Sanjaya Baru | How Trump Has Fuelled the Resurgence of BRICS

This column is being written even as the New Delhi Brics Summit is still in progress. The likely language of the joint statement to be issued by Summit leaders has been revealed in the joint statement issued by BRICS finance ministers at their meeting in Mumbai on September 10. Under the theme “Building for Resilience, Innovation, Cooperation and Sustainability”, the statement categorically stated, “We continue to have serious concerns with the unilateral imposition of trade and finance-related actions, including the raising of tariffs and non-tariff measures, which distort trade and are inconsistent with World Trade Organisation (WTO) rules.” Reiterating support for an open, transparent, inclusive, non-discriminatory and rules-based multilateral trading system, the Brics finance ministers decided to explore the potential for cross-border payments in local currencies. President Donald Trump has breathed new life into BRICS.

BRICS began as Brics — Brazil, Russia, India and China — a group of ‘emerging economies’ as they were dubbed by the American firm Goldman Sachs, that coined the term. Russian President Vladimir Putin immediately picked up the formulation and took the first step. A meeting of BRIC finance ministers met on the sidelines of the United Nations General Assembly in 2006. There was no proximate reason that year for such a gathering. India was in the midst of a lovefest with the United States, Russia was in fact a member of the Group of Eight (G-8), and China and Brazil were coasting along without any serious concerns. The US itself was still focused on a war in West Asia.

Then came the trans-Atlantic financial crisis of 2008-09. The United States took the initiative to convene a meeting of the Group of Twenty (G-20), an informal grouping of the finance ministers of 20 key economies formed in the aftermath of the Asian financial crisis of 1997-98, at the heads of government level. The initiative for a G-20 Summit meeting was taken by President Nicolas Sarkozy of France who convinced President George Bush that US convene a meeting to deal with the financial crisis.

The US toyed with the idea of expanding G-8 to G-9 by inviting China to the high table, recognising China’s potential role to help it steer out of the financial crisis. Both Presidents Bush and Sarkozy felt the creation of a G-9 may upset other developing economies, especially India, and so decided to elevate the G-20 finance ministers’ group into a heads-of-government group. While Brazil, China and India welcomed the idea they soon realised that the G-8 remained in place even as a G-20 was formed. Russia was invited to join G-7 in 1997 in the western hope that it would remain a supplicant. It was evicted in 2014 when it invaded Crimea.

It was President Putin who took the initiative to convene a Bric leaders’ summit on the sidelines of a G20 meeting he was hosting in 2009. South Africa was invited to join at the second BRIC summit in China and thus Bric became Brics. It was still a talk shop articulating the concerns of emerging economies in the context of the fallout of the trans-Atlantic financial crisis. The US and the European Union were focused almost entirely on graduating out of the crisis and discovered that they would not be able to do so without China’s help.

China’s global relevance came to the fore when it became key to the resolution of the 2008-09 financial crisis. US Treasury Secretary Frank Paulson desperately reached out to his Chinese counterpart to make sure that China would not dump the large stock of US treasuries it was holding. China decided to play ball and help stabilise the dollar even as the euro was going through convulsions. The 2008-09 financial crisis marked the beginning of the decline of Europe and the rise of China in the global economy.

When BRICS met in New Delhi in March 2012, the finance ministry, which remained the convening ministry for the group and was then headed by Pranab Mukherjee, came up with the idea of setting up a BRICS bank that was named as the BRICS New Development Bank (NDB). As soon as the idea of a fund-based institution was created the group realised that the national income of one member was more than the combined national income of the other four. China happily welcomed an Indian initiative proposing that NDB be located in China but offered to make its first chairman an Indian.

Those who today draw attention to China’s so-called ‘dominance’ within BRICS forget that in most such plurilateral groupings there has always been a ‘dominant’ member. The US has always dominated G-7 imposing its will on other six member economies. It dominates international financial institutions with its dollar power. When the US found Japan emerging as the second biggest economy and Japanese exports into the US market threatened American firms it forced Japan, and along with it, Germany and others, to accept a depreciation of the US dollar against their currencies through what was called the Plaza Accord and signed at Hotel Plaza in New York in 1985.

In international relations money and weapons define power. Indeed, US is the dominant member of Nato, with a defence budget that exceeds the combined defence budget of all other Nato member countries. The US has used its money and muscle to assert its global dominance in the post-war era. When American allies like Japan and Germany were beginning to pose an economic challenge, the US used its power to keep them in line. Even today, they remain occupied nations.

Quite understandably, therefore, China has come to dominate BRICS. For this reason, India’s interest in Brics began to flag until Donald Trump came along. Trump’s unilateral economic sanctions and escalating trade war against all emerging economies has united BRICS. While he has openly targeted China and Russia, he has bad-mouthed the leaderships of Brazil, India and South Africa and targeted each one of the Brics economies. In the newly expanded Brics he has been waging war against Iran. He has not spared other new members, including Indonesia, Malaysia and Saudi Arabia.

The 18th Brics summit was convened in New Delhi against this background. A grouping that seemed to be losing momentum has suddenly found new life being breathed into it by the shared concerns of member nations in the face of brazen bullying by an ageing superpower.