[E-rundbrief] Info 127 - W. Bello/ A. Kwa: WTO - US-Triumph in Geneva over G 20 Leaders

[Matthias Reichl]

E-Rundbrief - Info 127 - Walden Bello and Aileen Kwa: G 20 Leaders Succumb 
to Divide-and-Rule Tactics: The Story behind Washington's Triumph in Geneva

Bad Ischl, 12.8.2004

Begegnungszentrum für aktive Gewaltlosigkeit

www.begegnungszentrum.at

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G 20 Leaders Succumb to Divide-and-Rule Tactics:

The Story behind Washington's Triumph in Geneva

By Walden Bello and Aileen Kwa*

The July Framework Document is a major triumph for the big trade 
superpowers, particularly the United States.  As for the developing world, 
the situation is more complex, with most countries losing but some claiming 
that they have made gains.  Among the few claiming to be in the win column 
are Brazil and India, which are acknowledged as the leaders of the G 20 and 
two of the Five Interested Parties (FIPS) that played the leading role in 
drafting the Agriculture text.

Attention needs to be paid to the dynamics of the July framework 
negotiations since they were a departure from traditional North-South 
negotiations in trade and may set patterns for things to come.

General Council Supplants the Ministerial

Institutionally, among the innovations is that the General Council has now 
become de facto the supreme institution for WTO decisionmaking.  What the 
July meeting came up with was effectively a ministerial declaration without 
a ministerial meeting.  Two ministerial collapses--Seattle and 
Cancun--underlined to the WTO secretariat and the trade superpowers the 
unwieldiness of the ministerial as an arena for decisionmaking.  It 
attracted NGO's and popular protests.  It drew ministers, many of whom were 
not professional negotiators but political people determined to stand up 
for their country's interests.  It brought the press in large numbers, thus 
making decisionmaking more transparent despite the wishes of negotiators 
accustomed to exclusive "Green Rooms."

Only some 40 trade ministers were present in Geneva for the July GC 
meeting, with many representatives of countries that played a key role at 
the Cancun ministerial, like Kenya and Nigeria, absent.   Obviously, with 
some 100 ministers of WTO member countries absent, a great many governments 
failed to fully grasp the significance of the meeting.

As for global civil society, which had played such a critical role in the 
outcome in Cancun, it was, for the most part, complacent, failing to 
appreciate how quickly the trading powers could rebound from their state of 
disarray.  Very few NGOs had people in Geneva during the critical days in 
July.

Dealing with the G 20

Yet, this was not simply the old-style manipulative behavior of the trade 
superpowers and the WTO secretariat ofthe pre-Cancun period.  The 
post-Cancun situation made this impossible. Cancun marked the emergence of 
the G-20 as a key player in trade negotiations.  As Ambassador Clodualdo 
Huguenuy of Brazil put it during the debate at the World Social Forum in 
Mumbai last January, "The G 20 broke the monopoly over trade negotiations 
by the EU and the US."

The US, however, failed to appreciate the change situation 
immediately.  Coming out of the Cancun summit, US Trade Representative 
Robert Zoellick signalled a more aggressive, more unilateralist approach in 
trade negotiations when he said that the US would thereafter put its 
emphasis on concluding bilateral agreements with "can do" countries, 
implying that it would expend less effort in negotiations within the 
WTO.  Washington also launched a frontal assault on the G 20, successfully 
detaching El Salvador, Colombia, Peru, Costa Rica, and Guatemala from the 
body in a few weeks' time.

As for other developing countries, the G 20 was a phenomenon that was 
received positively.  Yet there were apprehensions among them that the most 
influential members of the G 20 were agro-exporters like Brazil and that 
the main focus of the group was ending the EU and US' massive subsidy 
systems and bringing down tariff barriers to market access in these 
prosperous markets.  Many countries, including Indonesia, were worried that 
the G 20 governments were much less concerned with protecting developing 
country markets and smallholder agriculture from low-priced 
imports.  Hence, the G 33 continued to put forward proposals for protected 
"special products" and "special safeguard mechanisms."

Other countries felt the G 20 focus on agriculture was inadequate as a 
strategy for defending developing country interests.  This led to the 
formation of the G 90 (composed of the Africa Group, ACP [African Caribbean 
and Pacific countries]and the Least Developed Countries) , which united 
around the effort to block the "New Issues" of investment, government 
procurement, investment, and trade facilitation from coming under the 
jurisdiction of the WTO.

Nevertheless, the G 20's formation did electrify the ranks of developing 
countries, and many governments were inspired by Brazilian Foreign Minister 
Celso Amorim's promise in his Cancun speech that the aim of the G 20 was 
to"bring it [the world trading system] closer to the needs and aspirations 
of those who have been at its margins--indeed the vast majority--those who 
have not had the chance to reap the fruit of their toils. It is high time 
to change this reality.''

By the spring of 2004, however, Washington's dual strategypursuing 
bilateral agreements and destroying the G 20--was running into 
trouble.  The Free Trade Area of the Americas (FTAA) that it wanted failed 
to materialize in the ministerial summit in Miami in November 2003, and it 
also began to realize that bilateral agreements could complement but never 
substitute for a comprehensive, multilateral free trade framework to 
promote corporate trade interests.  At the same time, the G 20, despite the 
initial defections, held firm.

Shifting Gears

To get the WTO restarted, Washington, working closely with Brussels, 
shifted gears.  Instead of trying to destroy or undermine the G 20, they 
moved to make its leaders, Brazil and India, a central part of the 
negotiations in agriculture, which was the key obstacle to any further 
moves at liberalization.  Thus was formed in early April the informal 
grouping called the Five Interested Parties (FIPS), composed of the US, EU, 
Australia, Brazil, and India.  It was in close consultation with this 
grouping that WTO Agriculture Committee Chairman Tim Groser produced the 
proposed agriculture text of the July Framework.

A shift in strategy was also evident towards other countries and 
formations.  In the spring, USTR Zoellick began visiting a number of 
strategic developing countries.  Instead of spurning invitations to the G 
90 meeting in Mauritus in mid-July, the EU and the US sent high level 
delegates, including Zoellick.  There, confrontational language gave way to 
rhetorical efforts to get the developing countries not only to come to a 
compromise on agriculture but also to get talks moving on bringing down 
non-agricultural tariffs, starting talks on trade facilitation, and getting 
the negotiations on services underway.  But perhaps the strongest message 
that the developing countries heard from the trade superpowers was this was 
the last chance to get the multilateral system movingthe implication being 
that they would be held responsible if the late July General Council talks 
did not get off the ground.

The US-EU drive to restart the WTO succeeded brilliantly.  The US and the 
EU were the main beneficiaries of the agreement to cut non-agricultural 
tariffs, with the highest tariff rates being subjected to the deepest cuts; 
indeed, Zoellick went back to the US trumpeting the claim that the accord 
on NAMA (Non-agricultural Market Access) was a massive victory for US 
corporations since it was but the beginning of a process that would reduce 
industrial and manufacturing tariffs to zero.  Both the EU and the US 
scored a victory by getting the developing countries to agree to begin 
talks on trade facilitation, one of the "new issues" that the developing 
countries rejected in Cancun.  But it was the US that scored the biggest 
gain, getting as it did, in addition to the foregoing, an expanded "Blue 
Box" in which to house a considerable portion of the subsidies to its 
farmers legislated under the US Farm Bill of 2002.

Part of Washington's success stemmed from a wily negotiating strategy.  For 
instance, to get its new expanded Blue Box, Washington distracted the 
developing countries attention by putting forward its demand that they 
reduce their de minimis domestic supports, that is, the allowable rate of 
subsidization of their production.  Thrown on the defensive, these 
countries spent much energy justifying their subsidies, so that they were 
only too relieved when the US stepped back to compromise on the issue in 
return for their agreeing to the expansion of the Blue Box.  Similarly, 
just before the General Council meeting, the EU suddenly brought in the 
category of "Sensitive Products" to protect some 20-40 per cent of its 
products from significant tariff cuts.  Worried that the EU might put 
blocks to their demand for protected Special Products essential to their 
food security, the developing country negotiators acquiesced.

Neutralizing Brazil and India

But the key to the victorious US strategy was bringing in Brazil and India 
to be part of the core group of the negotiations, then acceding to these 
countries' core demands in order to detach them from the rest of the 
developing countries.  India's key concern was to avoid the so-called 
"Swiss Formula" for cutting tariffs that would require it to bring down its 
agricultural tariffs substantially, something on which it saw eye to eye 
with the European Union.  According to one developing country negotiator, 
coming into the GC, protecting its tariffs was India's main focus, and it 
was not going to push hard on the issue of eliminating agricultural 
subsidies so as not to endanger the EU's support for its position on 
tariffs. (The Indian government's position on subsidies had been watered 
down by its informal alliance with the EU on the tariff issue after the 
Doha Ministerial before the EU abandoned the Indians to align themselves to 
a common position with the US]in the period leading up to Cancun.. Both the 
EU and India were comfortable with a "Uruguay Round" approach to tariff 
cuts as they regarded their average tariff level as high enough for them to 
stomach another Round of this type of cuts. There were developing 
countries, however, with much lower tariff averages, for which even a 
Uruguay Round approach would be too drastic [eg. Honduras, Sri Lanka, 
Indonesia].)

On the other hand, removing agricultural subsidies was Brazil's concern, 
and here it got its way.  The final text affirmed the phase-out of export 
subsidies as well as certain categories of export credits.  The big gainer 
with the phase-out of subsidies is said to be Brazil, with some estimates 
placing its gains as some $10 billion.  According to Amorim, the July 
decision marked the "beginning of the end" of export subsidies. Yet  the 
Brazilian "gains" are not secure unless locked in by the modalities of the 
negotiations. A specific end-date for the elimination of export subsidies 
will only be clinched in the next phase of discussions. Moreover, even when 
elimination has supposedly taken place, the EU has after all been known to 
replace export subsidies with indirect export subsidies by way of direct 
payments to farmers under the Green Box. This is also the intention of the 
current Common Agricultural Policy (CAP) reform. Furthermore, the framework 
leaves untouched the Green Box, which houses up to 70 per cent of US' total 
subsidies. Even the most optimistic analysts cannot say for certain that 
overall levels of support from the two agricultural giants will be brought 
down. In fact, it is predicted that subsidy levels will be maintained if 
not increased.

Nevertheless, for now, Brazilian agribusiness is very happy.  Indeed, it 
was the pressure of Brazilian agribusiness that allegedly forced Celso 
Amorim to clutch hard on the subsidy issue at the expense of a strong 
defense of developing country interests in other areas.  Having gained 
nothing from failed negotiations on the FTAA and an EU-Mercosur trade pact, 
Brazilian agro-exporters were hungry for a successful WTO agreement that 
would enable them to hike their exports to the EU and US.

Among those that were left disadvantaged from India and Brazil placing 
their specific interests in command were:

-         the majority of developing countries which will find that their 
markets will continue to be flooded by dumped products from the US and EU. 
For the South as a whole, the opportunity to correct the distortions in 
agriculture trade legitimized in the Uruguay Round has been lost

-         the African cotton-producing countries which failed to get 
negotiations on US cotton subsidies to be put on a fast-track independent 
of the agriculture negotiations, or even a commitment that all cotton 
subsidies will be eliminated;

-         the Group of 33, which were left with nothing more than a vague 
commitment that their demand for "Special Products" and the "Special 
Safeguard Mechanism" and in particular, the coverage of products under such 
a mechanism, would be a subject of negotiations;

-         most developing countries, which had rightfully opposed the text 
on market access of non-agricultural products as a prescription for their 
deindustrialization.  Indeed, the US scored a big win on NAMA for the text 
is a detailed agenda for the radical liberalization that transnational 
corporations have long wanted.  As the US National Association of 
Manufacturers saw it, "This is a huge accomplishment, and a big win for the 
WTO, the United States, and the world economy.  The really big 
accomplishment for industrial negotiations is that all countries have 
accepted the principle of big tariff cuts and sectoral tariff elimination."

-         most developing countries, which have now agreed to speed up 
their offers of services for liberalization.

Dilemma

It was not that lndia and Brazil were not sensitive to the demands of other 
developing countries.  In fact, they were given high marks for consulting 
the different developing country groupings.  It was simply that by becoming 
central actors in the elaboration of the proposed framework,they had 
painted themselves into an impossible situation.  And the more meeting 
interests began to diverge from a strategy of promoting the interests of 
the bulk of the developing countries, the more they trumpeted the claim 
that the July Framework Document was a victory for the South.  It is 
testimony to the prestige of India and Brazil among other countries in the 
South that up till today, many developing countries do not realize how 
badly they lost in Geneva.

The trade superpowers learned from the debacle in Cancun.  The shift from a 
confrontational strategy to one of cooptation and subtle divide-and-rule 
was able to rip apart the superficial "Third World unity" that came out of 
Cancun.  The centerpiece of the strategy was to bring in the leaders of the 
G 20, India and Brazil, into the center of the negotiations and play to 
their specific interests.  They fell for the trap.  Moreover, having become 
central players as members of the exclusive Five Interested Parties, their 
ability to repudiate large parts of a text that they had been consulted on 
prior to its release to the General Council was limited.  That would have 
invited the onus of being responsible for the "collapse" of the Doha Round 
and the multilateral trading system.

During and after Cancun, the G 20 was seen in some circles as representing 
a major power shift in the global trading order.  Some even saw the G 20 as 
the dynamo for a reinvigorated "New International Economic Order."  The 
reality is that the G 20, and in particular Brazil and India, have been 
accommodated into the ranks of the key global trading powers, but it is 
increasingly becoming clear that the price for this has been their diluting 
the strength of the negotiating position of the South.

More than ever, the South needs leadership, one that is willing to take 
risks for the whole and rejects the temptation to settle for small and 
maybe illusory gains for one's country. Many had expected the leaders of 
the G 20 to fill this role.  In the first decisive post-Cancun encounter, 
the latter have not lived up to expectations.


*Executive Director and Research Associate, respectively, of the 
Bangkok-based Focus on the Global South

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Matthias Reichl
Begegnungszentrum für aktive Gewaltlosigkeit
Wolfgangerstr.26
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Tel. +43-6132-24590
e-mail: mareichl at ping.at
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