The countries were bound together by not much more than an acronym coined by Jim O'Neill of Goldman Sachs, and a desire to exert greater influence in the international monetary system.
This was spurred in part by the functioning of the G, a group comprising most of the major economies. The G, in which emerging markets have roughly equal numerical representation with the advanced economies, had taken on the mantle of coordinating international policy during the depths of the global financial crisis in However, by the middle of the next year, the emerging market countries were beginning to feel that the advanced economies, which had precipitated the crisis to begin with, were running the show, both directly and through their control of the IMF and other major international institutions that assisted the G in its work.
The four BRICs demanded a greater say in running major institutions and also in helping to design any changes in the rules and procedures governing international finance. They wanted to send a clear signal that they would no longer accept old arrangements whereby leadership of the major IFIs — the IMF for Europe and the World Bank for the United States — would be carved up among the advanced economies through an implicit deal.
There was considerable skepticism about whether the BRICs had enough shared interests to be more than just a talking shop. These countries may all have common complaints about the advanced economies, but they are also geopolitical rivals. For instance, China and India have a long history of border tensions. It was hard to imagine that shared grievances directed at advanced economies would be enough for this group to coalesce on more constructive actions.
This skepticism was, if anything, heightened when South Africa was invited to join the group in China, with its vast foreign exchange reserves, saw its opportunity to lead. Established in July , its main goal is to promote sustainable development in the five countries.
Fearful of being sidelined, India lobbied unsuccessfully to locate the headquarters in New Delhi. China insisted the headquarters would be in Shanghai, and got its way. Recognizing that further aggressive moves to take charge could create bad blood, China compromised on other elements of control. India was allowed to appoint the first president. The five countries do not actually put up this money, but simply commit to providing the agreed-on amounts if any one of them were to need hard currency to respond to a crisis.
Through these two new institutions, the BRICS have earned the right to be taken seriously as an economic group. They have shown they can put money on the table in a coordinated way, thereby easing concerns about how the lack of fully congruent — and often conflicting — economic and geopolitical interests could hamper their cooperation on the world stage.
And with its vast financial resources, China has become the first among equals. Still, by fostering stronger financial linkages between the key emerging market economies and creating alternatives to the existing global financial architecture, China has devised another way of chipping away at the present configuration of global reserve currencies. It is not stopping at such initiatives, recognizing that its wealth could also be used to simultaneously promote its own development and that of its neighbors.
The Silk Road has long fascinated scholars investigating the many ways in which Asia and Europe were connected far back in history. But it was only in the late 19th century that German geographer Baron Ferdinand von Richthofen coined the phrase to refer to a specific route of east-west trade that has existed for about two millennia.
Despite the general notion that the Silk Road was a major conduit of commerce, some authors have argued that the importance of the routes in economic exchanges was far overshadowed by its prominence in cultural and religious exchanges. China's government likes emphasizing linkages to history, but the focus is now clearly on commercial interests rather than culture or religion. The two have come to be referred to jointly, and rather clunkily, as the Belt and Road Initiative.
The Belt and Road is envisioned as connecting a large and disparate group of economies, from the economically vibrant and rich to those that are poor yet have a huge potential for economic development. The stated objective was "to promote connectivity and contribute to the realization of the master blueprint and bright future of the Belt and Road Initiative in accordance with a principle of market-orientation, international standards and professional excellence.
The notion of following market principles and meeting or exceeding the best international standards of governance permeates many of the documents. This is no doubt meant to emphasize that the Belt and Road initiative is not merely a device to strengthen control of China's or other countries' state enterprises.
Moreover, China wants to make it clear that projects undertaken will not tolerate low technical, environmental or governance standards. It is easy to see how, despite concerns held by developing countries in Asia about hitching their economic and political fortunes too closely to China, the initiative is tempting. They desperately need better infrastructure, but lack the funding to build it.
This figure would eclipse all the economic- and security-related financial assistance given by the United States to Pakistan since Pakistan's prime minister Nawaz Sharif could barely contain his enthusiasm:. Mountains and rivers join our territories; and our hearts and minds unite our nations. We have an all-weather, time-tested cooperative strategic partnership. We are truly iron brothers. The Belt and Road Initiative also conveniently ties in the international expansion of China's influence to the goal of improving the economic prospects of the country's underdeveloped western and southern provinces, many of which are landlocked.
This would advance both the regional balance of China's growth and the level of internal integration of the economy. It would also provide a boost to growth, at least temporarily helping to address considerable overcapacity in manufacturing and opening more markets for Chinese exports. Despite being open about the scope of the initiative, Beijing is sensitive to concerns that it is meant mainly to further China's economic interests and to serve as a tool for the political subjugation of neighboring countries.
China is particularly sensitive about the political aspect, as it has long held that the United States and other Western countries have no business interfering in its own internal affairs, such as in the governance of Hong Kong and Tibet. Some scholars have argued that the Marshall Plan was as much a product of America's desire to protect its economic and geopolitical interests as it was an act of altruism.
Some of China's financial institutions are also playing a subtle but important part in expanding the country's role in international finance, with the RMB's rise being fueled through them in a backdoor way. The China Development Bank CDB , for instance, makes overseas loans to Chinese corporations operating abroad, as well as to foreign corporations.
The Export-Import Bank of China is another institution that facilitates the country's expansion of influence abroad — largely through financing trade deals. China is becoming a leader of the international community — not, as the West prefers, by being co-opted into existing institutions under the current rules of the game, but rather on its own terms. This goal subsumes another objective, which is to eventually alter the rules of global finance that China sees as conveying undue privilege to the existing reserve currencies.
Among other ends, this would allow the RMB to fairly stake a claim to being one of the world's dominant reserve currencies. The Dragon Spreads its Wings by eswar prasad. Flexing Economic Muscles In the s, as China's financial clout and foreign exchange reserves grew, it began using those resources to increase its sphere of influence, offering investment and various forms support to other economies.
Relationship Reset China's investments and aid to Africa and Latin America, which as noted above have ramped up over the past decade, strengthened China's economic and political linkages with countries in those two regions. Friendlier Multilaterals The first element of China's global strategy involves increasing its influence in existing multilateral institutions. Chinese housing project near Luanda, Angola.
The End Run While it was signing up for membership in multilateral institutions around the world, China was frustrated that, in the international and regional organizations that it most cared about, it still had second-class status. In an elegantly crafted sentence — elegant less in its linguistic than in its bureaucratic flourishes to which, as a former bureaucrat, I tip my hat — the two countries expressed agreement on a set of lofty and sufficiently vague principles: Both sides acknowledge that for new and future institutions to be significant contributors to the international financial architecture, these institutions, like the existing international financial institutions, are to be properly structured and operated in line with the principles of professionalism, transparency, efficiency and effectiveness, and with the existing high environmental and governance standards, recognizing that these standards continuously evolve and improve.
For many years China lobbied the Taliban and its allies to solidify relationships. With the United States deserting Afghanistan, China has an opportunity to operate with impunity and be in direct contact with the Taliban. Chinese trade support to a Taliban—controlled nation will make it a powerful influence in the region. China will leave no stone unturned in packaging the nation to its one belt one road initiative.
With the Taliban eyeing reconstruction of the region, China will provide infrastructure development necessary to rebuild the nation, eventually drowning it in debt and taking control of its prime assets. Apart from the economic gains, China has serious security concerns in the region. Chinese analysts believe that extremists and terrorist groups will not enter its soil from the Wakhan corridor, they are likely to threaten China through Central Asia countries if the situation in Afghanistan worsens.
China wants to thwart all efforts that could help advance the expansion of East Turkestan Islamic Movement ETIM , an Uyghur separatist organization seeking to establish an independent state. China worries that in the last year ETIM may have increased its logistical and financial resources, manpower, and weaponry. This leads to the question: How does the CAI measure against the standards of the constitutional law of the EU relating to its external relations?
It appears that there has been only a limited assessment of the CAI from a human rights perspective, which is especially problematic in light of recent political developments in China. Once finalized, the agreement will require consent by the European Parliament which maintained a critical position to the negotiations and listed a number of requirements including repeated references to human rights. Based on the terms of the CAI currently publicized, it is doubtful that these requirements will be met.
At the outset, it should be noted that a draft text of the agreement is not yet publicly available. While earlier drafts have been seen by journalists and some researchers, no text has been officially released or leaked to the public.
An assessment therefore needs to be based on the press release of the Commission of 30 December and on what is known about earlier drafts including prior statements by the Commission. It should be noted that despite promises towards increased transparency, no official draft texts were released since the beginning of the negotiations seven years ago.
The commercial essence of the CAI will be the market access for investment and services. This means that investors and exporters will face fewer obstacles and discrimination when offering their services on and investing in the markets of the EU and China.
These obligations will, however, not apply without exceptions as both sides will be able to exclude certain measures and sectors from their scope. Apparently, the EU obtained concessions from China in some sectors of key interest to European industries, including car manufacturing and services such as cloud services, financial services, private healthcare and environmental services, international maritime transport and air transport-related services but other sectors will be excluded from the agreement.
A full assessment of the commercial value and political impact of the agreement will only be possible once the Annexes with the limitations and specific concessions will be released and can be compared to other agreements concluded by the EU and by China respectively.
The CAI will also contain rules on subsidies and regulatory procedures, but the details are not yet known. Unlike the name of the CAI suggests, the agreement does not include rules on investment protection. Instead, the EU and China agreed to continue to negotiate on such rules including investment dispute settlement within two years of the signature of the CAI.
In other words, the standards which are typically included in bilateral investment treaties BITs and which can also be found in the agreement between the EU and Canada CETA on investment protection such as compensation for expropriation or fair and equitable treatment will not be part of the CAI.
The lack of an agreement on investment does not come as a total surprise in light of the significant divergences of both sides on the topic. It is therefore unclear if the EU has any scope for manoeuvre in this regard. To conclude, the CAI is neither a typical free trade agreement as it lacks any rules on trade in goods tariffs, non-tariff barriers, technical standards, trade remedies and on trade-related intellectual property rights TRIPS nor is it a classical investment agreement as it does not contain any rules on investment protection.
Even if such rules will be added later, the CAI will remain unique as agreements covering trade and investment, but not addressing goods or TRIPS are uncommon in international trade law. As most recent EU trade agreements, the CAI will contain provisions on sustainable development and labour standards. Typically, these provisions contain commitments not to lower environment and labour standards in order to attract investment and to respect existing international obligation of the respective party.
While a change in this policy would be revolutionary, it seems highly unlikely that the CAI will incentive China to engage in such a change.
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