April 17, 2011

Debut at BRICS summit

The Informal trade co-operation group of Brazil, Russia, India, China and South Africa will form a liaison group to increase co-operation to address currency, development and trade concerns. One issue that will be explored is the development of a mechanism for a settlement of trade without using a convertible currency. How this would be achieved is not yet clear as Trade and Industry Minister Rob Davies acknowledged that China had an ambition to use its currency, the renminbi, to become a reserve currency such as the euro and the dollar. After his return to South Africa, Davies said the countries had issued a joint declaration that articulated their position and what they had in common.

Known as the Sanya declaration, it expressed concern about the over-appreciation of currencies, which Davis said had been driven by loose policy by developed countries. "This overvaluation of currencies stems from loose currency policies that have lowered interest rates in developed countries, causing short-term capital flows," Davies said. "This was a result of, what it seems, their only response to stimulating their economies." Davies said that a study on how Brazil, Russia, India and China could improve their co-operation in trade and in multilateral organisation in general, such as climate change and International Monetary Fund reform, had begun, but it would now have to include South Africa. "Part of this study is how we can become more effective as leading developing countries to represent the other developing countries in the international arena," Davis said. "This study is part of our ability and the kind of programmes we develop among ourselves, which is a real alternative to what we are confronting in the multilateral system."

However, opinion on how South Africa – and by extension Africa – will benefit from BRICS membership is divided. “BRIC started as an economic countervailing bloc and now there is even talk it will develop key political and economic strategies,” said Chris Landsberg, professor of international relations at the University of Johannesburg. According to him it was still early days to assess what the tangible benefits of membership would be for South Africa. “We are the new cheerleader in the club and we need to be cautious about not getting too excited too quickly,” emphasised Lebohang Pheko, policy and advocacy director of the Johannesburg-based Trade Collective. “I am in two minds. I am not sure how South Africa or Africa would be benefitting from entry to BRIC.” She also stressed that she did not see any benefits for the poor or the vulnerable in low-income trading partners of the BRICS members, or even in South Africa itself. In order to illustrate this, she took the example of the impact of trade with China on the country’s textile industry “Look at our interaction with the Chinese market. They have managed to penetrate and dump their cheap, low quality textiles and goods not only in South Africa but the rest of Africa.” (sadocc/IPS)

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