BRICS balancing act: Geopolitics overshadowing trade growth?

The recent BRICS summit revealed a notable shift in focus towards geopolitics, placing economic integration on the back burner. With the expansion of the bloc and the inclusion of new nations, a pressing question arises: Is trade truly being prioritised within BRICS, and how does this align with the evolving global trade landscape?

This observation raises concerns about the bloc’s commitment to fostering economic cooperation, which has traditionally been one of its core strengths. While geopolitical discussions dominate, it remains crucial to evaluate whether BRICS' trade strategies are evolving in a way that aligns with global trade trends and addresses the challenges posed by the current economic environment. Addressing this balance will be key to BRICS' future relevance in global commerce.

Stagnant share in global trade

The share of all BRICS nations in global trade is stagnant. Except for China and Brazil, the share of most nations has either declined or remained unchanged. This comes at a time when many countries are looking to de-risk from China. China, in particular, is benefitting from the export of intermediaries to manufacturing nations and its expanding footprint in African and Caribbean nations.

Table 1: Share of BRICS+ nations in global trade

Source: ITC Trade Map, F2F Analysis

China has solidified its position as the leading exporter to other BRICS nations. In the first nine months of 2024, China's exports to Brazil, Russia, India, and South Africa saw a sporadic growth. Whereas the primary exports include machinery, chemicals, iron and steel, plastics, and textiles. This trend is notable, especially as many countries aim to reduce dependence on China. Despite these efforts, Chinese exports, including some products sanctioned by the US, continue to enter these markets.

Exhibit 1: Intra-BRICS trade (in %)

Source: ITC Trade Map, F2F Analysis

Except for Brazil, exports from all the BRICS nations have fallen. From January to September 2024, exports from Brazil grew at an average of 1 per cent, while South Africa recorded an average growth of 2 per cent in the same period. India’s exports to the bloc increased by 1 per cent when averaging the first nine months of 2024. Except for Brazil, all countries saw a decline in exports for September due to geopolitical conditions and the bloc's failure to bolster trade. If viewed on an annual basis, intra-BRICS trade is expected to reach $110 billion by 2026 with a 10 per cent CAGR. This will only occur if all BRICS members unify and establish a free trade agreement (FTA) or take their trade bloc commitments seriously.

At the recent BRICS conference, discussions centred largely on bolstering trade within the bloc, but little else was addressed. Significant attention was given to the establishment of a Multilateral Development Bank (MDB). Additionally, the members are working towards creating a system of cross-border payments built on principles of barrier-free trade.

The launch of a new BRICS currency, however, raises many questions: will such initiatives truly enhance trade? Beyond payment and settlement systems, there are other pressing issues the bloc should prioritise. The solution may also lie in leveraging the trade potential of the member nations.

Focus areas

The BRICS+ basket has now become an intriguing mix of both producer and consumer nations. In terms of sectors, a notable connection can be established among the core BRICS nations: cotton and textiles. Four out of the five core nations in the bloc are cotton producers, presenting an opportunity to implement policies focused on sustainability and the promotion of green textiles. The New Development Bank, which supports green projects in developing countries, could facilitate cooperation in this area—an aspect that has not yet been explored within the bloc.

Since 2019, categories such as cotton, apparel, and home textiles have gained traction within BRICS. For instance, India has witnessed a significant increase in cotton exports to BRICS nations, reflecting the demand for cotton in apparel manufacturing in countries like South Africa, China, and the UAE. The UAE, now a part of the bloc, is also a major apparel exporter to the Middle East.

This highlights the textile production and trade potential within both the original and expanded blocs. India’s cotton exports, along with the woven apparel exports of BRICS member nations, provide a compelling example of the opportunities in this sector.

Exhibit 2: India’s cotton exports (in $ mn)

Source: ITC Trade Map, F2F Analysis

India’s cotton exports surged by an impressive 320 per cent in 2023, whereas the exports of cotton saw a dramatic drop in the first four months of 2024. There was a huge uptick in the exports of cotton to Russia—an increase of 200 per cent—and to Brazil by 6 per cent. The recent uptick in exports to Brazil can be attributed to increasing investments by companies in the Brazilian textile industry, driving demand for cotton, whereas trade between Russia and India has picked up in many sectors, especially after the start of the war.

Exports of woven apparel to BRICS increased by approximately 10 per cent. Similarly, apparel exports from India, South Africa, and China rose significantly in 2022 and 2023, highlighting the strong potential of textile exports within the bloc. India’s exports of knitted apparel increased by an average of 23 per cent in the period from January to April 2024 compared to the same period in 2023. The increasing exports from India can hint at a positive push for garments made in India. Exports to Russia jumped from January to April 2024 by an average of 65 per cent compared to the same period in 2023.

The BRICS should prioritise including cotton and related textile products in trade discussions. On global platforms like the WTO, the demands of developing and underdeveloped nations often receive insufficient attention. BRICS, however, has the potential to address these issues through proper collaboration and targeted initiatives.

The future prospects of these exports, however, will heavily depend on the extent to which geopolitics influences trade within and beyond the bloc.

Exhibit 3: Woven apparel exports of China (in $ mn)

Source: ITC Trade Map, F2F Analysis

NDB may drive sustainable growth in BRICS' cotton and textile industries

The New Development Bank (NDB), established to mobilise resources for infrastructure and sustainable development projects in emerging markets and developing countries (EMDCs), has broadened its focus to include promoting green infrastructure across its member regions. The bank actively supports initiatives to reduce carbon emissions and monitors progress in sustainable infrastructure. So far, it has financed key projects in areas such as sustainable transport, renewable energy, railway networks, and water-saving technologies.

Given its mandate, the NDB holds significant potential to support the cotton sectors in BRICS nations, particularly India and Brazil, as they seek to transition from conventional cotton production to organic and regenerative agriculture. By providing crucial funding, the NDB could facilitate the adoption of sustainable farming practices in these countries. This support would not only accelerate the shift to organic cotton but also align with BRICS' broader goals of labour welfare and environmental sustainability.

Furthermore, the NDB could play a transformative role in advancing sustainability initiatives within the textile sector. Investments in projects such as recycling units for apparel production could reduce waste, lower carbon footprints, and foster circular economies across BRICS nations. Although the textile and cotton industries have not been a primary focus of BRICS discussions thus far, there is considerable untapped potential for the bloc to leverage NDB resources to boost sustainability and productivity in these areas.

By investing in sustainable cotton production and textile recycling, the NDB could help BRICS countries enhance productivity, expand exports, and improve labour conditions in these sectors. Such initiatives would encourage the adoption of policies aimed at reducing carbon emissions while creating more traceable and transparent supply chains—key global trends in sustainability.

In turn, these measures could lead to robust economic growth, increased employment opportunities, and improved well-being for workers in the textile and cotton industries, positioning BRICS nations as leaders in sustainable production and trade.

Fibre2Fashion News Desk (KL)