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September 03, 2012, Monday

BRICS a challenge to the supremacy of the West

Last Friday I participated in a seminar in Poitiers, France, that was organized by the Fondation Prospective et Innovation, a think tank founded in 1989 by Rene Manory, a former president of the senate, and François Dalle, president of L'Oreal. The title of the seminar was very intriguing: “China and the BRICS: What common fate?” A number of French parliamentarians, academics and private sector managers as well as diplomats from China and Russia also attended. The vice president of the influential Chinese People's Institute of Foreign Affairs, Ambassador Cheng Tao, and the councilor of President Vladimir Putin for G-8 and BRICS, Ambassador Vadim Lukov, made interesting contributions during the seminar. Former French Prime Minister Jean-Pierre Raffarin moderated the various round-table discussions.

I was invited to this annual seminar, at each of which a different theme is discussed, this time China, to talk about the Turkish economy. Arriving in Poitiers, I learned that this was the first time Turkey had been included in the seminar because, as a powerful emerging country, it was considered worth learning more about.

The name BRICS -- referring to Brazil, Russia, India, China and South Africa -- was coined by Goldman Sachs economists to group together markets offering speculative profits -- places “to direct the hot money,” as it was put by Ambassador Lukov. As Lukov explained it, Putin took the initiative in 2006 to bring together the BRICS countries with the aim of establishing a formal organization. The BRICS leaders meet at regular summits and, within the last few years, working committees on finance, trade and agriculture have been established.

Lukov defined the founding principles of the BRICS as a desire to reform the architecture of the world economy, including the international monetary system; the defense of international law, particularly the principles of noninterference in domestic affairs and the nonuse of armed forces; and, finally, to collaborate in facing the economic and social challenges of modernization.

For Ambassador Cheng Tao, BRICS brings an end to Western supremacy and balances out the world hierarchy. Responding to remarks made by Raffarin at an informal dinner debate on Thursday evening that the West is profoundly worried because of the pitiful state of the European economy, he said that while the questioning of the international system brought by BRICS may seem like a threat, fair cooperation can allay their worries. Raffarin, in his opening speech, recalled the troubled past of the BRICS countries but said, “Now we are in the quest for money with them.”

Indeed, in the past decade the international scene has been an arena of profound upheaval. At the beginning of the seminar, the chief economist of Credit Agricole, the largest French bank, gave the basic figures on this upheaval. In 2000, two-thirds of the world's wealth belonged to the G-7 countries, while in 2011 they had less than half of it. Nowadays, the BRICS countries contribute to a third of the world's gross domestic product (GDP) and, by the end of the next decade, are likely to have the biggest share as they continue to grow much more rapidly than the developed countries.

For France, and more generally for the West, the growth potential of the BRICS countries is a sign of hope as they try painfully to get out of the recession. However, recovering from the recession requires increased exports to the BRICS countries. At this point, eyes of course turn to the Chinese. For years, China has insistently been asked -- mainly by the United States -- to shift its export-led growth, which causes an enormous trade surplus, to more balanced growth. To do this, it would need to boost its domestic demand and allow the renminbi -- the Chinese currency, which is considered heavily undervalued -- to be revalued. Cheng Tao did not respond directly to this request. Nevertheless, the good news is that he said the average wage in China will catch up with that of Mexico by 2015 and Chinese investments abroad are rapidly growing, in natural resources and particularly in manufacturing.

The key word at this seminar, I think, was “interdependency.” It was first uttered by Bertrand Badie, a professor at the Institute of Political Studies, who pointed out that China has no interest in pushing the US to bankruptcy as huge Chinese reserves would lose their value and the primary market for Chinese exports would fall into recession.  According to Badie, this interdependency has replaced the competition between world powers and now a new form of governance in the international political system needs to be found. One of the critical steps in this could be the entry of India and Brazil to the UN Security Council. While the French representatives at the seminar said they are warm to this idea, the Chinese and Russians did not react at all. As was pointed out at the seminar by many academics, the BRICS countries are not fully isolated from internal conflicts. I have no place enumerating them all.

However, the BRICS countries have clearly already become an appealing entity and, according to Lukov, they do not want for candidates for membership. When Raffarin asked him if membership in the BRICS countries will grow in the future, the Russian ambassador indicated this will be possible after a three to four year period of consolidation. He added that potential members will not be made to wait 13 years as Russia did when it asked to be member of the G-7.

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