BRICS Trade Ministers Look to Closer Economic Ties, Issue Support for Multilateralism

12 July 2018

Last week, delegates and trade ministers from BRICS economies met in Magaliesburg, South Africa to discuss ways to strengthen the multilateral trade system and foster closer economic cooperation between BRICS member countries on a range of policy areas, including e-commerce. 

The meeting comes as leaders gear up for the 10th annual BRICS Summit on the theme “BRICS in Africa: Collaboration for Inclusive Growth and Shared Prosperity in the 4th Industrial Revolution,” which will be held in Johannesburg later this month. 

The BRICS are a grouping of major emerging markets comprising Brazil, Russia, India, China, and South Africa, and together account for 22 percent of global GDP. The coalition began including South Africa in its meetings in 2010. 

Systemic issues 

Ministers focused on identifying means to support the multilateral trade system amid mounting global trade tensions. The bloc has been affected by Washington’s decision to implement steel and aluminium tariffs on national security grounds, though Brazil was granted an exemption and instead faces a combination of quotas and tariffs, depending on the sector involved.

China and Russia have already filed WTO disputes on the subject, as have various other WTO members, with Switzerland being the latest to file a request for consultations at the global trade club. (See Bridges Weekly, 5 July 2018)

Furthermore, US tariffs of 25 percent targeting additional Chinese products went into force on Friday, following an investigation into China’s intellectual property practices and alleged forced technology transfers. Beijing applied its own measures on US$34 billion worth of US products the same day. (See Bridges Weekly, 21 June 2018 and related story, this edition)

“We are deeply concerned with the systemic impact of unilateral measures that are incompatible with World Trade Organization (WTO) rules and that put the multilateral trading system at risk,” read the joint communiqué issued following the BRICS meeting. 

The meeting came just as the WTO announced that 39 new trade-restrictive measures were introduced by G20 countries between mid-October 2017 and mid-May 2018, double that of the previous review period. The news has caused trade watchers to ramp up their warnings on the state of global trading system, and the risks it could create for consumers, producers, and the overall frameworks that have governed world trade for decades.

“We meet as trade ministers at a time of great turbulence in the global trading environment,” said South African Minister of Trade and Industry Rob Davies, who chaired the meeting. “We are seeing disruptive and destructive behaviour by the current leadership of the world’s largest economy.”

“We need to position the BRICS partnership differently and ensure that it contributes to inclusive growth and that development is at the centre of everything that we do in order to change the world,” said South African Small Business Development Minister Lindiwe Zulu, according to SA News. South Africa currently holds the rotating presidency of the BRICS.

Chinese Assistant Minister of Commerce Li Chenggang urged the BRICS to continue to lead economic globalisation efforts and lend their backing to the multilateral trading system, according to a press relese issued by the Chinese Ministry of Commerce (MOFCOM).

“We reaffirm the centrality of the rules-based transparent, non-discriminatory, open and inclusive multilateral trading system (MTS), as embodied in the WTO,” ministers said in the communiqué, pledging to “make all efforts to strengthen the multilateral trading system and make the WTO more responsive to the needs of its members.”

Ministers also underline the role of trade in supporting development, noting that the development dimension must remain a central component of WTO’s work. The coalition has made similar comments in the past, both in the BRICS formation as well as at the WTO in their individual capacities or as part of other negotiating groups.

“The BRICS Trade Ministers emphasise the need for inclusive growth and global trade rules that facilitate the effective participation of all countries in the multilateral trading system,” according to the BRICS Statement of Support for an Inclusive Multilateral Trading System, issued as an annex after the meeting, along with the communiqué.

The statement highlights the importance of special and differential treatment; capacity building efforts, including via the WTO’s Aid for Trade Initiative; and preservation of policy space for developing members to pursue their development objectives. It also emphasises food security and the need for agricultural reform as a priority area.

Deepening intra-BRICS economic cooperation, including on e-commerce

Ministers discussed pathways to improved cooperation in the bloc across a range of areas, including trade facilitation, investment, trade in services, e-commerce, intellectual property rights, trade promotion, and small and medium-sized enterprises (SMEs).

The grouping pledged to enhance cooperation on e-commerce, underlining “the need to address the digital divide.” E-commerce proved to be a key component of the meeting’s deliverables, with ministers endorsing a non-binding Cooperation Framework on Inclusive E-Commerce Development, aiming to exchange experiences as well as lessons learned in “promoting development through e-commerce.”

They also pledged to examine possible policy tools to harness and control “the potentially disruptive effects of e-commerce.”

Other elements of the framework include developing a better understanding of e-commerce in cooperation with international organisations; developing ICT infrastructure with a view to enhanced connectivity; and sharing experiences with regard to regulating data flows.

The discussions built on previous progress in BRICS cooperation on e-commerce, including the endorsement in 2015 of the Framework for BRICS E-Commerce Cooperation and the BRICS E-Commerce Cooperation Initiative in 2017, followed by the establishment of the BRICS E-Commerce Working Group.

According to a 2017 report from the International Trade Centre (ITC), a joint UN-WTO agency, and the UN Industrial Development Organization (UNIDO), BRICS countries are seeing e-commerce play an increasing role in their overall economies, though the report also notes differences in the volume of e-commerce sales across the group.

“The analysis of the BRICS e-commerce ecosystem indicates that certain challenges are common to all BRICS countries. This includes bureaucratic procedures, unfavourable tax regimes, underdeveloped delivery infrastructure, a lack of e-commerce skills in SMEs, hindering their ability to compete with larger companies, and adequate mechanisms for ensuring privacy and security of data,” the report says, while noting that each country also has individual circumstances to deal with.

BRICS trade ministers last week also pledged to strengthen collaboration on trade in services, given that BRICS members made up only 12.1 percent of global trade in services in 2016. The BRICS agreed to enhance information sharing and communication across organisations charged with gathering trade in services statistics, and thus get a better sense of the current situation.

BRICS countries further agreed to work together to support micro, small, and medium enterprises (MSMEs) in the economy, urging information sharing on regulating MSMEs, and facilitating their access to finance and public services as part of the BRICS MSME Cooperation Framework.

Ministers encouraged cooperation on trade facilitating measures aimed at increasing intra-BRICS trade, including through endorsing the Working Mechanism on technical regulations, standards, methodology, and conformity assessment procedures.

They also endorsed the terms of reference for a review of the BRICS 2013/14 joint trade study aimed at identifying opportunities to promote trade in value-added products between BRICS.

“The BRICS cooperation is at a key stage of development at present,” read the MOFCOM press release, encouraging members to explore new modes of collaboration to capitalise on the opportunities of the digital economy and contribute to the BRICS’ shared interests.

For its part, “China will continue to relax market access by a large margin, strengthen intellectual property rights protection, actively expand imports, and create an easy and orderly investment environment for entrepreneurs across the world including the BRICS countries,” according to the same press release.

ICTSD reporting; “BRICS ministers welcome South Africa as Chair,” BUSINESS REPORT, 5 June 2018; “BRICS commit to multilateralism,” SA NEWS, 5 July 2018; “BRICS trade ministers discuss protectionism, tariffs in South Africa,” CGTN Africa, 5 July 2018.

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