.

4. New trade agreements and potential partners in Asia and Latin America for the EU in case of cooperation with BRICS. It could strengthen the role of EU for the regional integration groups (EAEU, MERCOSUR, SAARC, SOC, SADC). EU – MERCOSUR cooperation seems to be one of the most relevant for the EU today.

Conclusion

Rapidly emerging powers: Brazil, Russia, India, China and South Africa can soon overweight G7 from the economic perspective due to the strong economic growth and demographic increase. China is potentially seen as the next global superpower with the huge population and economic growth rate.[9] Russia is the largest country in the world with huge amount of natural resources and strong military power. India is also mentioned as a leader with strong potential in IT technologies and huge population. South Africa is the dominant economic power in the south- African region, which increases the number of potential cooperation agreements with other states. Brazil is the country, rich in natural resources and emerging power in global diplomacy. The cooperation of these five countries with further network of regional cooperation agreements can spread the BRICS influence all over the world. The idea of BRICS cooperation with the international organizations was proposed in the concept of presidency of the Russian Federation in BRICS. The idea implicates the interaction of leaders and ministers of the BRICS countries in an ‘outreach’ format, with the participation of executives of international and regional organizations and regular consultations with these organizations, such as UN, Eurasian Economic Union, African Union, League of Arab Countries, ASEAN, integrations of Latin America. [10]

EU and BRICS countries have different long-term strategies for the development. EU put emphasis on the enlargement and integration strategy as well as bilateral agreements with other countries. One of the main strategies of BRICS countries is based on the conception of syndicate regionalism. The increased role of BRICS countries in the IMF, World Bank and the establishment of their own international institutions create a challenge for the western dominance. However, this gives not only potential challenges, but further opportunities for strengthening the role of the EU in the world in the spheres of cooperation with BRICS countries, particularly in trade (new markets in Latin America and Asia), economic cooperation and investments.

[1] Keohane, R.O. , Twenty years of institutional liberalism (2012). International Relations. (International Relations, June 2012, 26(2):125-138)

[2] Nadkarni, Vidya, Oliver, “The BRICS and the future of global order, (2015). Chapter 1: Capturing the Spirit of a Decade (2001-2006), p.1-8, p.1

[3] Stephen, Matthew D. “Emerging Powers and Emerging Trends in Global Governance” (2017). Global Governance. Jul-Sep2017, Vol. 23 Issue 3, p483-502. P.486

[4]Current Member of the UN Security Council, http://www.un.org/en/sc/members/

[5] Larionova M. (2018) The G20, BRICS and APEC in the System of International Institutions: A Piece of Good News for Global Governance. International Organisations Research Journal, vol. 13, no 1 (in Russian and English). p.1-31 DOI: 10.17323/1996-7845-2018-01-01. P.10

[6] Dreaming With BRICS: The Path To 2050. Global Economics Working Paper №99. URL: http://www.goldmansachs.com/our-thinking/archive/archive-pdfs/brics-dream.pdf (accessed: 03.04.2018).P.2

[7] Tembinkosi Bonakele, Eleanor Fox, and Liberty Mncube, ‘Competition Policy for the New Era: Insights from the BRICS Countries’ (2017). The Case for a BRICS Competition Agenda. P.38-50. P.42

[8] Rewizorski, Marek as an editor, ’The European Union and the BRICS : Complex Relations in the Era of Global Governance, Springer, (2015).Introduction. p.1-8. P.4

[9] Nadkarni, Vidya, “Emerging powers in a comparative perspective : the political and economic rise of the BRIC, editor of compilation”, (2013). Chapter 2, The Global Leadership of the USA and the Emerging Powers, Norma C.Noonan, p.23-42, p.23

[10] Larionova M.V. ‘Российское председательство в БРИКС: модели взаимодействия с международными институтами', 2016, p.4