Will G-20 coalition endure and save WTO system?

Geneva, 5 Sep (Chakravarthi Raghavan) - As Ministers of Trade/External Trade relations of developing countries head to Cancun (Mexico) for the 5th Ministerial Conference, they are doing so with a stronger hand than ever before, as a result of the coalition (Group of 20 on agriculture).

However, this ‘stronger hand’ is not one sufficient to endure and safeguard their interests beyond Cancun, in dealing with the US-EU duopoly at the WTO, which is functioning to enhance the grip of their business and financial TNCs over the South.

The Cancun meeting is not a ‘make or break one for the Doha Round’ according to the WTO Director-General Dr. Supachai Panitchpakdi.

UNCTAD Secretary-General Rubens Ricupero, who was the Brazilian ambassador to the GATT during part of the Uruguay Round negotiations, has compared the Cancun meeting to the 1988 Montreal mid-term review meeting. At that time, the US-EU joined hands and wanted agriculture to be put aside, and the ministerial proceed to tackle other issues (including changing the Punta mandate on IPR talks. This US-EC move resulted in a quickly cobbled coalition of Latin American agricultural exporters, which received sympathy and support from other developing countries, and resulted in the failure of the Montreal meeting, and the authorization to the then GATT DG, Arthur Dunkel to promote a settlement in Geneva.

But that coalition did not survive for long. And, when the US and EU applied pressures, and Dunkel helped the process by his mid-term package settlement, the Latin American agricultural exporters gave up, and then India - agreeing to modify the Punta del Este Uruguay Round mandate, and set norms and standards in IPRs. This resulted in the TRIPS agreement, again as a part of the Dunkel package text after the stalemate in Brussels (1990), and then the Blair house accord in agriculture, modified again in 1993 in the final outcome.

Ricupero on Thursday (4 Sep) viewed the emergence of the G-20 on agriculture in the run-up to Cancun, and their common position on agriculture modalities as a very important development.

But will it endure, and help save a collapsing system? Much depends on these 20 ministers and how they deal with procedure at Cancun, and set right once and for all the claims of inherent authority by those chairing WTO bodies, but acting rule-lessly in the interests of the majors.

For the WTO is in deep trouble, not because Cancun may fail, or the Doha Round may not be able to be completed within the watch of USTR Robert Zoellick, EC Commissioner Pascal Lamy or WTO head Supachai Panitchpakdi, but because the WTO and its trade agenda have been hijacked by transnational corporate interests, while developing countries are being denied “national policy space” to develop their economies, accumulate capital and develop technologies. This is the result of misguided and erroneous views about neo-classical economics and its late 20th century versions.

When, as William Greider points out in an article in ‘The Nation’ (Sep 22 issue,, free trade ideologue Prof Jagdish Bhagwati, is beginning to sound like Lori Wallach (lawyer, who heads the US-based Global Trade Watch, and a leader of the anti-globalisation front), and Bhagwati agrees that “People like Lori Wallach are right,” the WTO had better watch out and not repeat the dogma of neo-classical, and neo-liberal economics and think the public will swallow it.

As Greider puts it in his article, multinational corporate interests have “essentially hijacked the ‘free trade’ principles that Bhagwati espouses and turned free trade agreements “into their own agenda for a densely layered legal code-investment rules that impose a straitjacket of do’s and don’ts in developing country governments.”

When he looked through the investment agreements, Bhagwati is quoted as saying, “.. it was worse than reading my insurance policy for the fine print. I couldn’t make anything out of it, and I am a reasonably informed person, a pretty smart economist as they go.”

Would a multilateral agreement be better hence than negotiating bilateral agreements (an UNCTAD/WTO thesis)? The problem, developing country negotiators say, is that a multilateral agreement does not put an end to pressures for more via bilateral agreements. Both co-exist and are used to ratchet up the rights of foreign corporations and their home governments against the interests of the hosts and their people.

Hence, it may be wiser of developing country ministers going to Cancun to bear in mind that while Agriculture, and forcing the United States and Europe to cut back drastically their domestic support and export dumping (whether through subsidy or export credits) is important, it is not the real issue facing the developing countries at the WTO, whose secretariat itself at senior levels are controlled and run by the US-EU duopoly for the benefit of their business and financial corporations, and these shape and run the WTO agenda and business with this objective.

The way in which the ‘rules-based’ WTO and its secretariat, and the Chairs of the WTO bodies including the WTO General Council, have claimed ‘authority’ without being able to cite a single WTO rule or decision giving them this right, to produce draft texts and forward to the Ministerial Conferences is just the most glaring example of the rights of the membership being trampled upon by the WTO juggernaut.

If the unity over agriculture modalities forged by the group of 20 is to endure, all of them need to unite with others and demand of the Mexican chair, not to allow the repeat of the Doha charade. At that meeting, the then General Council chairman, Stuart Harbinson was allowed to table and bring on the agenda the draft text he had sent to the Ministers on his own claims of authority, during the confusion at the ceremonial opening session when the Qatar Emir was just leaving the hall. If this is allowed to be repeated at Cancun, it will become a precedent for all WTO meetings.

The Ministers of the Group of 20 countries are meeting in Cancun ahead of the Conference, and perhaps this issue of procedure should figure in their calculations and strategies and tactics. They could join hands with others, and insist on first negotiating and agreeing on rules of procedure to put an end to such shenanigans.

That would be the starting point of an interest-based coalition of Southern countries to emerge and endure at the WTO. WTO or World Bank economists throwing neo-classical economic doctrines at their face is not economics.

As Prof. Douglas North, who won a Nobel prize in economics in the 90s for his contribution to ‘institutional economics’ and is a consultant and advisor to the World Bank (in institution building policies in Africa), had this to say at the UN Economic Commission for Europe, ECE’s Myrdal lecture: “Neo-classical economics,” he said, “was never intended to deal with issues of economic development. It evolved in the late 19th century and its objective is to explain efficient resource allocation in developed economies. It has two gigantic failures.... One, it was frictionless, Two, it was timeless, static rather than dynamic in terms of its issues...”

There are a number of studies and publications, over a score during the last 3-4 years, where the claims of the World Bank and others propagating the neo-liberal Washington Consensus thesis for developing countries, and its claims of long-run benefits of “open economies” over “less open ones” and the virtues of trade and investment liberalization, have been studied across a sample of some 90 countries, and over the same time periods and using the same yardsticks.  These have found that a causative or associative link running from liberalisation of trade or investment to growth and development cannot be established, the conclusion is not consistent or proved, and the evidence is so mixed, that a proposition the other way round, that growth and technology and industrialisation brings in foreign capital can be held more likely.

After considerable efforts to prove a causal link going from trade and investment liberalization to growth (development) and poverty alleviation, the conclusion appears to be that under certain conditions in particular countries trade liberalisation has helped, but no conclusion or model of universal application emerges or is possible. There is no single relationship between any given policy, be it trade liberalization or any other trade policy, and economic development.

In evidence before the UK parliament select committee on International Development, the policy analyst of CAFOD (an NGO), Mr. Duncan Green, cites his discussions with the World Bank’s Head of Trade Policy, Mr. Uri Dadush. During the discursions, Dadush explained the post-Washington consensus (advice given by the Bank to developing world): good government, sequencing and pace with liberalisation etc. According to the testimony (page ev 52, col 2, Vol II of report) at the end of the discussion Dadush was asked to give some examples of countries that had developed this way. Adds Green: “he (Dadush) looked blank and said, ‘I cannot think of any, but there must be some.’ And this man is Head of Trade Policy at the World Bank....”

With everyone focussing on agriculture and agriculture market access, Prof. Robert Wade, professor of political economy at the London School of Economics, in an op-ed page article in the Financial Times, said that while agriculture and market access are important, and developing countries stand to gain from better access for their agricultural products in the markets in the industrial world, they should be aware of the trap, of improved market access in agriculture locking them into the role of commodity suppliers, their economic growth held hostage to export markets where they face falling terms of trade.

Developing country trade negotiators, Prof. Wade said, should be negotiating not only for improved market access but for more scope to pursue industrial policies that upgrade their own industrial space and escape the trap of commodity supplier. The WTO instruments preventing this, he points out, are TRIPS, TRIMS and GATS, and their rules are written in such a way that obligations on developing countries are enforceable, while the reciprocal obligations (for technology transfer, increased access to networks etc) are unenforceable. Prof Wade in his article has made a strong argument for Special and Differential Treatment for developing countries, not in terms of longer time periods to comply (as the Uruguay Round did), but in terms of international rules to permit these countries to pursue a range of development strategies.

“Developing country negotiators in Cancun and later negotiations,” he says, “should be concerting their efforts to secure more leeway for development policy, not just better market access.”

However, when Indian Prime Minister Atal Bihari Vajpayee, in an address to the Second Indian-ASEAN Business Summit, did just that and criticised the WTO for failure to meet ‘development goals’, and of developing country concerns always being put on a ‘slow track’ at the WTO, while the rich countries concerns are on a fast track, western trade diplomats in New Delhi were quoted in the Financial Times as fearing the emergence of “a two-tier world trading system” at the WTO.  A closer reading of the FT report suggests that the ‘western trade diplomats’ is really the US. For, the FT report soon after quotes the US assistant trade representative, Ms. Dorothy Doskin, as saying “the US was against a two-tier system at the WTO, with separate rules for developed and developing countries.”

Apparently a two-tier or multi-tier decision-making system at the WTO, where the large membership have no role except to rubber-stamp what the majors have agreed to is fine for multilateralism, but a two-tier WTO structure of rights and obligations is bad.

If the coalition of 20 developing countries who have joined hands over agriculture modalities, cannot even join hands to put an end to this Orwellian Animal Farm approach to decision-making and claims of authority and rule-less procedures, and raise the issue at the opening ceremonial session itself (if the Doha experience and the way Harbinson presented his draft and got it on the agenda at the ceremonial is going to be repeated at Cancun), then the Montreal example at Cancun will give way to a subsequent Geneva where Supachai and secretariat and the GC chairs will take over again, and the members of the coalition and supporters will be picked out one by one and hit, and their unity will end.

If this is allowed to happen, it will contribute in major developing countries to public repudiation of the WTO and its sham multilateralism, and make it more difficult for trade establishments to stem the tide. – SUNS5413

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