History has shown that there exists a strong correlation between a country’s foreign policy and its economic performance. A successful foreign policy invariably leads to beneficial economic linkages and enhanced financial engagements which put the national economic engine to work making for resource generation and wealth creation. Isolation, on the other hand, can lead to being sidelined and pushed into a vicious cycle where dwindling economic prospects reduce weight age in the comity of nations that in return starts negatively affecting the very foreign policy endeavors crucial to a nation’s interests and its sovereignty. And no better ways to avoid this trap than to pursue what the Chinese refer to as the ‘economic foreign policy’. Meaning, regardless of one’s political, geographical or religious ideologies, engage nations, enter international groupings, join global forums and manage entry into key economic blocs purely on economic grounds. This to not only to remain in sync with the economic success stories of the world but also to give strength to the country’s foreign policy, helping it to become more assertive and self-serving. The coming together of China and India in a grouping such as BRICS may not signal any significant shift in their vexed political equations, but goes down to show how they are putting economic well being before their historic disputes and how by sticking together within the folds of a strong economic group (BRICS) they are able to a assert themselves and exercise independent economic policies to suit their respective national interests cum needs.
The other major initiatives taken at the summit involved signing agreements promoting use of local currencies for extending credit and carrying out increased trade with one another. These measures basically intended to reduce the demand for fully-convertible currencies (Dollar and Euro) from transactions within the group. These five nations together account for over 40 percent of the world population and 22 percent of the global GDP. With economic considerations ruling the roost the BRICS nations have set themselves an egregiously ambitious agenda. BRICS Bank and BRICS Monetary Fund are to rival and take on the World Bank and IMF, respectively, but with of course a narrower focus – lubricating the wheels of finance of this Club of five. Further, as trade within the group grows the dependence on foreign exchange for each one of them reduces since the group members have agreed to pay for imports from each other in respective domestic currencies. For example, India will pay for imports from China in Indian Rupees.
However even in international trade and investments caution must be exercised. Let’s say that Indian imports from China pick-up then going forward accumulation of the Indian rupee by China would impel it to import more from India, i.e. to get rid of its Indian rupee reserves. However, if such a scenario starts to compromise China’s own quest for an export surplus then we could see a turn back to the basics; meaning all five pining again for the traditional hard currencies, the Dollar and the Euro. Further, in international trade the product invariably goes to the highest bidder without any considerations on groupings or blocs. For example, the Russian oil has many takers and it has no reason to please China or India with concessions. Likewise, Brazil too would not like to give away its formidable mineral resources cheap. And it is precisely due to concerns such as these that for the moment at least the BRICS nations are not talking of a common currency and are happy to work as a pressure group, even while seeking to have greater trade and investments with each other, and more importantly to take a united stand where and when necessary in order to keep the ‘bully around the block at bay’!
How one wishes that a P (meaning Pakistan) could also be added to this acronym. Countries cast their lot together into a regional trading bloc if they are contiguous to each other or the other glue that can bind nations is cartelization a la OPEC, the oil producers’ association that ramps up oil prices at will by creating an artificial scarcity. BRICS, perhaps, is the only grouping that defies the conventional rationale for economic togetherness as it depicts itself as a Club that represents not only the economic might of today but also of the future (‘the golden emerging economies of Goldman Sachs’) and thus cannot be ignored or bypassed from the major economic decisions of the world.
South Africa was the last one to be added (originally a group of only four nations BRIC) and it was admitted not because it added nicely to the acronym but because it has displayed an impressive record of growth and shown a vision in its economic management that also holds promise for its future. If population and potential were to be the criteria for admission then we perhaps would be the ideal candidate for the group’s next membership, but if it is the current economic performance and the vision for undertaking futuristic policies that count then sadly we may not even be in the frame!
n The writer is an entrepreneur and economic analyst.