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G-20's Merit and Future
A report on the G-20

Chase Foster
Staff Writer

Over the last few months, two major international trade negotiations have essentially failed. At both the World Trade Organization meeting in Cancun, Mexico this past September, and at the November Free Trade Area of the Americas negotiations in Miami, consensus failed because Global North and Global South countries were unable to resolve deep-set differences. In response, pundits, trade ministers, and government officials from countries around the world have been taken by surprise, and are left puzzled as to what has happened. Many officials are viewing the events as temporary setbacks that will be smoothed out in a matter of time. However, some decision makers are taking it seriously – rewriting their assumptions, redrawing their proposals, and renewing their sense of urgency – all in an attempt to revive these ailing agreements.

Most evidence suggests these changes are warranted, and that a new international dynamic has emerged over the past six months that has the potential to reshape the nature of international trade relations. Calling themselves the G-20, or “group of 20 emerging economies,” a group of developing nations has formed a new and potentially powerful alliance. Central to this alliance is mutual opposition to the $300 billion in agricultural subsidies that the US, EU, and Japan provide for their agricultural industries every year. Believing these subsidies put their farmers at a distinct disadvantage, the G-20 nations are hoping a coalition can put them in a better leveraging position.

Led by Brazil, China, India, and South Africa, this coalition consists of the largest developing nations, comprising 60% of the world’s population, and 63% of the world’s farmers. In what might be the first meaningful alliance of South America, Africa, and Asia, the G-20 have used strong bargaining tactics to force their issues to be dealt with. In Cancun, talks ended primarily because developing nations refused to discuss the Singapore issues – a series of proposals on investment, competition, trade facilitation and transparency in government – until Western nations made substantive agreements to reduce agricultural subsidies. When Western nations proved intransigent on these issues, the G-20 countered by halting progress on any issue. They walked out of the negotiations.

This collapse places the WTO in danger of not reaching its deadline of January 1, 2005, for the Cancun Doha Round talks. Likewise, this precedent of solidarity amongst developing nations contributed to the impasse in Miami. The G-20 could grow into a more powerful force or dissipate, but these two precedents demonstrate that even within negotiation structures like the WTO and FTAA, developing nations can refuse to go along with Western nations. This remarkable resolve has the potential to create the first powerful bloc of Global South nations. The power displayed by the G-20 over the past few months may signal the beginning of a power transition that gives Africa, Latin America, and Asia a counterforce to the North Atlantic Treaty Organization (NATO), the Organization for Economic Cooperation and Development (OECD), and the G-7.

By looking at what led to this, and why this is happening now we can determine this group’s potential, and whether or not it will likely have the solvency and longevity of other economic alliances. This new horizon might offer a palpable way for the poor of the world to improve their standard of living and more fully control their lives.

Agricultural subsidies
The driving force of the G-20 is the subset of Brazil, South Africa, India, China, and Mexico, which themselves constitute over 50% of the world’s population. Membership has fluctuated frequently over the past several months, but at present the G-20 includes Argentina, Bolivia, Brazil, Chile, China, Colombia, Costa Rica, Cuba, Ecuador, Egypt, Guatemala, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Peru, Philippines, South Africa, Tanzania, Thailand, Venezuela, and Zimbabwe. Ecuador, Costa Rica, Colombia, and Peru left the group after the U.S. placed significant pressure on them to do so, though Ecuador is considering rejoining. Furthermore, over 63 percent of farmers live in G-20 countries, which produce more than a fifth of global agricultural output and more than a quarter of farm exports. If all developing nations were thrown into the mix these numbers would become even higher. The name G-20, however, will remain no matter how many nations join as it does not refer to the number of countries but to the date it was formed, just before the Cancun meeting on August 20, 2003.

These developing nations have been pleading with wealthy countries to cut down on their agricultural subsidization for years, and fair trade campaigns have consistently urged Western countries to avoid the practice of dumping their agricultural surpluses on world markets. However, wealthy countries have not provided any meaningful concessions on the issues (usually they simply reformulate their subsidization policies), and they have refused to fully equalize their own markets, while forcing developing nations to equalize and open theirs. The G-20 hopes to provide the force that will ameliorate these inequities.

Collectively, wealthy nations spend U.S. $330 billion on agricultural supplements and subsidies each year, U.S. $250 of which goes directly to agricultural producers. This subsidization not only results in the overproduction of certain foods, but it is also economically inefficient and overwhelmingly goes to large, agri-business corporations. Moreover, these subsidies, combined with a more developed infrastructure for mechanized mass food production allow many Western nations to overproduce and dump artificially low priced foods on the international market. This practice devastates the economies of developing nations and skews worldwide agricultural production.

More than just agriculture
The significance of the G-20, however, goes way beyond agricultural discrepancies. James Wolfensohn, President of the World Bank, said its emergence, "has given rise to a new paradigm of global financial relations for the 21st century, and has demonstrated that poor countries can act as an effective counterweight to the rich.” Regardless of whether it succeeds or not, the G-20 has at least on the surface become the “voice of the unheard”, employing its ability to bring negotiations to a halt and to create leverage against the world’s most powerful nations.

Demonstrating its reach into other policy areas, the G-20 recently had its first meeting in Brasilia where President Lula of Brazil proposed the creation of a Free Trade Agreement (FTA) that would only include countries in the Global South. This would allow nations of similar developmental levels, with similar power, to more fairly and equally trade than the present system where the absolute advantage of the West seems to dominate trading dynamics. Though this FTA is still in the preliminary stages, it could mean that the G-20 will become increasingly multi-issue oriented and expand its influence beyond agriculture.

But is the West willing to compromise?
The E.U. and the U.S. have reacted clearly in opposition to the G-20. According to the New York Times, U.S. trade representatives called the coalition “a grouping of the paralyzed,” in September and Franz Fischler, the E.U. agricultural commissioner said "The improvised articulation led by Brazil is something from another planet," and that these countries “need to come back to earth quickly.” Both of these entities, consequentially, have reacted to the collapse in Cancun by pursuing bilateral trade negotiations of their own. The E.U. is pursuing a Euro-Mediterranean pact, while the U.S. has recently completed pacts with Chile and Singapore and is currently pursuing agreements with Australia, Morocco, Ecuador, Costa Rica, Colombia, and Peru. In fact, the U.S. has knocked four of the original G-20 members from the coalition by offering bilateral agreements. Moreover, the U.S. has made it publicly known that it would look unfavorably upon countries that were part of the coalition, despite that fact that many G-20 nations are not in opposition to U.S. policies outside of agriculture.

Many Western publications have also espoused the theory that the collapse in negotiations has only hurt the G-20 countries because they stand to benefit more from multi-lateral trade agreements than the West. As John Audley of the Carnegie Endowment for International Peace explained, “We’re going to be fine. The Europeans are going to be fine. Its developing countries that ultimately are the losers when negotiations like this collapse.”

However, most international economists would agree that the fulfillment of the Doha round is arguably more important, and thusly more beneficial for the West, than for the Global South. The heads of thirty-two business organizations representing over $3 trillion in trade have issued a common statement declaring the urgent need to revitalize the Doha round of negotiations and overcome the September failure in Cancun, according to the U.S. Council for International Business. These companies recognize that the Singapore agreements need to be deliberated if their corporate security and safety are to be held in developing nations markets. Western countries, therefore, can certainly not afford to abandon the Doha round of talks completely. If G-20 countries can hold their resolve, Western countries will consequentially now have to ensure some manner of compromise.

Yet, most experts would agree that these compromises would not come from the U.S. until at least after the 2004 election. International agreements rarely happen during election years in any country, and they are even more unlikely to take place in the U.S. in 2004, because key mid-western electoral votes for Bush are contingent upon maintaining high agricultural subsidies.

What does this mean for international organizations like the WTO?
The failure in Cancun means that the Doha round will not be accomplished unless substantial concessions are made on agricultural subsidies. And if the G-20 continues to expand and fortify, then it could create challenges to other free trade permutations having to do with intellectual property rights, patents, and the utility of multilateral agreements.

For the WTO, how it deals with the G-20 can determine whether it succeeds or fails. If the organization cannot overcome its U.S.-European dominance, evidenced through its disproportionate share of delegates then it will not be able to continue. Even if the G-20 collapses (which is seeming less and less likely), then an inevitable new coalition will form that will effectively fulfill the same space. Within the WTO, there is also evidence for hope. The 146-member organization at least has a democratic structure, where each member gets one vote. Many agreements continue to be made behind closed doors in so-called “Green room,” but modern technology utilization, and more up to date communication can help G-20 countries and others overcome heavy-handed divide and conquer strategies. Furthermore, a poll conducted by the Institute for International Business, Economics, and Law (IIBEL) revealed a strong desire by trade officials to deal with agricultural subsidies and remove the Singapore issues from the developmental agenda. Nearly three-quarters of those surveyed said a primary focus on subsidies was the only way towards an effective post-Cancun strategy. If the WTO can adapt to this new power bloc then it will prove its resiliency as an organization, and demonstrate that its structure provides a beneficial means for countries to arbitrate trade disputes.

How should activists respond?
Although, Western anti-corporate globalization activists certainly would not want to support a series of events that reinforces the power and legitimacy of the WTO, it must be recognized that a more equal WTO is better than an unequal WTO. Moreover, many of the problems with the WTO have to do with the players and not the structure or existence of the institution itself. If democratically elected Global South governments pragmatically decide that having improved free trade regimes are better than blindly abandoning membership in the WTO, Western activists need to respect this. Thabo Mbeki, President of South Africa has recently said that anti-globalization protesters are an important ally to the Global South. “They may act in ways that you and I would not like – breaking windows in the street and this and that – but the message they are communicating relates to us. We need to link up with our constituency in the developed world.”

If effective North South alliances can be created, especially on blatant issues like agricultural subsidy hypocrisy, then more equitable trading conditions can be reached, and the lives of millions of people can be improved. However, this requires activists to be more willing to work with more moderate elected leaders. And although there is always a role for radicals who bring up the issues in clear, power ways, the G-20 should not be written off completely. Although it should be scrutinized, it seems at least for now that it is serving as an indispensable lever of empowerment for dozens of countries and hundreds of millions of people.

Problematizing G-20
As a new coalition, the G-20 faces organizational, infrastructural, and financial problems. It has no precedent for similar developing nation agreements, and it seeks compromises by playing an inexperienced role in a power game with the most powerful and wealthy nations in the world – a move that could be self-destructive. Countries like the U.S. are not used to being told what to do, and there is some concern that U.S. will completely disengage if pressure is put on.

The G-20 also lacks trust and assurance between the countries that comprise it. Potential problems could ensue between agricultural exporting countries like Brazil, and agricultural importing countries like China. These two countries, along with many others have not traditionally been in alliance, creating an environment where small disputes could break the entire alliance. This is because, like all super-national entities, the G-20 lacks enforcement power, and nations can come and go as members whenever they want.

Conclusions
The emergence of the G-20 offers billions of people in the Global South, real, tangible improvements in their lives. Not only could it allow for the elimination of billions of dollars in harmful farm subsidies, but also it could allow for over 63% of the world’s population to have a greater voice, which is no small victory. Though the emergence of the G-20 does not have revolutionary potential, it does provide developing nations the option to play against the West on their own terms. It counters moneyed power with population and resource power, and seeks to force the West into negotiations that are long overdue. This new alliance, if it proves tenable, has the potential to negotiate deals with the West on a whole variety of issues. If developing nations can have structural solidarity, a “race to the bottom” can be averted and capital flight constrained.

It does leave out, at least for now, the poorest of the poor countries, and this could de-legitimize some claims of the grouping. Its primary coalition leaders also stand on shaky ground together, because many of them have very different interests. Many of the member nations are in the G-20 solely to oppose agricultural subsidies, so an expansion to other issues may meet opposition at first, especially from those countries largely influenced by the U.S. Petty divides and cleavages must therefore, be avoided if success is to be achieved. Finally, the G-20 faces its chief opposition from the forces it is trying to counter, those in the West. Though Europe has showed some movement toward compromise, the U.S. has not, and both the E.U. and the U.S. have pursued bilateral negotiations since the collapse in Cancun in an attempt to undermine the new group.

But with all of it’s problems, the prospects for the G-20 look good, and the prospect for developing nations to be able to stand up to the West looks even better. Indigenous movements are making their governments more democratic, and holding governments more responsible. Proposals like Lula da Silva’s FTA for developing countries only are gaining steam. Other South-South treaties are also being worked out, including a China-Africa negotiation agreement that is being debated this month. Treaties like these offer the real possibility for mutually beneficial growth.

What is needed now is for more nations to align themselves with the G-20, and for the nations who are part of it to create a more firm grouping. For the G-20 to be most effective, it should look to other organizations like the G-7 and G-8 for guidance, and create proposals, plans, and funding mechanisms for the future. The G-20 can also work with non-profits and anti-corporate globalization groups in the West for funding and support. Alliances across borders between groups that support each other are especially important now. With these efforts, the G-20 could be transformed into a force that can actually ameliorate people’s lives.

Staff Writer Chase Foster can be contacted at:
cmfoster@email.unc.edu

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