Image by Trenchfoot via Flickr
By Keith B. Richburg, Thursday, April 14, 2:20 PM
BOAO, CHINA — With the United States and Europe still reeling from the 2008 financial crisis, five disparate developing countries led by China — large, populous, with growing economies — are using their combined clout to demand a larger voice and to upend the world’s traditional councils of power.
Brazil, Russia, India, China and newcomer South Africa, collectively known by the acronym BRICS, used their third summit meeting here on this southern Chinese resort island to call for a restructuring of the World War II-era global financial system and an eventual end to the long reign of the U.S. dollar as the world’s reserve currency.
The five run the gamut politically, from vibrant democracies to authoritarian regimes. Economically, they are as much competitors as partners. But what they share is a common sense of exclusion, and the idea that the main institutions of global governance — the World Bank, the International Monetary Fund, the World Trade Organization and the U.N. Security Council — were formed in a different era when the countries were economically weak and the United States was the world’s dominant superpower.
“They were really the biggest countries kind of left out,” said Amar Bhattacharya, a former World Bank official who now runs the Washington-based Group of 24 forum of developing countries.
The Obama administration came to office trying to engage China to become a “responsible stakeholder” in the established global order. But China, now with the backing of the other BRICS countries in a forum that it dominates by virtue of its size, has argued that the existing order is unfair and needs reshaping.
“The governing structure of the international financial institutions should reflect the changes in the world economy, increasing the voice and representation of emerging economies and developing countries,” the group’s final statement said.
Of the United Nations, it said, “We reaffirm the need for a comprehensive reform of the U.N., including its Security Council, with a view to making it more effective, efficient and representative.” It added, “China and Russia reiterate the importance they attach to the status of India, Brazil and South Africa in international affairs, and understand and support their aspiration to play a greater role in the U.N.”
The countries called for “a broad-based international reserve currency system providing stability and certainty,” a slap at the U.S. dollar and Washington’s monetary policy, which they think has allowed the dollar to depreciate.
The statement, more strongly worded and specific than one expressing similar sentiments at the group’s 2009 summit, said these emerging-market countries should have more of a say in how the world’s financial system is run, including which currencies should be in the emergency “basket” of drawing rights managed by the IMF.
In one of the first concrete steps, the five leaders agreed to have their development banks provide credit to one another, denominated in their local currencies and not, as is typical, in U.S. dollars.
And in an attempt to find some political common ground for the disparate group, the five leaders said they were “deeply concerned” about the turmoil in the Middle East and North Africa and urged all parties to “resolve their differences through peaceful means and dialogue.”
Without specifically referring to the NATO-led airstrikes against the forces of Libyan leader Moammar Gaddafi, they said, “The use of force should be avoided.”
South Africa, the smallest of the countries, became a newly minted BRICS member this year. Meeting at the summit are Brazilian President Dilma Rousseff, Russian President Dmitry Medvedev, Indian Prime Minister Manmohan Singh, Chinese President Hu Jintao, who is the host, and South African President Jacob Zuma.
In a small irony for some, the term BRIC was coined in 2001 by a British economist for Goldman Sachs, mainly as a shorthand way to refer to the four countries that were far too large and advanced to be considered in the same league as, say, Zambia but were not quite wealthy enough to qualify for rich-world status.
The BRICS economies together are worth about $12 trillion, compared with $15 trillion for the U.S. economy. By 2020, their economies should pass that of the United States, economists say.
But the real story is their growth rates. While the United States and Europe are still shaking off the effects of the economic crisis and dealing with mounting debt, China is expected to grow by 9.5 percent a year for the next five years and India is expected to grow at more than 8 percent a year. Russia and Brazil each are expected to see growth of more than 4 percent.
With these emerging economies now seen as the engine for global growth, their leaders are demanding a greater voice on the world stage — even though they are hugely divergent countries with different political and economic systems. The five countries are just as often competing as cooperating.
Brazil and India are concerned that China’s undervalued currency is hurting their exports. And while Russia, a huge commodity exporter, is benefiting from soaring prices for oil and commodities, China, a major importer, is sharply criticizing those price rises.
“The member countries have starkly different economic interests,” said Phil Levy, resident scholar at the American Enterprise Institute, “and are unlikely to function effectively as an economic bloc.”
This is not the first time China has challenged the existing system, which it thinks is dominated by the United States. In January, in written answers to questions from The Washington Post, Hu called the world currency system a “product of the past.” China has begun moves to boost the use of its currency, the renminbi, in trade and investment. Yet the renminbi is still not a convertible currency.
The BRICS forum gives China a new international vehicle to push its agenda. “The economic size of BRICS countries accounts for about 18 percent of world GDP,” said Jin Canrong, a professor of international studies at Beijing’s Renmin University. “But these countries are not the decision makers in the international economic system. They are only the athletes. The Western countries are the rulemakers and judges. Right now, the BRICS countries want to join the judging committee, too.”
Yao Zhizhong, a researcher with the Chinese Academy of Social Sciences, agreed: “Times have changed. In the past, the developed economies manipulated the world economic system. But right now, they are no longer able to dominate the world economy. With the growth of their economic size, the emerging economies want to join the decision-making process and have their voices heard in the international economic governing system.”
Hu may have found an unlikely ally from outside the BRICS format: French President Nicolas Sarkozy, who holds the chairmanship of the Group of 20 wealthy and developing nations. Sarkozy has similarly called for a change to the global monetary order and an end to the dollar as the “sole” reserve currency.
richburgk@washpost.com
Researcher Zhang Jie in Beijing contributed to this report.
No comments:
Post a Comment