The Chair of the China Association of International Trade (CAIT) has called on the BRICS members – Brazil, Russia, India, China and South Africa – to “create a free trade agreement to increase the power and voice of emerging economies in the world economy”. The call was made against the background of two major US-focused initiatives, the pending conclusion of the Trans-Pacific Partnership Agreement and the launch of the EU–US Transatlantic Trade and Investment Partnership negotiations.
The CAIT proposed that the process of creating a BRICS FTA could build on current bilateral FTA negotiations, with China seen as being in a position to lead such a process, since it “plays a part in 85 percent of intra-BRICS trade”. The Director of the China Center for International Development called on the Chinese government to “deliberately merge its own interests” with those of the group, to establish “a comprehensive guideline while the group still lacks a core”. The Center maintained that “the future goal is building up an FTA of emerging economies.”
In the short term, a BRICS meeting that took place in South Africa in March 2013 announced the intention of the concerned governments to “progressively [develop] BRICS into a full-fledged mechanism of current and long-term coordination on a wide range of key issues of the world economy and politics”. According to the International Centre for Trade and Sustainable Development, “the BRICS together account for approximately a quarter of global GDP and 40 percent of the world’s population.”
Despite this apparent progress, it needs to be borne in mind that in 2013 the India–South Africa trade agreement negotiations were still ongoing, with the end of 2013 being set as the target date for conclusion. This agreement is aimed at promoting a process of tariff reductions, not a process of tariff elimination.
Indian press sources reported that India is also exploring the possibility of having similar agreements with African regional communities, and has already established a joint study group “to examine the possibility of a free trade pact” with COMESA. In addition, the Commerce Secretary indicated that India “is negotiating a Comprehensive Economic Partnership Agreement with Mauritius”.
While there is a growing focus on developing trade among faster growing emerging economies, and a particular interest in Africa in developing trade with China, India, Brazil, Russia and Middle Eastern economies, the continuing importance of traditional trade with the EU should not be underestimated – and nor indeed should the difficulties faced in developing a profitable trade in agro-food products when targeting the non-traditional markets.
The issue is not simply one of market diversification. A critical factor in determining the utility of market diversification is the identification of higher-value commercial opportunities on these emerging markets relative to those available on traditional export markets. Thus, while coffee producers in the EAC in their sector development plans are looking to diversify export markets, the difficulties of identifying and exploiting higher-value commercial opportunities in these markets can significantly affect outcomes. For example, Tanzania’s coffee exports increased their percentage share of the EU market from 32.63% in 2011/12 to 50.69% in 2012/13, while the EU continued to account for 70.1% of Kenyan coffee exports over the same period (see Agritrade article ‘Good performance in the EAC’s coffee sector, despite depressed global prices’, forthcoming 2013).
A second critical factor in the long term is how to use the emergence of market opportunities in non-traditional trading partners to foster a structural transformation of the basis of engagement of ACP agro-food sectors with the global economy. This is seen as essential for the development of local value-added processing and local employment creation. Thus, while South Africa exports to Asia have grown strongly in recent years (from 26 to 35% of total exports), minerals, base metals, precious metals and stones account for 83% of South Africa’s exports to Asia, while they represent only 55% of exports to the EU and 58% of exports to the USA (see Agritrade article ‘ South Africa diversifying its trade away from the EU’, 6 October 2011). This highlights the very real challenges faced in exploiting growing market opportunities in emerging economies in order to promote processes of structural transformation of engagement of ACP economies with the global economy.