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Race to the Bottom to Continue for G20 Nations

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Issue: 70 Section: Business Geography: Earth, Canada Toronto Topics: economics

July 23, 2010

Race to the Bottom to Continue for G20 Nations

A critical analysis of the G20's Toronto Summit Declaration

by Dawn Paley

A protester outside a bank during the G20 protests in Toronto Photo: Ali Mustafa

TORONTO—As the 2010 G20 summit wound down behind the fences of "Fortress Toronto", more than 1,000 people had already been sent to jail. While the police attacked crowds and snatched organizers in the streets, the Group of 20 gathered to write the Toronto Summit Declaration, a 27-page document released the evening of Sunday, June 27. A critical reading of this text reveals it as evidence that those who took great risk to mobilize against the G20 did so on behalf of the health of communities and the planet.

Although the Toronto Declaration begins with a populist appeal to sustainability, job creation and financial regulation, it enshrines a commitment to force the poor and working class around the world to tighten their belts yet again as states are ordered to implement strict new austerity programs.

The Declaration proposes an ambitious new structural adjustment agenda, designed by the International Monetary Fund (IMF) and the World Bank, which aims to halve First World deficits by 2013.

Shoring up financial sector abuse of public funds is one of the most pressing public concerns (bank bailouts have been denounced around the world), but the language in the Toronto Declaration does not guarantee meaningful public oversight of the financial sector.

The Declaration welcomes the recently-passed US Financial Reform Bill, which according to Newsweek "effectively anoints the existing banking elite" without putting a cap on executive compensation. Nor does the bill crack down on banks that are supposedly "too big to fail"—banks like JP Morgan, Goldman Sachs, Citigroup, Bank of America and Morgan Stanley.

Financial oversight will remain with elites—led by the IMF and other Multilateral Development Banks (MDBs, such as the Inter American Development Bank and the African Development Bank)—and the declaration proposes these institutions should become "even stronger partners" in the future.

The Declaration indicates that G20 countries will pump $350 billion into MDBs, doubling the MDBs' lending capacity, so they can "focus on lifting the lives of the poor, underwriting growth, and addressing climate change and food security."

The move towards putting MDBs on the front lines of global lending could be a response to the growing global rejection of larger International Financial Institutions (IFIs) like the World Bank and the IMF. This shift is reminiscent of a move away from global trade and regional agreements like the Free Trade Agreement of the Americas and the World Trade Organization, and towards smaller regional deals and bilateral agreements such as the recently-inked Canada-Colombia Free Trade Agreement.

The Toronto Declaration makes a point of noting that Haiti's debt with IFIs will be cancelled, but avoids mention of the larger debt the country owes to the Inter American Development Bank (IADB). Haiti owes less than $200 million to the World Bank and the IMF, while their outstanding debt to the IADB is upwards of $441 million. The IADB has also positioned itself to become the lead development bank behind the $10 billion given by "donor nations"—mostly OECD countries—for reconstruction of the country.

In addition to increased involvement in global economics by the IADB and by other regional development banks, the Toronto Declaration promises more privatized "development financing" for low-income countries. This could mean further subsidies for transnational corporations active in resource extraction and the maquila (sweatshop) sector.

Language in the document about increasing "global output," creating tens of millions of jobs, and reducing global "imbalances" flies in the face of the document's own recommendations for countries with higher debt-loads to continue a regulatory race to the bottom by "maintaining open markets and enhancing export competitiveness"—an openness that has historically widened global gaps, put millions of people out of work (or forced them to migrate for work) and siphoned the resources of low-income countries into the bank accounts of corporations.

The Toronto Declaration also welcomed the launch of the Global Agriculture and Food Security Program, which proposes to create food sovereignty with public-private partnerships. This contradicts the demands of peasant groups like Via Campesina, who stated at the end of 2009 that "the absence of the heads of state of the G8 countries [at the November 2009 Food and Agriculture Summit] has been one of the key causes of [its] dismal failure. Concrete measures were not taken to eradicate hunger, to stop the speculation on food or to hold back the expansion of agrofuels."

The Declaration asks that the Organization for Economic Co-operation and Devleopment, the International Labour Organization, the World Bank and the World Trade Organization (WTO) "report on the benefits of trade liberalization for employment and growth" at the next G20 meeting. States are cautioned to stick with WTO measures and avoid new "barriers to investment or trade in goods and services." Such barriers could be new environmental legislation and new forms of taxation on corporate activity.

On the topic of climate change, G20 countries that support the accord which came out of Cophenhagen last year issued a weak call for other nations to "associate with it."

Dawn Paley is an organizer with the Vancouver Media Co-op. This article was originally published by the Vancouver Media Co-op.

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