Richard Melson

July 2006

South Bulletin No.129

The focus of this issue is on the crisis of World Leadership.

The next issue of the South Bulletin will be dated 1September, 2006.

South Bulletin 129

1 August 2006

In this Issue:

Crisis in the WTO one of Leadership – President Lula

The crisis in the WTO negotiations is not technical but political, said Luiz Inácio Lula da Silva, President of Brazil, in the meeting between G8 countries and Heads of State and Government of Brazil, China, India, Mexico, Republic of Congo and South Africa in Saint-Petersburg on 17 July 2006. His analysis helps explain the events that unfolded in the WTO on 24 July, 2006.

The African Leadership Initiative

"To live in hope alone is to die little by little, unless we can draw from that hope the energy to find a way, the strength to reclaim our spirit, the will to sail the ship that leads." As the African Leadership Initiative was launched in Johannesburg on 13 July 2006, the President of South Africa, Thabo Mbeki speaks of the traditional African model of leadership – where the community as a whole must survive for the survival of every individual in the community.

Forging a South Consensus on Development

The North is taking too long to understand the new realities unchained by the strength of the integrative forces of the contemporary world and the nature and magnitude of the dangers it is confronting. That is the view expressed by Aldo Ferrer of the University of Buenos Aires in a recent article ‘Rethinking Development in the South: The Domestic Dimension of Growth in a Global World.’

No Compromise on Interests of Farmers & Infant Industry - Kamal Nath

The Indian Minister of Commerce and Industry, Kamal Nath, who has been in the small group of G-6 trying to find common ground to move ahead in the Doha negotiations, said there can be no compromise on the interests of farmers or infant industry in the current Round. Trade has to be seen through the prism of Development, he said upon his return to the capital after the suspension of the current Doha negotiations.

India-Brazil-South Africa: Towards a Comprehensive Economic Partnership

For India, Brazil and South Africa (IBSA), a comprehensive Economic Partnership Arrangement could provide an institutional framework for exploiting the potential of their partnership and their synergies for mutual benefit. It can also be a trail-blazer for South-South Cooperation, according to the Research and Information System for Developing Countries (RIS) based in New-Delhi.

Other articles:

Flexibility Shown by all Except the United States – Peter Mandelson

‘Solutions Ought to be Found Inside the WTO’

With Doha Round in Suspense, South-South Links Take Front Seat

WTO: Rich Countries Not Off the Hook - Oxfam

South Centre News

Editorial: Respecting Multilateralism in Trade

Crisis in the WTO one of Leadership – President Lula

The crisis in the WTO negotiations is not technical but political, said Luiz Inácio Lula da Silva, President of Brazil, in the meeting between G8 countries and Heads of State and Government of Brazil, China, India, Mexico, Republic of Congo and South Africa in Saint-Petersburg on 17 July 2006. "It is a crisis due to lack of leadership." To close the gap between the current negotiating positions, he said some decisions need to be taken which will displease some domestic constituencies. "There is always a risk of losing popularity and votes… but true leaders mind not only about immediate interests. They think about society as a whole, about the current and future generations." Following are extracts from his statement.

"The negotiations of the WTO Development Agenda are in a crisis. It is not a technical crisis. It is a political crisis. It is a crisis due to lack of leadership. It is therefore absolutely appropriate that we discuss this issue here. After all, this is why – and not only to produce formal declarations – the main leaders of the developed and developing world are supposed to meet.

What is at stake in these negotiations is not merely a handful of trade concessions. At stake is the very future of economic multilateralism, with obvious social and political repercussions.

Perhaps many do not remember that the Doha Round was launched shortly after 9/11, in a time of deep distress, when countries – rich and poor –joined forces in the fight against the scourge of terrorism. Not only its most tragic features, like the attacks themselves, but also its deepest roots: extreme poverty, disease, hopelessness.

It is not by chance that almost 60 years after the creation of the GATT/WTO system the term "Development" appeared for the first time in the title of a Round. This Round is not only about trade, even in the broader meaning the word has acquired in the last decades. It is, above all, about development, which means: creating conditions that allow the world’s poorest populations to enjoy the progress of our times, which was often achieved at their expense.

I will not dwell on analyses that are well known to all. A simple comparison is enough to highlight the injustices in our world that the Doha Round is supposed to correct, even if partially.

In agriculture, the means of livelihood of a great part of the world’s poorest populations, subsidies – which have been banned in the industrial sector for decades – continue to export hunger and poverty to less developed nations. While developed countries provide distortive support to the tune of US$ 1 billion a day, 900 million people in rural areas all over the developing world live on less than US$ 1 dollar a day.

It is absolutely false the notion that such distortions can be compensated with aid policies or trade preferences, which simply perpetuate situations of dependency. A dependency on just a few products – sometimes only one – and on a few markets. Poor countries do not need favors. They need equitable conditions to fully benefit from their comparative advantages. Hence, the priority on agriculture. With its ambitious and balanced proposals, the G-20 has contributed decisively in bringing positions closer. But obviously, we are not there yet.

Many developing countries, including Brazil, have already given clear signals that they are ready to contribute to the Round with important moves in industrial goods and services, proportional to their levels of development. Of course, such moves will be based on bound tariffs. They will, nonetheless, have a real impact on trade flows, offering new market opportunities.

However, it is utterly misleading – and unfair – to argue that progress in agriculture must be attained by means of concessions from poor countries. In fact, we all know that very few developing countries will effectively apply the formula for tariff cuts in industrial goods. The participation of these countries in the international trade is still relatively small and their contribution will never be enough to close the divide between the negotiating positions of rich countries in agriculture.

Without firm political impetus and renewed instructions, our ministers will not manage to narrow the distance between current negotiating positions. We know that, in order to close the existing gap, we will need to take decisions that will displease some domestic constituencies. There is always a risk of losing popularity and votes. Critics will surely have their space in the media, but true leaders mind not only about immediate interests. They think about society as a whole, about the current and future generations. Great nations have the additional responsibility to bear in mind the impact of their decisions on less powerful countries. Also in this respect, Brazil will not shy away from its responsibilities.

A Round that merely consolidates the status quo, particularly in agriculture, will be tantamount to condemning the vast majority of humankind to a life of hunger and extreme poverty. Last December, our ministers took an important step: to ban, forever, the use of export subsidies and other equivalent types of support. Now we have to deal with the other two pillars of negotiations in agriculture.

It is unacceptable and simplistic to argue that "my subsidies only offset the subsidies of others". The current level of subsidies is excessive, illegal and inhuman. The current expenditures with agricultural subsidies must be subject to substantial and effective cuts. I emphasize the word "effective", which is present in the Hong Kong Ministerial Declaration.

The current level of protectionism in the developed markets is also unjustified. Agricultural trade cannot remain hostage to exorbitant tariffs (some of them above 1,000%), quota restrictions, safeguards, and other trade limitations.

Tariff cuts in agriculture must be equally significant and cannot be neutralized by exceptions and managed trade. Special treatment for the specific situation of poorer countries, which face the challenges of subsistence and food security, must be acknowledged.

I am ready to instruct my minister responsible for the negotiations to show the necessary flexibility with a view to reach an ambitious and balanced outcome for the Development Round, with gains to all. I do not expect less from my colleagues gathered here. We must do what is necessary and what is fair. We all have our limitations, but we have to face them with a sense of historical responsibility.

It is not in easy times that we need leaders. True leaders step up, act and are recognized in moments of crisis. The Development Round is in a crisis. Omission is not an acceptable option."

The African Leadership Initiative

"Even in this century, this century that we call the African Century, when we speak of the Spirit of African Leadership, we speak with yearning, we speak with the hope of rebirth and restoration. But hope on its own is a poor ship on which to sail these waters." Speaking at the launch of the African Leadership Initiative in Johannesburg on 13 July 2006, the President of South Africa, Thabo Mbeki, said, "To live in hope alone is to die little by little, unless we can draw from that hope the energy to find a way, the strength to reclaim our spirit, the will to sail the ship that leads." Presented below are extracts from his address, where he expands on the traditional African model of leadership – which is collective – where the community as a whole must survive so that the survival of every individual in the community can be assured.

"If Africa is serious about its claim to make the 21st century the era of its rebirth, we need to invest considerable resources in the reconstruction of credible and competent leadership capacity. New generations of leaders will not mushroom naturally. Leadership development cannot be left to chance - it requires a deliberate, calculated, well-researched effort. The crux of our argument is that there must be an institution that serves as the backbone of leadership development and that this institution must be African. South Africa is a well-reported example of the need for such an institution. Because we have successfully negotiated a transition from oppression to freedom, from tyranny to democracy, it is tempting to believe that effective leadership emerges ‘automatically’. The truth is perhaps more sobering. As we enter the second decade of democracy, we run the risk of complacency in leadership development: yet the context of the struggle in which our most effective leaders emerged has given way to a new democratic framework."

With much humility, I must confess that I did not craft the passage I have just read. I have stolen it from a text prepared by Eric Mafuna and his colleagues, who have conceived of and today launch the African Leadership Initiative.

What they have said poses the stark question - does Africa have the cadre of leaders it needs to ensure the renaissance of our continent! Given where our continent has been and what needs to be done to improve the lives of the millions of Africans, the value system upheld by this cadre of leaders must be one of the central issues of concern.

My great pleasure at being here tonight, to share this auspicious occasion with you, is tinged, I must confess, by one small note of regret.

Hemmed in by these four walls, with this ceiling high above our heads, we are unable to lift our gaze to the southern sky.

We are unable to marvel at the very view that held our ancestors in thrall, hundreds, thousands, millions of years ago.

It is a comfort to know, in this epoch of cellphones and satellites, when unseen rays blaze the trail for us to follow, that some trails have changed little, if at all, since the awakening of time.

It is a comfort to know, amidst the flurry of fleeting moments that define our span on this earth, that we can anchor our highest hopes and ambitions on the distant pulses of light and energy that mark the pathway to infinity.

It is a comfort to know that these distant pulses reflect the afterglow of our ancestral memory, as much as they harbour the light that will shine on generations and generations to come.

And so I ask you tonight, to picture that celestial canvas in your mind’s eye, as we celebrate the birth of an Initiative that sets its own sights no lower than the stars.

I am told that the African Leadership Foundation is inspired, is energised, by the power of a constellation that watches over us, as much as it watched over the stonemasons of Great Zimbabwe, the God-Kings of the Nile, the hunter-gatherers of the Kgalagadi and the proto-humans who first stood upright and left their footprints on the sands of Maropeng.

To the Hindu astrologers of old, this constellation was "Trishanku", named for the impatient King who sought to ascend to heaven before his time, and who now lies suspended midway.

To the Dogon people of Mali, this constellation is the "Eyes of God", seeing everything and everyone from the bejewelled blackness of night.

A French astronomer, seeing a vision of his faith made real, named the constellation "Crux", and we know it today as the Southern Cross, emblazoned like a marker on our corner of the sky.

Centuries ago, there were mariners who followed that marker, as their vessels crashed through dark waters en route to Terra Incognita - Lands unknown.

The ancient mapmakers warned that they would sail off the edge of the earth, and into the jaws of waiting dragons. But these mariners, as we know, did not find the edge of the earth, and they did not find dragons.

Instead, they found us!

Something in our spirit was stolen in the aftermath of those tall ships cresting our horizon, driven by the wind and the power of what seemed to be an expression of Manifest Destiny. Something was surrendered, something was abandoned, something was drained from our blood, on the day that the proud leaders of Africa, became The Led.

For as a consequence of those ships finding their moorings, we lost ours. And even now, when we once again hold title to the land, when we no longer wear shackles on our feet, when we are no longer marked according to what we are not - not white, not European, not capable, not equal - we are drifting still, we are searching still for that something we have lost.

Even in this century, this century that we call the African Century, when we speak of the Spirit of African Leadership, we speak with yearning, we speak with the hope of rebirth and restoration. But hope on its own is a poor ship on which to sail these waters.

To live in hope alone is to die little by little, unless we can draw from that hope the energy to find a way, the strength to reclaim our spirit, the will to sail the ship that leads.

Leadership! Some may think this to be the most simple and basic of concepts, embedded in the law of natural selection that favours the strong and the bold. Yet, it is more than that.

Indeed, in the bush the lion does not seek from the impala permission to govern, or invite the warthog to convene an imbizo to discuss the condition of his burrow. It imposes itself through its brutal strength while, at the same time, the elephant asserts its presence in a silent and dignified demeanour.

But in Africa, too, we, the descendants of the upright-walkers of Maropeng, have long held that there is a force more mighty than the might of the one who has taken charge, whether that might has been assumed through birthright or the ballot or the barrel of a gun.

In Africa, we know that force as Community.

A little while back, Eric Mafuna and I shared some valuable time in Maputo under the African sky, sitting in the shade of an old school tree, ruminating on what it takes to make a leader, and then, what it takes to make that leader work.

He told a story of the Barotse or Lozi leader who was elevated to the position of a king or a Litunga. He was brought from his village to the capital, whereupon the great tidings were conveyed to him.

What did he do in response? He did not pump the air with his fist. He did not puff up his chest with pride. He did not recline on his throne with a self-satisfied smile.

Instead, he sighed deeply and declared: "Now you’ve gone and killed me." What he meant by that, was that the "me" in him, his sense of self, had been surrendered, had been sacrificed, for the greater good of the people over whom he would now rule.

Or, to put it more precisely, he had surrendered his individual freedom to the people with whom he would now rule, in solidarity, in consensus, in the fellowship of leadership, the African Way.

It is the way of the wild that the strongest will survive at the expense of the weaker individuals in the pack. It is however the way of African Leadership, the Great Way of our ancestors that the community as a whole must survive so that the survival of every individual in the community can be assured.

This is why the African traditional model of leadership is the collective, made up of men and women who are, first, equals among equals, and second, first among equals, who must serve the needs and aspirations of individuals, without ever allowing those needs and aspirations to rise above the best interests of the community.

This is why, in Africa, those whose destiny it is to lead, are destined to lead lives of paradox, as much loved as they are hated, as selfish as they are selfless, as flexible as they are decisive, as much looked down upon as they are looked up to.

This is why, in Africa, leadership is marked by fairness, by transparency, by egalitarianism, by the vigorous cut and thrust of the imbizo to which even the humblest of burrow-dwellers is cordially invited.

This model, in the words of Eric Mafuna, is the model of "Cohabitational Leadership", and I hope Eric will not think me too starry-eyed if I say we can also call it "Constellational Leadership", for it is a model in which the stars that shine brightest are the stars that reflect and absorb the brightness of the stars around them.

This is a form of leadership that seeks not to mould followers, but to mould leaders. This is the Grand Ideal. This is the dream. This is the spirit of African Leadership we have lost, in this age when the sacrifice of the self gives way too easily, and too often, to the sacrifice of others.

And yet, if we have lost the spirit of African Leadership, it is not just because of the way we have been led, but because of the way we have been led to believe that we are the forsaken, that we are the abandoned and that we are those left-behind by history.

In response to this, we must assert that leadership begins from within, with the rediscovery of what each of us can contribute, and what all of us can achieve, together, for the benefit of the community, of the people and of the nation.

In too many minds the name of our continent has become a byword for things that go wrong, for disasters wrought by nature and by humankind, for the catalogue of catastrophes, epic and mundane, that colour our perception of ourselves.

The Chairperson of the Board arrives 40 minutes late for the meeting, with no word of apology or explanation. "Oh," we shrug, "it’s Africa."

The crops wither and fail in a year of good harvest, because the new farmer who lives on the land has not taken the trouble to learn to live off the land.

"Oh," we shrug, "it’s Africa."

The shipment of charitable aid arrives at the harbour, to be seized by men with guns and sunglasses, and sold as merchandise for private gain. "Oh," we shrug, "it’s Africa."

The power goes out, the bus breaks down, the crime docket goes missing. "Oh," we shrug, "it’s Africa."

Or is it? Is this the Africa we see through our eyes, or is it the Africa whose prophecy of self-destruction we unwittingly seek to fulfill, through our own actions, our inactions, our perceptions?

Is this the only Africa we know, or is there another Africa, waiting to take its place?

Africa 2.0, we might say, if we were conversant with the language of computer technology. This is Africa the upgraded version - with more memory, more processing power and better networking capability than ever before.

We have a duty together to build the Africa of the Entrepreneur, the Scientist, the Artist and the Visionary. We must bring back the Africa that lies within us; the Africa that gave the world civilisation; the Africa whose high priests of knowledge taught the Greeks mathematics, philosophy, medicine and the alphabet.

Many centuries ago, drawn by the glimmer of the Southern Cross, and the rumour of riches and infinite possibilities, those tall ships docked on our shore. The rumours were true, and even today, we are counting the cost.

But let us turn the tide. Let us turn our eyes to tomorrow. Let us build on the foundation that has been put in place in this room tonight. Let us seize the opportunity to re-examine, to re-interpret, to reconnect the Africa we once were, with the Africa we can and must become.

I commend the African Leadership Foundation, for the work they are doing, for the seeds they have sown, for the initiative they have taken. I commend them not just for their vision of a new way of African Leadership, but for the energy, inspiration and toil they are investing in making that vision real and in sharing that vision with all of us.

Now is the time, I believe, for Africa to send its own tall ships across the waters, not to conquer, but to proclaim that Africa has found its will, that Africa has found its way and that Africa has earned its right to lead.

And yes, let us look to the stars, let us look to the Southern Cross, not to learn what tomorrow holds in store for us, but to show the world what we hold in store for tomorrow."

Forging a South Consensus on Development

The North is taking too long to understand the new realities unchained by the strength of the integrative forces of the contemporary world and the nature and magnitude of the dangers it is confronting. That is the view expressed by Aldo Ferrer of the University of Buenos Aires. In a recent article ‘Rethinking Development in the South: The Domestic Dimension of Growth in a Global World’, reproduced below, he maintains that globalisation as the field for the crude exercise of power - is no longer compatible with peace and security. "From a perspective of the South, we can not change the world we live in but we can change how we live in that given world." Aldo Ferrer was one of the members of the South Commission which produced the seminal report The Challenge to the South.

Globalization in a historical perspective

Globalization unfolds the integration forces of the world economy launched by the impact of scientific knowledge and innovations. It is, at the same time, a set of rules of the game on international relations, established by the dominant countries of each historical period. Globalization provides challenges and opportunities and creates the dilemma of development in a global world.

Since the times of Columbus and Vasco da Gama, up until now, there were several stages in the formation of the world economic order. The first one, under mercantilism, run from 1500 up to the end of the XVIII century, when the industrial revolution began in Great Britain. The second one, from around 1800 until the First World War of the XXth Century, covers the period of the first industrial revolution under the hegemony of Great Britain, the subsequent emergence of new great powers, the partition of Africa and imperialism. The third period covers the inter war years up to 1945, when there was a relative disintegration of the world economic system. Finally, since the end of the Second Word War until today, is the contemporary phase of globalization.

In the golden years after the Second World War of the the XXth century, the South was favored by three circumstantial factors. They were: an extraordinary rate of growth in the industrial countries; the substitution of the orthodox paradigm by the Keynesian; and, finally, the post independence euphoria in the new sovereign countries in Asia and Africa.

In the eighties, things went back to normal. It was by then clear that political independence is one, but only one of the necessary pre-requisites for development. Latin America is the most remarkable example. After two centuries of political independence, it has not yet overcome economic subordination and underdevelopment.

At the same time, the decline in the growth rates in the industrial countries and the dramatic expansion of speculative financial flows coincided with the revival of the orthodox paradigm in the North. The global atmosphere for development in the periphery became less favorable or hostile. The Latin American debt crisis of the early eighties was the starting point of the structural adjustment conditionalities of the multilateral agencies. By then, the North had regained its traditional convictions about what was good for the South. The Washington Consensus is the new version of the scriptures sermonized by the central countries in the periphery but largely overlooked in the management of their own affairs.

In this context, the rules of the game of international trade, financial flows, foreign direct investment and intellectual property rights, nowadays as in the past, are cut to measure of the industrial countries’ interests.

The domestic dimension of development and globalization

Development is a process of inclusion, in the economic and social fabric of countries, of knowledge and new technologies and of accumulation of capital, education, managerial abilities and capabilities of organization of production. Relations of countries with their external environment are an essential determinant of national development.

Domestic conditions are important factors in the manner of relations of countries with their external environment. It is thus essential to pay attention to the material and cultural resources of societies, the distribution of wealth and income and its impact in the social fabric, the quality and nationalistic motivations of domestic leaderships, stability of political institutions, the influence of economic ideas whether inspired by the dominant powers and domestic privilege minorities or by the national interest of countries and, finally, policies conductive or not to the promotion of national development and the ability of a country to draw its own destiny in the global world.

Such domestic conditions can be defined as the national density of countries.

The reciprocal feed backs between the domestic dimension and globalization are thus essential. Backwardness is in the midst of the domestic reality of many countries of the South and, when it so happens, their ability to provide positive responses to globalization is very poor.

In fact, globalization provides, simultaneously, risks and opportunities. Countries are then confronted with the dilemma of development in the global world. The answers they provide to solve the dilemma in critical fields such as trade, finance, investment, knowledge and information, become decisive for economic development. The economic history of each country can largely be narrated along the path followed by its answers to the risks and opportunities of globalization.

Those answers are influenced by the external context or scenario but are mostly domestically determined within each national space. Comparison of experiences of successful countries, namely, those that were behind the leading countries in different historical periods and succeeded in coming to the front, helps to illustrate the point. Whether it is the US, Germany, Japan, Sweden or Denmark in the XIXth century or the emerging industrial countries in Asia, including India and China, more recently, it is interesting to observe that, in all cases, certain specific domestic conditions prevailed, notwithstanding the substantial differences in the size and resources of those countries and the transformation of globalization forces operating in different historical periods.

Provided a country has the sovereign right to run its own affairs and international relations, national development requires a sufficient amount of material and cultural resources to manage knowledge and technologies and organize self centered economic and social activities. Given these basic requisites, national development largely depends of the following domestic conditions:

* A substantial degree of social cohesion and absence of extreme disparities in the distribution of wealth and income,

Leaderships or elites with strategies of accumulation of power and wealth within the domestic domain, preserving the control of critical resources essential for capital accumulation and employment,

* Institutional stability and the political capacity of containing and solving social conflicts in reasonable peaceful terms,

* Predominance of critical ideas on economic and social matters to sustain policies consistent with national development objectives, and

* On those grounds, long term policies capable of maintaining macroeconomic balances and promoting savings, investment, technical change and competitive abilities vis a vis the rest of the world.

These domestic conditions, or national density (see my La densidad nacional: el caso argentino. Capital Intellectual. Buenos Aires, 2004), prevailing in successful countries, and totally or partially absent on those which are not, are closely interrelated. For example, countries with extreme inequalities can be expected to have leaders and elites with closer connections with the central countries than with their own peoples and accumulate power mostly as agents of foreign interests. When this situation prevails it is not necessary for neoliberal circles of the North to preach the gospel in the South. Leaders and elites in the South itself are capable enough of doing so by their own initiative.

The gap between national densities of countries of the South and, thus, of the quality of their answers to globalizations, helps to explain the increasing discrepancies in growth and welfare within the South itself.

The problem of governance

The conventional opinion prevailing in the North suggests that governance in the South relates to the compliance, by all branches of the political system, with the criteria of the market. Thus, good governance would be the simultaneous ability by all branches of government to produce market friendly policies. Provincial or state local governments, should also comply with that requisite of governance.

In the western political tradition, inherited from Locke and Montesquieu, the division and independence of the three branches of government (parliament, the executive and the judiciary), are innate to the democratic system. In the case of governments organized on a federal basis, local authorities retain a substantial amount of autonomy vis-a-vis the central authorities. The good governance that the North pretends in the South, is only viable within authoritarian regimes. Thus, democracy would be a luxury allowed only to the North. This is not a rhetorical argument. For example, in its negotiations with debtor countries, the IMF usually brings into play conditionalities to be fulfilled simultaneously by all branches of government and provincial administrations.

Democracy and good governance, from the perspective of the South, is a different matter. It means transparency in public affairs, accountability, efficient use of available resources for sustainable development and well being, freedom and the rule of law.

Latin America

After two centuries of independence from Spain and Portugal, Latin American countries have not been able to overcome underdevelopment and dependence. This can not be explained by unsolvable obstacles imposed by the world economic order but, mostly, by the weakness of the national density of those countries. Remember, for example, that Latin America has the worst distribution of income in the world at large. Average income of the richest 10% of the region’s population is more than 30 times that of the poorest 10%.

As a result of transformations in the political and economic world scenario and the vulnerability of highly indebted countries, particularly in Latin America, dominant powers promoted a development credo for the periphery whose results are presently under critical scrutiny. Why some countries fell under the influence of such gospels and others not, is closely related to their relative national densities. The same point helps to explain the increasing disparity in the situation of countries of the periphery. Some of them were able to become emerging industrial economies while the majority, including Latin America, remains underdeveloped and dependent.

As Raúl Prebisch would have said, the Washington Consensus was elaborated from the perspective of the central countries, frequently shared by very influential groups within countries of the South themselves.

How can it be explained otherwise, for example, the situation of Argentina? In this case, other policies compatible with economic and social development and macro economic balances were possible. It is true that the advice provided by the Washington Consensus and multilateral agencies supported the perverse economic decisions taken in the past but the question remains: why the eighth largest country by territorial dimension in the world, a surplus producer of food and energy with a respectable level of industrial and technological maturity, has fallen into such a critical situation?. Answers should be looked after, in the first place, within Argentina itself. Her current recovery can also be explained by the improvement of several national density conditions, such as the ideas inspiring public policies and the governance of the economy.

The Washington Consensus

The Consensus is based on the neoliberal principle that development is externally determined by forces operating in the global market. Historical experience is conclusive to the contrary. National density, that is, nation building, is essential for growth and transformation and it can only be based, in the first place, by forces operating in the domestic arena of each country. Nations are built from within outwards and not the opposite.

Neoliberalism is also founded on the assumption that most transactions take place in the global market. Yet, exports represent not more than 20% of world GNP while product and investments of affiliates of transnational corporations represent less than 15% of GNP and fixed investment in the world economy. At the same time only 3% of the world population has migrated and live outside the countries of origin. Thus, domestic markets and savings are crucial for demand, investment and employment.

In the field of information and knowledge most of us live in fact in a global village but, in the real world of production, employment and growth, we still live in an international framework of nations and states.

Despite the flaws in the theoretical foundations and failures of the original Washington Consensus recipe, the gospel is presently augmented to reinforce or adapt the first Decalogue with new items such as corporate governance and flexible labour markets. It is interesting to observe that while multilateral agencies insisted on the basic ‘privatize, deregulate, and liberalize’ formula, they overlooked the overvaluation of currencies, as it happened, for example, in the Argentine case. Overvaluation demolished the competitive capacity of domestic manufacturing, increased fiscal and foreign payments imbalances and, finally, exploded in the foreign debt crisis. But overvaluation was crucial to increase the demand of foreign financing, promote capital flights and the transfer of profits and interests. It was in fact functional to speculative capital movements.

While some of the most successful emerging industrial countries, as the Republic of Korea, fell into the financial trap in 1997/98, they were able to recover in a brief period of time On the contrary, in Latin American experience, foreign debt became a chronic malaise. The difference lies in the fact Korea and others have provided very good answers to globalization in the field of production technology, investment and trade and, thus, were able to rapidly overcome their mistakes in the financial arena. This was not the case in Latin America. The overall vulnerability of her economic systems prolonged the duration of financial crisis.

The future

The dilemma of development in a global world refers to how to respond to the challenges and opportunities of globalization under different national conditions. Nations of the South have little relative power to change the rules of the game of the world order but, in many cases, a decisive ability to transform their domestic realities and, thus, change the style of relations with their external environment.

Globalization takes place nowadays in a scenario very different from the one prevailing up to middle of the XXth century. The outcome of the concentration of wealth and income in the advanced nations and in the well-to-do segments of the world population, remains no longer encapsulated within the frontiers of the backward countries. It originates global backlash effects that exacerbate religious and ethnic confrontations, bring about violence and terrorism, produces unwelcome migrations movements, gives incentives to production and traffic of drugs, encourages the arms trade and other calamities that plague the contemporary world. In fact, inequalities and social injustice are the main sources of the current threats to peace and security. No superpower or concerted action by the leading countries can eliminate or repress, by the mere use of force, the underlying tensions emerging from the disparities prevailing in the international arena.

Thus, globalisation as the field for the crude exercise of power - is no longer compatible with peace and security. The North is taking too long to understand the new realities unchained by the strength of the integrative forces of the contemporary world and the nature and magnitude of the dangers it is confronting.

Nowadays, globalisation is what it has always been: the field for the exercise of power. Cleary, leadership in the North is not up to the dimension of the challenge. Nor it is in many countries of the South.

Globalization has also unmasked the deep roots of backwardness and injustice that lies beneath the social and political fabric of many developing countries. They are threatened by the global scenario but, in the final analysis, the answers to such challenges are built, in the first place, from within. Stories of successes and failures in the South can be explained by the quality of the responses to the challenges of the world scenario. Thus, for example, several recently independent countries in Asia provided very good answers to the perils and opportunities of the international system and now belong to the group of very successful economies. We have now enough evidence of radically different development abilities in countries of the South. To a large extent, each country gets the globalization it deserves.

In this framework, South-South cooperation and regional integration become important tools to expand the freedom of maneuver in the world scenario and promote national development.

The South should continue to preach the gospel of a new world order, of solidarity and progress for all, as indispensable for peace, security, protection of the environment, freedom and democracy, faster growth and full employment in the world at large. What is good for the South is also good for the North. The eradication of the irrationality of violence and terrorism requires the removal of the deeper irrationality of poverty and injustice prevailing in the global scenario. The creation of a civilized new world order includes culture and other spheres of social activity and demands the partnership of practitioners of the same ideals in the South and the North.

Countries of the South do not have power enough to change the rules of the game of globalization, administered by the central countries through multilateral agencies and otherwise. Nor to change the forces of integration of human societies across frontiers imposed by the advance of science and technology. But the impact of exogenous factors can be transformed from within countries by providing good answers to the risks and challenges of globalization. In other words, from a perspective of the South, we can not change the world we live in but we can change how we live in that given world. By doing so, the South can accumulate power to change the world itself. In fact, the growing influence of the emerging industrial countries is already changing the balance of power in the world economic arena.

The South Consensus should not fall in the same neoliberal irrationality to propose the same policies for all types of countries and particular situations. Yet, there are some basic experiences relevant for all developing countries. Such as the importance of macroeconomic balances, progressive redistribution of incomes, control of speculative financial flows, orientation of private direct investment to targets compatible with national development, expansion of domestic savings and scientific and technological abilities, regional integration, transparency of public activities and reinforcement of the State to supply public goods and to fix rules of the game compatible with growth and social justice and good governance. In other words, policies for the dynamic interactions between the market and the State, linking the private profit motives with sustainable development.

The South Consensus will serve simultaneously three aims. First, it might help each developing country in the design and implementation of its national policies. Second, it would provide a platform to engage in the ideological debate with the vision prevailing in the multilateral organizations, financial markets and ruling circles of the North and in those influential groups that share those views within the South itself. Third, it will provide solid theoretical and empirical criteria to negotiate with the multilateral organizations in the global forums as well as in the bilateral negotiations in which developing countries are engaged.

In the North, respectable opinions are very critical of the ideology of the Washington Consensus and of the consequences of the implementation of neoliberal policies in developing countries.

The voice of the South is largely absent from this current and global debate. In Latin America and elsewhere - within the periphery - there are very vivid arguments on such critical issues. It is necessary to bring these views to the global debate in the context of a South Consensus.


* A. Ferrer: Development and underdevelopment in a globalized world: Latin America dilemmas (in Economic and social development into the XXI Century. Louis Emmerij, editor. IDB.Washington D.C. 1997).

* The South Commission: Challenge to the South. Oxford University Press. New York, 1990.

* CEPAL: Globalisation and development. United Nations. New York 2002.

* A. Madison. The world economy: a millennial perspective. OECD. Paris, 2001.

* A. Ferrer: Historia de la globalización: los orígenes del orden económico mundial. FCE (Fondo de Cultura Económica). Buenos Aires, 1996.

* Historia de la globalización II: la Revolución Industrial y el Segundo Orden Mundial. FCE, Buenos Aires, 2000

* De Cristóbal Colón a Internet: América Latina y la globalización. FCE. Buenos Aires, 1999.

* Buenos Aires, June 2006.

No Compromise on Interests of Farmers & Infant Industry - Kamal Nath

The Indian Minister of Commerce and Industry, Kamal Nath, who has been in the small group of G-6 trying to find common ground to move ahead in the Doha negotiations, said there can be no compromise on the interests of farmers or infant industry in the current Round. Upon his return to the capital after the suspension of the current Doha negotiations, Mr. Nath said developing countries want to see substantial and effective cuts in trade distorting domestic support of the developed countries in agriculture. And in NAMA (non-agricultural market access) developing countries are being asked to reduce their duties to levels which would threaten their infant industries. "We cannot agree to reduction of duties on industrial goods without adequate safeguards", he said. Presented below is his statement to the informal Trade Negotiations Committee (TNC) of the WTO on 24th July 2006.

"I speak with sadness and a sense of loss. The developments in the G-6 meeting yesterday have highlighted what has been clear to many for quite some time – that there is little ground for convergence on the core issues in the Doha Round negotiations as of now.

The Doha Round was premised on the centrality of development and the elimination of the structural flaws in agricultural trade which is of crucial importance to developing countries. The distortions in agricultural trade arise mainly because of the huge subsidies being paid by developed countries to their farmers and due to the formidable non-tariff barriers to the market access aspirations of developing countries.

Developing countries cannot allow their subsistence farmers to lose their livelihood security and food security to provide market access to agricultural products from developed countries. That is the rationale for Special Products and Special Safeguard Mechanism for which the G-33 has been negotiating. The overwhelming majority of poor farmers in the world are represented in the G-20 and the G-33 which have been in the forefront in the struggle for equity in the agricultural trading system.

The G-20 and G-33 represent 90% of the world’s farmers. But we have to contend with the question of how between them, the US and EU account for over 50% of the world’s share in trade in agriculture with only 2% of their population in farming. The answer is simple. Huge subsidies enable this trade at the cost of millions of developing country farmers.

The substantial reduction in trade distorting subsidies in developed countries and the protection of the livelihood interest of subsistence farmers in developing countries is the main component of the development dimension of this Round. Subsidised exports by developed countries not only pose a threat to food and livelihood security in developing countries, but also expose farmers of developing countries to unfair trade competition in their exports. Unfortunately, one member is unable to make any effective reduction in trade distorting subsidies but, at the same time, is insisting that developing countries open up their markets to provide access to their subsidised products. Insistence by some developed countries to perpetuate the skewed agricultural trade do not provide the basis for a fair outcome.

Some developed countries are attempting to convert this Round into a Market Access Round for their products into developing country markets, thereby inverting the core development dimension. Developing countries are being asked to pay a price for the removal of structural distortions by developed countries.

India has always stood by other developing countries including LDCs to ensure the centrality of the development dimension in the negotiations and to strengthen the multilateral system. It is possible to negotiate trade issues but it is not possible to negotiate the subsistence and livelihood security of poor farmers in developing countries.

In NAMA developing countries are being asked to reduce their duties to levels which would threaten their infant industries. We cannot agree to reduction of duties on industrial goods without adequate safeguards.

This Round is not about the perpetuation of the structural flaws in global trade especially in agriculture. This Round is not about developing countries opening their markets for developed countries for their subsidised agricultural products. This Round is not about negotiating livelihood security and subsistence of hundreds of millions of farmers. This Round is not about preventing the emergence of industries in developing countries.

This Round is about opening new markets for developing countries especially in developed countries. This Round is about creating new opportunities and economic growth for developing countries in all sectors including Industries and Services. This Round is about extracting LDCs and vulnerable economies from the stranglehold of poverty.

This is what we have failed to do so far in these negotiations. We can achieve a fair and sustainable outcome only when we recognise these central developmental issues, and look at trade through the prism of development.

India attaches utmost importance to the rules-based multilateral trading system of which the WTO is the core. This system has to be sustained by the commitment of all members. The current impasse in the negotiations poses a serious threat to the system. In the interest of the multilateral trading system, it is important that we continue to strive for ending this impasse".

India-Brazil-South Africa:

Towards a Comprehensive Economic Partnership

For India, Brazil and South Africa (IBSA), a comprehensive Economic Partnership Arrangement including a Free Trade Agreement (FTA) in trade in goods, services and investments could provide an institutional framework for exploiting the potential of their partnership and their synergies for mutual benefit. But above all, such partnership, in addition to being of immense strategic importance for the countries involved, can be a trail-blazer for South-South Cooperation, according to the Research and Information System for Developing Countries (RIS) based in New-Delhi. The following Policy Brief, just published by the RIS, is based on a report prepared by RIS on the subject at the request of India’s Ministry of Commerce and Industry.

The coming together of India, Brazil and South Africa (IBSA) in a trilateral commission to strengthen the economic partnership is to be seen as a major development in the area of South-South Cooperation. Besides shared political and economic history and development experiences, there are significant synergies between these countries as they have developed substantial capabilities in different sectors over the years. But these synergies are yet to be fully utilized for their collective benefit and development of the South in general. IBSA countries can reinforce the economic strength of each other by synergising their complementarities in areas of industry, services, trade and technology which in turn could create a market of 1.2 billion people, 1.2 trillion dollars of GDP and foreign trade of nearly 400 billion dollars. IBSA partnership is also of immense strategic value for multilateral negotiations and shaping their respective roles in the global governance.

IBSA Comprehensive Economic Partnership Arrangement

IBSA constitutes a large and expanding economic space where in the total two-way trade is close to US$ 400 billion currently. The share of intra-IBSA trade in their total trade has been approximately 2 per cent (about US$ 5 billion) in 2002. The New Delhi Action Plan has put an ambitious goal for doubling the mutual trade by 2007. To achieve this target several measures will be necessary. To exploit the synergies and potential of cooperation for mutual benefit, IBSA countries can explore an IBSA Comprehensive Economic Partnership Arrangement covering the following aspects among others:


At the Ministerial Meeting of IBSA in New Delhi in March 2005, it was decided to work towards evolving an FTA between the three countries. However, a trilateral FTA between India-Brazil-South Africa may not be technically feasible as Brazil and South Africa are members of customs unions (viz. Mercosur and SACU respectively) and hence are bound to maintain common external tariffs with other partners. Therefore, we may consider evolving an IBSA Free Trading Arrangement (IBSA FTA) between India-Mercosur- SACU. This FTA could subsume the ongoing negotiations between India-Mercosur and India- SACU PTAs. This way we could have a framework for mutual trade taking place on a preferential basis besides giving access to even other members of the respective customs unions.

IBSA Trade Facilitation Framework (IBSA TFF)

The IBSA FTA may be supplemented by an IBSA TFF focusing on identifying and eliminating the nontariff barriers and evolving a framework for trade facilitation. RIS study finds that significant non-tariff barriers impede mutual trade in the grouping. Some of the NTBs identified by the RIS study are as follows:

Harmonizing conformity assessment procedures and standards

India, Brazil and South Africa have their own regulatory import controls based on standards and conformity

assessment procedures, specifically from the standpoint of health and safety. In this context, mutual recognition of conformity assessment procedures between them for the purposes of meeting their respective regulatory requirements represents convenient method of reducing non-tariff barriers to trade. This will call for assessing the present situation with respect to the compatibility of each other’s standards and enter into mutual recognition arrangements with regard to standards and conformity assessment activities. Hence, there is also the need for the standards and export inspection bodies of IBSA to work together for harmonization and mutual recognition of conformity assessment procedures.

Customs procedures

There is the need for harmonization of customs procedures regarding the tendering, importer registration, shipment, customs and port-clearance, etc. This in turns calls for bringing together the customs authorities of IBSA to discuss ways and means of standardizing their procedures.

Addressing the Lack of Business Information and Perception Gaps

Very often a major factor that stands in the way of trade is the lack of information or presence of misinformation. The Indian products, especially in Brazil, are perceived to be of low quality. To overcome this constraint there is the need for bringing together the trading communities in the three countries. Much could be achieved in this direction by initiating an Annual IBSA Trade Fair with the location rotating among them. An IBSA Business Forum could also be set up to bring together the business community in the three countries to promote trade and investment. Such a business forum may be complemented with sectoral bodies especially covering those industries/sectors where the trade and investment potential is higher. Such bodies would facilitate formation of strategic alliances between the enterprises of the region to exploit their synergy for not only the regional markets but also for third country investments and trade opportunities. This Business Forum could also deal with trade disputes with respective governmental bodies involved in IBSA trade and also take up the other issues such as problems concerning LCs, and high cost of insurance, as observed in Brazil or certain anti-dumping or other discriminatory practices as observed in South Africa.

Facilitating Trade in Services

Service sector has emerged as the leading sector of the economy accounting for more than 50 per cent of the GDP in all the three countries. However, with the possible exception of IT software services in India, and travel in South Africa, the service sector is an area wherein IBSA is found to be relatively weak in terms of comparative advantage. Also the service imports of Brazil and South Africa recorded negligible or negative growth rate during the recent past. The only service sectors of Brazil wherein imports showed significant increase are insurance, computer services and other business services. The service imports of these countries are subject to a number of barriers such as job quotas and barriers for commercial presence in select sectors. These barriers can be addressed within the framework of IBSA CECA in select sectors of mutual interest.

Facilitating FDI Flows within IBSA

There have been significant two-way flows between India and South Africa but potential of investment

between India and Brazil is hardly exploited. A number of measures can be taken within the IBSA framework to facilitate mutual investment flows between them, as follows:

An IBSA Investment Agreement (IIA)

An trilateral IBSA Investment Agreement (IIA) signed within the framework of IBSA could be a useful component of the IBSA Comprehensive Economic Cooperation Agreement, as proposed in this Report. The IIA could provide a framework for postinvestment national treatment, non-discrimination, investment protection and dispute settlement to promote mutual investment flows. It can also be complemented by an IBSA Double Taxation Avoidance Agreement to further promote mutual investment agreements.

Cooperation among the Investment Promotion Agencies

All the three countries are having their respective investment promotion agencies. These agencies may cooperate between themselves and set up their representative offices in other member countries. Such representative offices could be instrumental in the dissemination of information about the policies, rules and procedures of the respective countries, linking the potential investors with local entrepreneurs, facilitating approvals, among other initiatives.

Strengthening the IBSA Transport Links

Given the geographical location of India-Brazil and South Africa, distance acts as a major constraints resulting in high transportation cost between them The estimated transport cost accounts for more than 12 per cent of the value of trade between India and Brazil and about 10 per cent in case of trade with South Africa. Therefore the outcomes of initiatives outlined above are likely to be sub optimal unless the air and shipping connectivity between the three countries is strengthened. Maritime and air linkages between India and South Africa, and between South Africa and Brazil are stronger than that between India and Brazil. The low volume of trade makes the business relatively unattractive to the main-line shipping companies. Competition for business is therefore weak leading to high costs. To improve the transport links between IBSA, following measures may be considered:

Common Feeder Structure

The alleged lack of coordination between the different carriers offering feeder and inter-island services and between these carriers and the main-line services may tend to increase costs and impair service frequencies. One suggestion that has been made is to discuss the feasibility of a common feeder structure as used in the

Mediterranean, whereby the main-line carriers agree to use regional feeders and inter-island carriers operating as a pool.

Warehousing Facility in South Africa

The new element in the equation is the emergence of a geographically dispersed range of ports offering transshipment services. This offers the possibility of providing even the smaller destinations with access to increased regional trade. The principal trans-shipment ports on the basis of geography for the IBSA trade should be at Durban or Cape Town. This might call for making arrangements for the creation of an IBSA Warehousing facility in South Africa which could be used by Indian and Brazilian enterprises for mutual


Improving Airlinks

The flag carriers of IBSA countries, viz. Air India, Varig and South African Airways (SAA) could join hands to launch code-shared direct flights connecting Delhi/ Mumbai-Johannesburg and Rio on a daily basis. This way the connectivity within the IBSA will improve tremendously. The other option is to provide a regime of Open Sky Policy between the IBSA economic space for the national carriers.

Sectoral Cooperation and Sharing of Expertise and Experiences

IBSA countries can fruitfully cooperate in the following areas and share their knowledge, expertise and experiences within the framework of the trilateral cooperation.

Experience Sharing in Transportation Sector

The study holds the view that IBSA have immense opportunity to learn from each other. For example, India’s expertise in automation of railways can be extended to South Africa and Brazil. Similarly, India and South Africa can also learn from the Brazilian experiences in introduction of private capital in improving railway efficiency. It would be advisable to form a commercial venture among three leading logistics operators from these three countries. Say for example, formation of any commercial venture among Container Corporation of India (CONCOR from India), Transnet Ltd. (from South Africa), and Companhia Vale do Rio Doce (CVRD from Brazil) could be of great boost to closer transport integration among the three countries. While CONCOR and Transnet are public sector companies, CVRD is Brazil’s largest logistics company in the private sector. Similarly, Air India can learn from the success of South African Airways and Varig Airways. Here apart from code sharing to connect Delhi Johannesburg and Rio, joining together to promote trade and tourism and to exchange technical experiences will certainly pave the way in sustaining closer integration in near future. India, with its renowned maritime training institutes, can offer modern maritime training to seafarers of South Africa and Brazil. Similarly, South Africa’s experiences of port management can also be extended to Indian port authority. Shipping lines in all the three countries can forge a network to exchange experiences in implementing ISPS code.

Promoting Joint R&D Alliances

During the last few decades, India, Brazil and South Africa have developed significant technological capabilities in different fields. IBSA cooperation should be instrumental in taking these capabilities to new

heights for the benefits of countries in the South in general and IBSA in particular. In pursuing this objective, an IBSA Fund for promoting Joint R&D could be set up to support joint R&D projects with active involvement of private sector and academia in IBSA. This may facilitate creation of strategic alliances between business enterprises of the three countries. It could also facilitate joint research on common problems of IBSA countries such as development of medicines for tropical diseases, AIDS drugs, Hepatitis vaccines, and agricultural research. It could also facilitate joint initiatives for processed food safety, quality standard, quality harmonization, market research and joint marketing among others. Other areas of cooperation in technology may include capacity building and harmonization of bio-safety guidelines, IPR regulations, and other regulatory frameworks in tune with the international protocols. To facilitate flow of technology between IBSA a Technology Transfer Network could be set up which may pool information on the availability of technologies with the enterprises/ R&D organizations in the region.

Cooperation in SMEs

SMEs not only contribute a substantial proportion of industrial output, employment and exports, but they are breeding grounds for entrepreneurship. All the three countries have very rich experience and exchange of these experiences in promotion of SMEs and micro enterprises is likely to have profound development implications. It is also worth exploring what India could learn from the Black Economic Empowerment programme being implemented by South Africa. The cooperation might take the form of bringing together the small-scale industry promotion agencies and SME Associations of IBSA to establish liaison with each other and learning from each other’s experience and technology sharing.


About 62 per cent of energy requirements of Brazil is met by renewable sources of which ethanol from sugarcane accounts for as much as 10 per cent. (In April 2002 India and Brazil signed a memorandum of understanding for technology sharing in blending of petrol and diesel with ethanol.) Given the fact that India is the largest producer of sugarcane in the world and is facing booming oil import bill, the returns from India-Brazil cooperation in this field cannot be over emphasized. At the same time, India’s capabilities in the field of solar photovoltaic could be of considerable interest for Brazil given the vastness of country and its settlement pattern. South Africa has a highly developed synthetic fuels industry, which takes advantage of the country’s abundant coal resources with coal liquefaction technology. With the oil prices ruling at around US$ 60 p.b., this technology may be commercially viable and could be explored by Indian companies. India has some expertise in harnessing solar energy and biofuels that may be of interest to Brazil and South Africa.

Agriculture and Food Processing

There is a vast potential of cooperation in the agriculture and food processing. They could conduct joint research on products of common interest and share their genetic resources in plant breeding programmes. Brazil is known for its capabilities in the food processing industry. Brazil has been able to develop a wide variety of value added products from root crops like cassava and other horticultural crops. Both India and South Africa may share these capabilities. Cassava is cultivated in on a large scale in some of the South Indian states. Yet we have not been able to develop and market value added products from Cassava. Cassava is also cultivated on a large scale in some of the African countries. It has been observed that their success in terms of productivity per hectare is low as compared to India and Brazil and they could also benefit from developing value added products. Hence, cooperation between IBSA in horticulture and root crops could be beneficial to all the three. In addition, IBSA countries may share their expertise, capability and experiences in complying with SPS measures applicable to processed foods in the developed country markets.

E-Governance and IT for development

This is a case of cooperation among equals. Focus needs to be on exchanging experiences and learning from each other. Creation of a forum of different stakeholders in IT, like private sector, civil society organizations and government for sharing experiences/expertise in the field of e-governance, harnessing ICT for development, and strengthening capabilities in Free or Open Source Software. They could also work towards an e-South framework agreement to pool together their capabilities to address the common challenges.

Gems and Jewellery

It is understood that bulk of trade between India and South Africa is in gold, gems and jewellery. However,

this trade is today routed through Europe and which in turn leads to a situation wherein neither South Africa nor India has a significant role in the value chain. Therefore, there appears to be immense potential for investment, which enables these countries to capture a significant position in gold, jems and jewellery value chain. The abundant supply of colour stones in Brazil and the rich craftsmanship of India in polishing stones provides yet another investment opportunity for the third country markets.


India with its vastness and geographical diversity could be an attractive location for tourist from both Brazil

and South Africa. It is found that tourism is one of the vibrant sectors in the South African economy accounting for about 7.1 per cent of the GDP and contributing significantly to job creation as a result of substantial investment made by both public and private sectors. Indian companies also have invested in the tourism sector of South Africa. Cooperative efforts among the three countries could reap rich dividends. For instance, Goa, a well-known beach resort with large Portuguese speaking population, could be of substantial interest to Brazilians. The low cost of healthcare in India is yet another fact that promotes health tourism. Initiatives to train tourist guides in the languages of three countries, relaxing visa regulations for travel within IBSA are needed to promote tourism besides improving the airline connectivity. Launch of IBSA Packages combining select locations of India-Brazil-and South Africa, for instance, Goa, Cape Town and Rio in a single package could be very attractive for western tourists seeking variety in a compact package. An Association of Tour Operators of IBSA could be formed to explore such possibilities.

Entertainment and Animation Industries

To leverage the markets in Entertainment and Animation Industries, it may be advisable that the TV and Radio broadcasting companies of IBSA join hands to launch an IBSA Channel covering news as well as entertainment content from the entire region. Indian entertainment industry (a la Bollywood), which is the largest producer of feature films in the world, could provide a backup for the Channel. It would also help in promotion of tourism and people-to-people contacts.

Financial Sector and Banking

India and South Africa have considerable experience in development of capital markets with the Bombay Stock Exchange being one of the oldest and well performing stock exchanges in the world. This expertise could be shared among the IBSA especially given the fact that the Brazilian capital market needs further strengthening. In addition, integration of the capital markets of IBSA by facilitating the cross-listing of securities with minimum standards of listing rules to help the flows of capital across the region may be beneficial to all the three countries. As of now the presence of Indian banks is limited in Brazil and South Africa. The situation appears to be not much different with respect to the presence of Brazilian and South African banks in India. Hence, with a view to promote trade and investment, intensive commercial banking links by facilitating the setting up of branches of commercial banks of IBSA in the partner countries is called for.

People to People Contacts

One of the key problems in promoting trade and investment between IBSA and especially with India and Brazil appears to be the lack of information. One of the possible ways to address this issue is through strengthening the people-to-people contacts. People-to- people contacts between IBSA are possible only through airlinks. Yet the air connectivity between India and Brazil is especially weak. In this context, code shared flights and an open sky policy, as outlined above, might be helpful in strengthening the links between the three countries. An initiative like IBSA Games could also provide rich dividends in facilitating the people-to-people links. There could be IBSA Soccer and Cricket Tournaments to promote visibility of each other country mutually.


Greater interaction between media of IBSA is crucial for reducing the information gap. There is very little reporting on India in Brazil and South Africa and vice versa. To bridge this gap, some exchange fellowships for media persons and journalists could be set up to allow journalists from Brazil and South Africa to spend some time in India and vice versa.

Sharing Development Experiences

RIS study notes that more or less similar policy reforms undertaken in the three countries have yielded quite different outcomes across them. Hence, there is an enormous potential for sharing development experiences between IBSA in managing globalization and for providing constant policy inputs for promoting mutual cooperation. To facilitate such a process an IBSA Network of Think-Tanks could be created to facilitate such exchange of development experiences and studies on promotion of mutual cooperation. The Network could comprise national focal points from each member country, and have fund at its disposal to draw upon for launching studies, annual conferences and for instituting fellowships for exchange of scholars.

IBSA Cooperation in Multilateral Forums

The strategic importance of IBSA cooperation in shaping the outcome of multilateral negotiations cannot be overemphasized. As emerging powers they can provide leadership to the developing world in these negotiations and thus help in evolving more development-friendly framework for multilateral trade and financial architecture. If the recent experience of their cooperation in multilateral trade negotiations is any guide, this partnership is going to have a major influence on the shape of multilateral negotiations in future.

Cooperation in Multilateral Trade Negotiations

Over the past year IBSA countries have already cooperated within the framework of the G-20 of developing countries at the Cancún Ministerial Conference of WTO and subsequent negotiations in a very fruitful manner. Later on in the negotiation of the July framework, India and Brazil represented G- 20 in the Five Interested Parties (FIPs) that hammered out the agreement. Given the fact that the G-20 was led by Brazil, India and South Africa, it can be said that the trilateral engagement by India with Brazil and South Africa under the IBSA framework has facilitated coalition-building on WTO issues. The Ministerial Meeting of the IBSA Trilateral Commission IBSA held in New Delhi in early 2004 emphasized the importance of a common approach with regard to WTO among other priorities. It is important that IBSA countries continue playing such leadership role in the multilateral trade negotiations as they have been over the past. Furthermore, it is important for the longerterm sustainability of the coalition of G-20 in WTO to develop a more constructive proactive agenda. This agenda might cover seeking a reform of the process of decision-making in the multilateral trade negotiations to make it more inclusive, transparent and equitable; setting up a Developing Country Watchdog on the implementation of WTO commitments by developed countries and bringing complaints against any cases of under-compliance; strengthening the provisions of technical assistance for developing countries; strengthening the provisions for special and differential treatment with the help of a framework agreement; seeking a framework agreement on movement of natural persons, and a framework agreement on transfer of technology, among others. G-20 could also become a forum for promoting South-South Cooperation such as mutual cooperation in implementation of commitments, technical assistance for compliance of emerging standards, etc. besides evolving approaches for promoting South-South trade. They could discuss ways and means for revitalizing the GSTP for promoting their mutual trade besides addressing non-tariff barriers to it. IBSA could take lead for making G- 20 to pursue these proactive measures.

Reform of International Financial Architecture and the United Nations

Considering the common development concerns of IBSA countries, they could also coordinate their positions and provide leadership to developing countries in pushing reforms of international financial architecture including reform of IMF conditionalities to prevent reoccurrence of financial crisis and making it more development friendly and sustainable. Both Brazil and South Africa have suffered from mild crises in the past. The reform of the UN with expansion of the UN Security Council is also a common agenda and Brazil and India have announced support of their candidature for permanent membership of the UN Security Council on a mutual basis within the framework of G-4.

Flexibility Shown by all Except the United States –

Peter Mandelson

The European Union Trade Commissioner Peter Mandelson did not hold back his frustration after the suspension of the WTO negotiations on 24 July. He was clear and forthright in accusing the United States of foot dragging when all other parties were willing to be flexible in coming to a deal so as to complete Doha Round on time and with some meaningful results for all. Back in Brussels the next day, however, he has made some suggestions on treating some of the Round issues outside the Round – something that developing countries are apparently not keen on. Presented below are remarks by Mr. Mandelson on 24 July and an analysis of what is wrong with the US proposals.

"I want to express the profound disappointment and sadness of the member states of the European Union, and of Mariann and myself, that the world trade talks are having to be suspended today.

This is neither desirable nor inevitable. It could so easily have been avoided. What stands between us and the modalities of an agreement are not vast numbers or enormous sums. In fact, our lengthy G6 meeting yesterday – which was to be the first of several continuing to the middle of August - was actually the best of its kind, until it became the worst. Having been mandated by heads of government at the G8 to come together to indicate further flexibility, I felt that each of us did, except the United States.

The United States was unwilling to accept, or indeed to acknowledge, the flexibility being shown by others in the room and, as a result, felt unable to show any flexibility on the issue of farm subsidies.

This was meant to be a consensus building meeting, a "what if" meeting, one in which we could indicate movement without tabling formal new offers so that, in the end, we could bring the ingredients together and finally act in concert. Nobody was being asked to act prematurely or unilaterally. The idea was, through intensive informal discussion, to build up a series of combined moves that would take us to the level of ambition at which everyone would feel comfortable to settle.

In deciding to withhold any indication of future flexibility, the US has judged that it would be better for the process of negotiation to be discontinued at this stage. This is not in keeping with the spirit of the St Petersburg summit. Actions have consequences and this action has led to the Round being suspended.

The EU deeply regrets this as we have signalled before the meeting and during it that we are able to make a significant improvement in our agricultural market access offer, bringing our average cuts close to the level requested by the G20 group of developing countries, provided others move in parallel. I am glad the G20 were good enough to acknowledge our level of ambition may not be what some have demanded but I defy anyone to say that it is meagre: 100% elimination of export subsidies. 75% reduction in trade distorting domestic support. Readiness to go to a 50% average tariff cut. We also indicated that we were ready to talk about the number and treatment of sensitive products. This is more, much more, than anyone would have expected from the EU.

There is no more time left. We have missed yesterday the last exit on the motorway of negotiations this summer and it would be unwise to conceal this from ourselves.

Fundamentally, with what is already on the table, we are close to a package that is greater in value than anything ever achieved in previous trade rounds. To say that there is no new market access on the table is simply wrong.

Failure this weekend means losing from the table the important, tangible gains we have assembled for the developing world, including for the poorest nations.

Not only new opportunities for trade in agricultural and industrial goods and services, but stronger trade rules that could drive economic growth and development for the most needy in the world. We stand to lose Duty Free/Quota Free access to others` markets for the least developed countries. A sizeable Aid for Trade package is now in abeyance, not withstanding that the EU will press ahead regardless. A major agreement on Trade Facilitation will not go ahead. And perhaps most important of all, we do not have the once and for all multilateral programme of fundamental reform of farm subsidies in the rich world that should be the centrepiece of this Round.

But the cost is even greater. We risk weakening the WTO and the multilateral trading system at a time when we urgently need to top up international confidence not further damage it, and do what we can to stabilise the world not create additional tension and uncertainty.

Let’s be clear, as well as an economic cost, there is a huge political cost of failure.

For all these reasons, the EU is not giving up on this Round. We have stuck with it, paid into it, given a lot, indeed given more than others. We will continue to do so because it is right and fair to do so towards the developing world, as well as in our own economic interests. I hope that when the smoke has cleared, others will want to do the same. We stand ready to pick up where we have left off."

Doha Lite? New market access in the Doha Round

The USTR has suggested that the Doha negotiation stalled because of the lack of ‘new market access’ in the offers of its major trading partners. But consider:

* For the developed world the EU has floated a further step from our existing tabled offer of 39% average farm tariff cuts to "close to" 51.5%. This is a substantial move. It is by far the deepest farm tariff cuts the EU has ever offered in a multilateral negotiation.

* The EU has been willing to discuss the use of sensitive products. Even here the charge of protection is not justified: sensitive product tariffs will still be cut, and their tariff rate quota levels expanded to allow new market access.

* The EU estimates that the EU offer would allow around 800000 new tonnes of beef imports every year even if beef was designated a sensitive product. That is more than the current beef exports of Argentina and about 7 billion new hamburgers every year.

* As the EU removes its protection its exports will fall and new markets will be opened for others - including the US. The EU will reduce its exports of sugar by 5 million tonnes, of fresh milk by 8 million tonnes. EU poultry exports would fall by a quarter.

* The EU offer will impact on EU farm jobs and livelihoods: the EU stands to lose billions of euros in annual farm receipts.

* If the market access being insisted on by the US is to the farm markets of the developing world – and US arguments suggest that it is – then we need to ask how that sits with the goals of a development round.

No deal better than a bad deal?

Some US lawmakers have suggested that the US should walk away from the WTO Doha trade round if the US does not achieve the exceptionally steep farm tariff cuts that it has demanded from others. The USTR has suggested that the current Doha package is a ‘Doha Lite’ agreement, with little real substance. No deal, these people argue, is better than a bad deal.

Yet the farm tariff cuts on the table are already the steepest ever offered in a multilateral trade round. The EU has offered to cut its average farm tariff in half, and reduce its highest farm tariffs by 60%. So even in the single area of farm tariff cuts, especially for highly competitive farm exporters in the developing world, Doha is hardly a bad deal. What would be the true costs of ‘no deal’?

* No deal would be a blow to the credibility of the international trading system and the WTO. The failure of a multilateral Round on this scale would return us to a system of bilateral agreements and FTAs in which the large can strong-arm the small. Trade muscle instead of multilateralism.

* No deal would mean losing new south-south trade in a way that reflects the growing reality of the global economy – that China and Brazil and the emerging economies of Asia and South America have a new power but also a new responsibility. Doha is an opportunity to integrate these markets further into the global economy.

* No deal would mean Europe and the US losing vital new access to the markets of the emerging economies like China and Brazil for their exported industrial goods.

* No deal would mean losing the possibility of binding the EU’s agricultural reform in Geneva and the possibility of locking in similar reform in the United States.

* No deal would mean losing new market access in farm goods – the deepest farm tariff cuts ever offered by the EU by a wide margin. In the EU this would include massive new market access for key agricultural exports such as chicken and beef.

* No deal would mean losing new trade in manufactures that is not just vital for the EU and the US but for the growing industrial sectors of the developing world. Most developing country trade is in industrial goods, and most tariffs paid in the global economy are for industrial goods.

* No deal would mean losing even a modest deal on services trade and foregoing the developmental benefits of foreign investment and the global flow of skills and experience to the developing world.

* No deal would mean losing a new multilateral agreement on duty-free quota-free market access for the Least Developed Countries – similar to that extended by the EU since 2001. We would also lose a huge new global package of Aid for Trade.

* No deal would mean losing the chance to rewrite the global trade rulebook in the trade facilitation negotiations to improve the standardisation of customs practice. Economic research suggests that the benefits of these negotiations for developing countries could be greater than any other area of the negotiations – the equivalent of adding $20bn to the GDP of Sub Saharan Africa by 2020 – effectively doubling what the region receives in aid.

The US and a Doha deal

"The G20 wants steeper cuts in US farm subsidies before it is willing to table the required cuts in industrial goods. Washington can unlock this by stepping forward with a better offer. If this happens the EU will, at the same time, meet them both with a strengthened offer." – Peter Mandelson, EU Trade Commissioner, 23 June 2006.

What does Doha need from the US?

* Real cuts in farm subsidies. That means a steep reduction in the level last bound in Geneva in 2001: $21.5 billion. The US has spent between $10 billion and 19.5 billion each year since 2002. The US is currently offering to cut its farm spending to $22 billion dollars. This is more that it currently spends and more than it has bound with the WTO in Geneva.

* The US has offered steep cuts in Amber box subsidies - $19.1 billion down to 7.6 billion. BUT it has proposed to increase what it spends in other categories of subsidy while rejecting the idea of reforming those categories to ensure they are not trade distorting. So the steep amber cuts hide a ‘reshuffling’ of US support from one box to another. Add together the three types of proposed trade-distorting support and you actually get $22.7 billion. More than they currently spend!

What would be a realistic US move?

* The EU has offered to get "as close as possible" to the G20 developing countries’ request in the area of market access: a 51.5% average farm tariff cut. The US should try to aim for the same proximity to the request of the G20 developing countries in the area of domestic support: $10.5 billion.

Three problems with the US proposal to cut domestic farm supports in the DDA

Problem One: The current US offer does not sufficiently cut into the maximum amount of money the US would be permitted to spend on trade-distorting farm subsidies.

* The current US offer would leave US total trade-distorting farm spending limits higher (22.7 billion $) than the last US notification in Geneva in 2001 (21.5 billion $). The US offer would therefore raise the bar on US farm spending, not lower it. This is politically impossible to sell to the wider WTO membership, and contrasts especially with the heavy demands the US is making for steep farm tariff cuts from both developed and developing countries.

Problem Two: WTO rules identify different forms of trade distorting farm spending which all together are grouped under the so-called Overall Trade-Distorting Support (OTDS): AMS (or Amber box), de minimis and Blue box. By shifting payments from box to box it is possible to lower AMS levels but maintain trade-distorting payments in the other two boxes. This appears to be what the US is proposing to do.

* In the WTO, non-trade distorting farm payments are classified in the GREEN BOX. Trade distorting farm support falls into three categories or ‘boxes’ in WTO jargon. The AMBER BOX contains support payments that are the most trade distorting and scheduled to be reduced under the terms of the Doha Round Framework Agreement.

* BLUE BOX payments are less trade-distorting- they have reduced effects on production and prices. The Doha Framework Agreement foresees BLUE BOX payments being capped at 5% of the total value of agricultural production of the country in question.

* The DE MINIMIS box is a minimum farm support allowance to all WTO members. Payments in the DE MINIMIS box must be less than 5% of the value of production of product for which the payments are allocated, OR below 5% for the total value of agricultural production for the WTO member in question.

* The US is proposing cuts to its AMS – ‘AMBER BOX’ – spending. But because of the lack of disciplines for the new BLUE BOX spending, the US will be able to preserve highly- trade-distorting Counter Cyclical Payments (which compensate US farmers when product prices fall below pre-determined levels and therefore shield them from market price signals) by moving them to this new BLUE BOX without having to change their heavily trade-distorting nature. Because these payments rightfully belong in the AMBER BOX – the US AMS reductions are not as serious as they may look. The EU is asking for real disciplines to BLUE BOX payments so that these sorts of shifts are not possible.

Problem Three: The US is asking for far bigger concessions than it is willing to offer.

The US is demanding farm tariff cuts of up to 90% - sweeping cuts that would reshape the markets of Europe and the developing world overnight. Yet there are serious problems with what it is offering in return. US needs to try and find a way to move towards what the EU and the developing countries of the G20 are asking on domestic support: real reductions in spending ceilings and commitments to discipline blue as well as amber box spending so that reductions are real. If the US does this it will force the G20 to reciprocate on NAMA and Europe will be in a position to employ the flexibility we have offered.

‘Solutions Ought to be Found Inside the WTO’

"Although the importance and influence of the most industrialized countries on international trade is well known, it is essential to reaffirm that it is not outside the WTO where solutions ought to be found." That was the view expressed by Mr. Jorge Ferrer, Chargé d’Affaires of the Permanent Mission of Cuba, on the suspension of the Doha negotiations at the WTO General Council on 27 July 2006. In the following unofficial translation of his statement, he raises a host of other concerns on the sidelines of the current crisis.

"The stagnation of the Doha Round negotiations was to be expected. There is lack of political will among developed countries, mainly the US, to make historical decisions that correct the structural injustices and inequalities of a trading system that only benefits the rich countries; a trading system in which developing countries - nearly 4/5 of the world population- only account for one-third of world trade. Once again, narrow national interests from a purely commercial perspective and the selfishness and unmeasured ambition of the industrialized countries have prevailed over humanism, solidarity, cooperation, equity and mutual benefit.

Although the reduction of domestic and export subsidies out of which 21 developed countries spend more than 250 billion dollars - 5/6 of the 300 billion dollars spent by all the world’s countries- is one of the oldest demands of developing countries, it would not guarantee by itself a development approach and this Round’s success.

Development, which is a vital part of our mandate to correct the inequalities of the Uruguay Round, is practically absent in this process.

Those developed countries that express in their statements their concerns about development and about the fact that we, the developing countries, are the main affected by the non-conclusion of the Round, are the same countries that oppose the proposals on special and differential treatment presented by many developing countries. They have not even coincided with the LDCs in a simple matter of procedure such as the consideration of the means to implement the Hong Kong Ministerial decision on duty-free/quota-free market access to products from the poorest and least developed countries at the negotiating session of the Committee on Trade and Development.

That decision on the LDCs would not even be enough. Even if the LDCs exported all its production, according to the UNCTAD’s report of 2006, their participation in world exports of goods and services would only rise to 2.4 %, while they account for more than 10 % of the world population.

However, we are not discouraged. This is not the end of history or of the negotiating mandate of the Doha Agenda and the Hong Kong Declaration. The negotiations may be suspended, but the Doha mandate is still in force. We will not accept, as some members intend, its replacement, modification, division or selective and selfish interpretation.

The Doha Development Agenda is not a menu of options to choose according to specific interests. It is a whole, as we have agreed, in which all of the elements are indivisible, interdependent and interrelated.

Evidently, the small group meetings format is also in crisis and has failed. The process must be put back where it belongs: the bodies which involve the universal participation of all the Members.

The failure to comply, so far, with the original schedule foreseen by the Hong Kong Ministerial Declaration, makes unfeasible the conclusion of the Round by December of this year.

Cuba is in favor of achieving results in order to conclude the Round, but not merely for the sake of complying with an artificial date, to achieve any results and even less to be hostages to the plans or the domestic policy needs of an important member.

In an Organization characterized and destined to observe the legal rules it has established, the scrupulous observance of its own rules should be a fundamental premise of its work.

However, we are concerned about a series of irregularities that are becoming a dangerous trend that must be stopped as soon as possible.

For example, the frequent convening of meetings with very little time in advance and undefined agendas, the proliferation of informal meetings to deal with significant matters, the absence of written texts handed out in advance of important decisions that must be approved and consulted by the Representatives in Geneva with their respective Governments, the convening of numerous and important meetings in parallel, the ignorance by some Chairpersons of this organizations’ bodies of the views of a significant number of delegations, the management of concepts and objectives that have nothing to do with the Doha and Hong Kong mandate, as well as the increasing influence during the course of the process of small group meetings held outside Geneva, such as the recent G-8 Summit.

Although the importance and influence of the most industrialized countries on international trade is well known, it is essential to reaffirm that it is not outside the WTO where solutions ought to be found.

We have heard here concepts such as ‘new trade flows’ and ‘real market access’. These issues have no legal backup in the mandate agreed by the Ministers. This is not a market access Round for developed countries but a development Round and, in any case, to give developing countries access to the markets of the industrialized countries.

Developed countries talk about real and effective tariff cuts for developing countries, but they refuse to apply that approach to their multimillion domestic subsidies that distort international trade. They talk about bringing the developing countries’ industrial tariffs down to very low levels, but they refuse to apply the same approach to their agricultural tariffs that can be up to hundreds and even more than a thousand percent in some cases and they maintain tariff peaks of 350-900 % on agricultural products of interest to developing country. What kind of equality and development are we talking about here?

We cannot afford to lose more than four years of work. We will not start from zero. The proposals and important documents like those on possible modalities, prepared by the Agriculture and NAMA Chairmen, although flawed and not agreed by consensus, constitute an obligatory point of departure for our future work."

With Doha Round in Suspense, South-South Links Take Front Seat

"The suspension of the negotiations constitutes an opportunity for reflection from the part of all WTO members on how to deliver on the Development objectives of the round," says Luisa Bernal, Coordinator of the Trade for Development Programme of the South Centre. "It also provides a breathing space for developing countries to reflect upon the potentials of South-South global cooperation initiatives and how to strengthen regional integration schemes among themselves in order to respond to the development aspirations of their people." Presented below is a brief analysis.

On Monday 24 of July the Director General of the WTO, Pascal Lamy, reported to WTO members that the most recent attempt by the Ministers of the G6 – Australia, Brazil, European Union, India, Japan and the United Stated- to unlock the Doha round talks by reaching an understanding on key issues related to NAMA and agriculture negotiations had failed. Lamy recommended suspending the discussions across all negotiating areas, indefinitely, and suggested members used this "time out" to review their positions and consider alternatives.

The recommendations by Lamy were formally endorsed by all WTO members who met in the General Council in Geneva on 27 July. The Doha round is, thus, in suspense.

The most immediate reason for the collapse of the talks was, once again, the incapacity of United States (US) to show any flexibility in its offer to reduce domestic support to agriculture from what had envisaged in its proposal of October 2005. Such proposal would allow the US to increase its trade-distorting support from the current bound levels at the WTO of around US$ 19 billion to US$ 22.4 billion! Developing countries and the European Union had asked the US to commit to cuts to bring its support below the current bound levels at the WTO. Internal political imperatives related to the mid-term elections in the US Congress in November made it impossible for this country to show the leadership it was expected from it in taking forward the long-due reforms in agriculture subsidies.

But the most recent impasse in the negotiations is just to be added to the history of missed deadlines and difficulties encountered by WTO members in translating the objectives of the Doha Development round into concrete commitments. In fact, the most striking feature of the negotiations so far has been the sidelining of the development components of the agenda and the pressure exerted on developing countries to make concessions that go beyond their means and capacities in order for the developed world to move forward with reform in agriculture.

Developing countries have indeed shown flexibility both in terms of the scope of the round itself (for instance, by agreeing to negotiations on trade facilitation, one of the Singapore issues which they had resisted to discuss in the WTO since the 1996 Singapore Ministerial Conference) and of the commitments they are willing to undertake in the various areas under negotiation. But what they are being asked to commit by the industrialised countries amounts to disproportionate concessions on their part, which would put at risk the viability of their rural areas, jeopardise their food security and the livelihood of millions of poor farmers and exacerbate deindustrialisation and unemployment across the developing world.

The principles of less than full reciprocity, proportionality and special and differential treatment - among other provisions carefully crafted by developing countries in the negotiating mandate in order to balance the level of ambition they are committed to with their development imperatives - are systematically questioned by developed countries. Developed countries insist instead on re-interpreting the negotiating mandate by introducing new concepts such as "real market access" and "new trade flows" nowhere to be found in the Doha Ministerial Declaration.

A development outcome is difficult to expect as long as developing countries are asked to reciprocate dollar-by-dollar the dismantling of subsidies to agriculture in developed countries with market access in agriculture, NAMA and services.

India’s Minister of Trade, Mr. Kamal Nath, referring to the suspension of the negotiations indicated the deadlock resulted from a gap in mind set, not in numbers, among members. The mindsets of market access versus development have proved very difficult to reconcile even after five years of intensive negotiations.

There is, thus, significant uncertainty with respect to whether, when and how discussions under the Doha round could be restarted. Pascal Lamy indicated that the breakdown of the negotiations makes all WTO members losers. There is an element of truth to this statement. The dumping of agricultural goods in the international markets and rigged rules will continue untouched to the despair of cotton farmers and the poor in the developing world. Further, the undermining of the multilateral system is clearly an issue of concern to developing countries, which see the multilateral rule-based trading system as a protective device against the use and abuse of power and unilateralism by major players. However, if the multilateral system would simply legitimise the policies of the powerful and force commitments on its weaker members, what is its added-value? In this sense, the negotiation impasse can be seen as an opportunity for reflection on the core objectives of the Development round and on how to deliver on them for the benefit of all WTO members, since an impoverished South is of no interest either to the countries of the North or its corporations.

Minister Nath has also emphasised the importance of unity among developing countries. Such unity has, in fact, been a very significant factor in deciding the course of the negotiations for the last three years. Developing countries have undoubtedly become mature and active members of the WTO. Groupings, such as the G90, G20, G33, the small and vulnerable economies, the African Group, the Africa, Caribbean and Pacific Group (ACP) and LDCs, have, in the course of the negotiations, articulated their positions through concrete and technically-sound proposals in the various areas under the discussion. They have coordinated positions, faced their contradictions and work out a way to support each other where possible, in spite of their differences. This has allowed many of the weakest developing countries to withstand pressures at various moments of the negotiations to break ranks with other developing countries.

The industrialised world, particularly the US and the European Union will have to come to terms with this new reality of the multilateral system and be ready to negotiate rather than dictate the terms of agreements to the developing world. The current suspension in the negotiations shows that the US and the European Union have not yet made that transition.

The current suspension in the negotiations may provide further impetus to the negotiation of bilateral and/or regional initiatives among WTO members. The US, in particular, has been fast in indicating its readiness to achieve its market access objectives by negotiating bilateral treaties with a number of developing countries. The European Union is already engaged in comprehensive negotiations of Economic Partnership Agreements with countries of the ACP Group divided into six geographical regions. Usually, the terms of such negotiations are very unbalanced, and the developing countries concerned end up accepting commitments of deep liberalisation and on disciplines in areas not envisaged in the WTO.

With no reform of the US and EU’s domestic subsidies in the horizon, the negotiation of free trade agreements with such countries would only mean the opening of the local markets to dumped produce. Further, the concessions made by developing countries in areas such as, among others, investment, government procurement and services, would deny them access to the very policy tools that would allow them to transform their commodity-dependent economic structures into more dynamic sectors with exports of value-added.

Many developing countries enter into bilateral agreements with the major developed countries under the imperative of protecting their traditional export markets, usually provided under unilateral preferential schemes. The suspension of the WTO negotiations through which developing countries expected to improve their market access conditions in the developed countries on a firm and lasting basis may provide further grounds to argue for the need of bilateral agreement with such countries.

However, the negotiation of bilateral agreements with countries of the North is not the only alternative available to developing countries. They could also consider options of South-South cooperation, including very importantly the strengthening of existing regional schemes among them.

Further, global schemes of cooperation among developing countries in the trade field already exist and could be reenergised. The Global System of Trade Preferences among Developing Countries (GSTP) provides a framework for the exchange of trade concessions among countries of the G77 and China. The GSTP launched its third round of negotiations in June 2004, in the context of the UNCTAD XI Ministerial Meeting in Sao Paulo, Brazil. The GSTP architecture, currently limited to the exchange of concessions for the expansion of trade, could be improved and complemented by promoting cooperation among developing countries in a wider spectrum of issues.

Developing countries have, over time, shown their commitment to the multilateral trading system and, more recently, in the current impasse in the Doha round by indicating their willingness to negotiate on a number of difficult issues. The offers they made have been pocketed by the developed world, which has not, however, been able to deliver on the development components of the agenda. By actively participating in the negotiations with technical papers and dedication, as well as by maintaining their unity, developing countries have shown they are now key players of the system and that no agreement is possible unless its terms are negotiated with, rather than imposed on, them.

The suspension of the negotiations constitutes an opportunity for reflection from the part of all WTO members on how to deliver on the Development objectives of the round. It also provides a breathing space for developing countries to reflect upon the potentials of South-South global cooperation initiatives and how to strengthen regional integration schemes among themselves in order to respond to the development aspirations of their people.

WTO: Rich Countries Not Off the Hook - Oxfam

The European Union and the United States are making a serious miscalculation if they think suspension of the WTO talks spells a free-for-all in global trade, says Oxfam. In the following analysis of 26 July, Oxfam assesses the costs of the current failure. It also maintains that it is upto the EU and the US to make amends to get the multilateral talks back on track .

Concern and anger over unfair world trade rules and harmful EU and US trade policies will only intensify following this week’s breakdown in negotiations. "The Doha round has opened people’s eyes to the fact that world trade could help millions of poor farmers and workers, but rich country farm policies are working directly against that,’ said Celine Charveriat of Oxfam’s Make Trade Fair campaign.

The EU and US farm policies are now wholly discredited and it is widely recognised that they must be reformed. Even with talks on ice, their harmful agricultural subsidies are vulnerable to a suite of legal challenges just as significant as Brazil’s successful cases on cotton and sugar.

The two trading blocs will also face considerable opposition if they try to pry open developing country markets by negotiating harmful bilateral and regional free trade agreements. "The EU and the US must make amends by changing their mindset and begin meaningful reforms for development," she said.

The Backlash of Failure

The indefinite suspension of the talks means that the chances of a deal in the immediate term is unlikely because of upcoming elections in key countries and the expiry next year of the US administration’s authority to negotiate a deal.

"This is a huge blow for millions of poor people, for instance cotton farmers who are struggling to make a living. If talks take years to complete, the entire West African cotton sector could be wiped out," Charveriat said. Oxfam says that the Doha suspension will:

* Continue to allow rich countries to capture the lion’s share of world trade flows;

* Continue to allow dumping, leaving countries little choice but litigation to stop it;

* Deny developing countries better access to rich markets;

* See the EU and US turn to bilateral trade agreements to open other countries’ markets.

The Doha round was primarily initiated in order to correct the rigged rules that allow rich countries to capture nearly 70% of world trade flows worth $20.6 trillion, while poor and developing countries representing 81% of the world’s people - many of them living in extreme povertty - got 30%. The entire continent of Africa got just 2.6%.

"These trade talks were about fostering equitable economic growth in all countries. This is in the long-term interests of everyone, especially the US and EU. However, for the past five years, both have behaved as if the Doha development round was a sacrifice for them to make," Charveriat said.

The suspension of the Doha round could mean that the international community has lost the only diplomatic option to influence upcoming reforms of the US Farm Bill and the EU common agricultural policy through negotiation.

But the option of litigation is still open because Oxfam says the EU and the US are violating existing WTO rules. Oxfam believes that $13bn worth of present-day EU and US subsidies are illegal. Countries such as Chile, Costa Rica, Argentina, Kenya, Peru, Ghana, Zimbabwe, Uganda, Egypt, Thailand and Nigeria among others could bring solid cases on rice, corn, sorghum, milk, butter, tobacco, fruit and tomato subsidies. "This is just the tip of the iceberg," Charveriat said.

Oxfam also sees a danger that the EU and the US will turn to bilateral trade agreements to get what developing countries refused to give them at the WTO: unfettered market access and intellectual property and investment rules that are damaging to development.

Why the Talks Failed

The EU and US failed to see that times had changed since the Uruguay Round and that developing countries are now key players. "Developing countries were clear about what they need from the round. They showed real strength of unity in refusing to allow development to disappear from the agenda, which would have happened had they accepted the EU and the US offers," Charveriat said.

There is also a growing public awareness about the unfairness of current world trade rules: an Oxfam petition calling for fair trade rules has 20 million signatures of citizens around the world and many more NGOs, farmers’ organisations, unions, workers and social movements mobilised against the current approach to trade negotiations.

National politics poisoned the Doha talks. The US Congress refused to give its negotiators the room to make meaningful reductions in US agricultural support. The EU was similarly hostage to its member states, for example France and Ireland, who refused to make meaningful reductions to its farm tariffs. "It is academic whether one was worse than the other. In the final weeks the US would not budge, but the EU is no less to blame by its earlier intransigence."

Poorer countries were expected to cut farm tariffs too steeply, despite the risk to millions of subsistence farmers. They were put under pressure to give up their ability to protect their food security and policies to fight rural poverty.

In negotiations to open up industrial markets, rich countries tried to push through a deal whereby developing countries would have had to slash their tariffs by more than twice as much as rich countries. "Developing countries were asked put jobs and industrialisation under threat for the privilege of rich countries reforming their illegal agricultural policies’ reforms that they had promised to make years before. This was trade negotiation at its most surreal."

A Roadmap Out

Oxfam is looking to the EU and the US to make amends. Irrespective of when talks restart, rich countries must end dumping - not only by ending export subsidies but by ending all trade-distorting subsidies that lead to dumping, especially on cotton. "The EU and US will lose all credibility if they take this suspension of trade talks as an excuse not to reform their Farm Bill and CAP," she said. "Developing countries will refuse to come back to the table to discuss cutting their tariffs if the EU and the US are still dumping."

"The cost of delay is too big and the potential for development too great for these talks to be left to wither on the vine," Charveriat said. However, restarting the talks would be difficult if rich countries continue to deny developing countries the right to use the available flexibilities as they liberalise their markets, at their own pace and scale. "The EU and the US must not try to question the development mandate of the talks and ignore the fact that there is extreme poverty in most developing countries," she said.

"The poorest countries of the world must not be made victims of this failure that is not their fault." The least-developed countries should be given full 100% duty-free quota-free access to rich country markets. This must also include reforming the ‘rules of origin’ that allow rich countries to use other means, for example overly burdensome health and safety, to exclude poor country exports.

The EU and the US must agree to a meaningful aid-for-trade, made up of new money and with no strings attached. "There is no excuse for this package to be suspended along with the Doha talks," she said.

South Centre News

Executive Director

The Executive Director of the South Centre, Prof. Yash Tandon, participated in an international seminar on the themes of Poverty and Development (25-26 July 2006) in Rio de Janeiro. It was hosted by the Government of Brazil and the Celso Furtado International Center on Development Policies, a new research body created last year by eminent Brazilian economists. Prof. Tandon also took part in a roundtable on Innovative Financing for Development on the 27th July in Rio as part of the Helsinki Process.

Earlier, Prof. Tandon met with the senior staff of Christian Aid in London on 17th July 2006 and also engaged in a roundtable with Christian Aid’s trade team working on EPAs (Economic Partnership Agreements).

Trade for Development

* Recent research and publications

The South Centre has published a new Research Paper titled "Rethinking Policy Options for Export Earnings". The paper comprehensively documents the debate on export earnings stabilizations and identifies strengths and weaknesses in various past and present national, regional and multilateral policy options and instruments.

* For developing country delegations in Geneva, the TDP staff:

Delivered a presentation on 14th July entitled: "Overview of the current state of the agriculture negotiations" in the "Ad hoc Consultative Workshop for ACP countries: Development issues in NAMA and Agriculture", organized by the ACP Secretariat in Geneva. The purpose of this briefing was to review the state-of-play of the WTO negotiations with a view to strategize on how to lobby for ACP members’ interests.

Attended several meetings organized by G-33 to exchange information and strategize on areas of their interest in the context of WTO agriculture negotiations.

Participated and made contributions in various meetings organized by groups of developing and least-developed countries on Aid for Trade and Trade Facilitation.


Respecting Multilateralism in Trade

Many have been surprised at the recent suspension of the WTO Doha round negotiations. But the signs were always there. Ever since the negotiations began in 2001, they were going in fits and starts. The landmarks - the July Framework Agreement of 2004 and the Hong Kong Ministerial Declaration of 2005 - were laboriously crafted and stitched up to hide wide gaps in positions and perspectives. The main stumbling block all along has been the failure of the major trading nations to make significant cuts in their domestic agricultural subsidies. And this has also been the immediate cause of the present suspension.

But there are other areas where the central development concerns of this round have been lost sight of. So what is needed is a fundamental shift in direction. Taking on systemic changes - of reforming built-in inequities and unfair rules of the game – was the promise of the Doha Development Agenda and that should be at the centre of the negotiations upon resumption.

As president Lula rightly pointed out during the G-8 summit in St. Petersburg on 16 July 2006, a round that merely consolidates the status quo, particularly in agriculture, will be tantamount to condemning the vast majority of humankind to a life of hunger and extreme poverty. "It is not by chance that almost 60 years after the creation of the GATT/WTO system the term "Development" appeared for the first time in the title of a Round. This Round is not only about trade, even in the broader meaning the word has acquired in the last decades. It is, above all, about development, which means: creating conditions that allow the world’s poorest populations to enjoy the progress of our times, which was often achieved at their expense."

Countries of the North should accept the new realities of a changing world where developing country coalitions – the G-20, the G-33, the G-90, and the G-110, and various others like the ACP group, the Africa group, the Small and Vulnerable states, the LDCs – have all come together to speak with one voice on Development in the multilateral trading system. And they want their development concerns to be genuinely taken on board, with special and differential treatment provisions were actually translated into meaningful operational and binding language.

To take the escape route of bilateral and regional trade deals may sound appealing in the short run for the rich industrialised countries. But they have to be mindful that even if individual developing country governments were to be pressured into accepting deals that were not in the their best interests – it is likely to fuel greater public discontent of the government policies – something that no government would like to do.

If there has to be ‘deep reflection’ during the time-out at the WTO, it has to be over what this Development Round is about. In agriculture, the means of livelihood of a great part of the world’s poorest populations, subsidies (by the rich industrialized countries) – which have been banned in the industrial sector for decades – continue to export hunger and poverty to less developed nations. And these are to the tune of hundreds of billions of dollars. What is currently on the table is not going to make much difference to the ‘dumping’ of agricultural surplus of the so-called developed countries into the markets of the less developed.

As Minister Nath of India put it, "This Round is not about the perpetuation of the structural flaws in global trade especially in agriculture. This Round is not about developing countries opening their markets for developed countries for their subsidised agricultural products. This Round is not about negotiating livelihood security and subsistence of hundreds of millions of farmers. This Round is not about preventing the emergence of industries in developing countries.

This Round is about opening new markets for developing countries especially in developed countries. This Round is about creating new opportunities and economic growth for developing countries in all sectors including Industries and Services. This Round is about extracting LDCs and vulnerable economies from the stranglehold of poverty."

The fact that developing country ministers of trade are insisting on not abandoning public interest is perhaps the most assuring sign of a development policy driven by peoples’ welfare. In this, they deserve the support of the rich industrialised North. After all, this goes along the grain of so many international summits and declarations by world leaders, where the avowed objective has been to remove poverty and underdevelopment. It is in the North’s own interest even in the long run if the emerging markets in the South were to be dynamic and robust.

Attached please find the latest issue of the 
South Bulletin no. 129 
in pdf and word word formats.

Best regards,

(See attached file: bulletin129.pdf)

(See attached file: South Bulletin129Word.doc)

Someshwar Singh

Senior Editor
South Centre
Ch. du Champ d'Anier 17
1211 Geneva 19

web site:

Latest issue of the South Bulletin no. 129

Attachment: bulletin129.pdf (1.28 MB), SouthBulletin129Word.doc (0.22 MB)

Monday, July 31, 2006