After Cancún: Southern Prospects for Trade and Development

01 May 2006
Article
 
Walden Bello speaking at the ISS

After Cancún: Southern Prospects for Trade and Development
Walden Bello
Policy Dialogue at the Institute of Social Studies, The Hague, 5 April 2004

The World Trade Organisation negotiations collapsed in Cancún last year. This was largely due to developing countries' resistance to the introduction of new issues, pending a thorough review of the impact of WTO rules on developing countries' economies, and accumulated resentment at the continued protectionism in the agricultural sector in the North. Two significant blocs emerged, representing over two thirds of WTO member states, almost all developing countries. In particular, the G20 led by Brazil, South Africa, India, China - major agricultural exporters and heralded as the vital economies of the future - is seen as a significant political development, with the potential to alter the balance of power in the global trading system. The future of the WTO and current orthodoxies regarding export-led development now hang in the balance. Greater attention is likely to be paid to intra and inter-regional trade and co-operation. Is another rules- based multilateral trade and development system now conceivable?

Report

How Monolithic is the G20, while different factors influence the scope of this group of developing countries that emerged as a regional force during the World Trade Organizations 5th Ministerial meeting at Cancún? Will the G20 expand to take on new issues? Walden Bello, Right to Livelihood Award winner and Transnational Institute board member and fellow, addressed these crucial questions at a Policy Dialogue organized by Transnational Institute and the Institute of Social Studies on the 5th April, 2004. This dialogue is part of the series of policy dialogues by which Transnational Institute aims to inspire critical thinking to the current neo-liberal development paradigm.

Introduction

Bello emphasized that the G20, which in effect comprises less than 20 but significantly powerful developing countries namely, Brazil, China, India and South Africa, should be more proactive. The coming together of this group has created a whole new dynamic that can no longer be controlled by the European Union (EU) and the United States (US). The EU though more sophisticated in approach did try to dissuade some countries like Kenya from joining the group of 20. The United States was more directly confrontational and aggressive in its efforts. The US criticized the G20 at a press conference at Cancún, stating, that the group was a throw back to the past and just a new face of the old programme of the new international economic order of the 1970s. What has alarmed the EU and US is that the G20 represents the most powerful economies of the developing world. The Brazilian foreign minister described the G20 as representing collectively 65% of the world's farmers. This is a formation that cannot be taken lightly!

Dynamics at Cancún: South America Victim of US pressure

Robert Zoellick, US trade representative, blamed the G20 for the collapse of the Ministerial, saying, that at Cancún there were "can do" countries and "won't do" countries and that the won't do countries were responsible for the outcome at Cancún. Tremendous pressure was exerted on governments who were negotiating the Central America Free Trade Agreement (CAFTA). El Salvador was one South American countries that fell victim to pressure from the United States at Cancún. Soon after Cancún, US Senatorial delegations in Columbia emerged with outright statements that it would not look kindly on Columbia with its differential relations with the US if it continued to be part of the G20. Zoellick visited Costa Rica and warned that Costa Rica's negotiations in the CAFTA would be negatively affected by its membership in the G20. Two months after Cancún, the G20 lost a number of members due to US pressure; Guatemala is another country that was forced to withdraw.

Dimensions of G20

Although the G20 has lost a few members, the group was formed on August 20 and thus the name of the group as G20 remains. The acknowledged core of the G20 represents the most influential and powerful economies of the developing world - Brazil, China, India and South Africa. The formal program of the G20 is limited. It is a formation built on agriculture with a very specific demand on a radical reduction of high levels of agricultural subsidization in the EU and the US that adversely affects the developing world. Nevertheless, the smaller African countries asserted caution with respect to the G20. This caution stemmed from a sense that the program was quite limited; a sense that the key countries in the G20 represented export agricultural interests rather than small farming interests; a sense that somehow some of the G20 countries were not that sympathetic to the demands of the smaller countries that should have special products that should be exempted from liberalization on the basis of special and differential treatment. The latter reason was the very basis on which the group of 27 was founded.

The Role of Brazil in the G20

Governments of the G20 felt that Brazil should take on the most active leadership and representative role of the G20. China and India too have graciously given way to Brazil in terms of articulating the demands of the G- 20. Part of this dynamic is Brazil's instrumental role in bringing the group into existence. Would the G20 have emerged without the internal developments in Brazil in which a workers party with President Lula as its leader came to power? Elements in the US have targeted Brazil for taking this leadership role. For instance, an Institute very close to Washington, when assessing the role of Brazil in both Cancún and Miami, wrote as a warning (which certainly reflects the States thinking), that Brazil defends anti trade and anti US policy and if it stays in its course Brazil will be sidelined. "It will miss its opportunity for leadership, loose economic benefits and find itself in useless confrontation with the US". To some extent the role of Brazil is dictated by a configuration of policies. Pr. Lula has moved to take on a strong leadership role in confronting the US on trade issues as a repercussion to its financial domestic policy. Brazil's radicalism has been limited by the concessions it has made to the International Monetary Fund with a contractionary program in order to produce a budget surplus equivalent to 3.5 %; which indeed was one of the concessions made by President Lula even before the elections due to the threat of capital flight. Brazil's political and economic space has been tied on the domestic front so trade is an opening for the workers party government to assert its progressive character and its progressive perspective even if there is an element of a compensatory kind here.

The Role of NGOs and Peoples Movements

The reactions to the G20 both from the developing world, NGOs, people's movements etc., were one of widespread support for the G20. The response from NGOs and peoples movements has been more ambivalent. Bello recalled, while the US was busy in its vendetta against the G20, a network to which he belonged to under the banner "Our world is not for sale" (which is one of the most influential in terms of civil society engagement with the WTO), had a lot to debate on a statement that was proposed to support the G20 in the context of the current attacks of the US to try to dismantle it. It became the most heated discussion in years. Even after discussing the statement for two months prior to Cancún, it was interesting in that it went back and forth; at first organizations would approve it, then on second thoughts disapprove. Bello himself was in charge of writing and rewriting the statements. Ultimately there was a consensus based on "our world is not for sale" and the statement could not be endorsed.

The G20: Limited in Scope but Hopeful

The fear was that the G20 represented the interests of large agro exporters rather than small farmers as there was no strategic program with respect to the protection of the interests of the small farmers. Smaller countries were worried that the G20 could come into an agreement on the reduction of subsidies with the US and EU or that they may find such concessions acceptable leading to liberalization and access to foreign markets which would be devastating for small farmers.

The formal program of the G20 may be limited in scope and built around agriculture. But can the G20 expand its programme even in the WTO context to take on the new issues? Why not expand it into a comprehensive developing country program for the WTO that would include process and the principles of special and differential treatment? There is a sense of frustration with the limitation of the G20. Related to this was a sense coming from a number of organizations and NGOs, that the G20 should be much more proactive not only with respect to other issues of a North South character but should begin to move negotiations and trade outside the WTO context. Cancún was an opportunity to get trade negotiations outside the WTO and get that momentum going. The G20 had an opportunity to do this but did not follow this up after Cancún. All these issues came together in an interesting debate with NGOs, people's movements and G20 representatives, during the World Social Forum in Mumbai, in January 2004. There were two G20 influential representatives that spoke, one from Brazil and one from India. Brazil revealed that it would be a big mistake if the G20 moved towards a South-South paradigm and moved from agriculture to incorporate the new issues. The G20 would continue to exist in an effective way because it has a very limited programme, which of course is opposition to high levels of agricultural subsidization. He felt this was its background and common principles and to bring it beyond that would disintegrate it.

There might be differences of opinion in the Brazilian government. As some critics rightly pointed out that this was a sort of Brazilian foreign ministry stand, a very limited and extremely pragmatic kind of expression of views that people were not hearing from the Brazilian government's initiatives. In the rhetoric and statements by Pr. Lula to Africa and India on TRIPS, there certainly was a sense that the G20 could be a basis for a South-South kind of cooperation and paradigm that has the potential to go beyond agriculture. Several questions remain unanswered...

The sort of interaction in Mumbai was very interesting as it explained how the G20 emergence began to spark a lot of hope in addressing the straight jacket approach of the WTO or alternatives pushed by the EU and the US for bilateral and multilateral free trade. The G20 was a sort of formation that could begin to raise the possibilities for an opening within the world trade system that was not there before. People were pinning their hopes on this new formation in terms of opening of their space as to what came to be known in the succeeding months as "trade relationships" that would be based more strongly on South- South cooperation. Some elements within the group of 20 are worried about expectations that have already been fulfilled and are pushing to slow the process down and scale expectations down to a fairly limited programme on which they can negotiate with the EU and US.

Speculations on the Future of the G20

The G-20 is monolithic. There are a number of different factors involved in trying to define the scope of the concerns of G20 and the struggle to define it is not yet over.

The US in particular will try to break up the group. There is no indication at all from Washington that its accepts the G20 as far accompli. Cancún and Miami were tactical retreats on the part of the US but strategically it has not accepted the G20 as a negotiating partner. The EU might be just as worried as the US about the emergence of the group of 20 but it sees the approach of the US as counter productive. The EU's stance to the G20 is not to oppose it frontally but to try to slow it down.

Within the G20 itself, there are a number of countries that would get more radical. Argentina would be more open to a comprehensive definition of the scope of the G20. Venezuela has been the most assiduous, getting the engagement support of the NGOs and people's movements in terms of trying to expand the scope of concern of the G20. India and China, which are big players, tend to be much more pragmatic and would probably want to keep the program more limited. Brazil will continue to be important in many ways as a leader.

The future of the G20 will be influenced by the struggle within the Brazilian government as was evident at the World Social Forum in Mumbai in January 2004. Conservative factions in the Brazilian government want to limit their demand to very specifically that of agriculture. But with respect to other circles within the Brazil government - certainly there are forces that would want to bring Brazilian advocacy in the G20 more towards the vision of South- South cooperation.

The G20 will be very hard to break up. The US will not succeed in breaking it up given the variety of governments involved and interests to expand its program beyond the question of agricultural subsidies. Many different countries within the G20 will use this platform to try to move towards a more progressive and comprehensive vision as well as to move negotiations out of the context of the WTO to one of regional trade agreements. So the G20 is important not only because it has shattered the monopoly of the US and the EU, it has indeed opened up a space in the global scene; a space to which the inheritors may not be in the G20 itself but other regional formations.

Angles for Analysis of the G20

  • the extreme fluidity of the alliances
  • the new period of South-South cooperation.
  • the greater willingness to stand up with the North
  • the courage displaced by the African countries
  • the whole question of agricultural subsidies
  • the ways that different countries from the South are trying to move negotiation beyond the WTO

Although the programme of the G20 might remain limited, the G20 has been an historical milestone in helping open up the Global Trade Order!