The Group of 20 (G20), which includes India and Pakistan, has emerged as a formidable negotiating bloc in the WTO. It has successfully questioned existing agricultural trade rules that hamper the interests of developing countries. However, there are crucial internal and external contradictions and pressures that it must resolve if it is to continue voicing the interests of developing countries.

By Prabhash Ranjan

Research Officer, Centad

SUMMARY

Since its emergence before the Cancun Ministerial in September 2003, the Group of 20 developing countries (which includes South Africa, India, China, Indonesia, Thailand and Pakistan) has become an important voice in WTO negotiations, particularly in the area of agriculture. This paper explains why it is important for the G20 to remain united, and also looks at the pitfalls that could derail this unity (click here to read the full text of the paper).

CHARACTERISTICS OF THE G20

The G20 represents 57% of the world's total population, 70% of the total farmers in the world, and 26% of total exports in agriculture. As such, it is too important to the world trading system to be ignored.

The trigger for the formation of the G20 was the joint EU-US text on agriculture, presented before the Cancun Ministerial, which was patently unfair to developing countries. The rules had to be challenged since agriculture is of vital importance to the economies of developing countries. But no developing country had the strength to individually tackle the powerful EU-US combine. Hence the formation of a coalition of developing countries that could bargain collectively. This is a strong reason for the coalition to stand together.

Fault lines

There are, however, internal differences between member countries that could jeopardise this unity. They could play out in four scenarios:

  • Differences in the position of individual members of the G20.
  • Differences in the position of an individual member country and the position of the G20.
  • Differences due to overlapping membership.
  • Attempts to break the G20 by developed countries.

Conflict between countries could arise, for instance, on the contentious issue of subsidies. If rich countries agreed to cut their export subsidies, it would increase the price of their products in the international market. This would be welcomed by big exporters like Brazil and Argentina. However, in return, the developed countries would want to see a reduction in the huge tariff rates of countries such as India and Pakistan. Both countries are likely to resist this as it could lead to a surge in imports.

Differences in the position of an individual member country and the position of the G20 could also surface. For instance, India supports the G33 proposal of availability of a safeguard mechanism for all agricultural products, while the G20 position is that of a special safeguard mechanism for all developing countries; it is silent on whether it should be available for all products or not.

Differences could crop up due to overlapping membership, as some G20 countries are also members of other groups such as the Cairns Group. These two groups have divergent views on issues like the tariff cutting formula, the special safeguard mechanism, and special and differential treatment. The Cairns Group, of which Brazil is a member, advocates deep cuts in all tariffs using the formula approach, and greater cuts in high tariffs, tariff peaks and tariff escalation. While the Cairns Group and the G20 both support special and differential treatment in achieving better access to the markets of the developed world, the G20 also wants special and differential treatment in protecting their own markets from cheap imports.

An important external threat that the G20 might have to counter is the attempt by developed countries to break the group by offering sops, or even arm-twisting. Immediately after the G20 was formed, several small South American countries deserted it in response to threats that continuing in the coalition would jeopardise their trading arrangements with the US.

RESOLVING DIFFERENCES

All coalitions are vulnerable to internal pulls and pressures that could lead to a split. Though the G20 countries have common interests, vis-à-vis the developed countries, their agricultural systems and domestic compulsions are not all alike. There are differences between member countries on market access, tariff reduction and the special safeguard mechanism, to name a few. Then, some countries like Brazil or Argentina want more liberalisation, while others such as India, Pakistan and Zimbabwe are more protective.

However, G20 members have shown that they can make internal deals with each other and put up a united front. The submission on market access that was made at Cancun, favouring a blended formula, clearly revealed that compromises had been made by countries belonging to the Cairns Group, which has always advocated the Swiss formula.

As the WTO negotiations become more specific leading up to the Hong Kong Ministerial and beyond, there will be greater challenges ahead for the G20. The paper argues that knowing this and preparing for it will lead to amicable settlements between members and ensure that they put up a united front.