Published: The Hindu Business Line, April 30, 2004,

By Pranav Kumar

The EU’s latest offer on agriculture is clearly intended to split the powerful Cairns group and the G-20 alliance

WHEN developing countries take a tough stance against the interests of their powerful counterparts, a variety of tactics is deployed against them to toe the line. This has become an integral feature of international trade negotiations for some time, especially after the establishment of World Trade Organisation (WTO) in 1995.

The tactics may include some combination of inducements in the form of sops to the least developed countries (LDCs); threatening to withdraw unilateral trade preferences, such as the Generalised System of Preferences (GSP); and in classic divide-and-rule style, even trying to pit one country against the other.

This “divide-and-rule” policy is not new. History is witness to this fact. In the WTO, developed countries from the very beginning have been engineering consensus by arm-twisting, offering sops to some and ignoring or sidelining those that take a tough stance. This happened at Doha, when the EU bought the support of the ACP (African, Caribbean and Pacific) countries to launch a new round of trade negotiations and “new issues” by giving them a waiver on banana.

After Doha, in case of special and differential treatment (S&DT), instead of abiding by the Doha mandate, developed countries went on to raise issues that were clearly intended to divide developing countries.

While developing countries insisted that there is only one aspect to the Doha mandate — that of reviewing the specific provisions on S&DT — their developed counterparts sang a different tune. They indicated that some kind of criteria for differentiation and graduation should be introduced. The Doha mandate, however, is clear that the current work programme should limit itself to agreement-specific proposals. All this created unnecessary controversy and made the S&DT negotiations more complicated.

Again, at Cancun, when a group of developing countries formed the G-20 to counter the US-EU joint proposal on agriculture, developed countries deployed all kinds of weapons from their armoury to break the association. They tried to bully Argentina which owes $12 million to the IMF and ridiculed the togetherness of India and Brazil on agriculture issues. Some smaller Latin American countries were even openly threatened by the US, which resulted in a few of them deserting the G-20 immediately after the Cancun.

The efforts to split the G-20 alliance did not end at Cancun. After failing to prevail upon the developing countries at Cancun, the US then tried to dictate the agenda of VIII FTAA (Free Trade Area of Americas) Ministerial meeting held in Miami (November 17-21, 2003).

To counter the growing influence of Brazil (leader of G-22) among the FTAA members, the US announced bilateral agreements with some member countries. Brazil has already made the US bite the dust by forcing it to drop demands for stricter patent rights and greater protection for foreign multinationals.

As reported in the Financial Times and other newspapers, the EU’s latest offer on agriculture to Mercosur — with which grouping it is negotiating a free trade agreement — is being perceived by many as a fresh attempt to split the Cairns group of 18 agricultural exporters as well as the Group of 20 developing countries led by Brazil which want the rich nations to reform their farm policies.

Mercosur is a trade bloc formed in 1991 by four Latin American countries — Brazil, Argentina, Uruguay and Paraguay. The four countries have been among the fiercest adversaries of Brussels in the global trade talks. Here it is worth mentioning that the EU and Mercosur had previously agreed not to conclude an inter-regional deal before the end of the WTO’s Doha Round which is to be completed by this December.

It is well-known that Brazil and India — the two main architects of the G-20 alliance — have conflicting interest in farm trade liberalisation. While Brazil, a big agriculture exporter, stands to gain from a freer world market in agricultural goods, India’s interest lies more in maintaining the status quo on tariff cuts and reduction in farm subsidies by the developed countries. India, at present, is maintaining steep tariffs on its own, averaging to almost 37 per cent. It is this weak link between India and Brazil that the EU has been trying to target ever since the formation of G-20 alliance at Cancun.

As reported in The Economist (April 16, 2004), India’s entrenched protectionism might provide the EU with an excuse not to open up its market in future Doha negotiations. That will hurt Brazil.

Hence, Brazil may be tempted to take what is on offer from the EU now rather than staying on India’s side in its stand-off with Brussels. What makes the EU hopeful is that the Mercosur negotiators have shown interest in the proposal.

The GSP — another important weapon in the arsenal — is a programme under which developed countries can grant reduced or zero tariff to selected imports from developing countries without having to extend the same concessions to other members, and without the beneficiaries having to reciprocate, as WTO rules would otherwise require.

The latest example is of granting the GSP to Pakistan by the EU. It has not only antagonised India but also compelled it to pull EU in the Dispute Settlement Body of the WTO.

Though the reasons of giving the GSP to Pakistan were purely political, it acted as an irritant between India and Pakistan which otherwise go along quite well on most WTO issues. In fact, at Doha it was India and Pakistan that vehemently opposed the inclusion of Singapore issues till the end.

Brazil may publicly announce that it will not do anything to harm the G-20, but the EU’s latest offer on agriculture is clearly intended to split the powerful Cairns group and the G-20 alliance. Only time will tell how far the EU will succeed in its mission. It will, however, definitely blunt the edge of G-20 alliance which was getting stronger day by day.