Valdai Club

“A house is made of bricks and beams. A home is made of love and dreams.” – a popular US real estate ad based on a quote from Ralph Waldo Emerson

The stark realities of a world descending into a vortex of sanctions and protectionism have already given rise to a number of initiatives in the developing world targeting the creation of alternative institutions and integration groupings that would to some degree provide for additional venues for openness and liberalization across the developing world. Some of the key initiatives in this area included the launching of the BRICS+ format by China at the BRICS summit and its further development by South Africa during its chairmanship in the BRICS in 2018.

These innovative approaches to economic integration increasingly point to a more active cooperation among not just the largest economies of the Global South but also the largest regional integration blocks led by BRICS economies. A potential mega-block that brings together these regional integration arrangements denoted as BEAMS (BIMSTEC, EAEU, AU, MERCOSUR and SCO – all on the basis of previous outreach undertakings by BRICS countries) could form the basis for the first mega-block of the developing world that would have enough weight to provide a counterweight to other competing megaprojects such as the TPP or the TTIP.

The commentary on the BEAMS concept (advanced in the Valdai publication “BEAMS of the sunrise: a look at BRICS 5-year cycles”, 14 June, 2018) has previously mostly focused on the “solar rays” analogy of the acronym, while a far more promising venue may be to look at the angle that brings BEAMS and BRICS under one umbrella of construction tools and materials that may be employed in the building of new global economic architecture.

In building jargon beams are an indispensable part of the building construction, serving as supporting structures for floors and playing a key role in the structural integrity of the building. Beams come in many varieties in construction – there are the bond beams, ground beams, ring beams, I-beams as well as vertical or horizontal beams. A typical house is built from elements such as posts, columns, beams and bricks, the latter frequently used as the material for the foundation, with beams used as support structures at the upper levels of the building to ensure its integrity.

Using these analogies, the BEAMS and the set of platforms of regional integration arrangements more generally may be seen as the missing links/support structures in the edifice of the global economy and in particular its South-South section. The problem with global economic architecture built in the last century is that the progression from country-level economic integration to the roof-top of global economic institutions has been too sporadic and swift, missing the crucial stage of incorporating the intermediate level of the supporting structures of regional integration arrangements. Despite their active propagation and increases in sheer numbers, the multitudes of regional integration arrangements have not been duly incorporated as supporting structures/platforms that would on the one hand sustain the global institutions above and render due stability below at the country-to-country level. What is then the sequencing and the mechanics of the construction process that involves the use of BEAMS in building a more stable global economic architecture?

BEAMS as the direct derivative of the earlier BRICS outreach exercises that included the African Union, BIMSTEC, EAEU, SCO and MERCOSUR may be subdivided into two main categories. The first one targets mainly connectivity in the respective continents between BRICS economies and their regional partners and includes the African Union and the SCO. This offshoot of the original BEAMS grouping is to emphasize primarily the cooperation among the regional development banks as well as the new development institutions such as NDB to work together in financing infrastructure projects related to intra-continental connectivity in Africa and Eurasia. Further progression in building a network of pan-continental alliances targeting the promotion of infrastructural connectivity may involve the addition of CELAC from South America to form a trilateral SCO-AU-CELAC alliance that brings together the vast majority of developing countries.

The second off-shoot from the original BEAMS grouping includes BIMSTEC, EAEU and MERCOSUR – this set of integration arrangements may form the initial stage for the FTA track that is to bring together the main regional integration arrangements with BRICS participation with the goal of forming a platform for economic liberalization. The formation of a trade and investment partnership among the EAEU, BIMSTEC and MERCOSUR is facilitated by existing agreements and negotiations already underway. In particular the EAEU and India are currently exploring the potential modalities for an FTA agreement, while India and MERCOSUR have formed a preferential trade agreement that went into effect in 2009. Finally, MERCOSUR and the EAEU have progressed towards preparing a joint memorandum on cooperation.

The FTA track of BEAMS may be extended to include regional groupings such as SACU (South African Customs Union) and the ASEAN-China (as well as ASEAN-India) FTA. The latter may play the role of establishing a connection between the BEAMS/BRICS+ framework and the Regional Comprehensive Economic Partnership (RCEP), of which the China/India-ASEAN FTA is a sub-component.

This in effect leads to a combination of regional integration arrangements that are more focused on trade and investment integration, namely BIMSTEC, EAEU, ASEAN-China FTA, MERCOSUR and SACU. The resulting acronym is BEAMS that may be considered as the FTA derivative of the original BEAMS group formed on the basis of BRICS outreach exercises. 

Overall, the combinatorics of bilateral alliances within a five-member framework such as BEAMS allows for 10 bilateral “integrations of integrations”. What is important is that out of the 10 potential agreements a significant part is in the process of negotiation or preliminary discussion:

- 1 agreement already entered into force: MERCOSUR – SACU preferential agreement entered into force in 2016
- 3 agreements concluded by BRICS individually apart from ASEAN-China FTA, ASEAN-India FTA: India – SACU FTA, India-Mercosur FTA, EAEU-China non-preferential agreement
- 4 agreements under discussion: China-India FTA, China – MERCOSUR FTA, China – SACU FTA as well as EAEU-India FTA. 
- 2 agreements that are yet to be addressed: EAEU with Mercosur and EAEU with SACU          

It turns out then that the construction of the BEAMS/BRICS+ framework is not starting from scratch – there is already a set of regional agreements among the potential BRICS+ members that can serve as the source of further multilateralization of trade preferences within the BEAMS circle. Importantly the set of trade agreements within the BRICS+ framework will serve to shape and provide a sense of direction to the evolution of South-South economic integration. Thus far the economic integration among developing countries has lacked structure and direction, being notably more fragmented compared to the largely coherent and effective framework of integration in the developed world.