India-Brazil-South
Africa: The Southern Trade Powerhouse
Makes its Debut
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New
alliance of regional giants slowly gains strength
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India,
Brazil, and South Africa (IBSA) spearheads
south-south co-operation
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IBSA
presses issues of poor nations’ development in
WTO and UN debates
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Economic
cooperation remains the largest challenge
- Only
another elite debating society?
In the face of mounting pressures to develop an
alternative option to globalization—one that emerges
from a developing world perspective and prioritizes
egalitarian advancement, technological cooperation,
and an end to global marginalization of the poor
nations—there has been a new push to redefine
political and economic arrangements springing from
Bretton Woods. One component of these many recent
initiatives is the idea of south-south cooperation.
This southern perspective, while not a new concept,
has by no means even been partially realized.
The fostering of transatlantic links between South
Africa and Latin America began in the post apartheid
period with the creation of the Zone of Peace and
Cooperation in the South Atlantic (ZPCSA) in 1986, and
recently, steps have been taken to vitalize this
incipient southern alliance. The foundation for this
was set when the leaders of three regional goliaths,
India’s Vajpayee, Brazil’s Lula, and South
Africa’s Mbeki spearheaded a new approach to
south-south cooperation at the 2003 UN General
Assembly Forum, resulting in a trilateral
India-Brazil-South Africa agreement.
These countries have initiated a dialogue based on
mutual enrichment for the developing world, and are
increasingly prioritizing the entrance of developing
countries into the competitive world market through
loosening their bonds with the U.S. and other rich
nations, while forging stronger ties amongst
themselves. Yet, IBSA is still merely an infant body
that has yet to even fully tally up its objectives.
Although, politically it boasts the outline of a bold
international stance, IBSA’s future viability relies
on its reaching beyond moral and symbolic congruencies
to enter into bold trade and technological cooperation
ventures among themselves and other developing
societies.
Conceptualizing IBSA
A trilateral agreement seems like a logical step for
countries that are preparing to go beyond merely
committing themselves to amplifying their emotional,
political and historical relations. South Africa and
Brazil had shared similar histories of racial tension,
inherent inequality, and abnormally high Gini indexes
(Brazil is currently sitting at 59.7 [2004 est.] and
South Africa at 59.3 [1995 est.], based on a scale
from 1 to 100, with 100 marking the most economically
unequal society). South African and Indian relations
date back at least to Mahatma Ghandi’s work for the
rights of indentured Indian laborers sent to South
Africa a century ago, India’s support of South
Africa’s long struggle against apartheid, and the
development of the Indian National Congress, with its
important solidarity links to the African National
Congress (the dominant South African party today).
Furthermore, an existing bilateral preferential trade
agreement between the South African Community (SACU)
and South America’s MERCOSUR (which is now being
expanded to encompass liaison connections between
India and MERCOSUR), along with a strong legacy of
trade between South Africa and India, make for an
increasingly important partnership.
IBSA as a Political Cause
The initial purpose of IBSA was to create a loose
alliance that could present a cohesive voice at the
bargaining sessions anticipated for the Doha Rounds,
and which would exert pressure on the rich nations in
order to achieve common positions in UN Security
Council deliberations. IBSA has further amplified its
presence in an annual dialogue involving the foreign
ministers of India, Brazil, and South Africa to
discuss the development issues and the possibility of
joint approaches in dealing with the Eight Millennium
Development Goals, which the IBSA members actively
support.
The foreign ministers of India, Brazil, and South
Africa attended the first IBSA Dialogue Forum, held in
New Delhi on March 4 and 5 of 2004. Issues addressed
included social development, disarmament,
infrastructure, health care, sustainable economic
development, and poverty alleviation. The ministers
supported the integration of bilateral preferential
trade agreements among the three members into one
trilateral agreement, stressing the goal of mobilizing
multilateral processes in the globalizing world that
could be seen as sympathetic to the south.
The second IBSA Dialogue Forum, held in Cape Town on
March 10 to 11 of 2005, reaffirmed the issues
presented in the first dialogue and focused on
IBSA’s potential influence on the global political
and economic scene. At Cape Town, the ministers
discussed the need for UN reform, equitable WTO
treatment of developing nations, south-south political
cooperation, development, and economic integration.
Environmental issues such as sustainable development
and mobilizing an integrated response to issues such
as climate change were revisited, as were geopolitical
factors such as the non-proliferation of weapons of
mass destruction and terrorism. Poverty alleviation
also remained of great concern for the ministers, who
pledged to donate modest contributions to the IBSA
development fund to support projects aimed at
improving living standards. And while the financial
heft of this fund remains relatively inconsequential,
its symbolic meaning, following the trend of IBSA
itself, is quite substantial. The third meeting was
scheduled for this month, and its outcome will
hopefully give a clearer indication of the
organization’s future path.
Since its inception in 2003, IBSA has progressed from
a loose partnership constructed mainly to address
political issues in macro terms, to a functioning
alliance that seeks to discuss and resolve specific
worldwide questions prevalent among developing
countries. These include the growth of democracy,
disarmament, environmental sustainability, and
maritime ties that have emerged as some of the
principle agenda items for discussion among the three
nations. Garth le Pere, Director of the Institute for
Global Dialogue, and Lyal White, Latin American
researcher at the South African Institute for
International Affairs (SAIIA), claim that the
“common challenges of poverty alleviation, economic
development and social equity” hold the coalition
together. In fact, soon after its inception, IBSA
partnered with the UNDP to develop a trust fund to
financially back the goal of worldwide poverty
alleviation. Meanwhile, we are witnessing the slow but
very important institutionalization of that body.
IBSA’s three members are universally seen as being
the principle powers in their respective parts of the
world and are, therefore, in a position to comprehend
their weaker neighbors’ needs in current trade
deliberations. Although IBSA’s goals are similar to
those of organizations like the G20 and G77, it has
the potential to act more effectively, as decisions
will be debated among three countries, rather than
twenty, or even seventy. In an interview with COHA,
Derek Moyo, Deputy Chief of Mission at South
Africa’s Washington DC embassy, stressed that IBSA
is a much more efficient body than larger forums, and
may have a greater capability to impact the UN
Security Council by playing a balancing role against
that body’s five permanent members—the U.S.,
China, France, the Russian Federation, and the U.K.
Barriers to a Single Market
IBSA, as a unifying factor in the international
community, has performed well in the political arena,
effectively negotiating at various trade summits.
However, the trilateral agreement has yet to achieve
critical mass in the institutionalization process.
While IBSA possesses substantial symbolic heft, more
concrete achievements must be made in its future.
Although India, Brazil, and South Africa share
bilateral trade agreements amongst themselves, binding
trilateral free trade arrangements between the
countries are not an option at the present time
because of previously signed multinational agreements
involving their neighboring nations. Organizations
such as SACU and MERCOSUR prohibit individual members
from forming a free trade agreement with any outside
nation without extending the newly expanded free trade
area and its benefits to other existing members.
Existing restrictions on imports and tariffs are quite
high; for example, Brazil imposes a flat 60 percent
tax on all manufactured imports. Additionally,
Argentina, a MERCOSUR partner, is apprehensive of
South Africa’s wine industry flooding the South
American market. In Moyo’s opinion, opening up trade
within IBSA would be beneficial overall, but would
require a long and intricate process of targeted
negotiations to reassure the security of existing
business interests within each nation. If, in the
future, the IBSA countries decide to create a
broadened free trade agreement, it may come to
fruition in the form of a multilateral SACU, MERCOSUR,
and ASEAN agreement. According to the SAIIA, IBSA
encompasses a total population of 1.3 billion people
and an economy of $1.26 trillion. The above numbers
would be only a fraction of the potential combined
population and economy that would come into existence
if current regional blocs were incorporated into one
gigantic grouping. However, at this time, the
foundations for such a move are shaky at best, and it
appears unlikely that a larger south-south alliance
will be permitted to emerge at this point.
Impediments to Bloc Building
There have been no trilateral free, or even
preferential, trade ties among the three members. In
fact, South Africa’s trade with Brazil comprises
only 2 percent of its total foreign trade. One
research institute from each country—the SAIIA, the
Indian Consumer Unity and Trust Society (CUTS), and
the Brazilian Institute for International Trade—have
been entrusted with the responsibility of conducting
research and compiling reports for their upcoming
summit addressing the benefits and repercussions
associated with openly linking the members’
economies into a single market. This project has
included a survey of public and private sector
responses to a possible trade pact. Some claim that
there is a lack of communication between public and
private sectors with respect to IBSA’s ability to
significantly affect the current markets. Moyo
explains that, when discussing a trade arrangement,
there are always certain sectors that will protest
relaxed trade barriers for self-serving reasons. For
IBSA to expand into complex trade relationships,
business sectors located in the three countries will
have to be prepared to cooperate with each other in
creating rationalized trade arrangements that could
prove mutually beneficial.
Furthermore, South Africa significantly trails the
other two countries in exports, especially those
relating to value-added commodities. In fact, export
flows from MERCOSUR to South Africa are five times
larger than the reverse, and, specifically with
Brazil, South Africa’s trade is at a disadvantage of
one to four. Although South Africa’s per capita
income tops India’s and Brazil’s, its economy is
less than one-third the size of other two.
Additionally, South Africa’s total trade at $70
billion is around $60 billion less than either
India’s or Brazil’s. Moreover, South Africa faces
other trade disadvantages with both of its partners,
from an economic as well as an efficiency standpoint.
However, Moyo claims that opening the borders of the
three countries will help South Africa to catch up in
its manufacturing sector. He acknowledges that
“their export packages have more manufactured goods
than ours...and ours is still predominantly made of
minerals...[but] it is that dynamic that we want to
change...because it’s companies that do business,
not governments.” Some international business
specialists maintain that South Africa has the
greatest potential to benefit from the export of its
agricultural products, auto parts, and chemicals. But
as of yet, IBSA’s economic components have been
built on existing bilateral agreements some at the
encouragement of the three countries’ business
sectors, which have met such integration prospects
with enthusiasm.
Current Initiatives
While a preferential trade pact in the near future is
still far from certain, IBSA nevertheless has made
strides elsewhere. In the tourism industry, many are
seeing the idea of IBSA’s existence as providing a
compelling opportunity and a strong selling point.
According to Nalini Gupta, head of the South African
Airlines (SAA) branch in India, regional airlines are
looking into tri-destination travel packages, and SAA
is already expanding its flights among the three
nations.
At the beginning of March, IBSA agreed to forge
cooperation in the agricultural sectors and
technology. The Indian daily, New Kerala,
states that the two-day trilateral discussions held
last month produced an agreement to work collectively
on agricultural issues such as “germplasm exchange
and enhancement; research and technology including
plant breeding for sustainable food production;
nutritional and environmental security; use of
frontier technologies for livestock and poultry health
management, and breeding quality improvement;
efficient management of natural resources; technology
transfer-capacity and competence building; fish
augmentation of productivity and value addition
through processing and small farm mechanization and
agro processing tools and techniques.” At the
meeting, a draft of an official agricultural
cooperative agreement was circulated and will be voted
upon by the three governments in this month’s annual
IBSA summit.
Agriculture
has always been a sore subject for developing
countries, mainly because of Washington’s insistence
on maintaining its federal subsidy program. Developing
countries have suffered an estimated $100 billion in
annual loses due to limited sales resulting from the
developed countries’ agriculture subsidy programs.
IBSA has helped to lead the fight against such
inequalities, taking strong stances over the issue at
WTO meetings. In negotiations last October, the U.S.
for the first time, agreed to consider lowering its
agricultural subsidies after years of pushing the EU
to lower theirs. At an IBSA colloquium on October
2005, Satyabrata Pal, India’s High Commissioner to
the organization, expressed IBSA’s potential ability
to influence the path of the Doha Round. He claimed
that “we were able to make [a] common cause in the
Doha Round of WTO talks, and that made it impossible
for the EU and U.S. to force on the developing world a
deal cobbled together between them.” IBSA, along
with the G4 (comprising India, Brazil, South Africa,
and China) and the G20, has been instrumental in an
effort to develop a “middle ground” on trade
negotiations. And it seems to be determined to
continue along this path, as demonstrated by Minister
of State for External Affairs Anand Sharma’s visit
to Brazil earlier last month to further discuss
proposed UN reforms.
What
does the future hold?
Unique as a transcontinental agreement among several
far-flung members of the developing world appears to
be, IBSA seems to have less common political ground
than your average regional organization. However, the
three countries have linked what they do have in
common, namely socio-economic conditions and political
positions within their respective regions, to promote
their internal strengths. In order to tailor a
mutually beneficial framework, IBSA can be effective
if the organization focuses on commonly held issues
and works to realize goals within spelled-out
categories. IBSA has been, and will likely continue to
be, an increasingly successful political format
representing the interests of these three emerging
regional behemoths with worldwide responsibilities.
Satyabrata
Pal admonishes his listeners that IBSA should not be
merely another “diplomatic debating society.”
However, its expansion into being a transcending
factor in global trade seems to be some distance off,
as a preferential trade agreement will have to be
negotiated, not just between the IBSA countries, but
among their likeminded counterparts in other free
trade relationships as well. Overall, IBSA has yet to
discover its final identity, and this disclosure will
go a long way to determine the future viability of
global-south synergy as embodied in IBSA. Yet, the
headway that these countries are making is quite
impressive. By tapping into interdependency among the
most capable states to be found in three southern
geographic areas, IBSA is helping to lead relations
between the new organization and other developing
countries to be found within their respective
geographical regions, while working to solve a variety
of ills and socio-economic problems plaguing both
their immediate and more distant neighbors.
This
analysis was prepared by COHA Research Associate
Kaia Lai
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