Conferences & Lecture Series

2004 G8 Pre-Summit Conference
Security, Prosperity and Freedom: Why America Needs the G8
June 3–4, 2004
Indiana University, Bloomington, IN


Email your comments and questions to our panelists!
Watch the live webcast of the conference.
(Download the free RealPlayer software.)

ProspectusProgramPapersRegister online

Summitry and Trade:
What Could Sea Island Do for Doha

Sylvia Ostry
Munk Centre for International Studies
University of Toronto
Draft: May 25, 2004

Introduction

In 1975 the G7 was the first institution established after the creation of the postwar architecture and it was not an initiative of the leading power or hegemon, the United States. Indeed, it was a response to the erosion of American power due to the reconstruction and rapid growth of Europe and Japan in the 1950s and 60s. The erosion of American power created a vacuum in global cooperation and represented a serious threat to global security. The threat became clearer as the Bretton Woods system collapsed in 1971 and a new "non-system" of floating exchange rates emerged in 1973. Finally, the first OPEC oil crisis of 1973 triggered action. Valéry Giscard d’Estaing of France and Helmut Schmidt of Germany created the Economic Summit. It was held at Rambouillet in France and included the US, France, the UK, Japan and Italy. Canada was included the following year. Both Giscard and Schmidt were former finance ministers. They intended the Summit meetings to be small, informal and secret. The objectives were limited, confined to international economic issues, especially financial stability and trade. The objective was to establish basic norms and principles for policy cooperation.

In this paper I shall briefly review the role of the Summit in trade policy: the Tokyo Round and the Uruguay Round. But before turning to a proposal in the Doha Round it is essential to describe the evolution or transformation of Summitry. And, of course, of the global system. It’s a long, long way from Rambouillet to Cold Sea Island.

[back to top]

Summitry and Trade: Tokyo and Uruguay Rounds

There seems to be general agreement that the summits – 1975-8 – were successful in bolstering the GATT during the Tokyo Round. From 1976 the OECD Ministerial Meetings were held before the Summit and this facilitated a coordination of agendas. There was concern about rising protectionism, termed the "new protectionism" consisting of border nontariff measures such as voluntary export restraints and domestic nontariff measures such as subsidies. The Tokyo Round was launched in September 1973 but was dragging on because of disagreements both within and between the EC and the US essentially over the impact of structural change stemming from the oil shock and the rise of the Asian Tigers. And, of course, agriculture.

The G7 from its inception played a role in encouraging the negotiations and setting deadlines. But it was not possible to completely mask the disagreements. Indeed the London Summit in 1977 included in the communiqué not just "a new impetus to the Tokyo Round" but also unprecedented statement that the Tokyo Round "should not remove the right of individual countries under existing international agreements to avoid significant market disruption."[1]

But, as is often the case with Summits, people matter. Summits are episodic in nature and this can produce good or bad – and largely unexpected – results. President Carter attended the London Summit and he had appointed Robert Strauss as US Trade Representative. Strauss seized the initiative to prod the Round and negotiations among the US, EC, Japan and Canada were concluded just before the Bonn Summit in July 1978. But given the rise of the New International Order – a short lived consequence of the OPEC crisis – it was important to placate the developing countries and the concept of special and differential treatment was included in the GATT. So the Round was completed in 1979 and hailed by the G7 leaders at the Tokyo Summit as "an important achievement."

It’s very difficult to evaluate the role of the Summit in the Tokyo Round. But Robert Strauss, the US Trade Representative (USTR), a most energetic and skilled trade diplomat, was certainly assisted by the initiative of President Carter and the pressure exerted by his allies among the Heads of State and Government. But for the Americans the Tokyo Round was less than satisfactory. The wide transatlantic differences over agriculture and domestic subsidies as well as lack of transparency in procedures concerning standards or government procurement fed a growing view that the American system was more open and competitive and therefore fairer. The weak GATT dispute settlement mechanism was another source of complaint. The Tokyo Round use of codes which excluded developing countries led to serious fragmentation of an already weak legal structure. One could argue, indeed, that a major result of the Tokyo Round was to add to the declining credibility of the multilateral system in the United States.

Of course the outcome of the Tokyo Round had nothing to do with Summitry. But they do illustrate an important point. The original summiteers were very concerned with substance, especially with respect to the international financial system. Their background as former Finance Ministers was of course, the reason both for the origin of the institution and its mode of operation. But it would be impossible for the Summit as an institution to deal with the complexities of other policy issues. So the role of the Summit in trade (or energy or whatever) has to be procedural. And in that context one would judge the completion of the Tokyo Round as "an important achievement" – when one considers the alternative.

The disappointment with the Tokyo Round led the US to try to launch a new Round almost as soon as the ink was dry. At the 1981 Ministerial the USTR William Brock asked the OECD to launch a program of research on agriculture and quite new issues such as trade in services and trade-related investment measures. At the 1981 Ottawa Summit a GATT Ministerial was endorsed and was convened in 1982. The timing could not have been worse. The world was in a serious recession. A serious debt crisis had emerged in Latin America. The old GATT club no longer existed and Southern Countries were firmly opposed to another negotiation. Fortunately the GATT as an institution survived. Further, an offspring of the Ottawa Summit was the Quadrilateral Trade Ministers or Quad, which played an important role in efforts to launch the Uruguay Round.

Subsequent summits in Williamsburg (1983) and London II (1984) were unable to paper over the growing transatlantic differences, especially over agriculture. But there were other serious problems of global imbalance arising from US fiscal policy and a rising dollar feeding protectionist fury in Congress. So a new round was considered crucial by Ambassador Brock and the Bonn II Summit was the proposed venue. Further, the major US Trade advisory committees had made clear in a report to the USTR that they would support a GATT Round only if the "new issues" of services, intellectual property and investment were included and if action was taken to lower the dollar. On September 22 1985 the Plaza Accord launched the new policy on the dollar. And the USTR initiated a new multitrack policy: multilateral (GATT), bilateral (Canada-US Free Trade Agreement) and, if necessary, unilateral under the so-called Section 301 of the 1974 trade act. The Bonn II Summit of 1985 failed to launch the round: indeed France’s François Mitterand briefly walked out in opposition. Finally, at Tokyo II in May 1986 G7 leaders declared themselves in support of a GATT Round that would include the new issues and agriculture. The Uruguay Round began in September 1986 at Punta del Este. Summitry probably helped nudge along the tortuous launching process. But the most important outcome of the Tokyo II was the creation of a new forum, the G7 Finance Ministers that began the process of shifting Summitry from the original focus on international economic policies. Of which more shortly.

The main role of summitry in the launch of the Uruguay Round was as a focal point for coordinating among different institutions, the OECD, the Quad – amplified by inclusion of some Southern Countries – and the GATT. The OECD’s research on agriculture and services was crucial in facilitating discussions in the GATT since the GATT had very meagre research capability. Canada played an active role in this coordination and, indeed, the creation of the WTO was a Canadian initiative.

[back to top]

The launch of the Uruguay Round took almost as long as the entire Tokyo Round negotiations. The role of summitry was constrained not only by the transatlantic disagreement on agriculture, but also because for the first time in the history of the GATT a number of Southern countries were active participants. In particular a group of developing countries, tagged the G10 hardliners and led by Brazil and India, were bitterly opposed to the new issues, and helped with the European foot-dragging. Other Southern countries joined the Australian-led Cairns group to support liberalization in agriculture. Summitry did not weigh heavily in their policy-making process.

If the word tortuous was not too strong for the launch it could also describe the negotiations. The Uruguay Round almost collapsed at a mid-term Ministerial in Montreal in 1988. It was supposed to be concluded by 1990 at a Brussels Ministerial. It dragged on until December 1993 and the final agreement was signed in April 1994 at Marrakesh. The transatlantic divide over agriculture was the core of the problem. By the onset of the 1990s the G10 coalition had disappeared, decimated by the debt crisis and the role of the IMF and the World Bank. So the main players were the EC and the US yet the role of summitry in promoting the agreement was negligible. While communiqués included support for trade liberalization at summit after summit nothing was able to overcome French opposition to reform of the Common Agricultural Policy. Indeed, despite the summit declaration of London that the Round be completed before the end of 1991 the Munich Summit of 1992 provided the weakest declaration of all: "we expect that an agreement can be reached before the end of 1992". This reflected a bow to France from her German partner. Finally, the US-EC Blair House Accord of November 1992 settled the agriculture agreement and the Round was completed in Geneva at the end of 1993.

Even on procedural grounds the role of summitry in both the launch and completion of the Uruguay Round was less effective than was the case in the Tokyo Round. As we shall suggest there are undoubtedly many reasons for this. But it should be noted that the Summit coordinating role with respect to the Quad was important. Just before the Tokyo III Summit in 1993 the Quad reached an agreement on market access under pressure of a deadline posed by the leaders. To placate developing countries the Quad made some concessions in the GATT.

Before turning to Doha it’s pertinent to ask why the role of Summitry in trade policy had weakened in the late 1980s and 1990s. A full exploration of this important question is beyond the scope of this paper but it’s useful to suggest some likely reasons. First, not only were the issues in the Uruguay Round far more complex than any previous negotiation but what could be called "mission creep" had taken over Summitry. During the 1980s a major change was the move from economic to political. But much more was added. Communiqués grew longer and annexes were added. The main players in the policy domain for which the Summit had been created were not the Summiteers but the Finance Ministers and Central Bank Governors. While efforts were made to contain the expansion of agendas and paper output these were not very successful. And there’s been an enormous expansion of Ministerial meetings that added more paper. And, perhaps to add to the gravitas of the institutional commitment and the credibility of the piles of paper, the summiteers are inclined to include specific goals. When these are not met or not likely to be met this mode of operations has led to an increasingly sceptical view of the institution in the press and among some academics and NGOs.[2]

So, given the growing number of issues now included in agendas, trade can hardly claim pride of place. But there’s another reason why the impact of summitry has weakened. As noted, the old GATT magic is gone and the role of Southern countries has become more significant. The transatlantic duo agreement was certainly necessary to complete the Uruguay Round but not sufficient without involving other players who are not involved in summitry, the Quad, or the OECD. The role of Southern countries in trade negotiations cannot be dealt with in a perfunctory fashion. One of the major results of the Uruguay Round – albeit an unintended consequence – was the creation of a serious North-South divide. The Grand Bargain that concluded the negotiations – the North would open their markets to Southern agriculture and labour intense products, textile and clothing in particular, in exchange for the South’s acceptance of the new issues and, as virtually a last minute piece of the deal, the creation of a new institution, the WTO, with the strongest dispute settlement mechanism in the history of international law and virtually no executive or legislative authority (apart from negotiations) – turned out to be a Bum Deal.

The Northern market opening in agriculture and textiles and clothing was far less than expected. The new issues require major institutional upgrading and change in the infrastructure of most Southern countries. These changes take time and cost money. Implementation thus involves considerable investment with uncertain medium-term result. The Uruguay Round thus generated not only a North-South divide but the WTO became a magnet for dissent by the increasingly activated NGOs (Non Governmental Organizations).

While the South is hardly homogenous there is a broad consensus that the Uruguay Round was asymmetric and the WTO system must be rebalanced. The débacle at Seattle in 1999 ended with a walkout of virtually all developing countries. It’s more than symbolic that the outcome of the Doha Ministerial in 2001 was termed "development agenda" and not a Round. The main objective of the Doha meeting was to avoid another Seattle. The Declaration repeatedly refers to technical assistance and capacity-building. Pushed by the successful NGO campaign about AIDS in Africa, the Americans even seemed willing to antagonize Big Pharma. So Doha was unique in its focus on the South and development. Of course there were other issues such as agriculture and the so-called Singapore issues of competition, investment, government procurement and trade facilitation. But the Doha Declaration was a masterpiece of creative ambiguity so the devil remained in the details of the negotiations. And the devil ensured that deadlines were missed. And at the Cancun mid-term Ministerial in September 2003 the meeting broke up with no agreement on agriculture or the Singapore issues, the core items of North-South conflict.

The role of Summitry in either the Doha launch or negotiations was minimal, consisting of some promises concerning the poorest countries which were largely irrelevant to the negotiations. Nor was there any direct link between the Kananaskis proposals on Africa and the Doha Agenda. And, of course, there were more commitments and goals. As one expert has remarked, if people could eat international resolutions and summit agreements, Africans would be among the best-fed people in the world. [3] WE should not forget World Bank President Robert MacNamara’s pledge in 1973 to eradicate poverty by the year 2000.

But I digress. Let me conclude with a proposal for Sea Island.

[back to top]

Conclusion: The 20-20 Solution

At Cancun, as at Montreal in 1988, the meeting broke up over agriculture. And at Montreal it was a group of developing countries, led by Brazil, who said to the EC and US negotiators: no agriculture no agreement on anything. But that’s where the replay ends. At Cancun two new coalitions were formed. The G20 led by Brazil and India as well as China (the Big Three) and including South Africa and a number of Latin American countries has not collapsed under American pressure and is still playing a significant role in the negotiations. The other coalition, the G90, includes the poorest developing countries, mainly from Africa. After failing to convince the US to eliminate cotton subsidies and the EC to remove the Singapore issues, the G90 terminated the negotiations. They, too, are still involved in the negotiations and, as was clearly evident at Cancun, are assisted by a number of NGOs providing ongoing information as well as research and policy analysis. So, I would argue, at Cancun there appeared to be an axial shift in the political economy of trade policy-making. The Big Two can’t produce another Blair House if the Big Three don’t agree. And the G90 can’t make the Round but they can break it. Unlike the Bretton Woods institutions there’s no weighted voting. Consensus rules the WTO. Or generates paralysis.

There have been some positive developments on the agriculture front as a result of a Mini-Ministerial en marge the recent OECD meeting. But there’s a long, long way to go even if a so-called framework agreement is reached before the summer break.

So what could the Sea Island Summit do? I would say that the central concern is how to achieve not simply a re-launch of Doha – desirable as that undoubtedly would be – but a discussion of the range of fundamental issues concerning the trading system. The list is long – trade and growth, trade, poverty, inequality, trade and environment, capacity building and development, WTO institutional reform, international coherence, etc., etc. But there is very meagre research capability at the WTO and we don’t need another Uruguay Round of unintended consequences.

The G8 Summit is a quite inappropriate forum for trade policy in today’s world. There have been a plethora of proposals to expand the membership. But the most popular candidate is the G20, chaired by Canada’s previous finance minister Paul Martin. I’m not suggesting that the G20 replace the G8. That’s a matter for another time. But a proposal from Sea Island to inaugurate a joint meeting of the Finance Ministers’ G20 and the WTO’s G20 (there is some overlap and members of the G90 should be included [4]) with a mandate to launch a discussion of the trading system which includes a new round but goes well beyond that to deal with systemic issues and report back to next year’s Summit. This 20-20 project would have to be provided with research capabilities which should consist of knowledge networks involving researchers from a range of institutions, academics, NGOs and so on. But the details could be worked out later. The objectives of the Summit proposal would be to acknowledge that the trade issue is no longer just about trade but has been transformed into a far more complex policy template and the institutional architecture – perhaps including the Summit – needs repair and reform. A new 20-20 vision?

[back to top]

Footnotes

[1] Theodore H. Cohn, Governing Global Trade: International Institutions in Conflict and Convergence, Ashgate, Burlington, VT, 2002, p.96. For analysis of Summitry and Trade there are a number of sources. See, for example, Nicholas Bayne, "The G7 and Multilateral Trade Liberalisation: Past Performance, Future Challenge", in J.J. Kirton and G.M. Furstenberg (eds.), New Direction in Global Economic Governance: Managing Globalisation in the Twenty First Century, Ashgate, 2001, pp.171-187 and references therein; Nicholas Bayne and Stephen Woolcock, The New Economic Diplomacy: Decision Making and International Economic Relations, Ashgate, 2003; Michael Artis and Sylvia Ostry, International Economic Policy Coordination, Chatham House, Paper 30, Royal Institute of International Affairs, London, 1986; Sylvia Ostry, "Canada, Europe and Economic Summits", in C.H.W. Remie and J.M. Lacroix (eds.), Canada on the Threshold of the 21st Century, The Hague, Netherlands, John Benjamin Publishing Co., Amsterdam, 1991; Sylvia Ostry, Globalization and the G8: Could Kananaskis Set a New Direction?, O.D. Skelton Memorial Lecture, Queens University and Department of Foreign Affairs, 2002.

[2] Sylvia Ostry, Kananaskis, op.cit.

[3] IFPRI Forum, March 2004.

[4] The financial G20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, UK, US, the EC and IMF/IBRD. The latest information on the WTO G20 membership is: Argentina, Bolivia, Brazil, Chile, China, Colombia, Costa Rica, Cuba, El Salvador, Guatemala, India, Mexico, Pakistan, Paraguay, Peru, Phillipines, South Africa, Thailand and Venezuela.

[back to top]


Email your comments and questions to our panelists!
Watch the live webcast of the conference.
(Download the free RealPlayer software.)

ProspectusPapersProgram
Register online

G8 Centre
Top
This Information System is provided by the University of Toronto Library and the G8 Research Group at the University of Toronto.
Please send comments to: g8@utoronto.ca
This page was last updated .

All contents copyright © 1995-2004. University of Toronto unless otherwise stated. All rights reserved.