South African trade lawyer Emile Myburgh, of Johannesburg law firm Bowman Gilfillan, has not detected much response from the Brazilian and South African companies with which he deals. Credit: John Fraser/IPS

By John Fraser
JOHNNESBURG, Dec 17 2012 (IPS)

Politicians in the leading developing nations have been active in boosting mutual ties, as one way of counterbalancing the influence of the developed world. But the economic success of the Brazil, Russia, India, China, and South Africa and the India, Brazil, and South Africa groupings will depend on the extent to which businesses take advantage of the new opportunities which are being created.

South African trade lawyer Emile Myburgh, of Johannesburg law firm Bowman Gilfillan, has not detected much response from the Brazilian and South African companies with which he deals.

“I have not seen any evidence or heard any of my clients say that business among BRICS countries is any easier than with non-BRICS countries,” he told IPS.

“Philosophically one might think the countries might promote business or attempt to attract more investments from fellow BRICS countries, but so far the practice does not show that.” 

Myburgh noted that the challenges of conducting business between Brazil and South Africa are numerous, “but fortunately they are not insurmountable.

“The language issue is always important, but it is becoming less of an issue as a new generation of (Portuguese-speaking) Brazilians, who are fluent in English, enter the market.

“Brazilian tax and compliance are still major issues for South African investors, just as for any other foreign investor, but with business opportunities abounding many companies face up to the challenge and do their best to adapt.”

He has observed that South Africa presents its own problems to Brazilians.

“The first one is unnecessary hurdles put in place when Brazilians apply for work permits to work in South Africa,” he complained.

“The South African Department of Home Affairs has an unfortunate tendency to impose internal requirements for work permits which are not published and not based on law, and then to turn down valid applications for work permits.

“This is a political issue because the Department of Home Affairs seems to be under the impression that, by being unduly difficult with work permits, they protect South African jobs.”

However, he warned that the reality is that these practices destroy South African jobs “as the disgruntled investors would rather not hire a South African, invariably citing the same reason each time: the lack of capability and of suitable South African candidates.”

Two of South Africa’s regional neighbours – Angola and Mozambique – share the Portuguese language with Brazil, and Myburgh suggested that it is not surprising that “Brazilians do more business with Angola and Mozambique – not only because of the language, but because there are more opportunities there.

“Brazilians have traditionally invested strongly in infrastructure projects in those countries, and there are fewer infrastructure opportunities in South Africa than in Angola and Mozambique.

“However, Brazilian companies do invest heavily in other non-Portuguese speaking African countries, like Ghana, the DRC, Nigeria, and Tanzania, so language is definitely not the only factor,” he said.

Myburgh concluded that in future a county’s membership of the BRICS or IBSA clubs may affect where businessmen choose to form partnerships. “This may change in the future, but it is regrettably not the case today.”

Johannesburg-based consultant on developing nations Martyn Davies agreed with Myburgh that to date the business element of South-South partnerships has yet to reflect the more advanced political relationships.

“I believe these loose associations may offer benefit but most often – and due to the disconnect between business and the state – these opportunities are insufficiently exploited,” Davies, the CEO of the Frontier Advisory consultancy, told IPS.

“IBSA is primarily designed as a south-south developing grouping focused on trade liberalisation. With the prominence of the G20 and BRICS, it has lost its lustre somewhat.

“Also, without China being part of the grouping, IBSA does not have the necessary clout to drive through its policy proposals.”

Davies reported that the BRICS grouping is “undoubtedly generating the most interest and excitement amongst our clients.

“They are aware and interested, but while the macro-economic enabling environment of these emerging-market associations is obvious, the practical benefits to business are not always that apparent.

“There has been a great deal of hype around BRICS, which is generating excitement, but beyond the realm of the state and state-owned enterprises, private business is not easily able to leverage the geopolitics for commercial advantage,” he said.

Davies called for far greater and closer connections to be made between the business communities of each BRICS member state.

Johannesburg-based business leader Neren Rau, who is the CEO of the South African Chamber of Commerce and Industry, agreed on the need for more work in exploiting the opportunities presented by the BRICS and IBSA alliances, and he complained that there has not been enough strategising to date.

“The chamber’s concern is that South Africa did not have a defined strategy going into these relationships,” he told IPS.

“The securing of South Africa’s standing within these arrangements was considered as an end, or victory, in itself. For South African Business to leverage real value, an established strategy to support South African business within these arrangements would be required.

“That being said, membership of these arrangements does create a platform, which would have otherwise not existed, for businesses which seek to pursue opportunities with other member countries.”

Davies suggested that as the BRICS grouping becomes more institutionalised, more opportunities will emerge for private companies.

South Africa is hosting a BRICS summit meeting in Durban next year, and Davies said there will be a business forum for approximately 250 companies from the BRICS nations, with 50 firms from each of the BRICS members.

“There will be a great deal of media interest in the outcomes of these business discussions and the sizeable deals that will be announced by the attending heads of state of each BRICS country,” he predicted.

“I notice a great deal of interest amongst the Chinese business community in the BRICS meeting, buoyant interest from India and Brazil and perhaps less interest coming out of from Russia.

“Arguably, South Africa is embracing the BRICS meeting with the most enthusiasm.”

The European Union is calling for protectionist measures against strong emerging economies. Credit: Jim Killock/CC-BY-SA-2.0

By Julio Godoy
BERLIN, Sep 28 2012 (IPS)

For many years, the European Union (EU) and its individual member states counted among the strongest advocates for free trade, arguing that it would boost economic growth and welfare both at home and abroad.

But since the global financial crisis in 2007 triggered a severe sovereign debt crisis and a general economic downturn across most European countries, EU institutions, individual governments and representatives of some industrial sectors are calling for protectionist measures, especially against competitors from strong emerging countries such as Brazil, India, the People’s Republic of China, and South Korea.

The European turnabout on international trade became evident this summer, when struggling German solar panel manufacturers and the new, Leftist French government of François Hollande urged the EU to launch protectionist measures against Chinese competitors and to suspend a recent free trade agreement (FTA) with South Korea.

French minister for industrial renewal, Arnaud Montebourg, denounced in early August “the unacceptable dumping (by) Korean auto manufacturers such as Hyundai and Kia, which are disloyal competitors to the French auto industry”.

“Europe may open its markets, but it should not give herself up” to disloyal economic competitors, Montebourg argued.

An assessment of current industrial trends suggests that Europe is indeed lagging.

The legendary French automaker Peugeot accumulated losses of 1.2 billion euros between July 2011 and June 2012, and has announced layoffs of more than 8,000 workers in France, and industrial relocations to Eastern European countries.

Meanwhile, Korean automakers have substantially increased their exports to Europe. According to European Commission figures released on Aug. 29, exports to France by Korean automobile maker Hyundai grew by 48 percent during the first half of 2012.

At the same time, European automobile exports to Korea fell by 13 percent in the same period.

However, these figures alone do not make a strong enough case for Europe’s calls for protectionism. According to the South Korean car maker Hyundai, well over half of the 400,000 automobiles it sold in Europe between January and July this year were actually fabricated in EU countries such as the Czech Republic.

Additionally, the FTA led only to a marginal fall of customs duties for small South Korean autos, from 10 percent before the agreement to 8.3 starting July 2011, and to 6.6 percent since July 2012.

Still, since other French industrial players – from manufacturers of ships and high-speed trains to constructors of nuclear power stations – have recently suffered severe contract losses against South Korean competitors, the latter has become the embodiment of a strong, allegedly disloyal competitor.

Additionally, according to the World Economic Forum’s newest global competitiveness report, South Korea’s economic performance in 2011 surpassed that of France.

But South Korea is not the only formidable threat.

Twenty-five European producers, led by German solar panel manufacturers facing bankruptcy due a strong Sino presence in the market, asked the EU to launch an anti-dumping measure against Chinese competitors, arguing that the government in Beijing gives local manufacturers illegal subsidies and allows them to sell their products below actual costs of production.

Such practices, according to the group EU ProSun – which represents the majority of solar industrial production in the region – constitute “unfair distortions” of international trade.

The World Trade Organisation itself allows governments to act against dumping where there is genuine injury to the competing domestic industry.

In 2011, the Chinese solar panel industry sold 60 percent of its global exports in Europe. On Sept. 6, the EU announced it would respond to ProSun’s demand by launching an official investigation into Chinese subsidies and trade practices.

Protectionism on the rise

The EU has also developed a new international trade concept, which, according to economic experts and analysts, clearly includes new protectionist measures likely to hurt emerging developing countries such as India, Brazil and South Africa (IBSA) as well as China, South Korea, and Vietnam.

In an analysis released last July, ‘The next decade of EU trade policy: Confronting global challenges?’, the London-based Overseas Development Institute (ODI warned, “There is a major concern that the EU is moving towards protectionism.”

The ODI paper analyses the proposals on international trade approved by the European Commission last May. This new agenda, expected to come into force in January 2014, foresees a reform of the EU’s generalised system of preferences (GSP), which has ruled European trade policies towards developing countries since 1971.

According to the new rules, several strong developing countries would be excluded from the GSP. Additionally, the new GSP would establish new standards on environment, labour, and social rules to be respected by developing countries trading with the EU.

In its analysis of this new GSP, the ODI report warns that the number of countries eligible for preferential trade with the EU will fall from 175 at present to about 80 in the near future.

Dirk Willem te Velde, head of the ODI’s International Economic Development Group and coordinator of the ODI report, is concerned that “the EU will retreat into protectionism, especially vis-à-vis the so called BRICS countries (Brazil, Russia, India, China and South Africa) with a range of trade-related economic policies.”

“Clearly, the GSP reform is likely to impose more trade barriers on a range of products and countries when they are not benefiting from a reciprocal Free Trade Agreement (FTA) with the EU,” te Velde added.

“This does not offer the best value for EU consumers or developing country exporters,” he said.

Christopher Stevens, co-author of the study, said the new GSP regime would exclude all so-called Upper Middle Income Countries (UMICs) from the GSP, even for products where these countries are not competitive.

“The justification for the change is that the UMICs are sufficiently well integrated into the world economy (that they) do not need the GSP; and it will ease pressure on less competitive developing countries and hence focus the GSP preferences on the countries most in need,” Stevens added.

But neither claim stands up well to examination, Stevens argued. “UMICs are not a very close proxy for ‘the most competitive developing countries’,” he wrote in the report, concluding with some very telling examples of the coming discriminations: “Under the new regime, China will remain in the GSP but Cuba will be excluded; Indonesia and Thailand will remain in, but Gabon and Namibia will be out.”

(END)