Issues & Overview Will The G-20 Be the Swing Vote On Legal Services?

Friday, October 1, 2004 - 01:00

Owen D. Nee
Coudert Brothers LLP

The World Trade Organization has been struggling with the Doha round of liberalization talks on agriculture, services and industrial goods. The Doha round began in the Qatari capitol in November of 2001 with the intention of completing its work by January 1, 2005. That end date is now open. Last September, in Cancun, Mexico, the talks stumbled badly when developing and developed nations proved incapable of reaching an accord on agricultural subsidies. The European Union and the United States pour almost $300 billion each year into domestic or export farm subsidies. Countries in the developing world, many of which are solely agricultural based economies, find it difficult to compete in their own domestic markets with subsidized exports, and impossible to crack European, American or Japanese markets against domestic subsidies.

The fiasco of Cancun was papered over with a commitment to complete the negotiations in Geneva by July 31, 2004 - a deadline remarkable only by the fact that it was met. The WTO produced in early August a Framework for Establishing Modalities in Agriculture , which constitutes a roadmap for the 147 member WTO to reach a final agreement on the ending of agricultural subsidies and the opening of domestic markets to competition in farm products. The significant accomplishments of the document are: the recognition of a tiered approach to ending domestic subsidies (that is, those that subsidize most will have to reduce their subsidies on the steepest curve so that all arrive at the destination at the same time), a new formula to cut the highest agricultural tariffs the most, and a re-commitment to ending all export subsidies, except for export credits of 180 days or less. The Framework , however, as with all political documents, contains numerous compromises: developed countries can exclude "countercyclical" payments (farm price supports when prices are depressed), poor countries can go-slow on agricultural tariff reductions, and developed and developing countries can, respectively, protect politically sensitive products or certain special products affecting their economies.

The WTO may be a club with too many members to govern itself. The agricultural accord's most significant point is that it happened at all. To a large extent, this political compromise was engineered by the G-20, a group of developing countries that includes India, China, South Africa and Brazil. Unlike the Cancun meeting, when the poorest countries decided to demonstrate against globalization, these nations welcomed the leadership of the G-20, and particularly Brazil's trade minister, Celso Amorim, in the negotiation of the Framework solution with the United States and Europe.

With agriculture subject to a roadmap for future negotiations, the WTO moves on to the other issues within the Doha development round: liberalizing trade in services being the most important. The issue for service providers like insurance companies, banks, distribution companies, engineering and construction firms and law firms is what role the G-20 will play in brokering the necessary compromises. To date, most of the G-20 members have carefully and strictly closed their service markets to foreign competition. India, China, South Africa and Brazil all strictly limit the presence of foreign law firms and their ability to practice domestically, for example.

While both the United States and Europe are proponents of the "rule of law" in the affairs of government and trade, neither has shown much interest in developing the legal community abroad, which is the profession that makes the rule of law work. The best way to encourage global trade under a global rule of law is to allow - and for the developed nations to promote - the expansion of large multinational law firms into the major developing economies of the world. When accounting firms globalized, accounting standards became international; for there to be a global law of trade, law firms must be global and full participants in the domestic markets of developing countries. In general, this trend is opposed in the developing world, since foreign law firms bring greater independence, a willingness to test the system, and an insistence on enforcing the rule of law to international standards.

The danger is that in the political compromises to be made between now and December 2005, when the WTO next meets in Hong Kong, the G-20's firm resolve to keep their legal markets closed will easily overcome the American and European negotiators' attempts to globalize the practice of law. The problem with this result, however, is that world trade has lost far more from the rules not being enforced than it does from having imperfect rules.