BRICS: August 2023

Or should it now be BRICSAEEISAUAE??

[In early June I posted a short piece on the possible expansion of the BRICS nations. On 23^rd August, this became a reality.]

The BRICS group of nations (Brazil, Russia, India, China, and South Africa) have announced a growth of the bloc to include six new members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. The new members will formally join in January 2024.

This group of ‘emerging economies’ has been described as a counterbalance to the Western economic and political dominance that currently exists, and to bring greater relevance to the concerns of the ‘Global South’.

China has boosted the standing of this informal group and propelled its collective share of global GDP to a level that could soon rival that of the Group of Seven – made up of the more advanced economies of Canada, France, Germany, Italy, Japan, the UK, and the USA. It is predicted that the BRICS’ share of global GDP will increase to more than 44% by 2040, compared with 35% in 2022. The G7’s share will reduce to just 21% (from 30% in 2022). (Figure 1).

Figure 1. Relative share of global GDP by economic grouping (1980-2050)

[BRICS-Plus is the name given to the expanded grouping]

Source: Bloomberg Economics

What would an alternative BRICS-led model of economic GDP growth look like? We should anticipate a different era of decision-making where government intervention plays a more direct role in global trade flows. A recent report from the University of St. Gallen in Switzerland identified three areas where the BRICS differentiate themselves from other economies: subsidies, market access barriers and export restrictions:

·         the BRICS make heavy use of subsidies and offer state funds to local companies much more openly than the rest of the world.

·         BRICS rely on export bans less than other nations and prefer more opaque licensing restrictions and export taxes. In addition, BRICS nations make less use of barriers to trade – e.g. increased import tariffs, quotas - than other countries.

·         tax-based export incentives remain a distinctive feature of BRICS policy.

Politically, when the six new countries join the bloc in January, it will have six democracies, two authoritarian states, two autocratic monarchies and a theocracy. What could possibly go wrong?