Social Forum of the America, Quito 2004
(Copyright Penelope Anthias 2006)
With collapse of the Doha round, the cancellation of FTAA and the uneven progress on a number of bilateral and regional agreements, the issue of trade in Latin America is hanging in the balance. The future depends partly on the success or failure of last-ditch attempts to revive the Doha round currently being made by Brazil, the US and the EU and several other large developing countries. However, even in the unlikely event of an agreement being reached before July, the progress and nature of free trade agreements (FTAs) in Latin America remains uncertain. Not only is the multilateral trading system in a fragile state, but opposition to FTAs from social movements across the region remains widespread. One thing that does seem fairly certain is that Brazil – a key player in the Doha negotiations - will continue to have a leading role in future trade negotiations in Latin America.
The Doha round – is there hope for revival?
The Doha round of trade negotiations, which began in 2001, was intended to liberalise sectors such as manufacturing, agriculture and industry. Framed as the ‘development round’, it also promised a better deal for developing countries. Negotiations finally collapsed last July, when six WTO members (the US, the European Union, Brazil, India, Japan and Australia) failed to bridge their differences over farm subsidies and tariff cuts.
There now appears to be some hope that the talks could be revived; this month has seen meetings between US, Brazilian and EU trade representatives, which could potentially pave the way for a deal at the World Economic Forum at Davos this month. However, this would rely on major concessions being made by the US over farm subsidies and by the EU on tariffs, which seems unlikely.
The deadline for a deal is July, when President Bush will lose his current authority from Congress. After this, the round is effectively dead, as the impending US election makes further progress difficult if not impossible. The failure to rescue Doha will have important consequences and may be another step towards the demise of the World Trade Organization (WTO), which some predict could 'drift into irrelevance' (see ODI’s trade and finance portal for more on this).
The role of Brazil and the G20
Brazil has taken the lead among developing countries in trying to revive the floundering Doha negotiations and broker a deal with the EU and the US. Just last week, Brasilian Chancellor Celso Amorim met again with US trade representative Susan Schwabb to attempt to break the current deadlock. In fact, Brazil has come to play an important role in giving voice to poorer agricultural economies within multilateral trade negotiations (albeit for self-interested reasons given its strengths as a competitive producer of agricultural commodities). In particular, Lula has reiterated the need for the US to reduce agricultural subsidies, for the European Union to lower barriers to farm imports and for access for manufactured goods to developing markets.
These demands have been made primarily been through the G20 group of developing nations, led by China, India, Brazil, and South Africa. This group was established at Cancun, where developing countries united to but pressure the EU and the United States into making concessions on agricultural subsidies and trade barriers. Brazil also pressed for agricultural trade liberalization in the negotiations leading up to the July 2004 settlement and then became a member of the Five Interested Parties (along with United States, the EU, India, and Australia), who led the July process.
Brazil’s involvement in free trade agreements is not new: it has been an active participant in
GATT and WTO negotiations since the 1970s and is a founder member of GATT. However, Brazil’s current role in trade negotiations reflects the Lula administration’s commitment to strengthening trade ties with other developing nations, an objective which he has pursued both through Mercosur and through treaties with other developing countries in Latin America, Asia and Africa.
The formation of the G20 reflects important shift in the power relations between North and South; the emergence of China, India and Brazil as economic rivals to the US and EU has allowed greater negotiating clout for developing countries, as Larry Elliot of the Guardian has argued. While each country has their own agenda to pursue, in the short term at least, this has allowed the voice of the poor to be heard more consistently in negotiations. This gives some hope for the future of multilateral trade, where it seems likely that Brazil and the G20 will continue to play an important role. However, unless the US and the EU are prepared to make greater concessions, attempts to reach a fairer deal for developing countries stand little chance of success - as Doha has clearly shown.
In next week’s sequel blog, Penelope Anthias looks at the progress of other free trade agreements in Latin America and asks, who really stands to benefit from trade liberalization?
Click here to see ODI's Trade and Finance Portal
Click here for ODI paper series on 'The Doha development agenda: impacts on trade and poverty'
