BRICS Update: Promoting Local Currency Usage in International Trade, Opposing Unilateral Actions

Posted by Written by Melissa Cyrill Reading Time: 5 minutes

At a two-day meeting of their foreign ministers in Cape Town, the BRICS countries – Brazil, Russia, India, China, and South Africa – emphasized the importance of utilizing local currencies in international trade and financial transactions. They also pledged their commitment to promoting a rule-based, open, and transparent global trade system. 

India’s Minister of External Affairs S. Jaishankar said at the meeting: “At the heart of the problems we face is economic concentration that leaves too many nations at the mercy of too few. This may be in regard to production, resources, services or connectivity. Recent experiences impacting health, energy and food security only highlight this fragility.” Jaishankar also urged the BRICS nations to take into account India’s endeavors to raise concerns of the Global South within the G20 and to foster the crucial aspect of “economic decentralization that is integral to political democratization.”

Per the Russian Foreign Minister Sergei Lavrov and China’s Vice Foreign Minister M Zhaoxu, several countries have shown interest in joining the BRICS grouping. According to reports in the media, Saudi Arabia has sought to join the multilateral group.

The New Development Bank, set up by the BRICS countries, met on May 30-31, prior to the foreign ministers’ meet. Established to provide financial support for infrastructure and sustainable development in its member states and other emerging economies, the NDB has broadened its membership to include Bangladesh, the UAE, and Egypt, all of which are close partners of India. Over the years, the NDB has allocated US$33 billion in loans to fund over 96 projects across the five founding member countries.

These meetings are ahead of the next BRICS Summit, to be held in South Africa in August this year.

The informal five-nation BRICS grouping brings together the largest developing and emerging economies in the world. Collectively, they account for 41 percent of the world’s population, 24 percent of global GDP, and 16 percent of global trade.

The joint statement: Key points

Reforms in international trade and financial governance bodies

On June 2, in a joint statement released at the conclusion of the BRICS Ministers of Foreign Affairs and International Relations meeting, they called for the establishment of a strong Global Financial Safety Net. The Ministers emphasized the need for an adequately funded International Monetary Fund (IMF) with a quota-based structure at its core. The statement further stressed on the completion of the IMF governance reform process, including the adoption of a new quota formula, by December 15, 2023, as part of the 16th General Review of Quotas.

The joint statement endorses a multilateral trading system that is free, open, transparent, inclusive, equitable, non-discriminatory, and rules-based. They highlighted the World Trade Organisation (WTO) as the central institution for this system, with a focus on providing special and differential treatment (S&DT) for developing countries, including the Least Developed Countries (LDCs).

The Ministers stressed their support to work towards positive and meaningful outcomes on the issues at the 13th Ministerial Conference (MC13). They committed to engage constructively to pursue the necessary WTO reform with a view to presenting concrete deliverables to MC13. They called for the restoration of a fully and well-functioning dispute settlement system accessible to all members by 2024, and the selection of new Appellate Body Members without further delay. They condemned unilateral protectionist measures under the pretext of environmental concerns such as unilateral and discriminatory carbon border adjustment mechanisms, taxes, and other measures.

[The Ministers] reaffirmed their commitment to strengthening the framework of BRICS cooperation under the three pillars of political and security, economic and financial, and cultural and people-to­ people cooperation upholding the BRICS spirit featuring mutual respect and understanding, equality, solidarity, openness, inclusiveness, and consensus.

Position on the G20

The Ministers reiterated the significance of the G20 as the primary multilateral forum for economic cooperation, comprising both developed and developing countries, where major economies collaborate to address global challenges. They expressed anticipation for the successful hosting of the 18th G20 Summit during the Indian G20 Presidency. Recognizing the opportunities presented by India, Brazil, and South Africa chairing the G20 from 2023 to 2025, they expressed support for continuity and collaboration in their respective presidencies, wishing them success in their endeavors.

Opposing unilateral actions breaching international law

The ministers acknowledged the detrimental effects on the global economy caused by unilateral actions that violate international law. They further observed that the situation is exacerbated by unilateral economic coercive measures, such as sanctions, boycotts, embargoes, and blockades.

Financial inclusion and greater use of local currencies in global trade

The Ministers highlighted the significance of promoting financial inclusion to enable citizens to access the advantages of economic growth and prosperity. They welcomed the development of numerous technological tools for financial inclusion within BRICS countries, which can facilitate the full participation of citizens in the formal economy.

Furthermore, the Ministers emphasized the importance of encouraging the use of local currencies in international trade and financial transactions among the BRICS nations and their trading partners.

Implementing UNSDG goals

The Ministers also called for the comprehensive and balanced implementation of the 2030 Agenda for Sustainable Development across its economic, social, and environmental dimensions. They emphasized the need to mobilize the necessary resources to achieve the goals of the 2030 Agenda. In this regard, they highlighted the upcoming Sustainable Development Goals (SDGs) Summit, scheduled to take place in New York in September 2023, as a unique opportunity to reaffirm international commitment to the implementation of the 2030 Agenda.

Energy security

The Ministers underscored the critical importance of energy security as a fundamental pillar for economic development, social stability, national security, and the well-being of all nations worldwide. They emphasized the need to enhance energy security and market stability by strengthening value chains, promoting open and transparent competitive markets, and safeguarding critical energy infrastructure.

Obligations on climate action and support for the Paris Agreement

The Ministers reiterated the necessity of upholding the objectives, principles, and provisions of the United Nations Framework Convention on Climate Change (UNFCCC) and its Paris Agreement. They specifically emphasized the principles of common but differentiated responsibilities and respective capabilities (CBDR-RC) in light of varying national circumstances. The Ministers reaffirmed their individual and collective efforts to advance the implementation of the Paris Agreement. In this context, they stressed the significance of developed countries fulfilling their commitments to provide technology and adequate, predictable, timely, new, and additional climate finance to assist developing countries in addressing climate change. The Ministers expressed concern that the target of jointly mobilizing USD 100 billion per year by 2020, and annually through 2025, has not been achieved, and urged developed countries to meet their commitments. They rejected attempts to link security with the climate change agenda and reiterated that the UNFCCC, including the annual Conference of the Parties (COP) sessions, is the appropriate and legitimate international forum to discuss all dimensions of climate change.

The Ministers highlighted their determination to contribute to a successful COP28 in Dubai, with a focus on implementation, later this year. They recognized the Global Stocktake as the primary mechanism for promoting implementation and climate action across all aspects of the Paris Agreement under the UNFCCC. They stressed the importance of an effective Global Stocktake in assessing and identifying implementation gaps in the global response to climate change, while also setting the groundwork for enhanced ambition by all parties, particularly developed countries, and addressing the outstanding gaps in means of implementation for mitigation and adaptation actions in developing countries.

Lastly, the Ministers welcomed Brazil’s candidacy to host COP30 in 2025, recognizing that the year will be pivotal for the future of the global response to climate change.

The full joint statement can be read here.

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