Pivoting without the BRICS?
February 25, 2013, 11:22 am

One of the many neoliberal slogans often heard in the corridors of power of the rich (and very much indebted) industrialised west is the virtue of free trade. The theory of free trade preaches that when all follow the same rules all will later enjoy benefits. Practice, however, is very different. The powerful western economies are selective when it comes to membership in free trade areas and those who benefit the most are those who make the rules. Presumably this is the political calculus behind the proposed free trade zones comprising the US and the EU and Washington’s Trans-Pacific Partnership talks – both enterprises intentionally exclude or target the BRICS.

Backgrounder

On November 12, 2011, the leaders of the nine Trans-Pacific Partnership countries – Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, and the United States – announced the broad outlines of an ambitious, 21st-century Trans-Pacific Partnership (TPP) agreement.

The Trans-Pacific Partnership (TPP) aims to be an ambitious, next-generation, Asia-Pacific trade agreement that reflects US economic priorities and values. The slated aims of this agreement are that through the TPP, the Obama Administration is seeking to boost US economic growth and support the creation and retention of American jobs by increasing exports in the region.

China-led Regional Comprehensive Economic Partnership (RCEP) seeks to link 16 Asia-Pacific countries with the notable absence of the US [Xinhua]

No all-out war

Then there is the issue of serious political realities. American and European publics are in no mood for more integration of anything when the issue of diminished sovereignty is considered. The supporters of this new mega trading zone are prepared for this accusation – it is a card called the BRICS. Tighter economic integrations is not the selling point of a US-EU trading zone; the PR pitch is to counter the economic, financial, and monetary dynamism of the emerging market world. This approach is backward looking and defensive – and is probably doomed to fail as a result.

The idea of the Trans-Pacific Partnership is to overtly counter China’s growing regional economy hegemony and keeping it from going global.

Meanwhile, Japanese prime minister Shinzo Abe and US President Barack Obama confirmed last Friday, that Japan will not have to vow to remove all trade tariffs if it joins the Trans-Pacific Partnership trade initiative, coaxing the country’s early entry into the ongoing talks.

In a very meaningful way the US is creating a red line with the global trading system. China will not let this stand. But what is ahead will not be an all-out trade war embroiling Washington and Beijing. China didn’t become the second largest economy by accident – expect a robust (by Chinese standards) response to Washington.

Again the rhetoric of this “partnership” is free trade. Though it is clear Washington is most interested in corralling its strategic military allies within the Pacific Rim into a trading bloc that is demonstratively at odds with Beijing’s trading interests.

Obama announced US support for a US-EU trade pact during his State of the Nation address [Getty Images]

Washington is pursuing this approach that imperils its own trade and security interests in the region and far beyond. Essentially, Asian trading countries are being asked to choose between a fading economic superpower with entangled alliances all over the world and the “factory of the world.” At this point, it should surprise anyone many Asian countries (even under Washington’s military umbrella) are taking a wait and see approach to the Trans-Pacific Partnership.

Why are the BRICS excluded? The simplest reason is the lack of vision and uncompetitiveness of the industrialised west. Unable or willing to reform at home, Washington and Brussels are looking for ways to recast much of the global trade system to maintain their advantage. However, without the constructive participation of the BRICS and other emerging economies there is little prospect the west will continue to be able to drive global trade flows. The BRICS today have the wealth, consumption power, geopolitical position, expertise and the political will to influence and re-arrange the global system to their net advantage. And there is the obvious unintended consequence: targeted by the US-EU deal and excluded from Trans-Pacific Partnership will only push the BRICS world closer together (and at the expense of the west).

The Washington-Brussels “pivot” on global trade fails to take into account the protectionist nature of trading blocs today and underestimate the power and dynamism of globalisation. The BRICS have learned the hard way. If you join a club in which you can in no meaningful way influence the rules, then you will always be a junior member, essentially a second-class partner. Since global growth continues to be driven by the emerging market world, there is no reason whatsoever for the BRICS to settle for less.