Post date: 12.10.03
Foreign policy wonks have spent the last three years fretting about the Bush administration's unilateralist tendencies and agonizing over the growing tensions between the United States and Europe. But another cleavage is worming its way into the forefront of world politics: the divide between large developed economies--such as the United States, the European Union, and Japan--and the large developing countries--such as Brazil, India, and China.
This divide has been on vivid display over the past few months, as the latter group of countries practices what you might call a "global southern strategy" of Third World solidarity. At world trade talks in Cancun this September, developing countries--like Argentina, Brazil, China, Cuba, India, Nigeria, and South Africa--organized themselves into a new trade bloc called the G-22. The group pushed the United States and the European Union to cut agricultural subsidies deeper than they'd pledged to, and fiercely resisted efforts by the EU to expand WTO obligations into investment and government procurement issues.
Then, six weeks after Cancun, Brazil's firm negotiating position forced the United States to convert the proposed Free Trade Area of the Americas into a much less ambitious "FTAA-lite." Under the new arrangement, FTAA members can choose to opt in or out of various parts of the agreement, putting a damper on hemispheric integration. And, this week, at the World Summit on the Information Society, a coalition of developing countries led by China and Cuba lobbied aggressively (though ultimately unsuccessfully) to shift control over cyberspace from ICANN--a private order dominated by the United States, European countries, and their private sectors--to a U.N. agency that would give more power to developing countries.
Of course, this is hardly the first time Third World countries have banded together to fight for their common interests. During the 1970s, developing countries entranced with dependency theory proposed a New International Economic Order (NIEO), consisting mostly of increased state regulation and income redistribution to the Third World. These countries made a lot of noise at the U.N. General Assembly, but there was little substantive change in the global rules of the game. The 1982 debt crisis and collapse of the Soviet Union killed the NIEO and replaced it with the neoliberal Washington Consensus.
Is the current solidarity of developing countries likely to be any more lasting or consequential than the old nonaligned movement? Some trade officials scoff at the notion. Already the G-22 has been renamed the G-20+ because Colombia and Peru dropped out of the group. In September, EU agriculture commissioner Franz Fischler blasted these countries' negotiating positions, warning: "If I look at the recent extreme proposal co-sponsored by Brazil, China, India and others, I cannot help [getting] the impression that they are circling in a different orbit. If they want to do business, they should come back to mother earth."
But there are good reasons to believe that the global southern strategy might be more resilient and influential this time around. For starters, these countries have some grievances that even neoclassical economists agree have genuine merit. Although China and India are more protectionist than the developed world tends to be, they have a point in harping on First World agricultural subsidies. The subsidies lead to $300 billion a year in trade distortions, helping to stifle export opportunities for developing countries eager to enter the global marketplace. Similarly, while there are sound economic reasons for liberalizing investment and procurement in the developing world, the cost to developing countries of creating the proper institutional support for such reforms is not inconsiderable, at least in the short term. Some of these positions are so compelling, in fact, that the G-20+ has been able to attract prominent supporters in the developed world. In May of this year, the heads of the IMF, World Bank, and World Trade Organization issued a joint statement imploring the G-8 to "appreciate fully the value of liberalising world trade, particularly in agriculture."
Second, the sheer number of developing countries gives them effective veto power in a number of international organizations that operate by consensus. In the past, the major economic powers responded to such Third World solidarity by forum-shopping to bargaining arenas more friendly to First World interests. But that strategy will be of limited use this time around, particularly on trade matters. The major trading powers have too much invested in the WTO to simply walk away from it--hence the Bush administration's decision to remove the steel tariffs. For the United States in particular, the benefits of free-trade agreements with small economies such as Colombia and Thailand are piddling when compared to the benefits of completing the Doha trade round. Meanwhile, the aforementioned transatlantic divide will make any deeper economic integration between the advanced industrialized states outside of the WTO unlikely.
Third, and most important, the big developing countries have much greater market power than they did 30 years ago. In the global political economy, the currency of power is the size of one's internal market. Measured by purchasing power parity, China is already the second-largest economy behind the United States. But it's the future market power of these countries that's enormous. A recent Goldman Sachs study on the big developing economies contains some startling predictions. In less than six years, according to estimates, the annual growth in aggregate demand (in U.S. dollars) from Brazil, Russia, India, and China will be greater than the combined growth of the United States, Japan, Germany, Italy, and Great Britain. By 2025, the annual growth in aggregate demand from the four leading developing economies will be twice that of the G-7.
As these countries' economic growth accelerates, the battles over who sets the global rules of the economic game will only get more intense. The big Third World countries are gung-ho for exports, but they are far less comfortable with other forms of economic liberalization than the United States, or even the European Union. And this divergence of preferences is unlikely to change soon. If the global southern strategy persists, economic negotiators may soon look back fondly at the days of Seattle and Cancun as relative cakewalks.
Links to relevant documentation and further information can be found here.
Daniel W. Drezner is Assistant Professor of Political Science at the University of Chicago. He is the author of The Sanctions Paradox (Cambridge 1999). He writes regularly at www.danieldrezner.com/blog.
Copyright 2003, The New Republic