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MANAGING THE CHALLENGES OF WTO PARTICIPATION: CASE STUDY 7

Brazil and the G-20 Group of Developing Countries

Pedro da Motta Veiga*

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Opinions expressed in the case studies and any errors or omissions therein are the responsibility of their authors and not of the editors of this volume or of the institutions with which they are affiliated. The authors of the case studies wish to disassociate the institutions with which they are associated from opinions expressed in the case studies and from any errors or omission therein.

Case Studies main page
Introduction

   

ON THIS PAGE: 
I. Introduction
II. The local and external players: roles and interaction
> III. Challenges and outcome
IV. Learning from the experience
The first challenge: the establishment and the composition of the G20
The second challenge: building consensus and retaining cohesion in the G20
The outcome: a high level of legitimacy and Brazil becomes a major player in agricultural negotiations
Bibliography
 


I. Introduction    back to top

It is widely known that Brazil, as a major exporter of agricultural and agro-industrial goods, has adopted an offensive stance in negotiations on the liberalization of trade in agriculture taking place in the WTO, as well as in other negotiating processes. In line with this Brazil has participated actively in the Cairns Group — a coalition of developed and developing countries exporting agricultural products — both during and after the Uruguay Round. As the launching of a new multilateral round of trade negotiations was being discussed, Brazil pushed for including in the agenda ambitious goals related to market access and the reduction or elimination of export and domestic support schemes. Moreover, in the Free Trade Area of the Americas (FTAA) and EU-Mercosur negotiations, Brazil has presented proposals consistent with those developed in the multilateral arena.

However, in the months preceding the WTO Ministerial Conference in Cancún in September 2003, an interesting process of strategy-shifting took place, involving Brazil’s stance in negotiations on agriculture.

Without breaking with the Cairns Group and giving up its pro-trade liberalization stance in agricultural negotiations, Brazil led the setting of an issue-based developing countries’ coalition aimed at bargaining jointly during the Ministerial Conference and beyond. This new coalition, the G20, brought together developing countries which traditionally adopted differing — even opposed — positions in the agricultural negotiations in the WTO; the simultaneous presence of Argentina and India in the group is the best example of this novelty.

It is worth noting that the shift in Brazil’s negotiations strategy was driven not only by the internal dynamics of the agricultural negotiations in the WTO, but also by a broader shift in the country’s foreign economic policies — especially in its trade negotiations strategy — towards a view where the North-South axis acquired a growing relevance. Brazil’s leadership in the setting of the G20 is perhaps the best example, at the multilateral level, of the country’s new ‘southern’ stance in trade negotiations.

 
 

II. The local and external players: roles and interaction    back to top

One of the more interesting features of the decision-making process leading to the establishment of the G20 was that it involved intensive interaction between public and private domestic actors and between these actors and external players. Even more interestingly, the domestic and external dynamics became more and more interconnected as the G20 was set up and became a relevant player in agricultural negotiations at the WTO.

The ‘domestic’ interplay involved continuous co-ordination between public agencies and between public- and private-sector representatives, leading to the setting up of new structures and institutions, including a non-governmental organization (NGO) focused on technical research related to agricultural negotiations which is financed by the main private associations of the Brazilian agribusiness.

On the domestic front, the adoption by Brazil of increasingly assertive and autonomous positions in agricultural trade negotiations has been backed, in structural terms, by the impressive modernization Brazilian agribusiness underwent during the 1990s.

By the late 1980s, agricultural exports concentrated on primary goods — coffee, cocoa and cotton, among others — and were strongly regulated by state-owned sectoral bodies. As a consequence of this and until the beginning of the 1990s, the private sector did not show a great deal of interest in trade negotiations, and the participation of agribusiness representatives in the Uruguay Round was very timid. During the negotiations to launch the sub-regional integration process, the private sector adopted an essentially defensive stance, focused on the alleged risks of competition in the domestic market arising from the elimination of tariffs among Mercosur member countries.

From 1995 onwards, driven by large investments, a strong expansion of agribusiness productivity took place in Brazil. This process speeded up at the end of the decade, and sector representatives began to push the government to adopt more aggressive negotiating positions in agriculture, in the FTAA and EU-Mercosur trade talks. In the WTO, the new position taken by the private sector was crucial for the government’s decision to ask for the setting up of agricultural-products-related dispute settlement panels in their actions against the United States and the European Union (EU).

In early 2003, summing up these evolutions in attitudes, the Brazilian Minister of Agriculture called for the adoption of an ‘autonomous position’ in the agricultural negotiations, a position which also reflected — as shown below — some disappointment towards the recent performance of the Cairns Group. At that time, the main sectoral Brazilian agribusiness associations created a research institute geared to providing technical support to the ongoing agricultural negotiations at the WTO as well as at the preferential fora.

As the so-called ‘Harbinson paper’ was made public in the WTO talks, during the first half of 2003 a working group, created as a joint initiative by the ministries of Agriculture and Foreign Affairs, undertook a cautious and detailed analysis of the paper, criticizing it and formulating technically sound proposals on each of the points it raised. Later on, the working group expanded to integrate other ministries, governmental agencies and private representatives related to the agriculture and agribusiness sectors.

A similar position was adopted once the joint EU-US document on agriculture was made public, in the weeks preceding the Cancún Ministerial Conference: ‘the day after the document was issued, the working technical group began to work on this new proposal, analyzing and assessing each paragraph, deconstructing it’, according to a participant of the group from the private sector.

On the external front, the political origin of this coalition can be traced back to the Brasilia Declaration signed between Brazil, India and South Africa in June 2003. According to the Brazilian Minister of Foreign Affairs, the G20 ‘was not born in Cancún or in Geneva, during the weeks preceding the WTO Ministerial Conference. It emerged from the political trust built up between Brazil, India and South Africa some months earlier.’

The creation of the new coalition also seems to be related to a growing feeling of disappointment with the Cairns Group and its positions on agricultural negotiations before Cancún.

In the view of a private-sector representative, the WTO informal mini-ministerial, held in Egypt in July 2003, made it explicit that Australia was exerting the strongest leadership within the Cairns Group; however, it did not wish to adopt a more aggressive stance in the negotiations, favouring instead the EU-US bilateral understanding as a first step towards untying the agricultural knot in the multilateral negotiations. According to this private sector representative, ‘the G20 began to emerge in Egypt, when it became clear that Australia and the Cairns Group would not seek to counterbalance the EU and US common interests’.

The timid reaction of the Cairns Group to the EU-US joint document on agriculture — issued some weeks before Cancún — strengthened the incentives, on the Brazilian side, to look for political alternatives to what was being perceived as a new Blair House Agreement, excluding the interests of developing countries. As a Brazilian diplomat put it, ‘Cairns was paralyzed and Brazil seized the opportunity created by this “leadership vacuum” to gather support to its paper in Geneva’.

However, the document prepared by the public-private working group in Brasilia turned out to be very aggressive as far as market access demands were concerned. In the view of high-level officials, this stance could isolate Brazil in the negotiations, jeopardize efforts to build a coalition around the Brazilian paper, and compromise the objective — most valued by the Brasilia authorities — of attracting some of the most important developing countries to this new coalition.

One of the consequences of this, according to a Brazilian diplomat, was that

Brazil had to reduce its ambition in market access issues in order to gather the support of India and China for its demands against developed countries’ domestic and export subsidies. It had also to emphasize the idea of proportionality of concessions to be made during the negotiations: developing countries were supposed to pay less than the developed ones in the agricultural negotiations.(1)

The historical evolution of G20 also includes a period of intense activity in Geneva prior to Cancún. As a Brazilian diplomat puts it,

the group met frequently at the level of heads of delegation in Geneva prior to Cancún. The group also met (and continues to meet) at the technical level to discuss specific proposals in the context of the WTO agriculture negotiations, and to prepare technical papers in support of the group’s adopted common platform. The frequent contacts and meetings at the ministerial level in Cancún further consolidated the group and made it possible for the G20 to resist the strong pressure to break its common position.

In the words of a leading negotiator,

Since its inception the G20 had established close relationships with other groups in the WTO with a special interest in the agricultural negotiations. The G20 is not a closed group. On the contrary, it is open to the participation of other interested countries that share its objectives and positions. It is thus only natural for the group to have close contacts with other groups. A majority of G20 countries are members of the Cairns Group and there is a large degree of coincidence between the positions of both groups which naturally support each other and try to co-operate for their common purpose: the faithful implementation of the Doha mandate.

The frequent contacts with other groups and coalitions did not jeopardize the identity of the newly born G20. Making reference to the relationship between the G20 and the Cairns Group, a Brazilian diplomat stressed that

each has its own personality. The G20 tries to strike a balance between the interests of trade liberalization and the development objectives of its members. Cairns is more focused on trade liberalization. Their respective agendas and interests coincide as regards the need to end trade-distorting policies in agriculture and for the opening of developed countries’ markets. The difference lies in the definition of special and differential treatment for developing countries, especially in the area of market access. The G20 clearly accepts the need for a dual approach to market access that fully takes into account the needs of rural development and the situation of countries with a large rural population. The Cairns Group acknowledges in its platform the need for special and differential treatment for developing countries, but defends — as is only natural due to its composition, where major exporters of agricultural products play a central role and where developed and developing countries are present — a policy more committed to open markets in agriculture, in both developed and developing countries.

As the G20 is composed only of developing countries and as it tries to combine the broader interests of economic and social development, especially in rural areas, with trade liberalization, it has established strong ties to other developing country groups: ‘the African Group recognized the existence of common ground with the G20 in the Cairo Communiqué and some African countries have joined the group since Cancún. Others have indicated their interest in the group’s work and may join in the future’, according to a high ranking diplomat.

These ties and contacts produced some non-negligible impacts on the dynamics of the agricultural negotiations at the Cancún Ministerial Conference: ‘At Cancún, the G20 maintained frequent dialogues with the Cairns Group and the African Group and the G20’s reaction to the Derbez text incorporates elements of the position of both groups. In the case of the African Group the issue of cotton was taken up by the G20 as part of its platform.’


 

III. Challenges and the outcome    back to top

The first challenge: the establishment and the composition of the G20

The G20 was created in response to the EU-US text on agriculture. Why the focus on agriculture? The common position reached by the United States and the EU created the risk of reducing the scale of ambition set in Doha with consequences, in the light of the central role of agriculture in the Doha Development Agenda (DDA), for the whole of the Round. And why an alliance of developing countries? The US-EU common paper revived the North-South polarization in a crucial area of negotiation and generated concrete risks of marginalization for the interests of the developing countries in this central issue. The understanding between the two major trading partners had the potential to affect the ambitious targets set at Doha, especially as far as developing countries’ interests and development issues were concerned: ‘developing countries from both sets of interests came together when they realized that the EU and the United States had joined forces and come up with a text that was highly unsatisfactory’.(2)

Hence the first challenge faced by Brazil’s strategy was the setting up of an issue-based coalition composed exclusively of developing countries. On the one hand, southern coalitions — bloc-type coalitions — in trade negotiations were broad in scope but their effectiveness has proved very limited. On the other side, the most successful experience in the setting up of a North-South issue-based coalition — the Cairns Group — had, in the view of Brazilian diplomacy, run out of steam. As stressed by two analysts, ‘the coalitions of today, including the G20, having learnt from the failings of their predecessors, utilize some elements of both the bloc-type coalitions and issue-based alliances’.

As emphasized by one of the leading official Brazilian negotiators, ‘the establishment of the group and its composition involved a political decision and sent a message to all participants in the Round, especially the developed countries, that there was a new factor to be taken into account in the negotiations. The creation of the group was a political statement.’(3)

According to a representative of the Brazilian private sector, the setting up of G20 ‘challenged not only the agricultural policies of the developed countries, but the legitimacy of the model adopted by those countries to negotiate in multilateral fora, presenting their agreed position as a fait accompli to developing countries’.

From the Brazilian point of view, the decision to form a coalition of developing countries with heterogeneous interests in the agricultural negotiations represented a significant shift in the country’s negotiation position on this issue; it was now driven by the offensive interests of a large exporter but also by the objective of breaking the North-South protectionist front in agricultural negotiations through the setting up of a new ‘southern agenda’ on agriculture, albeit less ambitious than the Cairns Group’s agenda.

 

The second challenge: building consensus and retaining cohesion in the G20    back to top

The second challenge faced by Brazil in the emerging coalition involved the ability to build a consensus among developing countries with heterogeneous interests in the multilateral negotiations on agriculture. Cohesion of the coalition has been a major concern of Brazilian diplomacy, and consensus-building within the G20 required that much attention be directed to the design of negotiating technically consistent proposals in order to avoid the G20 being labelled as a coalition that merely sought to block progress and was uncommitted to a positive outcome for the WTO Ministerial Conference. As a Brazilian diplomat recalled, ‘At Cancún, the group not only presented its views and influenced the elaboration of the proposed final text of the conference, but, also, after the presentation of this text, it met for several hours and prepared a number of concrete amendments to the text for the final round of negotiations which unfortunately never took place.’

The co-ordination between technical experts from the Brazilian government and the private sector, and the experience accumulated in Brasília during the months preceding Cancún played here a central role, allowing Brazil — and then the G20 — to develop a sound, substantive position dealing with the complex issues involved in the agricultural negotiations.

The battle to maintain the cohesion of the G20 was described by one of the main Brazilian negotiators at Cancún as follows:

Even before the Ministerial Conference, some developed countries tried to dismiss the group, by refusing to take its proposals seriously and by accusing the group of trying to introduce an ideological dimension in the negotiation, by importing into the WTO positions and tactics that had their origin in the North-South dialogue. This reflected a sort of annoyance with an attempt by a group of developing countries to try to interfere with the agreement between the EU and the United States which should represent the basis for the results on agriculture at Cancún. The attempts by many countries from the G20 and other groups to change the bilateral deal to better reflect their interests were met with a negative reply.
 

Once the G20 was set up, another battle began at Cancún, as some developed countries attempted to divide the Group and to create difficulties in its relations with other groups in the WTO, especially the Cairns Group and the African Group. In spite of strong pressures put on members of the group, the G20 remained united during the whole of the conference, with the withdrawal of only one delegation from the group. Another delegation, Nigeria, joined the group in the final stages of the meeting. After Cancún a small number of countries also left the group, but others became members, for example Tanzania and Zimbabwe.

 

The outcome: a high level of legitimacy and Brazil becomes a major player in agricultural negotiations

In spite of criticisms from developed countries and the fact that no agreement on agriculture was reached at the end of the day in Cancún, the G20 was perceived by public opinion, in both the North and the South, as a legitimate and constructive effort by developing countries to advance their interests in the WTO negotiations and to defend the idea, officially agreed in Doha, of a development round.

Since Cancún, the G20 has been widely recognized as a major new player in agricultural negotiations, and one whose interests should be taken into account if some agreement on this issue is to be reached in the WTO. In December 2003 the EU’s chief negotiator, Pascal Lamy, participated in the G20 ministerial meeting, held in Brasília, implicitly confirming this understanding. Another G20 ministerial meeting was held in São Paulo in June 2004, and during the first half of 2005 the group embarked on technical and political consultations with a view to injecting momentum in ongoing agricultural negotiations.(4)

The G20 is clearly today an important partner in the agricultural negotiations in the WTO and the five main partners remain in the group. The failure of the Cancún Ministerial Conference and the consolidation of the G20 help to explain the Non-Group-5 (NG-5), created in March 2004, which put together three major developed players in the agricultural negotiations (United States, EU and Australia — the leader of the Cairns Group) with Brazil and India, respectively the most liberal and the most protectionist member of the G20.

In the view of Brazilian diplomats and representatives from civil society organizations, once the period of ‘blame-shifting’ that followed Cancún was left behind, the initiative of setting up the NG-5 reflected the recognition that the process of decision-making in agricultural negotiations had to change to integrate the G20.

Beyond that, the setting up of the NG-5 is considered to be a very important initiative, as the technical and political work of its members paved the way for concrete proposals which proved essential to consensus-building in Geneva on the negotiations framework. As one NGO representative put it, ‘After the meeting of the NG-5 in São Paulo in June 2004, consensus was reached among members as far as the export and domestic subsidies were concerned, and the market access issues remained as the only area of dissent. A very important step was made in this meeting, making the work carried out in Geneva in July 2004 easier.’

According to Brazil’s Minister of Foreign Affairs, ‘The G20 has produced a change in the dynamics of agricultural negotiations, which migrated from the Blair House model to the NG-5 model as far as decision-making is concerned…. It is not by chance if the text on framework presented for discussion in July 2004 represents a progression from the G20 point of view as compared with the text presented at the beginning of the WTO Ministerial in Cancún.’

The official view in Brazil on the 1 August ‘package’ is quite positive, although it is widely recognized that a lot of work remains to be done. The adopted framework is perceived as a text which respects the Doha mandate and its level of ambition, and represents a substantial improvement as compared with the text submitted in Cancún as far as agricultural negotiations are concerned.

 
 

IV. Learning from the experience    back to top

The assessment of the strategy of setting up the G20 is widely positive in Brazil, despite the setback of the WTO Ministerial Conference where the coalition made its début. Brazil continues to participate in the Cairns Group, and has made significant efforts to keep the G20 coalition alive and has involved itself — with India — in the NG-5, which put together the major players in the multilateral negotiations on agriculture.

Many lessons can be learnt from the Brazilian experience of setting up the G20, but two will be emphasized here. The first relates to the importance of the domestic dimension in the formulation of the national position on a negotiation issue central to Brazil. The domestic dimension is about political negotiations involving groups with different views and interests as far as trade negotiations are concerned: in the case of Brazil, these negotiations played an important role in shaping the option of building a coalition with other developing countries and in balancing liberalization goals and development objectives.

The technical and institutional component of the domestic dimension in setting up the G20 are worth highlighting. Technical preparation and permanent co-ordination among public agencies and with the private sector helped to build domestic consensus supporting the official position in the negotiations. These mechanisms have been kept active before, during and after the Cancún Ministerial, and it seems correct to assert that they have become more and more dense and complex. Capacity-building initiatives in the private and public sector made their contribution in this way: the Ministry of Agriculture has created a specific institutional structure to deal with trade negotiations in a systematic manner; agribusiness sectoral associations have supported a research institution charged with presenting technical proposals for agricultural negotiations, and they have participated in the Brazilian Business Coalition — a forum representing industrial, agribusiness and services sectors in trade negotiations.

The second lesson refers to the convenience (or not) of replicating the coalition-setting initiative in the area of non-agricultural market access. The assessment of one leading negotiator is clear-cut on this point:

After Cancún, and in the light of the role the G20 played at the conference, there have been some suggestions that the group could perhaps play a larger role encompassing other areas of the WTO agenda or even the broader agenda of co-operation for development. Perhaps this is only natural and reflects the need that is felt in many quarters for a new coalition to revitalize the debate on development issues in international fora. This is even more true in the light of growing fatigue with orthodox adjustments, self-regulating market forces as an answer to development problems and the negative aspects of globalization. Nevertheless, the G20 is perhaps not the answer and to try to expand the mandate of the group would possibly jeopardize its unity. One of the strengths of the G20 is its ability to combine a political stance with a focused approach to agricultural negotiations.

 
 

Bibliography    back to top

Brazilian Mission in Geneva (2003 and 2004), Carta de Genebra, various issues
 
Hugueney Filho, C. (2004), ‘The G20: Passing Phenomenon or Here To Stay?’, processed
 
Jank, M. S. and M. Q. Monteiro Jales (2004), ‘On Product, Box and Blame-Shifting: Negotiating Frameworks for Agriculture in the WTO Doha Round’, ICONE, 14 May
 
Narkilar, A. and D. Tussie (2003). ‘Bargaining Together in Cancún: Developing Countries and their Evolving Coalitions’, mimeo

 
 

NOTES:
1.- It is worth noting that, within the Brazilian Government, divergent positions did exist as far as the agricultural negotiations were concerned: the ministry in charge of the agrarian reform and issues relating to the small-scale agriculture supported defensive positions in these negotiations, while the Ministry of Agriculture had a strongly pro-liberal stance, supported by the modern agribusiness sectors. Hence, the G20 platform, less ambitious in the market access issue and more attentive to developing countries’ concerns related to food security and small-scale agriculture, helped to generate a broad domestic consensus around the official position. back to text
2.- Narlikar and Tussie (2003). back to text
3.- Idem. back to text
4.- A G20 website was recently created and a link to this website can be found on the homepage of Brazil’s Ministry of Foreign Affairs. back to text
 

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* CNI (Confederação Nacional da Indústria), Rio de Janeiro, Brazil.