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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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