'Global South' flexes its trade muscle in Brazil

"The South shall rise again," the old saying goes. But these days it may apply less to America's faded confederacy than to the up-and-coming trading power of the global South.

At trade talks among 180 nations in Brazil this week, the world's poorer countries - often called the global South, even if some are above the equator - are working to expand trade among themselves. They're also flexing their bigger trade muscles in preparation for coming talks with rich neighbors up north, like the US and the European Union.

Consider that last year, for the first time in history, the US spent more on goods and services from poorer countries than from rich ones - more toys, stereos, and cars from places like China, Brazil, and South Africa than from Germany or Japan. The South's overall share of global trade has risen from 20 percent in the mid-1980s to 30 percent today, according to a new United Nations report.

As the South increasingly leverages this power, it could start to tilt the long-term balance of prosperity away from Iowa corn growers or Florida sugar producers, and toward Brazilian maize farmers and cotton growers in the African nation of Mali.

It all represents what the UN calls "the new geography of international trade." Or as Harvard University economist Robert Lawrence puts it, "It's no longer the 'G-2' " - the US and the European Union making all key decisions on global trade. Today, he says, "We have a multipolar system," in which "players like South Africa, Brazil, India, and China are much more active and capable."

The wake-up call to this new reality came in September 2003, when developing nations walked out of World Trade Organization (WTO) talks in Cancún, Mexico. The move marked the rise of the so-called G-20, which includes the power players of the developing world: Argentina, Brazil, Chile, China, Egypt, India, Indonesia, Mexico, Nigeria, and South Africa, among others. Since then, several things have reaffirmed the South's growing power.

One was Brazil's victory in April in a dispute with the US over subsidies to American cotton farmers. The WTO ruled that the subsidies violate trade rules. This potentially "opens a can of worms" in terms of limiting US subsidies to all farming sectors, says Professor Lawrence.

Another: The EU's new willingness to consider phasing out its famously generous subsidies to farmers. This has been, observers say, the biggest stumbling block to major trade deals.

There's also growing South-South trade. There's a new strategic trade alliance between Brazil, India, and South Africa. And this week's talks in Brazil are aimed at reviving the so-called General System of Trade Preferences (GSTP), which lowered trade barriers among poorer nations. Already this trade is growing 11 percent per year, the UN says. More than 40 percent of exports from developing nations go to other poorer countries.

All these changes are figuring into the US's position. In Brazil, Robert Zoellick, US trade representative, has showed openness to reducing American farm subsidies, in hopes of a deal to open developing-nation markets to US exporters. Yet the conventional wisdom is that, in an election year, the US won't give up much. In fact, the US will soon be engrossed in presidential politics and unlikely to push forward on trade.

"By the end of July, forget it; Zoellick won't be able to move," says Peter Draper of the South African Institute of International Affairs here. The EU's main negotiator also steps down this summer.

There's still a big North-South gap in quantity of trade. Consider that the total foreign sales of auto giant DaimlerChrysler last year were 40 percent bigger than exports from the entire continent of Africa, according to the UN. Foreign sales of Japan's Honda cars were worth more than all of India's exports.

For decades, the North has been used to such dominance. But the South's growing power risks putting the two hemispheres at loggerheads, as happened at Cancún. The tension could prolong, or scupper, negotiations over the current round of WTO trade talks.

"I doubt they're going to be successful in breaking the deadlock," WTO chief Supachai Panitchpakdi told Reuters Monday in São Paolo.

But the stakes are high. Leaders at the Group of Eight summit in Sea Island, Ga., last week told their trade ministers to push hard for a deal. They know an agreement could be worth $500 billion and help boost the global economy.

A deal may also be crucial to the world's poorest people. Traditional means of development - aid money doled out by rich nations - don't seem to be enough. UN development chief Mark Malloch Brown said this week that rich nations aren't meeting Millennium Development Goals they set in 2000, which aim to cut world poverty in half by 2015. In Africa, he said, at current rates, the goals won't be met for 43 years - in the year 2047.

That's why trade deals are essential. "These are the issues," says Francis Kornegay of the University of the Witwatersrand here, "that make the world go 'round."

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