Global Policy Forum

By Rainer Falk

Ironically, the publication of the 2006 World Trade Report on 24 July (see reference) coincided with WTO Director-general Pascal Lamy's announcement that all negotiations under the Doha Development Agenda (DDA) will be suspended. The report exposed the industrial countries' practice, namely the US, the EU and Japan, to spend US$ 200 billion each year in domestic support for their agriculture, not to mention export subsidies and other expenditures. And it was exactly agriculture which caused the talks to collapse.

* Doha, G8 and IMF: Biased agendas

Considering the tiny share that agriculture makes up in modern economies it is hard to understand how the North's representatives in trade negotiations allowed themselves to be hijacked by a small group of narrow-minded agricultural lobbyists. But fact is that the negotiation strategy of the industrial countries has never foreseen sacrificing minor interests, such as agricultural exports, to gain market access for industrial goods and services. The plan was to have it all. Thus, it is the North who offered too little and demanded too much from the South, and it is therefore the North who is fully responsible for the recent collapse of Doha.

Trade is not the only case where the globalisers themselves obstruct globalisation. Just 10 days after the G8 leaders in St Petersburg side-stepped poverty, the incoming German G8 presidency made it clear that next year's G8 summit in Heiligendamm will not continue the course of last year's Gleneagles anti-poverty road show. According to a report in the Financial Times of 28 July, Germany will lead the G8 further away from its focus on development issues. Under the guise of "getting back to the roots" the German chancellor Angela Merkel wants the exclusive club to return to the focus on the global economy, including growing global economic imbalances such as escalating deficits and growing surpluses. In addition, intellectual property protection and energy will be on the agenda, as is poverty, but it's not clear which place this last topic will really occupy at the summit meeting from 6-8 June 2007 in the Baltic Sea resort Heiligendamm.

The shake-up of the G8 agenda is a case in point. More than 30 years ago the Group of Seven was founded to coordinate macro-economic policy of the rich countries because these countries did not want to discuss these issues in the broader frameworks of the United Nations, not even in the Western dominated International Monetary Fund. The recent move to "re-focus" the G8 agenda comes at a point when efforts are being made to strengthen the IMF's global macro-economic surveillance role and to enhance the weight of the developing countries within the Fund. Both issues will play a major role at the IMF's and World Bank's annual meetings from 19-20 September in Singapore.

But even here the intention is not to overcome the role of the Fund as a controlling agency of the developing world and its economic policy or to overcome the undemocratic and corporatist system of its governance. The goal is to find ways to more effectively co-opt emerging economies into the existing model rather than to overhaul the model itself and give it a democratic structure.

* The Achilles heel of globalisation

This is connected to a systemic dimension of the governance structure of current globalisation. As Sunita Narain from the Indian ‘Centre for Science and Environment' recently pointed out, "the problem is that economic globalisation has not gone together with political globalisation. In other words, the world has not any way – democratic or legal – to make the rich and powerful comply with decisions taken by the majority, in the interests of all. This is the Achilles heel of globalisation. And it needs fixing."

The consequences of such anachronisms are fatal. The voting system of the IMF is still the one established in the colonial era with votes weighted according to economic criteria such as national income, trade and international capital flows – a mockery of democracy. The governance structure of the IMF does not even reflect the real changes in the world economy during the past three decades. The G8 is still behaving like a corporate directorate dominating and excluding the rest of the world from its decisions. The incoming German presidency has just recently rejected the idea of including the new dynamic powerhouses of the South into the summit structure not to mention considering a wider reform of the summit architecture which would reflect the socio-economic realities of the world. The WTO is at least formally a member-driven organisation, but even there the rich minority refuses to deliver on its promise to transform the current international trading system into a more development-friendly one.

* Enhancing alternatives

Without overcoming the undemocratic governance systems of the existing international institutions it won't be possible to realise only the most modest policy alternatives. Nevertheless, the situation is not the same as it was 30-60 years ago. The current crisis of the Bretton Woods twins entails new possibilities for change. In view of the upcoming annual meetings in Singapore and the ongoing 13th review of quotas in the IMF civil society organisations from all over the world prepare for a global campaign on the Fund. Remarkable shifts of strategy are taking place. For example, the British NGO Christian Aid challenges the conditionalities of the institutions in a new way. As IMF and World Bank continue to impose harmful economic conditions on poor countries Christian Aid (see references) demands that the UK government redirects its aid funds through other multilateral agencies. (Last year the Blair government had announced to stop imposing conditionalities to aid.)

In the WTO the change is even more evident. It is no longer possible, like in the Uruguay Round, for a handful of developed counties to set the outline of a deal and than impose it on the rest of the membership. The NGOs have done a great deal to convince governments and the public that a Development Round, if taken seriously, is more than a market-opening exercise. What is necessary now is to use the time for reflection and to rethink the role of the WTO in the multilateral trading system. With the suspension of the Doha Round members have been given the unique opportunity to look for an alternative model of trade that supports genuine development and employment objectives.

And the G8? Since 1984 in London world economic summits have had a catalytic role in mobilising protest and discussing alternatives. Next year's G8 will be no exception. But protest and discussing alternatives are not enough. What we need is a practicable approach to launch a more inclusive system of global governance at the highest level. As Johannes Linn and Colin Bradford from the Brookings Institution have shown, the idea to develop the G8 into an L20 (L=Leaders) summit forum, according to the model of the Group of 20 (ministers of finance), is such an approach (see reference). One opportunity of the year 2007 that should be used is the fact that the German G8 presidency and the South African G20 presidency coincide. If finance ministers from the South sit at one table with their Northern colleagues – why shouldn't Presidents and Heads of Government do the same? To start a process leading to more inclusive global governance – not just for dinner.

References: * Christian Aid, Challenging conditions: A new strategy for reform at the World Bank and IMF, 35 pp., London, July 2006 (order at www.christian-aid.org.uk) * Johannes Linn/Colin Bradford, Pragmatic Reform of Global Governance: Creating an L20 Summit Forum, Brookings Policy Brief # 152, Washington DC, April 2006 (order at www.brookings.edu) * World Trade Organization, World Trade Report 2006: Exploring the links between subsidies, trade and the WTO, 266 pp., WTO: Geneva 2006 (order at www.wto.org)

Recommended citation: Falk, Rainer (2006) 'Between Geneva, Singapore and Heiligendamm: When globalisers obstruct globalisation', World Economy & Development In Brief, 3/Aug-Sep (www.wdev.eu)