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International Business BRICS countries say global trading system faces ‘unprecedented challenges’ amid U.S. tariffs

Chinese President Xi Jinping, from left, South African President Cyril Ramaphosa and Russian President Vladimir Putin arrive prior to posing for a group photo at the BRICS summit in Johannesburg on July 26, 2018.

Gianluigi Guercia/REUTERS

There was no shortage of grandiose gestures at the summit of the BRICS nations in Johannesburg this week. Russian President Vladimir Putin and the other summit leaders compared themselves to anti-apartheid hero Nelson Mandela and left their hand prints in clay for a museum at the renowned Cradle of Humankind archeological site.

The powerful bloc of five emerging-market countries – China, Russia, India, Brazil and South Africa – sees itself as on the ascendancy on the global stage in the aftermath of the chaos provoked by U.S. President Donald Trump at the rival Group of Seven summit this year.

Despite issuing an ambitious 102-point statement on Thursday, covering everything from climate change to peacekeeping, the BRICS leaders could not escape Mr. Trump’s shadow. His trade wars cast a pall over the mood at their summit.

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In a formal declaration on Thursday, the five BRICS leaders said the global trading system is facing “unprecedented challenges.” It was a reminder that U.S. influence remains strong and pervasive, even as the BRICS countries aim to create a more multipolar world.

Global trade has been crucial to the rise of China, the biggest supporter of the BRICS partnership. Chinese President Xi Jinping sounded the alarm over Mr. Trump’s tactics, warning of their potentially devastating effect.

“Unilateralism and protectionism are mounting, dealing a severe blow to multilateralism and the multilateral trading regime,” Mr. Xi told the summit in a clear reference to Mr. Trump, who has already imposed tariffs on US$34-billion of Chinese goods, sparking retaliatory tariffs from Beijing.

“The international community has reached a new crossroads and we are facing a choice between co-operation and confrontation, between opening-up and a closed-door policy, and between mutual benefit and a beggar-thy-neighbour approach,” Mr. Xi said.

“A trade war should be rejected, because there will be no winner. Economic hegemony is even more objectionable. … Those who pursue this course will only end up hurting themselves.”

South African President Cyril Ramaphosa, whose country is also suffering from Mr. Trump’s tariffs, was equally critical of the trade wars. “We are concerned by the rise in unilateral measures that are incompatible with World Trade Organization rules and are worried about the impact of these measures, especially on developing countries,” he told the BRICS summit.

The trade conflict could grow worse. Mr. Trump has threatened to impose tariffs on the entire US$500-billion in imported goods from China.

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While its U.S. markets are increasingly difficult, China continues to find success in African markets. Chinese data, released this week, show China traded nearly US$100-billion in goods with African countries in the first half of this year – an increase of 17.3 per cent over the same period last year.

China has been Africa’s biggest trading partner since surpassing the United States in that role in 2009. But there are concerns China’s massive expansion into the continent could saddle African countries with excessive debt. Beijing has lent more than US$100-billion to African governments and state enterprises over the past two decades and many countries will have trouble repaying the debts.

In a statement issued on Thursday, the BRICS leaders called on all WTO members to abide by the trade organization’s rules and to honour their commitments to a multilateral trading system.

“We recognize that the multilateral trading system is facing unprecedented challenges,” the BRICS countries said in their statement, which they called the Johannesburg Declaration. “We underscore the importance of an open world economy, enabling all countries and peoples to share the benefits of globalization.”

The 10-year-old BRICS organization formed the New Development Bank in 2014, the first major international development bank from outside the West. It has also created the BRICS Contingency Reserve Arrangement as an alternative to the International Monetary Fund.

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