ISMAIL LAGARDIEN: After Bali, can developing countries become rule makers?

The Group of 20 (G20) meeting held in Indonesia came to an end last week. As with all of these high-level summits there were enough activities, incidents and issues to keep observers busy. Whether it’s the reported spat between Canada’s Justin Trudeau and China’s Xi Jinping, or the almost universal condemnation of Russia’s war on the Ukrainian people, among other issues, there was no shortage of stories — or even gossip. 

One thing that stood out was the apparent shift in power to the developing world under the leadership of the Brics countries, with Russia in effect replaced by Indonesia. As one Indian official said towards the end of the G20 meetings, “This was the first [G20] summit where developing nations shaped the outcome.”

The official was correct. Under the leadership of Indonesian President Joko Widodo, the G20 countries ended the summit with a draft communiqué that included an unambiguous condemnation of the war in Ukraine, emphasising the “immense human suffering and exacerbating existing fragilities in the global economy”.

With most global political economic shifts it is probably wise to be circumspect; it is almost always too soon to tell, and anyway there is no apparent fightback against this apparent shift in power. Not yet, at least. Let us take a step back.

For most of the past three decades there was a discussion about countries, cast variously as “developing,” “underdeveloped” or as “the Global South”, moving from being rule takers to becoming rule makers in global political economic matters, especially in global trade, finance and the multilateral system.

The discussion gained momentum when the Soviet communist challenge dissolved into history, and there was a sense that developing countries would finally enter the world stage to challenge the postwar liberal international order designed and defended by the Wall Street-Washington axis and its European allies.

Fast-forward to June 2009 and the creation of Brics, which was posited as a challenge to the unipolar post-Cold War world dominated by the West. The Brics bloc, with Russia in the naughty corner and Indonesia acting in its place, seems to have come into its own in Bali.

This may or may not be the start of the shift from being rule takers to becoming rule makers. It is too soon to say. What we can do though, is consider the last time the developing world asserted itself at multilateral level or in global governance, and what happened.

The Doha Round of trade negotiations that started in 2001 saw the emergence of India and Brazil in leaderships positions. The two countries played a significant role in shaping the negotiating agenda, as well as the substance and content of the draft Doha agreement. As tentative as this was, it was potentially a better deal than wealthy/developed countries anticipated.

The agreement sought meaningful reductions in rich country agriculture subsidies, and significant gains in market access across negotiating areas. Its substantial special and differential treatment provisions meant comparatively little liberalisation would be expected of developing countries.

We’re not allowed to say this in polite company, but the West baulked and Doha stalled. Sure, the matter is complicated, and having spent several years studying the genesis and evolution of the global trade regime, from the Havana Charter of 1948 to the establishment of the World Trade Organisation (WTO) in 1995, I am fully aware of the terribly detailed and complex legal and institutional structures of the regime. What is clear, nonetheless, is that the legal and institutional basis of the trade regime is rooted in the European legal tradition, and an elision of the basic ideas of Adam Smith (free trade) and Immanuel Kant (perpetual peace).

The European world was never going to surrender the founding principles of postwar liberal internationalism, and definitely not the privilege it derived from this order. There is also firm evidence of how the European world, mainly the US and Britain, but also Europeans and Australians, self-selected in committees across almost 50 years of cobbling together the legal and institutional framework that underpins the WTO.

If we recall the way the Doha Round ground to a halt because the developing world sought to become rule makers, we may reach the conclusion that at best we need to wait and see if Brics (without Russia and with Indonesia) can significantly influence the work of the G20. As it happens, India is the host of the G20 for the next 12 months, followed by Brazil.

The most significant difference between the time of the Doha Round’s collapse in 2001 and the G20 meetings in Bali is China, which is challenging the liberal political capitalist order that has prevailed since the end of World War 2 with its (own) state-led capitalism.

If China is the wild card in this power game the West, especially the US, stands in the way of developing countries securing their place as rule makers in the world. The G20 is not formally an institution of global governance, but we would be foolish to deny its power and influence.

• Lagardien, an external examiner at the Nelson Mandela School of Public Governance, has worked in the office of the chief economist of the World Bank as well as the secretariat of the National Planning Commission.