Echoing India’s stance on the European Union’s carbon tax, BRICS nations, in the Kazan Declaration under Russia’s chairmanship, rejected the carbon border adjustment mechanism (CBAM), calling it discriminatory. The group also advocated for trade settlements in local currencies amid thinning dollar reserves globally.
This comes after India’s criticism of the EU’s carbon tax, which as per industry estimates, could raise the costs of Indian exports by 20-35 per cent, making them uncompetitive in the European market. Notably, more than a quarter of India’s exports of iron, steel, and aluminium in 2022 were destined for the EU.
“We reject unilateral, punitive, and discriminatory protectionist measures that are not in line with international law, under the pretext of environmental concerns, such as unilateral and discriminatory CBAMs, due diligence requirements, taxes, and other measures, and reconfirm our full support for the call at COP28 to avoid unilateral trade measures based on climate or environment,” the joint statement read.
The statement also sought to encourage the strengthening of correspondent banking networks within BRICS and to enable settlements in local currencies, in line with the BRICS Cross-Border Payments Initiative (BCBPI), “which is voluntary and non-binding.” The alliance that initially included Brazil, Russia, India, China and South Africa when it was founded in 2009 has expanded to embrace Iran, Egypt, Ethiopia, the United Arab Emirates and Saudi Arabia. Turkey, Azerbaijan and Malaysia have formally applied to become members.
Last year, India and the United Arab Emirates signed agreements on the use of local currencies for cross-border transactions. Indian and Russian central banks are also working to set up a mechanism to expand local currency trade.
A push for settlement in domestic currency also comes as Russia and China have actively reduced the use of dollars in bilateral trade after the US excluded Russia from the international payment system ‘SWIFT’ following the invasion of Ukraine.
Meanwhile, the IMF’s (International Monetary Fund) Currency Composition of Official Foreign Exchange Reserves (COFER) indicates a gradual decline in the dollar’s share of central bank and government foreign reserves. However, the reduced role of the US dollar over the past two decades has not been matched by corresponding increases in the shares of the other “big four” currencies — the euro, yen, and pound, according to the IMF.
The joint statement also expressed concern over the disruptive effect of unlawful unilateral coercive measures, including “illegal sanctions”, on the global economy, international trade, and the achievement of the sustainable development goals.
