Third World disunity allows developed countries to maintain their trade barriers

The huge economies of India, China and Brazil play along with the Third World coalition so long as it suits their interests.

This is the second of the two-part series about the WTO. The first part authored by Edward Gresser was published on March 27 in these columns.THE FAILURE of the recent World Trade Organisation ministerial in Hong Kong is bad news for developing countries, since the meeting made little progress toward making trade work for development. A more serious implication for the long-term future of a global trade regime, however, is the dissent the Hong Kong meeting revealed within the ranks of developing countries. The rich countries stonewalled on the most basic commitments to open their markets while lack of cohesion among the developing countries forced them to make steep concessions. The failure of the WTO meeting suggests that multilateralism, as we know it, is comatose, if not dead.

Deepening divisions

The Third World has become divided into roughly 30 major trading nations - including China, India, Brazil, South Africa and Thailand - with substantial populations benefiting from trade, and the rest consisting of small, landlocked or poor nations that are not integrated into the world economy. G-20, a coalition of medium and large developing countries, was formed during the last WTO meeting in Cancun through the leadership of Brazil, India and South Africa - the self-styled G-3 - and served as a substantial counterweight to the rich countries, especially on issues relating to agriculture. Due to extraordinary political pressure exerted by the U.S. and others, the G-20 has now withered to become a G-12 or even less. The G-33 is another grouping of developing countries led by Indonesia that has focused on issues such as special and differential treatment for the products of poor countries. Members of these coalitions have increasing disparities in levels of development. Large continent-sized countries such as India, China and Brazil have huge economies and a leadership position in sectors such as agriculture or textiles. Such nations play along with the Third World coalition so long as it suits their interests. Exacerbating this shift was the establishment of a special negotiating group consisting of the E.U., the U.S., Australia, Brazil and India, which took over finalising draft text on the package of agreements containing the WTO General Council's decision on how to carry forward the agenda from the Cancun meeting in July 2004 and played a strong role in smoothing disagreements in Hong Kong.

No real concession

Including India and Brazil in the group was a brilliant ploy by the West to divide the Third World by removing two key leaders from the Third World G-20 coalition in Cancun. Outside of these emerging differences, the Third World coalition seems united only by the historical continuity of belonging to the same coalition since the 1970s, the prevalence of high poverty rates and perhaps a sense of moral entitlement born from years of colonial or foreign rule.In Hong Kong, the rich countries especially the E.U. refused to cut most subsidies for agriculture, which are largely domestic. The ostensible agreement by the E.U. to reduce export subsidies by 2013 is not a concession but a legal obligation that the E.U. has tried to postpone. Domestic subsidies and market access, much bigger issues for developing countries, were not even touched. The rich countries also refused full market access to the exports of poor countries, such as textiles, and chose to protect their domestic industries a privilege denied to developing countries. On top of this, the rich countries extracted serious concessions from developing countries. The developing countries were forced to agree to harsh tariff reductions and free trade obligations in non-agricultural products, for example, fisheries.

Divergent interests

The forced agreement on services serves as an example of the collapse of traditional multilateralism. Leaders of developing country coalitions such as India or Brazil deserted traditional roles and, instead, acted like agents of rich countries using their diplomatic and political capital to persuade other developing countries to agree to the final draft declaration. The reality is that the interests of small and large, trading and non-trading, developing countries do not coincide anymore, if they ever did. For many smaller countries, especially in Africa, negotiating market access to commodities, such as cotton, is difficult, entangled with larger issues of domestic subsidies by the rich countries to their farmers. The WTO no longer represents poor or developing nations. Its rules force Third World countries to rush headlong into the global economy. The Hong Kong meeting has shown that traditional forms of international politics have vanished. Radical thinking is required to develop new strategies and building new alliances rather than relying on outmoded statist alliances. BALAKRISHNAN RAJAGOPAL

The author is the Ford International Associate Professor of Law and Development at the Massachusetts Institute of Technology. Reprinted with permission from Yaleglobal Online (http://yaleglobal.yale.edu), a publication of the Yale Center for the Study of Globalization. Copyright © 2006 Yale Center for the Study of Globalization.