Rich and Poor
June 6, 2007
Without the five emerging guest nations, the G8 summit's motto "Growth and Responsibility" couldn’t be implemented, said German Chancellor Angela Merkel recently.
Indeed, all five of them exhibited healthy growth in their gross domestic products in 2006: China and India topped the group with 10.7 and 9.2 percent respectively, while South Africa (5 percent), Brazil (4.4 percent) and Mexico (3.5 percent) came in strong. According to the German Office for Foreign Trade (bfai) in Cologne, the upward trend is expected to continue in 2007 and 2008.
Economic growth encourages confidence on the international political playing field. They have already become key players in the World Trade Organization (WTO) and in climate debates, for example. Their businesses are expanding worldwide and representatives from these emerging nations are already questioning the legitimacy of the Group of Eight (G8). In addition, Brazil, India and South Africa are aspiring to obtain a permanent seat in the United Nations Security Council.
G20 represents world majority
In the WTO, the "Big Five" belong to the so-called G20, a group of emerging and developing nations that was founded in Cancun, Mexico in 2003 and represents two-thirds of the world's population. However, in international economic negotiations, the Big Five sometimes give the impression that they are already playing in a league of their own.
"The economic upturn of China, India, Brazil and South Africa doesn't necessarily lead to a poverty-oriented global economic policy," concluded a study by the aid organizations Bread for the World and Südwind Institute, which is to be presented Wednesday at the Alternative Summit in Rostock. "Economic growth alone doesn't help the poorest of the poor."
The gap between rich and poor is growing even wider, particularly in Brazil, Mexico, India and South Africa.
In the run-up to this year's summit, there was talk of expanding the G8 -- which currently represents only 13 percent of the world population -- to the G13. However, this could weaken the position of the world's poor, say experts.
The poor still lose out
"The dominance of the wealthy industrialized countries in the World Trade Organization and the International Monetary Fund would be reduced, but the interests of poor people in emerging nations and the least-developed nations would still be pushed onto the back burner in the world trade system," said Reinhard Koppe, development policy expert at Bread for the World.
Furthermore, the study reveals how power relationships have shifted over the past few years through the offensive economic policies of four of the largest emerging nations -- China, India, Brazil and South Africa.
"All four states have become world powers in many sectors, not just in their regions but worldwide," said Koppe.
The study's author Friedel Hütz-Adams said that "established industrialized nations are no longer in a position to assert their own interests without making major compromises -- both in the WTO and in bilateral and regional treaties."
Strategies on the political front
According to the study, Brazil's discourse within the WTO focuses on close cooperation with the G20 countries and the NAMA 11 group (Argentina, Brazil, Egypt, India, Indonesia, Namibia, Philippines, South Africa, Tunisia and Venezuela), while making deals of its own behind the scenes.
"The government in Brazil is getting involved in the non-transparent structures of the WTO by agreeing, together with India, to talks with the US, the EU and Japan," said the study.
China, which like Brazil has only signed a handful of bilateral open-trade treaties, continues to focus on the WTO negotiations and is prepared to support the positions of other emerging and developing countries.
Conflict of interest is standing in the way, however, said Hütz-Adams. In addition, China's engagement in Africa is now being seen as a threat by governments and companies from industrialized countries, added the author.
India sees itself as a spokesperson for developing countries on the international playing field, which could soon change. Hütz-Adams sees the willingness of the Indian government to join Brazil in informal trade talks with the US, the EU and Japan as a warning sign.
"No on knows whether India will stay connected with the goals of the G20 and G33 in the World Trade Organization negotiations," he said. The country has increasingly been distinguishing itself as an economic power and seems to be going its own way.
Mexico continues to be an emerging country but, at the same time, is a member of OECD. Of the five "guest" nations at the G8 summit, its economy has opened up the most since the 1990s. It maintains 13 free trade agreements with 42 other countries, including one with NAFTA since 1994 and with the EU since 2000. Last year, the Mexican government reduced customs duties on merchandise with 148 WTO member states.
After Mexico joined NAFTA, cheap corn from the US flooded the Mexican market and led to protests by farmers. Since Mexico had increased the use of corn in ethanol production, it became scarce.
"That's why there were tortilla rebellions and the country was noncommittal during the WTO agricultural negotiations," said Hütz-Adams.
What's more, economic expansion in China and India is putting competitive pressure on Mexico and Brazil.
More influence for smaller countries
The study named other differences between the major emerging countries as well. Brazil and South Africa support a fundamental voting reform in the International Monetary Fund and the World Bank that would give small countries more say. India and China, on the other hand, want to enhance their own positions in both institutions.
It remains to be seen whether India and China will agree to the United States' new climate initiative. "That would require a parallel structure to the UN where the small states wouldn't have any say anymore," said Hütz-Adams.