Events & Issues

New Delhi, 7 April 2009

G20 Trade Agenda

A STEP FORWARD, NEED TWO MORE

By Dr. P. K. Vasudeva

The G20 leaders’ communiqué has given a vital boost to global trade, but several important trade-related commitments -- to developing countries, sustainable development and multilateralism -- were either missing or disappointing. With an extended G20 meeting scheduled before year-end, the leaders must concentrate and expand their trade agenda to address these shortfalls. At the same time, they must acknowledge the democratic deficits of the G20 and explore more inclusive alternatives for global economic decision-making - in particular those that would ensure greater representation of the poorest countries.

The communiqué called, as expected, for the conclusion of an ambitious and balanced round and by reference to existing modalities emphasized the importance of moving forward not backwards with the negotiations. What is important is not the conclusion of just any Doha Round of the World Trade Organisation (WTO), but rather a Round that fulfils the mandate that launched the ‘Doha Development Agenda.’ The latter, explicitly prioritizes the needs of developing countries and addresses the imbalances present in the rules of the global trading regime. Out of 20 outstanding issues 17 have already been agreed to by the 53 WTO members. The balance three pertaining to agriculture and non-agricultural market access (NAMA) should not be a problem if India, China and the US agree to come to a consensus.

Also as expected, the G20 leaders extended till 2010-end their agreement not to impose new protectionist trade barriers in whatever guise, calling for crisis-related measures to be sensitive to impacts on other countries. While this had to be said, the credibility of such words is undermined daily in reports of precisely such measures in a diversity of countries. Indeed, the promise of G20 to quickly ‘rectify’ such measures, suggests a tacit confession of already-broken promises.

A more promising point was the call of G20 for the WTO and other international organizations to enhance their surveillance of protectionist measures and to report back publicly every quarter, within their respective mandates. Using existing institutional mechanisms, the WTO has already started a process of monitoring its trade policy review process. The rub is that it is the WTO member states as a collective, and not the G20, which provide a mandate to the WTO Secretariat on the scope of its activities, including the authority to ‘name and shame’ members.

Nonetheless, the decisions of G20 are already vital steps in the right direction. Now is the time for the WTO members to consider more fundamental reforms in monitoring the function of WTO that would boost its usefulness to member states. Calls to establish independent monitoring initiatives that may offer swifter and more critical surveys warrant attention as well.

In trade finance, the G20 leaders promised a sizeable $250 billion. We, however, need to ensure that it is accessible to developing countries and their exporters, and that the poorest nations are its top beneficiaries. Though it is unclear from the declaration as to who will be the primary beneficiaries, there is at least a commitment to act swiftly, within two years. At the same time, we need to ensure that the poorest receive the requisite support to maintain and expand their participation in global trade but also be buffeted from the costs of adjustment associated with the crisis. Africa, in particular, needs a specific and clear plan for rapid trade-related support as sharp drop in trade revenues has caused hefty losses to many government budgets, which in turn have threatened a range of social and health services meant for the poorest.

Regrettably, while New Delhi has pitched for a tougher stand against protectionism, the summit did not seem to give it much importance apart from making the usual noise against putting up of trade barriers and reaffirming support for an early conclusion to the Doha Development Round. All said and done, timely and effective implementation of the measures suggested will determine the success or failure of the G20 summit.

The promises on Aid for Trade and Overseas Development Assistance (ODA) were also clearly underwhelming. While the communiqué details a series of financial steps to boost resources for developing countries via the IMF and the World Bank, there was no express commitment to ensure that Aid for Trade represented new resources rather it was a diversion of existing ODA. The talk of meeting existing ODA targets offers little assurance when countries have long failed to meet them. Unquestionably, developing countries need more to restore their growth levels and contribute to the global economic recovery.

Perhaps some of this lies in the promised $50 billion to support social protection, boost trade and safeguard development in developing countries - but the details so far are unclear. Herein lies a recurring problem: we still lack effective mechanisms for holding a developed country to account either on its delivery of both the ODA and Aid for Trade commitments.  

While G20 leaders made several references to the WTO, they did not explicitly emphasize the value of the multilateral trading system. In fact, to rectify this shortfall, they should use their political clout to ensure a full WTO Ministerial Conference is held this year. It would be vital in reinforcing the importance of a multilateral approach to global trade, to reviewing the mandate and performance of the WTO system, and to protecting the institution and existing agreements of the WTO system.

The Conference would provide an opportunity for a political dialogue on how the world trading system could play a major role in addressing critical global issues, including poverty reduction, climate change, food security, quality jobs and sustainability of natural resources. It would also prompt a long-overdue ministerial discussion on governance reforms that could boost the responsiveness of the WTO to developing countries. Such a meeting could also take up a key topic absent from the G20 communiqué i.e. the proliferation of bilateral and regional agreements spawned through asymmetric negotiating processes. For developing countries, a multilateral approach to trade rules, with all its imperfections, offers them the best prospect for managing collectively the mercantilist power plays that define global trade relations.

Looking ahead, the G20 must also provide leadership on global trade governance challenges that were present before the crisis and will demand our attention in future. Top priorities are to boost the voice of diversity of developing countries in global trade decision-making and to make more tangible efforts to integrate sustainable development concerns into both national and global trade policymaking. On this front, the G20 appropriately did acknowledge the importance of a greener, lower-carbon and more sustainable world economy.

While a global agreement on climate change in Copenhagen later this year is indeed critical, the G20 leaders must not neglect that the world’s sustainability challenges are deep and serious on a number of fronts. While crisis related to fisheries, forests, and water affects people across the world, it impinges most on the economic and social welfare of people in developing countries. As such, the world not only needs measurable benchmarks to assess progress but concrete actions to ensure the multilateral trading system is part of the solution.—INFA

(Copyright, India News and Feature Alliance)