Our Terms & Conditions | Our Privacy Policy
Combined with the fast-paced economic dynamism of the four East Asian tigers, this led the United States in 2011 to a Pivot to Asia and, more broadly, the Asia-Pacific region (APR). This pivot also caused then US Secretary of State Hillary Clinton come up with an idea of reviving the Silk Road from Asia to Europe, with India playing a key role as part of a global infrastructure redevelopment initiative (op. cit.). That same year, at the 13th
UNCTAD General Conference, its Secretary-General delivered a report that strongly criticised neoliberal approaches. The report emphasised that “putting liberalized markets and flexible prices at centre stage has proved to be insufficient in the light of the complex challenges that the new generation of globalization poses” and, therefore, relying exclusively on self-regulating markets is “costly and inefficient” and the separation of financial markets from the real economy led to “rapid debt accumulation and unjustified asset price inflation, outpacing productivity growth.” This dynamic ultimately results in global destabilisation, “and yet, to date, effective rebalancing strategies have not materialized at the multilateral level,” especially given that “neither IMF nor the World Bank… have been able to forge a vision of a postcrisis world economy” (UNCTAD XIII, pp. 6–8). This report was the first one to substantiate at the UN level the need for a constructivist shift from the previous neoliberal model of exclusive development to a new inclusive model advocating the “end of finance-driven globalisation (ibid., p. 4) and the need for development-led globalisation” (ibid., p. 7).
In 2013, Chinese President Xi Jinping announced China’s unilateral Belt and Road infrastructure initiative featuring its own New Silk Road configuration. Most countries around the world consequently joined this project which meant that Beijing had effectively taken the strategic initiative away from the United States. In fact, the BRI signalled the end of the unipolar international order. Considering that the development potential of any economy largely depends on its infrastructure, the practical advancement of the BRI mega-project with the involvement of most countries, primarily in Asia and Europe, laid the foundation for a new global economic infrastructure thus affirming China’s role as a leading international trade centre.
The post-war era with its rapid – by orders of magnitude – growth of a country’s share in international trade which had traditionally driven its socioeconomic development came to an end around the same time as well. However, post-crisis slowdown set in, and between 2012 and 2014, their growth rates almost evened out (WB 2017, p. 37). Consequently, the share of international trade in global GDP which previously grew steadily from 25 percent in 1970 to 50 percent in 2000 began to show negative dynamics, as was the case in 2008 (down 8.5 percent), even though the volume of trade was brought back to its pre-crisis levels at the height of the crisis, and trade levels exceeded 60 percent in 2011.
However, later, in 2012-2016 and during the 2019-2020 pandemic outbreak occasional declines in foreign trade became quite commonplace (WT 2024). This reflected the practical exhaustion of reserves for further growth of the global innovation-driven consumer demand. Traditionally, this composite demand was primarily driven by about a half of the golden billion represented by wealthier individuals from developed economies with annual incomes over $20,000. To address this challenge, the consumer base needed to be expanded by directly or indirectly involving countries with incomes below average, including through e-commerce.
Broadly speaking, there was an objective demand for a new economic growth engine. BRICS+ countries, with their demographic and economic potential, as well as rapidly growing markets, emerged as the most suitable candidates for this role in the 21st century.
By 2014, almost all countries from this group, except Russia, had significantly increased their share of foreign trade compared to 2000. India saw the largest growth (from 26.9 percent to 48.9 percent), followed by China (from 39.3 percent to 44.9 percent), Brazil (21 percent to 24.1 percent), and South Africa (47 percent to 59.6 percent). Russia, however, saw a decrease from its initially high share (65 percent in 2000) to 47.6% (calculated based on WB data from WT2024).
However, due to a relatively low baseline in global trade, high transaction costs, and weak influence of interstate political decisions on practical economic dynamics, a pronounced effect of accelerated growth in foreign trade within BRICS was not observed during this period. Exceptions included China (with an average annual growth rate of export-import flows of 9.85 percent compared to 8.65 percent GDP growth) and Brazil (4.3 percent compared to 3.7 percent).
Meanwhile, the economic dynamics of India (7.9 percent compared to 13.5 percent), Russia (5.9 percent compared to 8 percent), and South Africa (3.2 percent compared to 2.5 percent) had a distinctly different nature. Furthermore, in 2014-2023, only South Africa and Brazil managed to increase the relative share of their foreign trade in their GDP (to 65.1 percent and 33.4 percent, respectively), while the other three countries saw a decline (India to 31.2 percent, China to 37.1 percent, and Russia to 41.6 percent).
Notably, in the global rankings involving this indicator, only South Africa is among the top 100 at the 96th position while the other participating countries are listed in the second and third tiers of the second hundred. For comparison, the leader of this ranking, Luxembourg, has a foreign trade-to-GDP ratio exceeding 394 percent, while in the top 40 developed economies this indicator exceeds 100 percent (EU 2024).
Discussing the locomotive role of international trade in BRICS economic dynamics in the traditional sense is not an option in these circumstances. However, the situation will change dramatically if we focus on e-commerce and analyse the evolutionary growth dynamics of BRICS countries in the sphere of exchange of intermediate goods (GVC-related trade) within the framework of international innovation-industrial cooperation and the resulting Global Value Chains (GVCs).
As shown by our estimates based on WITS 2024 data, BRICS countries demonstrate, albeit at different speeds, accelerated growth in international trade. For instance, in 2000, China’s cooperative trade volumes were nearly four times (3.8) smaller than Germany’s and five times smaller than those of the United States. However, due to a relative strengthening of its position during the global financial and economic crisis, China narrowed this gap to 1.6 and 1.3 times in 2009, respectively. In 2019, it caught up with Germany and in 2020 the United States.
By 2022, China’s economy had surpassed Germany’s economy by 15 percent and that of the United States by 10 percent, and assumed global leadership as one of the three world GVC hubs. China outperformed Russia in cooperative trade by 2.4 times in 2000, tripled the gap in 2009, and further expanded it to 5.7 times by 2022. With regard to other partner countries, during the 2000-2007 pre-crisis period, India made the most progress by increasing its cooperative trade volume by 4.2 times compared to China’s 3.1 times, Brazil’s 2.3 times, and Russia’s 1.3 times. Overall, from 2008 to 2022, China increased its GVC-related trade volume by 6.2 times compared to Russia’s 4.7 times, India’s 4.2 times, and Brazil’s 3.0 times.
With recent research indicating that in this day and age the key drivers of a country’s internal economic growth are not the overall volumes of traditional foreign trade, but rather e-commerce and international cooperation (see, e.g., Borin, Mancini, and Taglioni 2021), the 2024 BRICS Kazan Summit decisions related to international trade should be examined in this particular context. These decisions are as follows:
1. Ensuring security of supply chains and integral GVCs within the BRICS+ shared space (Paragraph 70 of the Declaration) which will minimise potential damage from unilateral sanctions that run counter to the WTO principles. Achieving this will require the appropriate institutional and infrastructural development of a shared economic space and aligning it with the institutional and regulatory frameworks of each partner country. As a result, transaction costs and investment risks for businesses and trade will decrease.
2. Protection and effective management of shared databases (Paragraph 71). This is a key requirement for developing post-industrial shared infrastructure, including the security and protection of the entire information and communication chain, starting with the production of an element base.
3. Comprehensive development and security of e-commerce (Paragraph 72). E-commerce significantly enhances the information and communication accessibility of goods and services while minimising associated transaction costs. It allows not only for a substantial expansion of the BRICS+ consumer base (potentially up to 6 billion people) but also for an inclusion of numerous micro- and small-sized businesses into value-added growth and GVC expansion. This, in turn, stimulates aggregate, including the innovation-driven, consumer demand. Consequently, the Kazan Summit decisions position e-commerce expansion as a key driver to engage the broadest range of participants, to simplify micro-investment in small-scale production, to promote joint cooperation within the BRICS internal market, and to strengthen consumer rights and to promote trust in this market.
Consequently, the Kazan Summit decisions position e-commerce expansion as a key driver to engage the broadest range of participants by simplifying micro-investment in small-scale production, promoting cooperation within the BRICS internal market, and strengthening consumer rights and measures to promote trust in this market.
4. Sustainable resolution of the food supply issue based on innovative technology as part of an inclusive approach by creating an efficient and distributed agricultural trade and service network. This network would be open to engaged and fair participants such as small farmers and households for their further integration into international trade. Creating the necessary market infrastructure includes supporting Russia’s initiative to establish the BRICS Grain Exchange, which could be used as a model for scaling it up to include other foods in the future (Paragraph 73).
5. Development of joint BRICS special economic zones (SEZs) with a variety of sector-specific focuses. These zones will reduce infrastructure costs for medium- and large-sized businesses and thus stimulate imports and regional dissemination of borrowed industrial technologies and enable exports of their own high-tech innovations to their partner countries in order to generate new types of added value (Paragraph 74).
6. Creation of institutional, infrastructural, and motivational conditions to enable broad-based integration of micro, small, and medium-sized businesses (MSMEs) into existing intra-BRICS production GVCs and newly developed innovation-oriented GVCs and Global Production Networks (GPNs) (Paragraph 75). Together, this will establish a global institutional and infrastructural framework for BRICS+ as part of a constructive approach that combines “hard” (at the level of joint political decisions and their harmonised legislative codification at the national level), “soft” (coordination of joint policies and regulatory practices), and “virtual” (motivational) factors. These methods have been effectively employed in China as part of its institutionally-managed economic development model.
7. Creation and professional support of a shared governance platform, PartNIR, to harmonise and synchronise processes for advancing the achievements of the New Industrial Revolution (NIR). This includes training top managers at BRICS Competence Centres (Paragraph 76) and reducing business transaction costs. This decision aims to establish an institutional framework for global management of innovation-industrial co-development among partner countries based on a network systemic approach which offers more effective management of sustainable and globally integrated economic development for BRICS+ than the current mechanisms, which are constrained by state borders and often slow and inefficient mechanism for coordinating and multi-tier implementation of intergovernmental decisions. Research from the early 2010s (e.g., Rodrik, 2012) showed that national governments and tariff and non-tariff trade barriers that they create are primary drivers of high transaction costs, which at the time amounted to 170 percent of the production costs of goods and services. Therefore, developing the PartNIR platform offers the potential to significantly reduce these costs and to thereby enhance BRICS+’ global competitive advantages.
8. Comprehensive digitalisation of the social sphere and development of the Digital Economy (DE) as a prerequisite for the Digital Transformation (DT) of BRICS to be achieved through the widespread use of modern innovative ICTs and access to secure network systems (Paragraph 77). These ideas will be given a systemic character through the creation of a shared public “smart” digital infrastructure for scaling and globalisation within innovation-industrial GVCs and GPNs, including the use of Artificial Intelligence (AI). In fact, this forms the foundation for effective management of the aggregate capabilities of BRICS+ countries within the PartNIR platform.
9. AI will be extensively used to promote economic and social entrepreneurship to promote sustainable network development. These two types of entrepreneurship will be synchronised and harmonised by the BRICS Institute of Future Networks (BIFN), which will also work on establishing a joint trading platform for digital public goods (paragraphs 78 and 79). This initiative is expected to boost the internal potential of aggregate consumer demand within BRICS+.
10. Ensuring broad and open access to distributed energy sources in the interest of an inclusive, fair, and sustainable green transition in the context of the Paris Agreement (Paragraph 80) will harmonise BRICS’ energy strategy with the global green agenda. Given the universal and global nature of this issue, BRICS countries facing financial constraints are calling on the developed economies to allocate part of their financial and investment resources to this sector in order to support new innovation and industrial development models and the infrastructure that is needed for such transitions (paragraphs 80, 82), among other things.
As can be clearly seen from our contextual analysis, the decisions made at the BRICS Summit in Kazan regarding the partner countries’ international trade have a fairly systemic nature beginning from setting objectives for developing new models of innovation and industrial growth and areas of restructuring through upgrading existing economies and their sectors and creating an innovative digital economy leveraging the achievements of the New Industrial Revolution (NIR) and advanced ICT. The cornerstone of these efforts includes the development of modern public digital infrastructure with inclusive access, which opens practical ways to scale up and globalise local projects not just under Globalisation 3.0 (Production without Borders), but also Globalisation 4.0 (Services without Borders), through integration into joint GVCs and GPNs in a secure and comfortable BRICS+ space.
This approach dramatically reduces transaction costs of the participants, allowing as many participants as possible to take a broader and inclusive part in the global production processes. These participants, such as small participants, start-up companies, and micro- and small businesses may previously have been unable to take part in them due to insurmountable tariff, non-tariff, and information-communication barriers within the logic of modern BoP 1.0-4.0 (Base of Pyramid) models. Notably, the widespread adoption of digital trade forms the essence of the BoP 1.0 model. Importantly, this structural transformation is accompanied by creating critical institutional innovations, such as new entities like BIFN, or BRICS Competence Centres, as well as coordinating and governance platforms like PartNIR. These measures set the BRICS approach apart from the coordination and management framework of the 17 GVCs promoted by the United Nations, which rely on existing institutional foundations. The BRICS model offers a more dynamic and adaptive system for advancing sustainable and globally integrated economic development.
In this sense, this kind of systematic approach is particularly advantageous for China as a leading global innovation and industrial hub, which attracts a significant number of GVCs and GPNs positioning itself, as our analysis indicates, as the most powerful of the three global centres of attraction (China, the United States, and Germany) for the global integration of innovation and industrial market activities and international trade. However, other BRICS+ partner countries objectively lag behind China in this regard. It goes without saying that the subjective factors – political and institutional drivers – can either enhance or weaken the influence of these determinants, but cannot override them which creates challenges for other partner economies, which lack comparable demographic and economic potential, and Russia, among them. That said, it is important to consider the critically important role that competency, information and communication, and motivational factors are playing within an inclusive approach at the micro-level when it comes to practical realisation of this objective landscape.
The fast-paced development of digital trade and support at the level of MSMEs in creating and integrating them into joint GVCs and GPNs with the help of appropriate innovative digital infrastructure and inclusive institutional architecture, offers significant opportunities for the Russian economy and Russia’s foreign trade. In this sense, the decisions adopted at the BRICS Kazan Summit can serve as a strong foundation for carrying out the corresponding transformation with a focus on regional and local readiness to implement this transformation effectively.
REFERENCES
Borin A., Mancini D., Taglioni D. (2921). Economic Consequences of Trade and Global Value Chain Intergration: A Measurement Perspective. Police Research:WorkingPaper9785.
CFR 2024|Council for Foreign Relations: US- China Relations.1949-2024.
Rodrik D. (2012) Roepke Lecture in Economic Geography – Who needs the Nation-State? – Economic Geography, vol.89, No 1, pp.1-19.
EC2024| European Commission: Global Trade in Goods and Services.
UNCTAD XIII| Development-led globalization: Towards sustainable and inclusive development paths. Report of the Secretary – General of UNCTAD XIII (2011)
WB2017|Global Value Chain Development Report 2017. Measuring and Analyzing the Impact of GVC on Economic Development Washington DC 20433: The Global Bank.
WT2024| Global Trade to GDP Ratio. 1970 – 2024.
Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.
Aggregated From –
Comments are closed.