Recently, China and Brazil signed a critical agreement whereby the US dollar will be excluded from trade exchanges between the two countries. The deal gives China (the world’s second-largest economy) and Brazil (one of the world’s top 10 economies) the option to use the Chinese (yuan) or Brazilian (real) currency in their trade transactions. China has signed similar trade agreements with several other countries, including Russia, Saudi Arabia, Iraq, and Pakistan, and is rapidly de-dollarizing its bilateral trade with foreign countries.
China and Brazil are each other’s important economic partners, and the volume of trade between the two countries is about 100 billion dollars. China’s share of Brazil’s total export products (240 billion dollars per year) is about 33 percent, or 79 billion dollars, more than three times Brazil’s exports to the US. The United States, as Brazil’s second export destination, has attracted less than 10 percent of the country’s total exports.
China and Brazil have 20 percent of the world’s population and 12 percent of their land area. With a GDP of 18 trillion dollars, China alone accounts for about 18 percent of the world economy, second only to the United States.
After the agreement between China and Brazil, the Association of Southeast Asian Nations, known as “ASEAN,” is also considering removing the dollar, euro, yen, and British pound from trade transactions between member countries and using national currencies. ASEAN has ten permanent members and one observer member, occupying 7 percent of the world population and 3 percent of its area.
ASEAN is the third largest trade bloc in the world after NAFTA (the US, Canada, and Mexico) and the European Union. The total volume of ASEAN foreign trade is about 2 trillion and 500 billion dollars.
Considering that the size of ASEAN’s digital economy is estimated at 200 billion dollars, and according to forecasts, this amount will reach 360 billion dollars by 2025 and one trillion dollars in 2030, therefore, ASEAN is looking for a digital cross-border payment system between its member countries to use their national currencies in trade transactions.
The world’s emerging economic powers, known as “BRICS,” have also made significant efforts to remove the dollar from their trade exchanges in the past one or two years. BRICS members are Brazil, Russia, India, China, and South Africa.
BRICS is strengthening infrastructure related to the common payment network to reduce reliance on the US and European financial system based on a basket of the currencies of member countries. The total volume of BRICS exports is about 4 trillion dollars. BRICS member countries have increased the use of their currencies in mutual trade in recent months. BRICS has half the world’s population and 26 percent of its territories, 28 percent of its economic capacity, and 20 percent of the world’s commodity trade.
Members of the Shanghai Cooperation Organization also recently agreed to increase their trade in local currencies. Shanghai has a 20 trillion dollar economy, which includes 23 percent of the world economy.
The agreement of the world non-Western economic and political powers and organizations to remove the dollar from trade exchanges, which has seen a progressive trend in recent months, is a “big blow” to the “dollar dominance” in the world.
The dollar, whose technical infrastructure is at the disposal of the United States, is the “cornerstone” of the power and hegemony of the United States in the international system. The role played by the dollar in the world power of the United States in the years after World War II has been greater than other components of the country’s military, industrial, technological, etc., strength.
More than 70 percent of currency transfers on the SWIFT platform are in dollars. An essential part of non-dollar transfers also touches the dollar cycle in part of the transfer process. In addition, the dollar accounts for 59.8 percent of the world’s foreign exchange reserves. These figures show that the dollar remains dominant in international trade. However, the “ de-dollarization “ trend of international trade has intensified in recent months in trade exchanges of non-Western countries and organizations among the top global and regional economies.
Although weakening the dollar’s role in the short term seems unlikely, in the medium term, this process will deal a significant blow to the global hegemony and dominance of the United States, a major part of which is owed to the dollar’s supremacy in the world.
If extended to other countries, the de-dollarization of international trade and bilateral and multilateral exchanges between countries will cause more control over financial and monetary policies and prevent shocks and economic-livelihood disturbances that have social and security consequences.
Decreasing the dollar’s role in trade between countries also leads to the potential strengthening of economic relations between nations, increasing the development process of poor countries, creating immunity against the US and European sanctions, and weakening the dollar in international trade and currency diversification in the world currency market.
The US sanctions against Russia and the blocking of half of the country’s foreign exchange reserves have given “strong and new impetus” to efforts to reduce the role of the dollar in international trade. Today, the non-Western countries of the world have concluded that tying the fate of their economy and foreign exchange to the dollar, in a situation where the US and Europe seek to achieve maximum domination over the world economy and trade through dollar and euro, causes a permanent threat to the economic infrastructures and always makes those countries vulnerable before the US.