THE G20

India was last week the host of a meeting of twenty developing country Trade Ministers, the G20. Roughly the G20 countries, in purchasing parity terms, represent a collective GDP as large as Japan, and the three biggest EU economies, Germany, France and the United Kingdom, and are flexing their emerging markets and political muscle. This pivotal group is lead by India, South Africa, China and Brazil, and was formed from the rubble of the World Trade Organisation Ministerial that collapsed i n Cancun, Mexico. Why are Trade Minister meetings so prone to public failure when Ministers of Finance, Labour, Sport or Environment meet and nothing happens? Exactly, nothing much happens. These meetings are not held under the umbrella of the WTO. The decisions are not negotiations, the decisions are not binding and are not subject to a legal, binding disputes mechanism. The Cancun Ministerial failure was a surprise to me because that meeting was about negotiating timelines, possible modalities, a mid-term review for the Doha Development round. Essentially, developing countries dug their feet in and demanded immediate action on issues vital to them such as agriculture. I agree with them, Africa would get up to 5 times more from an agriculture deal than all the aid put together. Cotton subsidies, alongside coffee tariffs, sugar subsidies by the rich cannot be justified economically, morally, or intellectually. It’s an abomination and theft from the poor producers. However, it was a heroic hoax even to pretend that if the Conference stopped, the EU, U.S. and Japan would fold and surrender. They can and will only do that in the context of an overall package. Sad, but true. We had tried to reform agriculture for well over a decade after the Uruguay round was finalised. I think the G20 is a good idea. Negotiations in the WTO are difficult and clumsy, with contradictory positions. Developing countries don’t all want the same things. India’s needs in agriculture are very different than Brazil’s. but if they can internalise these needs, present a common position, deals are possible.

Trade negotiations are often like Generals fighting the next war on the basis of the last war’s mistakes and lessons, forgetting that everything has changed. Months are spent discussing the role of the World Bank and its funding possibilities for restructuring to assist countries to do better under new conditions. Mean while capital flows explode and the World Bank’s share of global investment is now only a discreet 2%. 98% of capital flows privately. And while politicians, bureaucrats, and NGO’s timelessly hand-wring about what kind of conditionality should be imposed on lending to prevent corruption, to properly audit and evaluate these loans, the private sector has its own voluntary set of conditions. A set of conditions based on predictability, rule of law, independent courts to address grievances, and honest civil servants to manage public affairs. Conferences are held to discuss investment in Gaza. There is no shortage of money in the Middle East, but it’s going to London, Paris, and New York. Why? Easy answer, safety in the rule of law, real property rights, companies will invest more where they feel safe, where their staff are comfortable. That’s why head offices are in South Africa, not the Congo, India, not Burma. A new trade round that gives market access in agriculture, that removes vicious subsidies and protection will give the gift of opportunity to millions. I’m optimistic. The West wants better rules on intellectual property, pointing out that piracy represents up to 5% of world trade. This has not been a high priority for China or India. Both now have highly sophisticated research and development industries. R & D is being outsourced to thousands of eager, hard-working, highly motivated Third World graduates. India now has the world’s fourth largest pharmaceutical industry. This is where many of the new breakthroughs will come in medicine and technology. The number of patents sought from the developing world has dramatically exploded. They would be wise to push to protect these enormous intellectual capital reserves that will soon be ready to harvest. Bollywood is now a victim of piracy as is Hollywood.

I can see a deal as the needs of rich and poor converge. The trick in these negotiations, as in all negotiations, is to ensure everyone goes home with a good balanced story to report to their anxious and puzzled public.