“Open Protectionism”: The BRIC Integration Mechanism

By Chandrashekar (Chandra) Tamirisa, (On Twitter) @c_tamirisa

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That the American dollar is no longer the anchor of the world is now a matter of fact.

The coming receding tide of the US dollar from global trade may not be much of a concern after all. The four major countries which have emerged in the past 2 decades – Brazil, Russia, India and China (BRIC) – are ready for the world stage, an outcome intended by the United States and the rest of the Group of 7 (G7) countries since the end of the Cold War.

The approach to their economic integration into the post-Cold War world order has thus far, after the Asian and Latin American crises since the Mexican peso crisis in 1994 escaped by China and India, has been to tie their domestic institutional reforms to the viability of their currencies in international trade. This view needs serious reconsideration because domestic institutional reforms, especially in the aftermath of the financial crises within the G7, take time. There is no holier than thou.

The international monetary system which is predicated on the US dollar being the anchor has faltered. Propping up the dollar to mask the flimsy institutional fundamentals in the United States by engendering foreign institutional and direct investment (FII and FDI) crises through mutual recriminations over corruption and institutional quality elsewhere in the G20 may be counterproductive for all. Reform, adapted to country conditions, is required everywhere.

The US dollar must, therefore, recede behind America’s borders, and the euro must end. Economic performance and commodity prices in the various local currencies must be denominated in a synthetic global currency such as the International Monetary Fund’s (IMF) Special Drawing Right (SDR). Countries keep each other’s currencies in reserve to buy and sell for their sustainable economic performance and the SDR exchange rates will be monitored through the IMF’s surveillance function.

The United States will no longer be permitted to invest in dollars in BRIC unless BRIC can invest in their currencies in US. Any FII and FDI pullouts as during the 1990s by US financial institutions will be paid back in BRIC currencies. BRIC need not wait for their dollar reserves to be exhausted to begin paying the US for their imports in their currencies. BRIC can use dollar reserves to acquire natural resources elsewhere. More importantly, All EU countries, including the UK, can begin to pay the US for their imports from US in their own currencies. The British, to make a historical point, can once again, after a century, begin to pay for their imports from US in pounds.

“Open protectionism” is the zeitgeist albeit an oxymoron.


About Chandrashekar (Chandra) Tamirisa

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