The Brics Are Harming Each Other’s Trade, and India Is Largely to Blame – India Real Time – WSJ

Like most families, the Brics bloc isn’t as happy as it looks from the outside.

Brazil, Russia, India, China and South Africa, whose leaders begin a two-day summit today in Russia, are responsible for a growing share of the world’s trade-distorting policies but an even larger portion of trade-liberalizing ones, a new report finds.

However, the temporary nature of some of the market-opening measures means that overall these countries are still discriminating significantly against their trade partners—many of which are fellow emerging markets.

The finding, documented by the Global Trade Alert project of the London-based Centre for Economic Policy Research, highlights some of the awkward contradictions in the effort to unite the Brics.

“On the one hand, the Brics have sought to bolster trade between themselves with more generous credit lines for exporters and the like,” writes the report’s author, Simon Evenett, a professor of economics at the University of St. Gallen, Switzerland. “On the other hand, the Brics are responsible for a third of the instances of the harm to each other’s commercial interests. This cannot make sense.”

Global Trade Alert monitors trade-distorting moves such as tariffs, investment restrictions, “buy local” requirements for public procurement and export-promotion tools such as tax incentives and trade finance. GTA says its dataset includes more than 4,500 trade-related policies enacted globally since the financial crisis, more than double the number tracked by the World Trade Organization.

The GTA database documents three major spikes in protectionism since 2008. Over that period, the Brics governments have implemented a total of 1,451 policies that favor domestic commercial interests over foreign ones, or 32% of such measures world-wide. The Brics countries have since unwound just a fifth of these, suggesting that protectionist walls weren’t raised merely as temporary crisis-fighting measures. The Brics account for 17% of world trade.

Within the bloc, India stands out as an offender. According to GTA, the country is second only to the European Union both in the number of discriminatory measures imposed since November 2008—452 against the EU’s 604—and in the number of product categories affected by such measures—1,174 against the EU’s 1,220, both out of a possible 1,229.

Rich-country protectionism is still alive and kicking, the report shows. Of the 2,733 economic policies that harmed at least one Brics member, a fifth came from a member of the G-7 group of nations—the U.S., Canada, Japan, Germany, France, U.K. and Italy—or Australia. Nearly a third, however, came from fellow Brics nations.

All told, a greater share of G-7 policies were discriminatory, but the Brics’ protectionism affected a broader range of products. China was the most-common victim, with 2,153 foreign measures hitting its commercial interests.

The Brics also account for an increasing share of reforms world-wide to lower obstacles to foreign firms and investors, the report finds. But 28% of these liberalizations have already lapsed, compared to the global average of 15%.

Some economists say developing countries, in order to kick-start industrialization, need to shield and nurture local firms until they’re ready to compete on world markets. But Mr. Evenett argues that condoning “special and differential treatment” for poor countries doesn’t straightforwardly protect them against rich countries’ discrimination—it also provides cover for developing countries to step on other developing countries’ toes. China is the only one of the Brics whose exports haven’t stagnated over the past four years.

Hence, “a less selective approach to tackling crisis-era protectionism would seem to be in order,” Mr. Evenett writes. “The frequency with which Brics commercial interests are harmed by beggar-thy-neighbor interests ought to make the Brics champions of the monitoring of protectionism by international organizations.”

via The Brics Are Harming Each Other’s Trade, and India Is Largely to Blame – India Real Time – WSJ.

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