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WTO-SPECIAL: G20’s Key to Survival – Pragmatic Diversity

Mario Osava

RIO DE JANEIRO, Dec 12 2005 (IPS) - The greatest feat of the Group of 20 (G20) developing nations is to have survived as a key actor in the World Trade Organisation (WTO) multilateral trade negotiations, despite its heterogeneous nature and the diverse interests of its members.

Among the members of the G20, a coalition of countries pushing for a reduction of trade-distorting farm subsidies and for greater access to industrialised markets, “rules of conduct” have taken shape.

These rules allow the group to reach consensus agreements, respecting the limitations of each country, reconciling diverse interests and recognising that “it is better to reach agreement on less ambitious proposals than to tear the group apart” and lose bargaining power, said André Nassar, executive director of the Institute for International Trade Negotiations Studies (ICONE).

The G20, which emerged in August 2003, is currently made up of 21 countries: Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt, Guatemala, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, the Philippines, South Africa, Tanzania, Thailand, Uruguay, Venezuela and Zimbabwe.

As exporting nations, they are demanding that the United States, the European Union and Japan put an end to their farm export subsidies and domestic supports that distort trade.

But divisions in the bloc begin to appear when it comes to presenting and negotiating specific proposals.

Some of the interests are kept quiet and only appear when the group is attempting to adopt an initiative. “It’s easy to see the ‘offensive’ interests,” that is to say the demands for trade liberalisation and opposition to subsidies and other barriers like high import tariffs, but the “defensive” interests only show up at the last minute, said Nassar.

China, for example, does not want to make any commitments that in the future would keep it from adopting price support and farm income policies. Although it does not now shell out subsidies, it knows it will have to do so in the future and is seeking to reserve that option for itself, said the expert.

India, for its part, forced the G20 to break an old rule according to which, in an eventual agreement, developing countries would lower their tariffs by two-thirds of the reduction set for the industrialised powers.

For that “super-protectionist” country – which charges, for example, the world’s highest import duties on vegetable oils: up to 80 percent – the phasing out of tariffs would be very difficult, even if it would have to reduce them by a smaller proportion than the industrialised countries. It is not the same to lower tariffs from six to three percent as from 60 to 40 percent, he pointed out.

Thus, countries that have taken an “offensive” stance in agriculture like Argentina, Brazil and Chile have had to “renounce their ambitions” in the face of the “defensive” limitations and interests of other G20 nations that prefer the possibility of reducing tariffs by a proportion of less than two-thirds. That pragmatism “works politically,” Nassar acknowledged.

Brazil is not only one of the group’s largest members, but is also a leader due to its broad interests as a major exporter of a number of products, and because it is one of the “offensive” countries, he noted.

But in the chess game of the negotiations, countries do not completely give up their specific individual aspirations, and at times form undeclared temporary alliances. Brazil knows that some day the United States will pressure India to reduce its protectionism, and that hence it will not have to do so itself within the G20, which would endanger the bloc’s unity, he explained.

ICONE is a Sao Paulo think tank created by Brazilian business associations in 2003 to assist the country’s trade negotiators, especially in the area of agribusiness. Brazil wants to see an end to farm subsidies and is pressing for greater access to markets in both the industrialised North and the developing South.

A study by ICONE researcher Mario Jales shows that while Brazilian farm exports have historically gone to industrialised nations, the country’s exports to the developing world have grown significantly, to half of the total value of exports last year.

For that reason Brazil is keen on ensuring freer access to developed as well as developing nations. But it will have a hard time gaining market access for its commodities, because a large part of its farm exports are “sensitive” products like sugar, beef, fuel alcohol (ethanol) and orange juice, which pay heavy tariffs.

No one expects an agreement to be reached at the sixth WTO ministerial conference in Hong Kong, running Dec. 13-18, due to the difficulties in overcoming the differences in agricultural trade, especially between the G20 and the EU.

But in Nassar’s view, certain concepts will be hammered out and the meeting will serve as a “rehearsal” that will pave the way for more concrete negotiations next year.

Representatives of civil society in Brazil, however, do not want any agreement to be reached, because in the current scenario in the WTO, an accord would only be made possible by concessions from poor countries, which would thus sacrifice their chances of development.

The G20 will play “a central role” in Hong Kong, but its problem is that it is focusing all of its efforts on opening up markets for agribusiness, at the expense of the rights of countries to “protect rural lifestyles and family farming,” said Fatima Melo of the Brazilian Network for the Integration of the Peoples, which groups non-governmental organisations and social movements.

Her fear is that in exchange for mere “crumbs” in the reduction of European farm subsidies, Brazil will make “unacceptable” concessions, opening up essential public services like water and power to transnational corporations.

That risk exists because of an alliance of forces in Brazil that favours export agribusiness at the expense of family farms, said Melo.

India, she added, has taken a better position, one that is more sensitive to the need to defend poor countries’ chances for development.

ICONE, however, denies that such a division exists, arguing that family agriculture forms part of agribusiness and accounts for the largest share of some leading Brazilian export products, like beef and tobacco, and thus has a direct interest in gaining access to markets.

Debate is “healthy”, but there is a lot of “ideology” involved in the belief that family agriculture is in need of protection, said Nassar. The risk that imports will threaten Brazil’s agricultural development “is very low,” while reducing international trade distortions would favour both large and small farmers, he maintained.

According to Nassar, efforts should now be concentrated on the country’s “offensive interests” in the trade negotiations, and social movements should press for public policies aimed at promoting the development of family farming, instead of depending on protectionist tariffs.