G20, the developing country coalition
FOCUS ON TRADE NUMBER 98, APRIL 2004
IN THIS ISSUE of Focus on Trade we look at the G20, the developing country coalition that threw a sizeable spanner in the works during last year’s WTO ministerial. Although their role as a potential counterpower to the US and the EU is welcome, their negotiating position in the WTO is riddled with contradictions. How does the G20 propose to reconcile market access and agricultural liberalisation in the framework of the WTO with their stated intention to protect small producers and peasants ? Whose interests are they really defending ? Can export agriculture bring employment and prosperity to the rural poor ? Is it possible to simultaneously maximise the benefits from exports and protect local producers ?
Nicola Bullard speculates about where the G20 is heading and how progressive movements should respond, while Clodoaldo Hugueney from the Brazilian ministry of foreign affairs describes the G20’s origins and agenda.
G20 : THEIR POWER IS NOT OURS By Nicola Bullard
THE emergence of the G20 as a force in the WTO negotiations was one of the many factors contributing to the collapse of talks at the 5th ministerial held in Cancun last September. The G20 - named to commemorate the date of its formation in August last year - is spearheaded by four of the most significant developing country economies : India, Brazil, China and South Africa. Some commentators refer to the group as the "G4 plus" highlighting the dominance these countries. Its membership has waxed and waned over the past months with several of the smaller members succumbing to pressure from the US to leave the group. (1)
The G20’s negotiating position was - and still is - straightforward : increased access to the Northern markets for their agricultural products, an end to agricultural export subsidies and the elimination of domestic suppor ts that are effectively export subsidies. (See Hugueney’s article below for more details on the G20 position.) In Cancun, the EU and US showed little interest in accommodating the demands of the G20 and, in any event, the talks ended before any substantial negotiations on the draft agriculture text, so the balance of forces was not tested.
Following the ministerial, the G20 was characterised by the EU and the US as intransigent, although others saw the creation of a third force to challenge the US and the EU as the dawn of a new era in WTO negotiations (or even South-North relations).
The EU and the US, however, were not the only critics. The international peasant federation Via Campesina, for example, saw the G20’s position as a thinly veiled effort to promote the interests of agro-exporters and agri- business, with little regard for the impact on peasant producers. This view came to the fore during the drafting of a call from NGOs denouncing the below-the-belt tactics of the US and the EU to divide the G20 coalition p ost Cancun. Via Campesina decided not to endorse the statement, arguing that although the G20 might be a useful, short-term obstacle to negotiations, their demand for further liberalisation in agriculture, if met, would simply deepen the crisis of peasant farmers and small producers.
It was a hard call : for many, the mere existence of the G20 deserved support because of the role they might play in shifting the balance of power in the WTO, even if their concrete negotiating positions fell far short of demands for a transformation of the Agreement on Agriculture (AOA), let alone the complete withdrawal of the WTO from agriculture.
G20 DEBATE AT THE WSF
In this context, Focus on the Global South invited G20 representatives from Brazil, India and South Africa to debate with Via Campesina, the Africa Trade Network, Focus on the Global South, the Brazilian trade union confe deration CUT and the Delhi-based Economics Research Foundation at the World Social Forum in Mumbai earlier this year. The topic was "G20 : passing phenomenon or here to stay ?" The goal was simple : to get a better sense of where the G20 is heading, and whether there is any scope for the group to adopt an expanded and radicalized agenda reflecting the demands of social movements, trade unions and peasant farmers.
The Brazilian Ministry of Foreign Affairs - the Itamaraty - sent Ambassador Clodoaldo Hugueney, responsible for coordinating the G20 senior officials and with the authority to represent the Brazilian government’s position . India’s spokesman was Shri S.N.Menon, special secretary in the ministry of commerce and industry. In the end South Africa was not represented.
While waiting for the debate to start, Ambassador Hugueney joked that he wanted to "lower" our expectations of the G20. We joked back that some people already had very low expectations and he might need to raise them.
In the end, our expectations were definitely lowered (or met, depending on your starting point), as Hugueney insisted several times that the G20’s agenda inside the WTO is narrow - market access and an end to export subsi dies - and that any effort to broaden the agenda of the group would lead to its collapse.
Ambassador Hugeuney’s presentation follows this article. In it, he defines clearly the aims and the limits of the G20, although neither in the debate nor in his paper does he explain how the group proposes to square the c ircle of protecting small farmers and promoting export agriculture. There is no mention of market protection, no mention of stabilizing commodity prices, and no mention of how to deal with the trade-offs that will inevitably be demanded by the US and the EU in return for any future concessions in market access or domestic supports and export subsidies.
This is the crux of the dilemma : can the G20 liberalise and protect at the same time ? Of course, resolving this paradox is all in a day’s work for the EU and the US, as the recent US concessions to the sugar industry in t he US-Australian free trade agreement and CAFTA amply demonstrate, but whether the big powers let their competitors into the same game is another matter altogether.
INSIDE-OUTSIDE STRATEGY, SEEN FROM THE INSIDE
Hugueney and Menon both live "inside the box" and their approach is to match the political game with technical proposals. As Hugueney said, "the proper role of civil society is to derail the WTO. Our job is to work inside and see if the WTO can play a constructive role in development." During the debate, he placed a lot of emphasis on the importance of "external" forces in shaping the debates inside the WTO and said that the G20 would not have "stood together" in Cancun if it had not been so well received.
Menon believes that the G20 is "here to stay" and their challenge is to stay "firm, focussed and faithful" while expanding the group to include least developed countries (LDCs). Both Menon and Hugueney identified the defi ning characteristics of the G20 : all are from the South, twelve are members of the Cairns group, but unlike that alliance which lobbies solely for full liberalisation, most G20 countries have large sectors of their popula tions dependent on subsistence and small scale agriculture and define their position as striking a balance between liberalisation and development.
Hugueney is convinced that the G20 can make Doha a "development round" and described their approach of "combining the benefits of trade liberalisation with solving the problems of hunger, the landless and unemployment." T his, of course, is exactly the approach that Brazil’s president Lula Ignacio de Silva (Lula) has adopted in his first year of office, providing strong evidence that the G20 is being driven out of Brasilia. Whether the "Lu la strategy" works - either in Brazil or anywhere else — is yet to be seen. (For more on this, see the interview with Joao Pedro Stedile of Brazil’s landless movement below.)
THE BRAZILIAN STRATEGY
At the Congress of the Brasilian trade union confederation CUT in June last year, Workers’ Party president Jose Genoino and the minister responsible for "social dialogue" Luiz Dulci explained the Lula government’s economic policy to international guests. In spite of the liberal references to justice, poverty and fairness, after two hours of discussion it was plain that the bottom line is "keep the markets happy". The success of economic policy is measured in terms of bond yields, interest rates and a strong Real, and is shaped with the intention of "stablisation" (that is, keeping the investors calm). Yet, after one year of intensive-care stabilisation, Brasil’s growth in 2003 was just 1%, significantly less than the 5% Dulci said they needed : a small return for such a massive capitulation to the markets.
Given Brazil’s debilitating foreign debt and their apparent policy of appeasing the financiers, Brazil must try to boost its foreign exchange earnings. What’s more, fifty per cent of Brazil’s GDP and jobs depend on the ex port sector, hence Brazil’s aggressive efforts in the past year to establish and diversify its trade relations, especially South-South trade. The G20 is one of the arrows in this quiver. The G20 also symbolises Brazil’s r evitalised foreign policy, characterised by asserting its leadership and independence (for example, requiring US citizens to be fingerprinted when entering Brazil in response to the US requirement that Brazilians do the same, or Brazil’s role in the newly formed IBSA Forum (India, Brazil, South Africa) launched in new Delhi in March, and taking on a broad agenda of trade, development, energy and political issues. (This brave foreign polic y is perhaps also designed to placate progressive forces at home, impatient at the slow pace of change and the government’s capitulation to the markets.)
Although Brazil’s trade and foreign policy appear to be coherent - boosting growth through exports especially to new markets and assuming a leadership role in the South — the question remains : can the economic commitment to liberalisation be squared with the political commitment to "justice and dignity for all" ?
The same conundrum faces every member of the G20, not least the other three leading countries - India, China and South Africa, all of which face tremendous, and potentially explosive, internal pressures from growing unemp loyment and rural poverty.
On the evidence of the past twenty years of neo-liberalism, it seems unlikely that the sort of massive redistribution and revitalisation of local economies necessary to create jobs for tens of millions of unemployed urban workers and to secure the livelihoods of millions of peasant farmers is possible inside the neo-liberal box. But, perhaps through a judicious mix of the political and the technical, the G20 can push the boundaries of tha t box. This depends on what sort of support they get inside the WTO, and what sort of pressures are exerted from outside.
EU’S LOVE/HATE RELATION WITH G20
The EU now appears willing to do business with the G20, reversing trade commissioner Pascal Lamy’s disparaging comments in Cancun when he questioned how long the alliance would last. Speaking to the Confederation of India n Industry on 19 January this year, Lamy referred frequently and generously to the G20, acknowledging a reality that in Cancun he wished would go away.
The EU’s faces a dilemma in its relations with the G20. On the political front, the EU has an interest in forming a strong alliance with the G20 to bolster their relationship vis- ?-vis the US. On the trade front, however, Lamy (in spite of his diplomatic overtures) undoubtedly would prefer a weak and divided G20 that does not represent a real force inside the WTO which could slow the EU’s own ambitions in industry, services and investment .
But the EU has little to offer the G20 : the signals coming out of Brussels indicate that there is very little flexibility in EU agriculture policy, despite noises that they might consider opening their markets to a very l imited range of non-sensitive products. At present, EU policy is constrained by the internal imperatives of keeping European agro-business happy and accommodating the effects of expansion which will bring in several new m embers with significant agricultural economies and rural populations also competing for access EU markets.
On the other hand, export subsidies is an area where the EU might eventually shift, not least because of the enormous cost. A small but growing share of European public opinion favours protecting small producers and the " multifunctional" aspects of agriculture, and realises that export subsidies go straight to big business at the expense of developing countries. Of course, any changes begin with the Common Agricultural Policy (CAP) and th e EU will have to grin down the powerful agri-business lobby, but the benefits of shoring up a relationship with the G20 — especially if there is reciprocal liberalisation in services, industry and investment (remember t he G4) — might eventually be worth the price.
So, in a highly speculative mode, "what if" the EU and the G20, through various configurations of bilateral agreements with individual G20 countries or through regional trade bodies such as the Mercosur, cobble together a n "Agreement on Agriculture Plus" (AOA plus) that would set the benchmark for AOA negotiations in the future ? And what would this mean for a progressive agenda to transform agricultural production away from exports and to wards food sovereignty ?
In the US, both the Republicans and the Democrats are finding that potectionist talk goes down well with the public, tapping into the popular view that tens of thousands of US jobs are being "stolen" by low paid workers i n the South. Although Bush recently re-affirmed his commitment to free trade and globalisation, actual experience (for example, the Australia-US trade agreement) confirms that "free trade" hits a brick wall when powerful agriculture lobby groups - especially those from the (US) South - start throwing their weight around. What’s more, the US’ stated position in WTO agriculture negotiations is that any reduction in US domestic subsidies mus t be matched by market access commitments from major developing countries such as China, Brazil and India. That is, the G20. Like the EU, the US is almost certainly continuing to pressure individual G20 members to leave t he group, hoping to weaken the coalition and any obstacles to their own trade ambitions.
THE G20 AGENDA OUTSIDE THE WTO
According to Ambassador Hugueney, Brazil’s own agenda is much more wide reaching than the G20, and they will pursue this both inside and outside the WTO. Lula has suggested that the G20 could negotiate a free trade agreem ent amongst themselves using the Generalised System of Trade Preferences (GSTP) and the signing of an agreement between Mercosur and India during Lula’s five-day state visit to India just days after the WSF indicates that the G20 will continue to strengthen their South-South links.
"India and Brazil can together build a strong force that can change the trade geography of the world," President Lula told reporters in Delhi. Using preferential trade agreements to shape this new geography might be one w ay forward, but seems contradictory to the G20’s stated commitment to strengthening multilateralism.
Pascal Lamy is also up-beat about the prospects for deepening South-South trade, telling the Chamber of Commerce of India (CCI) that it is "essential for development" and urging India to open its markets to least develope d countries. Perhaps this is one way to get the "development" into the Doha round without the EU having to give up anything.
A PROGRESSIVE AGENDA FOR THE G20 ?
How, then, should progressive movements relate to the G20 ? There are three considerations. First, there is no likelihood that the G20 will move beyond its minimalist position in the WTO for market access and elimination o f domestic/export subsidies. If they were to succeed in this (and it’s a very big "if") the logic of export oriented food production dominated by agri-business and agro-exporters would become entrenched in the South. A ra pprochement between the G20, the EU and/or the US is not imminent, but if that did occur then the debate on agriculture would be closed for a very long time, and remain impervious to the demands of small-scale farmers who would undoubtedly lose out in the new agricultural detente.
Second, the G20 is trying to "combine the broader interests of economic and social development, especially in rural areas, with trade liberalisation." Whether this is possible in the framework of the WTO remains to be see n, but many are sceptical. What’s more, there is no sign that the G20 has any ideas about how that might be done as they have no proposals on market protection, on commodity prices, on supply management, and so on.
Third : do we trust the G20 governments to be the bearers of the peoples’ interests ? Should the political elite be allowed to occupy the space that farmers, workers, indigenous peoples, students and activists have carved o ut through their work and struggles ? Many of these governments claim to represent the interests of their impoverished and marginalised populations, but if, indeed, they ever listened to these impoverished and marginalised people they would realise pretty quickly that market access and the end to export subsidies won’t solve the problems, and it could simply create a lot more.
The G20 did a good job in stalling the negotiations in Cancun and they are an important tactical ally in efforts to block consensus, derail and disempower the WTO, especially if they can hold to their Cancun position whic h is clearly so unacceptable to the EU and the US. However, as Ambassador Hugueney said, the proper role of civil society is to "derail the WTO" and progressive movements and activists should not to be drawn into the G20’ s logic of negotiations and power.
Nicola Bullard is a senior associate with Focus on the Global South.
(1) Current members of the G20 are Argentina, Bolivia, Brazil, Chile, China, Colombia, Costa Rica, Cuba, Ecuador, Egypt, El Salvador, Guatemala, India, Mexico, Pakistan, Paraguay, Peru, Philippines, South Africa, Thailand and Venezuela. Informally, the Brazilian mission in Geneva says that the group is now 22. Nigeria and Indonesia have joined. El Salvador has left. This was accurate on 2 2 September 2003 and a more up to date list could not be found via a web search.
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