#dnaEdit: Conflicting interests

The BRICS Summit in Brazil appears to have given a go-ahead for two pillars of collaboration among the participating nations — the proposed bank of the BRICS nations — and the currency stabilisation fund. The BRICS bank is now agreed to have an authorised capital of $100 billion dollars and paid-up capital of $50 billion which will be equally contributed by the member countries. China had initially wanted the capital base to be much larger, at least around $200 billion. However, in the face of opposition from others, it had to back down. This presented a point of conflict among the BRICS nations. China having an enormous chest of foreign exchange reserves —running into some $4 trillion — could have easily subscribed to the entire proposed amount without the slightest pinch. For some others, even $10 billion could be a big amount.  As for the currency stabilisation fund, its size of $100 billion is large. But not for meeting potential currency de-stabilisation threats.

The proposed two BRICS institutions, the New Development Bank (NDB) — as it has been christened in the present summit — and the currency fund are simply replicas of old Bretton Woods institutions: the World Bank and the IMF. The ways they are structured and run reflect the global economy as it was after World War II. Why then the duplication? Because — persistent demands for a radical restructuring of these institutions to reflect the importance of new emerging economies have not yielded results. The World Bank continues to be run by the Americans, with an American as its organisational head.  The IMF, on the other hand, is a European fiefdom with almost always a French chief at its helm. 

But despite offering useful alternatives, there are serious limitations for the BRICS institutions as well as BRICS itself.  The economies of BRICS — Brazil, Russia, India, China and South Africa — are as varied as apples and oranges. Their economies are vastly different as their identities are disparate.  These pit their interests against each other, besides making such a collaboration vestigial. 

Take for instance, the stand of the BRICS countries on the last round of WTO negotiations in Bali last December. The draft Bali agreement stipulated a strict time schedule for reducing national farm subsidies and holding of stocks for food security. It was maintained that government stock holding and subsidisation of food amounted to infringing the global trade in farm products. The Bali agreement came just when Indian Parliament had passed the National Food Security Bill, providing subsidised food to ensure adequate food for all. Agreeing to the Bali declaration would have transgressed Indian statute. India had opposed the Bali declaration and wanted exemption from these stringent provisions. The Bali declaration could not be pushed through.

However, on the eve of the Brazil Summit, the Brazilian trade minister told the global media (according to international reports)  that the Bali agreement should be implemented to carry the process of WTO negotiations to the next stage. He mentioned that regardless of India’s objections, the Bali draft should be pursued as this was the first such concrete step after the Doha Round of talks were discontinued eleven years before.  South Africa too concurs with such a view; possibly Russia too. Given the background, India should adopt a flexible strategy towards BRICS, without pinning too much of faith in the alternative structure.