BRICS to play dominant role in global trade
The economies of Brics will play an increasingly dominant role in global trade.
By Janice Roberts
The economies of Brazil, Russia, India, China and SA (BRICS) will play an increasingly dominant role in global trade, according to those scheduled to participate in the upcoming World Ports and Trade Summit (WPTS) 2012 in Abu Dhabi in April.
Summit participants also said BRICS economies would be major drivers of the global economy in 2012, a year when most developed economies were expected to witness sharp slowdown or negative growth.
The summit is set to include a dedicated emerging markets review session, which will bring together industry experts from various countries to discuss the role that these economies will play in light of developments in the Middle East.
"Over the past two decades, south-south trade has become an important feature of the international trade system due to the development of complementarities between southern economies," Fabiano Mielniczuk, research coordinator at the BRICS policy centre said.
"Brazil, India and China together with countries like Russia, SA and Mexico, have emerged as the engines of this trade in the last decade, as their hybrid nature has enabled them to buy and sell products from and to their southern neighbours."
He added that the global economic crisis had further intensified south-south trade because it had affected the two most important poles of world trade: the USA and Europe.
According to United Nations Conference on Trade and Development, from 1996 and 2009, south-south trade grew 50% faster than north-south trade.
"The agreement reached among developing countries on the global system of trade preferences in Sao Paulo last year might contribute to further increases, going forward," Mielniczuk said.
Sanjeev Sanyal, global strategist at Deutsche Bank added that the eurozone would see its economy shrink by 0.5% this year with a recession in the first half of the year and a gradual recovery in the second half.
"The US is expected to grow its GDP by around 2.7% this year.
"While China's growth is also slowing, we are confident that it will avoid a hard landing," Sanyal noted.
The positive sentiment regarding BRICS is supported by regional leaders.
"In terms of container volume, China is already the largest trade partner of the UAE, followed by India. The upcoming Khalifa Port facility and Kizad (Khalifa industrial zone Abu Dhabi) will improve access to local and regional markets for these powerhouse economies," Mohamed Al Shamisi, Vice President of Ports at Abu Dhabi Ports Company said.
Commenting on the factors that will most significantly influence the course of global trade, Sanyal noted: "Cost of energy and communications technology are the two major factors affecting the future of transportation infrastructure worldwide. Shipping remains by far the most efficient way to move goods and a single container ship can need thousands of trucks to empty. This means that in terms of energy efficiency and cost, Hamburg is closer to Shanghai than to Munich. Strange as this may sound, higher energy costs will systematically favour ship based transportation over all other forms.
"A second important factor will be communications. We are shifting from a world of mass production/consumption to a world of mass customisation. This will affect how transportation deals with the logistical requirements of this new world. Technologies like 3D printing may fundamentally change the nature of transportation in the not-so-distant future.
Sanyal added that the world's economy was undergoing a fundamental shift at many levels - geographical, technological and financial.
"All of this will affect the transportation industry as it is the circulatory system of the world economy. The WPTS is, therefore, an important place where key players can exchange ideas and build plans for the new world that is emerging."
Commenting on the potential that other emerging economies held in diminishing the BRICS' role, Mielniczuk said that in 2005, Jim O`Neil of Goldman Sachs suggested that there was a group of countries, the Next Eleven (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam) that were strong candidates to become larger economies and good markets to explore.
"However, a significant portion of these countries lack the political stability that made the BRICS so attractive to foreign investment that, in turn, ignited the boost of their economies. I would keep my expectations high on BRICS economies."