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Brazzil - Foreign Relations - September 2003

Brazil in Cancún and the Free Trade Farce

The creation of the G21 group led by Brazil in Cancún was
intended to break a stalemate that confirmed what has been
suspected for some time. Free-trade has one primary direction:
North to South. As with its other international commitments, the
US had no intention on settling for anything less than the status quo.

Norman Madarasz


The foremost legacy of Cancún is how the Rich countries refused to ease up on export tariffs levied against the Poorer and Poor ones on what stands as their main source of foreign income, agriculture. In as much they did, the World Trade Organization Cancún Ministerial Summit (September 8-13) closed in failure. As a follow-up to the manifested goodwill of the 2001 Doha round, this dramatic outcome is the result of hypocrisy among the wealthy.

Lifting tariffs on industrial imports and loosening intellectual property rules, proposed as compromises by the US and EU, in no way alters the balance of power in international trade. That's because few countries outside the G7 and South-East Asia have any industrially manufactured goods to export. For those that do, like Brazil and India, they have been deprived of broader markets.

Despite the failure, the Cancún Summit will be most remembered for the spotlight it shone on the mathematics of the pending global trade imbalance. Much of the developing world's industry is based in agriculture. The formation of a large group of countries with similar exporting ambitions in that sector sought to drive that reality toward broader understanding. The G21 as the association was called, at one point growing to 23, was led by Brazil's astute staff of diplomats and negotiators. Without a move from the North, the G21 refused to bend on the so-called Singapore issues regarding investment, competition and transparency in government procurement.

The G21's attempt was to break a stalemate that just happened to confirm what has been suspected for some time. Free-trade has one primary direction: North to South. As with its other international commitments, the US had no intention on settling for anything less than the status quo.

The free-market ideology that has been the backbone to `globalization' flowed liberally in Cancún. It was contradicted collectively. Well ahead of the summit, it was as clear as day for anyone caring to leaf through the pages of Business Week. From the American perspective, the main problem with the WTO suddenly became what the Seattle demonstrators had pinpointed in 1999 as they fled from teargas. The Organization profoundly lacked a democratic structure and catered only to the corrupt.

The upshot holds that the US cannot afford to negotiate for broader free trade in such a philosophically deprived environment. Underlying it all is the fact that numerous punitive decisions were taken against the US in recent months for its protectionist farming subsidies and import levies. The entire purpose of the WTO was to make such trade practices unlawful. It would set international standards by which to pass punitive action.

Opposition to US and EU farming `subsidies' delves much further, though. Rubens Ricupero, Secretary General of UNCTAD (United Nations Conference on Trade and Development), writing in the Folha de S. Paulo on June 6, portrayed these funds as destined "to fattening the pocket-books of the largest farming estates, the gigantic agribusiness conglomerates and their allies in the Congresses and governments of the wealthiest countries." A statement from Oxfam reinforced his point: "distribution of agricultural support in the industrialized countries is far more unequal than the distribution of income in the world's most unequal countries." The claim to protect farmers turns out, yet again, to be but a house of cards. In the meantime, the land and soul of American and French farming culture spiral downward into poverty and suicide as a function of depopulation.

Purporting to protect such privileges, the northern countries have blocked the economic aspirations of the South. Next to the Brazilian delegation, perhaps nobody expressed deeper dejection than Supachai Panitchpakdi himself, current head of the WTO. "We seemed to be making real progress. We were very, very close to a final agreement," he insisted.

US Threats

The days following the summit's failure have been rowdy. The international press has reported how most of the 146 member-states are posturing toward bilateral trade talks. The US has predictably returned to its moral high horse, threatening the developing world with retaliation for unlawful trading. Even during the summit, as reported by the Financial Times, Robert Zoellick, the US trade representative, energetically attempted to split the G21 "by telling its members that they were jeopardizing their chances of doing bilateral deals with the US." Brazil's Foreign Minister and head of the G21 group, Celso Amorim, regretted the "psychological war" waged against the coalition by the EU, US and Canada. In the end Zoellick failed in his rabblerousing in Cancún. On the other hand, there is surely little reason to believe the G21 will easily settle for a compromise now.

Opponents to northern rigidity could only rejoice, but rejoice they did after successfully countering the final summit declaration. The world is clearly divided, once again, by an opaque North-South border. In hindsight and contrary to what many of its critics contended, the principles of the WTO do favor the economies of developing nations, at least partly. Given the northern stance, however, it now appears to have been nothing more than a finely woven trap for the latter. Despite what the poorer nations might lose out on in the short-term—and by listening to the northern press's morality tale, it will be significant—the South has perhaps managed to communicate the collective nature of its terms.

Perhaps is the keyword. For northern audiences can hardly be expected to grasp the gist of this gathering. Those who opposed the WTO, and have done so especially since Seattle, have played into a devious logic. Ever since the Bush administration was elected, it has drawn back from its international commitments. That stands foremost for the WTO. Even in its imperfect form, the WTO represented opportunity for the South, provided that its free-market principles were respected. Demonstrations against the very existence of the organization ultimately ended up sustaining the most conservative of Northern economic doctrines.

Then again this was not the first time that the free trade dream has faced its Janus head. For all the denial displayed by rich countries regarding the links tying political turbulence, including political terrorism, to trade, the WTO has consciously connected its goals with 9/11. The round held in Doha was done so in urgency after the Twin Tower and Pentagon attacks. Last week's scheduling was no different.

But just as the mood has changed since the months following 9/11, so has the negotiating spirit. As Brazil's President Lula da Silva proclaimed after the summit's end in praise for his country's stance: "We are not out to win. We just want fair play because we can compete. (...) This is hardball and we know that you do not win if you do not play hard."

A gap has thus emerged between the meaning of northern protest movements and the business needs of southern economies. The fact that the world, with few exceptions, is affected by an economic slowdown does not change the expectations of developing nations. Nor are they seemingly prepared to stand by as obedient spectators, swayed by the prescriptions of economists. Instead of being dictated to by the North about "fair trade", southern economies are above all after "free trade".

The sack in Seattle confronted the WTO to the fact that both the organization and the question of international trade were found out to be the rulers and agents of the out-sourced empire of American power. Prior to that date, taking a political stance against an economic system was a political act, and remained as such. From Seattle on, what would soon become the alter-globalization NGO movement proved that it had done its economic homework. Even President Clinton reacted well to the protests, somewhat as a teacher impressed by the savviest of his students. Political protest had managed to come around to the new world economic system and tackle it head-on.

The grounds of the Organization had changed considerably since the 1994 Uruguay round. Prior to that date, its predecessor, the GATT (General Agreement on Tariffs and Trade) was basically a G7 affair. In Seattle, the South yearned for a seat at the negotiating table. Clinton's terms in office exhibited a certain diplomatic goodwill on the part of negotiators, a sentiment from which the WTO also drew. A lot was on the table. Clever cunningness could get States what they wanted. The WTO's agenda appeared to be no different. To the astonishment of business sectors in the developing world, however, they had to face off in the same square against northern protectionism and protest.

This negotiating spirit was pointed to as compensation for the lack of democratic structure or transparency in the Organization's decision-making processes. The Doha round and agenda seemed to prove that in spite of 9/11, the developing countries could count on the G7's good spirits. It was as if a kind of universal democratic ethics were taking shape amongst multilateral organizations. The WTO suddenly crystallized into a broker of beliefs.

Despite the so-called concessions the US was willing to make, and Europe's following the lead, nothing ever touched the tip of southern demands in Cancún. In the end, China stood askance from the G20+ group out of self-interest, but also out of a sense of fulfillment. The compromise to lift tariffs on some industrial goods clearly corresponds to the nature of Chinese exports, whereas agriculture merely corresponds to its import needs.

Moreover, the entangled web of Chinese and American trade relations, making the former the latter's biggest creditor and the latter the former's largest buyer, places China in America's camp. After all, Treasury Secretary John Snow was just in China making a humiliating visit to request that the Chinese Yuan be appreciated, amounting to a depreciation of the American dollar.

Complaints of Dumping

Meanwhile, the US has been dealing with another agenda. Bilateral agreements with countries on the American continent have predominated in view of a Free Trade Agreement of the Americas (FTAA). Robert Zoellick made a good show of professing interest in multilateral agreements, when he was not amusing himself by launching faceless threats against Brazil and other dissenting G21 nations. The fact is the US has been withdrawing from WTO rulings through complaints of foreign "dumping". In turn, it has never come as close to dumping the very organization to which it gave rise.

Most North Americans and many Europeans perceive Third World leaders most often as corrupt embezzlers who feast while their people starve. The vision of the banana republic was always more self-serving than accurate. Given that the US only seemed to sponsor, support or fund the most corrupt, murderous and tyrannical of southern regimes, its factual basis proved to be little more than fictions. Nowadays the entire South American region is run by democratically-elected governments, whose security agendas range in varying proportions, though none exceeding America's own. The attempt to split the political class from the people therefore amounts to being a diversion tactic.

It reminds one of the glee with which the Northern hip audiences received Brazil's hit film, City of God. One Montreal critic seemed to climax at the thought of how replete with fright the film left the Brazilian middle class. Far from such unsubstantiated artistic sublimation, this middle class has no need for a film to be scared out of their wits: violence abounds in the country, as it does in Colombia.

Northern city-dwellers can hardly suspect the degree to which it has become banal, which is hardly to deny the pain and suffering of its experience. What has triggered the hopes of the middle classes in most Latin American countries is the old trickle-down dream. Income from trade can offset the debt balance which in turn might allow governments to invest in local infrastructure—and loosen IMF-managed austerity measures on social spending.

On paper, the WTO aimed at concretizing some of those aspirations. When Brazil succeeded in establishing a national aeronautics industry, for example, the North came challenging. An unlikely Inquisitor, Canada showed a considerably different face to what we have seen since it sided with the UN against the US over Iraq. It sought a WTO sanction against Brazil for unlawfully subsidizing its industry, a devastating consequence whose outcome the Canadians clearly caressed.

In the end Brazil was the camp to receive retribution. The WTO ruled against Canada's claim and competitive strategy, consisting basically of offering low-interest loans for foreign companies to buy its nationally produced aircraft. Brazil requested $5.2 billion in countermeasures; the countries settled for $385 million. Such rulings confirm what Joseph Stieglitz, writing in The Guardian, confirmed as the current structure going "some way to restricting the brutal exercising of economic muscle by the more powerful".

By merely focusing on the very poor, the wealthy nations are confronted with a workable option: give a little, the result can mean a lot. Even so, the deeper confrontation lies on this side of charity. The less poor of the world persist in being tired of the North's arrogance regarding their education system, industry and governance. When the North dispatches their unemployed technicians down south, they are treated like princes whereas local university grads with n-years of experience pocket only a fraction of the Gringo's salary and benefits. In such circumstances, the world's non-Western middle classes are demanding more. And that does equate with a thinning northern pocketbook. It's a question of balance, of moral and ethical due.

Were they to take it from the positive end, what would be in it for Americans, Canadians and Europeans? The possibility of tackling the long term question of an exhausted consumer society. The last period of economic growth in the US, Canada and Asia (Europe has been relatively stagnant in low growth for over a decade) proved to be a bubble. Personal savings were erased in its burst, but populations were coerced into blowing the consumer bubble back into shape. The message with which Cancún has closed is that consumerism will be forced onto the developing world as a last resort by the US to hold onto its economic predominance.

In the meantime, it is said that in conflict new formations arise. The G21 may not long survive as a lasting entity. The South has still mustered up its skills, competence and courage to spell out what it understands by capitalism, globalization and free trade. Accurately measuring its importance may end up shaping the Cancún legacy.


Norman Madarasz, Ph.D., teaches and writes on philosophy and international relations in Rio de Janeiro. He welcomes comments at nmphdiol2@yahoo.ca




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