Home|[in] focus|BRICS Plus in Prime Position for a New Trading System as WTO Multilateralism Falters
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by Ashraf Patel

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Categories: [in] focus

by Ashraf Patel

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  1. The Globalisation consensus is in crisis.

As the World Trade Organization (WTO) concluded its 13th Ministerial Conference (MC) in Abu Dhabi, there has been little agreement on the development agenda and discussions reviving its apex Appellate body have been blocked by the US. As the WTO system faces multiple disagreements, the ‘Plurilateral model’ has little scope for actual trade agreements.

Already the much-touted investment agreement and climate -trade frameworks are fluttering at the WTO. In addition, major disagreements on the E-Commerce treaty, so crucial for national data economies and Micro, Small, and Medium and Enterprises (MSMEs) of the global South have stalled.   The Covid vaccine nationalism experience and lack of any promised commitment to IP access for medicines is another scar on the Global South at the WTO.

The inability to deal with trade disputes as well as marginalisation of the Development Agenda of the Global South and the rules-based trade order in line with the Marrakesh treaty, there is a new void in global trade governance. Further challenges in the post COVID world such as the supply chain constraints and wars leading to food and fuel inflation has opened a pandoras box in the global political-economy.

Trade and climate policy fragmentation are resulting from uncoordinated national carbon markets, unilateral environmental standards enforced at the border, and green industrial subsidy races. These risk reducing the climate and economic benefits from trade, while making effective climate policies unnecessarily costly and reinforcing international economic inequities. Nations of the global South decry this new form of ‘green colonialism’ whereby the climate change agenda is misused by powerful Northern nations to raise tariffs and increase their own state directed industrial policies, while at the same time making it mandatory through donor programs to push developing nations to stop investments in coal, oil and gas.

The very foundational values of the UN Climate Change CoPs Common and Differentiated Treatment is being eroded in these ‘new green issues’ at the WTO and hence the growing opposition.

  1. Towards a BRICS Trading and Commodity system model

In a rapidly eroding WTO global trading system, BRICS Plus nations are thus in prime position to build a new trading and commodity architecture – one based on equity and common development pathways.

BRICS nations are already in the prime position in developing new systems of trade, payments and funding models.  The New Development Bank (NDB) is playing a role in development finance and a new BRICS payment system is developing.

 

  1. Possible new contours of a new trading system led by BRICS Plus

Local and regional currency trade amidst De-Dollarisation:

Trade and finance – and mode of currency are the soft infrastructures of global trade and relations between nations, in the core and periphery alike. Financialization of global trade and the speculation of commodities (i.e. futures, spot markets etc) has for decades created volatility and major income loss for the global South.

Trading in local and regional currencies as proposed by the BRICS currency initiative shall have the dual benefits of cheaper trade transaction costs, and reduce volatility in commodity markets. Furthermore, the new BRICS Payment system is developing and can be an integral part of the new architecture for such an evolving trading system.

Russia and India are already trading oil and fuel in bilateral currencies, thus reducing volatility, and so is Russia and China.  Brasil and China are also trading agriculture commodities in their respective currencies.

Earlier this month Egypt, a new BRICS member also supporting trading in local currency, indicated through Economic advisor El-Etreby that dealing in national currencies would alleviate the rising costs of using foreign currencies as a result of the high global inflation. The ambassador said he has been directed by the presidency to promote industrial, agricultural and service cooperation between the bloc’s nations. El-Etreby also assumed responsibility as the personal representative of the Egyptian president at the Group of 20 (G20). During the G20 meetings, Egypt will seek to highlight the priority issues in Egypt, Africa, and other developing nations, El-Etreby stated.

“Among these topics will be enhancing food and energy security, developing international debt governance, ensuring international financing for development, and reforming the multilateral financial, monetary, and trade system.”

For Africa such as system would have immense benefits as Sub – Saharan Africa faces multiples headwinds; the  debt repayment crisis, high food and fuel inflation and vulnerabilities  such  as ‘new generation carbon trade barrier frameworks’ in the North   such as the EUs Carbon Border Adjustment Mechanism (CBAM) program and as the USA’s Inflation Reduction Act (IRA) kicks in.

4 Towards a BRICS Agriculture, Fisheries, and Fertilizer club

Agriculture subsidies was a key reason the Doha development round didn’t succeed as powerful Agri industries collapsed talks and refused to acknowledge that their Agriculture subsidy system was a major issue for fair trade.

For India, Indonesia, Nigeria and other large population nations, Agriculture public stocktaking is central to food security and viability for local farmers.  For Russia, hit by sanctions, diamond trade leads to gluts in world markets and price elasticities and income losses and volatility and quality.

Access to Fertiliser and wheat play a key role in food security globally and in Africa, and Russia as lead for BRICS 2024 has already shipped 200 000 tons of grain to Africa, and committed to the provision of wheat and grain to African nations and new agricultural technologies that will ensure food security as part of the broader BRICS Agriculture framework.

  1. Towards a BRICS Mining and Commodity Club

Already the core of OPEC member states Saudi Arabia, Iran, UAE, and Russia are part of BRICS , and the OPEC  model of ‘commodity club’ with its system of trade, price setting and other elements can be expanded to other commodity categories such as wheat, iron ore and diamonds.  In diamonds both South Africa and Russia are major exporters and through trading in BRICS currency can export diamonds to India as a cutting and polishing centre, using a BRICS payment system. Such a system can include a new certification system and go global and reach economies of scale, thus ensuring the value of the commodity is captured in the producing and value adding countries, and avoid external risks (i.e. high marketing costs, sanctions, etc)

Furthermore, the global commodity markets are volatile, and Africa has a huge commodity sector and reserves. As much of Africa and the Global South nations are commodity exporters integrated in the volatile financial circuits of global capital, they are also subject to commodity speculation, and together with high interest on debt repayments that eat into social expenditure.

These Commodity Clubs can mitigate commodity trading speculation risks. In the long term, this model can potentially and gradually replace the WTO model, especially the so called ‘Plurilateral model’   which is a non-committal negotiation regime that plagues the WTO and where powerful nations have asymmetrical power. And man of the BRICS Plus nations have dynamic markets, youthful populations, product, technology, and payment systems to move towards a ‘Cluster of Commodity Clubs’.

=In the post-Cold War era, when the ‘international liberal order ‘emerged victorious and neoliberal globalisation dominated, the formation of the WTO symbolised the globalisation consensus of the era. But it also spurned the global financial crisis of 2008-9 of which the global South is still paying the debts.

BRICS Plus is thus in a unique position as its core members have the populations, technology, currency clout, new institutions and developing world power status in major institutions from G20 to WTO to the UNSC and regional institutions to reshape a new order.

Today this ‘Globalisation consensus is dying’ and a new, more equitable order for the Global South is emerging –   with BRICS Plus as a core anchor, building the new global trade-investment-financial systems and cultural architecture for the 21st century.

 

Mr. Ashraf Patel is the digital data and economy associate at the IGD. His research is also supported by the National Institute for Humanities and Social Sciences (NIHSS) and the South African BRICS Think Tank (SABTT). Mr. Patel’s views do not necessarily reflect those of the IGD

 

This article was first published by Sunday Tribune https://www.pressreader.com/south-africa/sunday-tribune-south-africa/20240310/282093461704950

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