Inter-State Competition and Transnational Capitalists across the North-South Divide: Different Strategies, New Configurations of Power

Abstract

Existing research emphasizes the rise of new coalitions of states from the global South, such as the BRICS, on one hand, and the rise of a transnational capitalist class on the other. Yet only a small body of work has considered how transnational capitalists shape, and are shaped by, inter-state competition. Research neglects explicitly comparative inquiries: do transnational capitalists in the global North and the global South interact with inter-state competition differently? This article analyzes two cases in which transnational firms in the global North and South attempted to shape state institutions at domestic and international levels to strengthen trade liberalization. We argue that, while firms in the global North and South increasingly share preferences for trade liberalization, the way in which these firms pursue that goal is shaped by their historical relationship to the institutions of U.S.-led hegemony. Transnational firms in the global South seek to foment inter-state competition in order to decenter U.S. leadership, while their counterparts in the North seek to minimize and accommodate inter-state competition to preserve U.S. leadership and their own private authority. Both the North and the South are contributing to the geographical re-centering of institutional power in the world economy.

inter-state competition, transnational capitalist class, North-South divide, hegemonic transition, World Trade Organization

The contemporary era is one of increasing tumult, uncertainty, and divergent assessments of the period’s most salient dynamics. On one hand, the rise of new coalitions of states from the global South, such as the BRICS (Brazil, Russia, India, China, and South Africa), and their trenchant critique of U.S.-led hegemony is considered a defining feature of this era. On the other hand, these geopolitical tensions are seen as epiphenomenal to the rise of a transnational capitalist class, “consisting of those who own and manage the TNCs and financial institutions that drive the global economy” (Robinson 2015:3). Yet only a small body of work has considered how these dynamics intersect—that is, how transnational capitalists shape, and are shaped by, inter-state competition, or states’ efforts to capture the benefits of global trade within their territories. Moreover, existing research neglects explicitly comparative inquiries: do transnational capitalists in the global North and the global South interact with inter-state competition differently?

This article answers these questions by analyzing two cases in which transnational firms attempted to shape state institutions at domestic and international levels to strengthen trade liberalization. These cases are not strictly mutually exclusive, as both shape and are shaped by the broader world historical context. We thus employ McMichael’s (1990) “incorporated comparison” approach that designs comparative analyses to capture variation of a phenomenon across space and time to better understand world historical dynamics as a whole. In the first case, the transnational firms originated in the global South as Brazilian agribusiness firms sought to transform the agenda at the World Trade Organization (WTO) by pressing for agricultural trade liberalization from the United States and other states of the global North. The data for this case draw on field research conducted between 2007 and 2010 at the WTO in Geneva, as well as in Brasilia, Sao Paulo, Beijing, New Delhi, and Washington, including over 150 interviews with trade negotiators, senior government officials, and representatives of industry and non-governmental organizations. In the second case, the firms in question originated in the global North. Transnational cotton merchants sought to stabilize institutions for governing cotton quality in response to a challenge from the Chinese state and Chinese firms. The data for this case draw on multi-sited qualitative research conducted between 2005 and 2008 that included over 80 interviews with cotton merchants, trade association officials, and government officials during field visits to the United States, China, Brazil, England, and Benin and at four international cotton industry conferences.

We integrate three broad areas of research to build a comparative framework for understanding how different transnational capitalists shape inter-state competition. First, the global capitalism approach importantly stresses the agency of transnational capitalists in coordinating the global economy, but tends to emphasize the shared interests of capitalists in the global North and the global South over potential conflicts. A second, interdisciplinary debate has centered on the significance of new coalitions in the global South and intensifying inter-state competition, but gives less attention to the agency of transnational capital. Together, these two literatures point to important dynamics in the contemporary period, yet they have rarely been brought together to allow consideration of the intersection of inter-state competition and spatially distinct capitalists. We propose that this lacuna can be addressed via an institutional approach to hegemonic transition that traces political struggles over institutions at a meso-scale in order to shed light on emergent configurations of power in periods of hegemonic transition. This approach allows us to consider the way in which transnational capital’s differential insertion into global circuits of accumulation and hegemonic institutions might shape their strategies for navigating inter-state struggles.

Through this comparative analysis, we identify key differences in the way that Northern vs. Southern transnational capitalists intersect with inter-state competition. We argue that while firms in the global North and South increasingly share preferences for trade liberalization, the way in which these firms pursue that goal vis-à-vis states and inter-state organizations is shaped by their historical relationship to the institutions of U.S.-led hegemony. Transnational capitalists in the global North have historically benefitted from U.S. leadership within governance institutions and thus seek strategies to minimize or accommodate inter-state competition and protect the privileges that come with political influence. This is evidenced in the case of Northern cotton merchants who built new coalitions to contain the influence of the Chinese state while also positioning their private institutional power as compatible with either continued U.S.-led hegemony or as a recentering of institutional power in the cotton trade in China. Transnational capitalists in the global South, in contrast, have historically been marginalized by the institutions of U.S.-led hegemony. As a result, they have incentives to foment competition among states to the extent that it serves to decenter U.S. institutional leadership and erode the privileges enjoyed by Northern actors within these institutions. In the case of Brazilian agribusiness at the WTO, these Southern capitalists worked with Southern states to construct new geopolitical coalitions and ideologies of South-South solidarity to challenge the dominance of the U.S.-led coalition at the WTO. As the agency of transnational capitalists in both the North and South rests on the production of new coalitions, both are contributing to the geographical recentering of institutional power in the world economy.

THE RISE OF A TRANSNATIONAL CAPITALIST CLASS

The global capitalism perspective is a useful starting point for exploring the role of transnational capitalists in shaping configurations of power in the global economy. Global capitalism scholars identify the rise of a transnational capitalist class as the defining characteristic of the contemporary period in the world evolution of capitalism (Robinson 2001, 2004, 2015; Robinson and Harris 2000; Sklair 2001; Sklair and Robbins 2002). These scholars suggest that transnational capital has emerged as a result of increased foreign direct investment, worldwide outsourcing via subcontracting, and the massive growth of transnational corporate mergers (Robinson and Harris 2000). Distinct from the “national capital” of an earlier era, the interests of transnational capitalists are “grounded in global circuits of accumulation, marketing and finance unbounded from particular national territories and identities” (Robinson 2015:3). Moreover, transnational capitalists cooperate within transnational business associations and interlocking corporate directorates to build consensus around liberal economic policy priorities and press for policy action in national states and international institutions like the WTO (Carroll 2010; Carroll and Carson 2003; Carroll and Sapinski 2010; Robinson 2001; Sklair 2001; van Apeldoorn 2003). For proponents of the global capitalism perspective, the contemporary period is indeed one of hegemonic transition, and the transition is ushering in the global hegemony of transnational capital.

The global capitalism perspective thus draws attention to the agency of transnational firms in influencing states and building new configurations of power in the global arena. Yet this scholarship offers us less traction in understanding how transnational firms are navigating growing inter-firm and inter-state competition with the rise of the BRICS bloc and how firms in the global North versus the global South may navigate these dynamics differently. This research does not ignore the BRICS bloc per se; rather, it downplays its significance in relation to the growing power of transnational capital (e.g., Robinson 2015; Sklair 1997, 2001; see Arrighi 2001; Moore 2001). Robinson (2015), for example, insists that business elites from the BRICS states are not rivals of the transnational capitalist class, but rather part of it, as they have been integrated into “decentered” globalized production and financial structures (see also Sklair 1997). In turn, rather than challengers to U.S. hegemony, BRICS states are becoming accomplices in the rise of the transnational capitalist class as their increasingly unified economic interests shine through “shorter-term and local conflicts of interests and purpose” or setbacks of “emergent global nationalisms” (Sklair 1997:523). In short, the global capitalism perspective sees inter-state competition as epiphenomenal and emphasizes the shared interests of transnational capitalists over the different interests of distinct capitalists, such as in the global North vs. the global South.

THE RISE OF INTER-STATE COALITIONS IN THE GLOBAL SOUTH

While the global capitalism perspective tends to downplay inter-state competition and geographic differences, a growing interdisciplinary body of work centers on the rise of inter-state coalitions in the global South and their potential challenge to the declining U.S.-led hegemony. On one hand, this literature points to the growing influence of these coalitions and their alternatives to Western-dominated institutions such as the World Bank and the IMF as indicative of the heightened inter-state competition that characterizes periods of hegemonic transition. On the other hand, this literature cautions against overstating the unity of these coalitions given the myriad differences across domestic political institutions, geopolitical goals, and economic structures and challenges (Armijo 2007; Elsenhans and Babones 2017; Laïdi 2012; Nayyar 2016; Vieira and Ouriques 2016).

Despite attention to geographic difference across BRICS states, much of the research on the BRICS either explicitly or implicitly neglects the strategies of Southern transnational capitalists and how they might differ from those of Northern firms. Some of this research, particularly that by political scientists, employs a realist approach that, with its nation-state-centric assumptions, has difficulty capturing transnational capitalists’ agency. Another significant strand in this literature—world-systems analysis—does theorize the intersection of transnational capital and inter-state competition (e.g., Arrighi 1994; Arrighi and Silver 2001; Komlosy 2016). The rise of Western transnational firms and their rivals in East Asia, as well as the growing influence of states such as China and India, is evidence of heightened tensions during periods of hegemonic transition and their potential to bring “a spatial shift of the system’s center” (Arrighi, Barr, and Hisaeda 1999:141). These scholars thus clearly recognize the importance of both transnational capital and inter-state competition; however, their macro-level analyses tend to use states as the proxy for the agentic power of the broader coalition of state and business elites (e.g. Arrighi 1994; Komlosy 2016). In doing so, they often underemphasize the agency of business elites in developing the institutional innovations that de/restabilize hegemonic coalitions.

Thus far we have considered two literatures focused on the transnational capitalist class and the rise of the BRICS, respectively, that tend to privilege either the agency of transnational capital or the dynamics of inter-state competition but give less attention to how the two interact. Moreover, few contributions to these literatures explicitly compare the agency and strategies of transnational capitalists in the global North versus the global South and how they intersect differently with inter-state competition. It is to these issues that we now turn.

AN INSTITUTIONAL APPROACH TO HEGEMONIC TRANSITIONS

The starting point for the institutional approach to hegemonic transitions is that capitalism is an institutionalized social order, and periods of hegemonic transition are characterized by struggles over institutions (Chorev 2007; Chorev and Babb 2009; Epstein 2017; Hopewell 2016a; Quark 2011, 2013, 2014). This approach follows Arrighi, Silver, and colleagues by emphasizing that, during periods of hegemonic transition, the institutions upholding the declining hegemon’s power face intensifying tensions as an array of actors struggle to (re)construct them or generate new institutions (Arrighi 1994; Arrighi et al. 1999 and Arrighi and Silver 2001). However, diverging from the macro-level approach of these scholars, the institutional approach to hegemonic transitions traces world-systemic dynamics as they unfold through contested institutions at multiple scales. This literature draws on the broader neo-institutional tradition that considers why and how institutions persist and change but situates these processes within broader world-systemic dynamics (Quark 2013).

In employing this approach, we build on a small but growing body of literature that examines struggles within the institutions of U.S.-led hegemony. For example, in their comparative study of the IMF and the WTO, Chorev and Babb (2009) argue that the resilience of these different institutions and the U.S.-led hegemony they support depends on whether their procedures encourage “exit” or “voice” among challengers. Similarly, Epstein (2017) demonstrates the ideological labor of the U.S. state in reconstructing its hegemony amid heightened tensions in the Codex Alimentarius Commission, an inter-state body that sets international food standards under the WTO regime. Our focus is less on how these organizations and/or the U.S. state maintain their influence than on how transnational capitalists in the global North versus the global South de/restabilize these hegemonic institutions and shape inter-state competition within them.

This first requires us to recast the concept of the transnational capitalist to capture both the common interests and distinct concerns of transnational firms in the North and South. We agree with the global capitalism perspective that transnational firms are those whose “interests lie in the global over national or regional economies” but contest the idea that global economic interests result in firms that are “unbounded from particular national territories and identities” (Robinson 2015:3; Robinson and Sprague-Silgado 2018:323). As Schrank argues, even the most globally competitive firms “hold place-specific investments and assets” due to the immobility of land, physical capital, and human relationships (2005:94, emphasis in the original). Indeed, as capitalists are dependent on states to create and enforce the institutional rules that facilitate transnational trade, one of their critical place-based assets is political influence. For transnational firms in the North, for example, investment in political influence over the U.S. state was critical not only for institutionalizing liberalization at the national level but also for establishing the U.S. state’s role as architect of and agenda-setter at the WTO—an institution that could compel other states to open their markets to U.S.-based firms (see Chorev 2007; Hopewell 2016a). From this view, Schrank (2005:94) insists that transnational firms should be understood as “cosmopolitan yet combative.” Transnational firms in the North and the South share preferences for liberalization; however, they also compete to instantiate their advantages within liberalizing institutions at national and international scales by influencing “cosmopolitan yet combative” states. This builds on the global capitalism perspective, which recognizes that transnational capitalists do not always behave in a monolithic way and tend to adapt their behavior based on national situations and challenges (e.g., Robinson 2004); at the same time, it extends this view by sharpening the focus on the conflicts among transnational capitalists. Following from this, we will refer to firms as Brazilian agribusiness or Northern vs. Southern firms throughout the paper to signal where the firms originated and are headquartered, as well as the geography of their historical investments in political influence.

An institutional approach to hegemonic transitions not only recasts our understanding of transnational capitalists; it further demands a new model for understanding the distinct ways in which transnational capitalists in the global North versus the global South interact with inter-state competition. This is represented schematically in Figure 1. As our definition above suggests, transnational firms in the North and South share preferences for liberalization and remain dependent on the institutions of U.S.-led hegemony that facilitated their rise. However, these cosmopolitan yet combative firms are also subversive of these institutions—and subversive in different ways given that firms in the North vs. the South have different historical relationships to, and political influence over, the institutions of the declining hegemon. Transnational capitalists in the global North are subversive as their preferences increasingly diverge from those of the broader hegemonic coalition, such as more domestically oriented capital. In contrast, the subversiveness of transnational firms in the global South is different given their distinct relationship to the institutions of US-led hegemony. While their successful ascent in the world economy has been due in part to the liberalization created by the institutions of US-led hegemony, these remain institutions designed to capture the most benefits for actors in the North (see Quark 2013).

Figure 1.

Distinct Institutional Preferences and Strategies of Transnational Capitalists in the Global North vs. the Global South

As Schrank (2005:94) notes, the disciplines on trade, investment, services, and intellectual property that were central to the establishment of the WTO do not reflect the general interests of a transnational capitalist class but rather were “designed to constrain the growth and dynamism of peripheral capital” (emphasis in the original; see also Chang 2002). The WTO was designed both to limit the use of protectionist measures through which Northern firms climbed to affluence and to put in place new forms of protectionism (e.g., intellectual property rights) to construct Northern firms’ competitive advantages (Chang 2002; Hopewell 2016a). Thus, while Northern firms seek to protect these advantages, the challenge for Southern firms is to redirect existing institutions or create new ones that better reflect their preferences (Quark 2013).

Transnational firms’ cosmopolitan yet combative character thus shapes their preferences for institutional leadership in the world economy. If a critical asset in the contest for institutional advantages is political influence, then transnational capitalists are likely to prefer the institutional leadership of those states over which they can best exercise such influence. Although their transnational economic interests increasingly transcend those of the U.S. hegemonic coalition, Northern capitalists would largely still prefer U.S. leadership of transnational governance institutions over a potential Asia-centered leadership, given their historical investments in political influence and other place-based assets. Southern transnational firms, in contrast, would prefer the leadership of Southern states over which they have historically wielded political influence.

Transnational firms’ distinct preferences for institutional leadership, in turn, create different incentives for how transnational capitalists strategize vis-à-vis inter-state competition, as well as the types of coalitions and legitimating ideologies they develop. Northern transnational firms must problem-solve as they seek to maintain the stability of the U.S. hegemonic coalition but also require its transformation to allow for expanded accumulation. Northern firms thus seek strategies to minimize inter-state competition or accommodate it in such a way that it does not threaten the power of transnational capital and private authority. This involves building new coalitions and legitimating ideologies that stress global unity and the level playing field of the neoliberal imaginary. Transnational capitalists in the global South, in contrast, have incentives to foment competition among “cosmopolitan-yet-combative” states to the extent that it serves to decenter U.S. institutional leadership and erode the privileges enjoyed by Northern actors that have been instantiated within these institutions. This involves forging coalitions and legitimating ideologies among states and firms around South-South solidarity in a challenge to U.S.-led hegemony. To be sure, neither transnational capitalists in the global North nor in the global South can simply shape states and supranational institutions to serve their wills in a straight-forward or unproblematic way; rather, efforts to accommodate or foment inter-state competition can shift the balance of power and state objectives in unexpected ways. This also means that these dynamics do not generate a decentering of the global economy, as global capitalism scholars predict, but rather a geographical recentering of institutional power in the global economy.

Transnational Brazilian Agribusiness at the WTO

Our first case centers on the role of transnational capitalists in the global South—specifically Brazilian agribusiness—and their efforts to influence inter-state decision-making at the WTO. The WTO, an institution central to U.S.-led hegemony, has undergone a power shift. For over half a century, the WTO and its predecessor the GATT were dominated by the United States and other countries of the global North. Agreements were negotiated among “the Quad” – the United States, the European Union, Canada, and Japan – and imposed upon the rest of the organization’s membership effectively as a fait accompli. Yet, during the Doha Round negotiations that began in 2001, United States/Northern dominance at the WTO faced a powerful challenge as countries in the global South, led by Brazil and India, united  under the banner of the Group of 20 (G20).¹ The G20’s campaign focused on reducing agricultural subsidies in high-income countries, particularly  the United States and the European Union. While out of step with the uneven liberalization practiced under U.S.-led hegemony in which the United States pressured other nations to liberalize while maintaining its own protectionist policies, the goal of ending subsidies was in line with the liberalizing mission of the WTO and the preferences of Brazilian agribusiness firms.

This power shift initially appears to reflect the predictions of the global capitalism perspective. Much of the G20’s success can be attributed to the agency of transnational agribusiness firms in Brazil. Brazilian agribusiness became increasingly oriented toward global markets and pressured the Brazilian state, other states in the global South, and international institutions to support liberalization. At the same time, however, this account demonstrates the need to take inter-state competition seriously. Rather than consolidating the WTO as an international institution in support of a transnational capitalist class, these efforts by Brazilian agribusiness ultimately contributed to the breakdown of the institution’s core function of negotiating multilateral trade agreements. Thus, to understand the agency of Southern transnational capitalists, we must situate it geographically and historically in relation to the institutions of U.S.-led hegemony.

The Rise of Brazilian Agribusiness within the Institutions of U.S.-led Hegemony

Tracing the emergence of Brazilian agribusiness firms reveals the cosmopolitan yet combative nature of Southern firms vis-à-vis their Northern counterparts and the institutions of U.S.-led hegemony. The initial emergence of Brazil’s agribusiness sector in the 1970s was driven by a combination of Japanese investment and state-led technological innovation that opened up large parts of the country to commercial agriculture (Oliveira 2016; Hopewell 2016b). The explosive growth of Brazilian agribusiness subsequently took off with economic liberalization in the 1990s. Neoliberal economic reforms generated substantial investment, restructuring, and consolidation in the sector, leading to rapid and sustained growth in production and exports. Between 1995 and 2013, Brazil’s agricultural exports increased from $14bn to $86bn.² This growth was driven by the expansion of corporate farming, including the emergence of “mega farms” – large, professionally managed corporate farm groups benefitting from massive economies of scale, many with planted areas in excess of 1 million hectares. Brazil has now emerged as a major “agro-power” (Margulis 2014): it is the third largest agricultural exporter, after the United States and European Union. In soybeans, for example, while the United States historically accounted for more than 75 percent of global exports, Brazil has now surpassed the United States as the world’s largest soybean exporter, claiming 41 percent of the global market and reducing the United States share to 39 percent.³

Liberalization prompted a large inflow of foreign investment into Brazil’s agriculture sector and an increase in the presence of foreign TNCs, such as the “ABCDs” (ADM, Bunge, Cargill, and Louis Dreyfus) (Oliveira 2016). However, it also spurred a dramatic expansion of Brazilian firms, including processing companies, corporate farm groups, and powerful agroindustrial cooperatives (Table 1). Today, 90 percent of the largest agribusiness companies operating in Brazil are Brazilian in origin.⁴ There are over 20 Brazilian agribusiness firms with annual sales of more than US$1bn and many others poised to soon reach this level.⁵ Brazilian firms have diversified their activities and moved up the value chain into higher value-added activities, such as trading, processing, transport, and energy (biofuels). Many of Brazil’s largest companies have globalized their activities and joined the ranks of the world’s leading agribusiness multinationals. Brazil’s JBS, for instance, has become the world’s largest meatpacker, with annual revenues of over US$50bn; it acquired many of the largest beef, pork and chicken processing companies in the United States and Europe and now operates over 200 plants around the world, with 230,000 employees and exports to 150 countries. Brazilian agribusiness has become integrated into global circuits of production, trade, and capital.

Table 1.

Illustrative List of Major Brazilian Agribusiness Companies

Company	Annual Revenues (US$)	Primary Activities	Headquarters
Processed agri-food companies
JBS	$50 billion	World’s largest meat processing company & 2nd largest food company; 200+ industrial plants, 230,000 employees globally	Sao Paulo
BRF	$8.3 billion	World’s 7th largest food company; 50+ plants, 100,000 employees	Sao Paulo
Marfrig	$8.1 billion	World’s 4th largest beef producer; plants in 22 countries, 90,000 employees	Sao Paulo
Minerva Foods	$4.4 billion	Meat and live cattle exporter	Sao Paulo
Aurora	$2.3 billion	Poultry and pork processor	Santa Catarina
Bianchini	$1.2 billion	Soybean processor	R.G. do Sul
Caramuru	$1.1 billion	Soybean and grain processor	Goiás
Citrosuco	$925 million	World’s largest orange juice producer	Sao Paulo
Sugar & ethanol giants
Cosan	$16 billion	One of world’s largest sugar & ethanol companies; 45,000 employees globally	Sao Paulo
Copersucar	$10 billion	One of world’s largest sugar & ethanol companies; 11,000 employees globally	Sao Paulo
Corporate farm groups
Amaggi Group	$4.7 billion	Soybean, cotton, corn producer & trader	Mato Grosso
SLC Agricola	$614 million	Cotton, soybeans, corn	R.G. do Sul
Terra Santa Agro	$224 million	Soybeans, cotton, corn	Sao Paulo
El Tejar	Unknown	Soybeans	Sao Paulo
Bom Futuro	$719 million	Soybeans	Mato Grosso
Agroindustrial cooperatives
Coamo	$3.9 billion	Soybean production & processing, corn	Paraná
C. Vale	$2.3 billion	Poultry, soybeans, corn, pork	Paraná
Lar	$1.7 billion	Poultry, soybeans, corn, pork	Paraná
Cocamar	$1.2 billion	Soybeans, corn, cotton	Paraná
Comigo	$1.1 billion	Soybeans, corn, seeds, cattle	Goiás

Source: Valor Economico 1000, Reuters, Bloomberg, Financial Times.

Brazil’s agribusiness sector now directly competes with the United States and European Union in global markets, but the latter’s heavy agricultural subsidies – $38 billion and $102 billion annually, respectively – give their exports an artificial competitive advantage and depress world prices.⁶ Reducing such subsidies therefore became a key priority for Brazilian agribusiness. In 1999, the Brazilian Agribusiness Coalition (ABAG), along with the National Confederation for Agriculture (CNA) and the Organization of Brazilian Cooperatives (OCB)⁷, created the Permanent Forum for International Agricultural Negotiations, to press the government to take an offensive stance in pursuing global agricultural trade liberalization (Søndergaard and da Silva 2019). But historically, developing countries like Brazil had been disadvantaged under U.S. institutional leadership of the trading system; excluded from WTO decision-making, their interests were marginalized (Hopewell 2016a). The United States and other rich countries had long protected their agriculture sectors while pushing for liberalization in other sectors. For Brazilian agribusiness, pursuing its interests in agricultural trade liberalization required challenging U.S., and more broadly, Western, dominance within the WTO.

Fomenting Inter-State Competition

Brazilian agribusiness actively pursued agricultural trade liberalization at the WTO by fomenting inter-state competition. Brazil’s agribusiness firms and industry associations pushed the state to take an aggressive position at the WTO  against United States and European Union agricultural subsidies. This initially manifested itself through Brazil’s successful challenges to U.S. cotton and EU sugar subsidies in 2002 via the WTO dispute settlement mechanism. However, Brazil lacked the power to shift the agenda of the WTO agriculture negotiations on its own; building a coalition—the G20—was therefore seen by Brazilian negotiators as “a clear strategic move.”⁸ At the start of the Doha Round, the negotiations remained dominated by the United States and the European Union, with Canada and Japan as junior partners.⁹ Prior to the Cancun Ministerial Meeting in 2003 – an important milestone in the Doha Round, when negotiations shifted to laying down the specific terms of the potential deal – the developing world found itself broadsided when the United States and the European Union jointly proposed a draft text of the Doha agriculture agreement (Clapp 2006). The US-EU proposal was seen as an attempt to force developing countries to open their markets, while allowing developed countries to maintain their subsidies. Prompted by its agribusiness sector, who feared its hopes of making gains in the round were at risk of being obliterated, the Brazilian state launched into action. Brazil began by approaching India, which was seen as a key representative of the defensive concerns of developing countries in agriculture. Together, they assembled a new coalition of countries from the global South representing more than half the world’s population and two-thirds of its farmers, with broad support from the rest of the developing world. By virtue of the one country-one vote decision-making procedures at the WTO, the coalition, which came to be known as the G20, was able to block the US-EU proposal, demanding that those states undertake greater liberalization, specifically by reducing their agricultural subsidies.

In allying with India to construct the G20, Brazil was building on a long tradition of developing world activism and coalition-building dating back to the Third Worldist movements of the 1950s–70s (Bair 2009; Bockman 2015; Getachew 2019). However, the G20 was not an obvious or automatic development given the diversity of interests across countries in the global South. Most developing countries, including India, have small-scale peasant-based agricultural sectors that are potentially vulnerable to agricultural liberalization. Therefore, building the coalition required intense diplomacy in order to unite the group around a trade liberalization agenda focused specifically on reducing rich country subsidies, the primary goal of Brazilian agribusiness and the only issue on which the members of the G20 could agree. The Brazilian state-agribusiness alliance couched the goal of reducing agricultural subsidies in a discourse of development and Third World struggle (see, for example, WTO 2003) that could harness decades of discontent among countries in the global South over U.S. hegemony in the trading system. Yet, ultimately, it was Brazil’s agribusiness sector that stood to be the primary beneficiary from agricultural trade liberalization in the Doha Round (Polaski 2006). The G20 was thus useful to Brazil, because, to quote one of its negotiators: “it provide[d] credibility, and in trade negotiations to some extent you have to disguise the fact that you’re a greedy bastard. So you put lofty ideas in your presentation, you show a willingness to partner in coalitions and disguise that you’re going for the kill.”¹⁰

Negotiators indicate that Brazilian agribusiness “was the driving force for the G20 – it was a technically-driven, market-driven initiative.”¹¹ In the past, a technical capacity gap between developed and developing countries had put the latter at a significant disadvantage in multilateral trade negotiations. To counter the technocratic dominance of the United States and other advanced-industrialized states, Brazilian agribusiness founded the Institute for International Trade Negotiations (ICONE). ICONE was created with support from ABAG, as well as the beef (ABIEC), chicken (ABEF), oilseed (ABIOVE), pork (ABIPECS), sugarcane (UNICA) sectors, and a major cross-sectoral industry association (FIESP). ICONE generated the majority of the technical work for the Brazilian government and the G20, providing technical studies of agricultural subsidies, tariffs and nontariff barriers; running econometric analyses of the impact of different tariff and subsidy reduction proposals; and generating proposals that were given directly to Brazilian negotiators and then to the G20 (ICONE 2007).  As the key source of technical analysis for the G20, ICONE was instrumental in shaping its negotiating position. But ICONE’s orientation was clear: as one representative stated, “We work for agribusiness: we are free traders.”¹²

Fueled by the interests of Brazil’s agribusiness sector, this new coalition had profound consequences. Under the leadership of Brazil and  India, and backed by China, the G20 transformed the Doha Round into a North-South struggle focused centrally on the elimination of agricultural subsidies. However, it also generated new spatial configurations of power that reflect a geographical “recentering” of institutional power in the global economy rather than a simple geographical “decentering” of power with the rise of a transnational capitalist class. The fragility of the new coalition put limits on the ability of transnationally-oriented capitalists in Brazil to focus the G20 agenda simply on liberalization. For example, the Brazilian state restrained efforts to push other developing countries to open their markets by reducing their tariffs and other trade barriers, as doing so would jeopardize the unity of the G20 and broader developing world support for Brazil’s leadership. Moreover, the coalition enabled Brazil, India, and China to pursue initiatives that not only reinforced the liberalization agenda at the WTO but also challenged it in strategic ways. The emerging powers were able to use this power repeatedly to thwart many of the United States/Northern objectives in the Doha round. But they also successfully put at the center of negotiations—and won concessions on—issues of importance to developing countries, including, not just agricultural liberalization, but also food stockholding, intellectual property, and public health, the special safeguard mechanism, and special and differential treatment provisions for developing countries (WTO 2008a, 2008b). These run counter to the liberalization agenda and are intended to give states more policy space to manage liberalization and its effects.

This questions Robinson’s (2015:9) interpretation that the G20’s challenge will simply benefit Western agricultural traders like Cargill and Bunge and integrate Brazilian agribusiness into “the ranks of the global elite.” Although greater agricultural liberalization may, indeed, have these effects, the coalition-building that allowed this challenge created forms of inter-state competition and cooperation that shifted the geography of power within the multilateral trading system. The G20 produced a “tectonic shift” at the WTO, in the words of one Ambassador, bringing to an end the unfettered dominance of the United States and other Northern powers.¹³ As a WTO Secretariat official stated, the “creation of the G20 completely imploded the Quad,” launching Brazil and India into the inner-circle of power alongside the United States and the European Union, later to be joined by China.¹⁴ Yet the result was a clash between the United States, on the one hand, and Brazil, India, and China, on the other, with each side demanding liberalization from the other but refusing to yield itself. Since neither side was able to overpower the other, the Doha Round collapsed in a stalemate (Hopewell 2017). Rather than reinforcing the emerging hegemony of the TCC through the WTO, as global capitalism scholars suggest, heightened inter-state competition has paralyzed the WTO’s core negotiation function, a critical vehicle for liberalization.

U.S.-LED SECTORAL HEGEMONY IN THE TRANSNATIONAL COTTON TRADE

Our second case explores the agency of transnational capitalists in the global North—specifically, cotton merchants—and their attempts to manage inter-state competition over cotton quality standards. Quality standards are crucial to the trade as they influence price. The governance of cotton quality standards involves three key tasks: the definition of quality, or determining which characteristics of cotton should be evaluated to determine its price; the creation of calibration cottons, or the highly manipulable process of making physical representations of the “true” value of the standards; and the settlement of disputes. Like the WTO case, the case of cotton quality standards appears at first blush to confirm the global capitalism perspective. The establishment of the WTO in 1995 transformed the cotton trade through the liberalization of the apparel and textile sectors. Large U.S. and European merchants had already extended the transnational scope of their operations from the 1970s to the 1990s and their importance in global trade only increased following the post-liberalization boom. With this growing power, Northern merchants lobbied the United States to extend its governance of the definition of quality and the creation of calibration cottons to support deepening liberalization and extended their own private dispute settlement authority transnationally. For global capitalism scholars, these efforts demonstrate the agency of transnational capitalists in creating the supranational institutions necessary to establish their hegemony. However, the agency of Northern merchants and the nature of their institutional power cannot be understood outside of the inter-state competition that world-systems scholars emphasize.

The liberalization of the apparel and textile trade achieved through the WTO not only brought consolidation among Western merchants; it also brought a geographical re-centering of the cotton trade on China. With its accession to the WTO in 2001, China came to rely on imported cotton to fuel its booming apparel exports, which skyrocketed from $24 billion in 1995 to $120 billion in 2008 (Gereffi and Frederick 2010). The apparel boom made China the single largest cotton importer, claiming 43 percent of the market by 2005 (ICAC 2010). Not only would China’s newfound power in the cotton market challenge the United States’ role in defining quality and making calibration cottons; it would also shape the strategies of Northern merchants to maintain their private authority in the global cotton market. Indeed, in order to understand how U.S.-based merchants navigated inter-state competition, we must consider their relationship to the institutions of U.S.-led hegemony.

The Emergence of Northern Cotton Merchants within the Institutions of U.S.-led Hegemony

A handful of large U.S. and European merchants came to dominate the cotton trade as U.S.-led liberalization created new opportunities to expand their sourcing and distribution networks abroad from the 1970s onward. The United States gave market access to textile manufacturers in East Asia based on Cold War political calculations, launching the long shift in the geography of cotton demand from the United States and Europe to East Asia. At the same time, World Bank and International Monetary Fund Structural Adjustment Programs compelled the privatization of state-owned trading companies in cotton-exporting countries in the global South. Northern merchants, with histories of exporting U.S. cotton to Europe or coordinating the (neo)colonial cotton trade to Europe, responded to these new opportunities to link far-flung cotton producers and consumers. Northern merchants competed—and consolidated—through mergers and acquisitions, creating broad-based sourcing and distribution networks worldwide. By 2007, there were sixteen major cotton trading enterprises, the largest ten of which handled more than two-thirds of the transnational trade (Çalişkan 2010:61; see Table 2). In a league apart from the rest, however, were “the Big 3” cotton merchants—Allenberg, Cargill, and Dunavant—that each handled over 1 million metric tons of cotton a year, had worldwide sourcing and distribution networks, and together controlled around 45 percent of all transnationally traded cotton.¹⁵ With the decline of both the U.S. and European textile industries, all of the Big 3 merchants located their cotton division headquarters in the United States where agricultural subsidies supported the continued dominance of U.S. producers as the largest suppliers to the transnational cotton trade.

Table 2.

Illustrative List of Major Cotton Trading Enterprises with Annual Volume Traded Exceeding 200,000 Metric Tons, 2007*

Company (in order of size, as estimated by the International Cotton Advisory Committee Secretariat)	Headquarters	Type of Firm
Allenberg Cotton	USA	Private, subsidiary of multi-commodity firm (Louis Dreyfus)
Cargill Cotton	USA	Private, subsidiary of multi-commodity firm (Cargill)
Dunavant Enterprises	USA	Private, cotton
Staple Cotton Cooperative Association	USA	Cooperative, cotton
Paul Reinhart AG	Switzerland	Private, multi-commodity firm
Olam International	Singapore	Private, multi-commodity firm
Weil Brothers	USA	Private, cotton
Chinatex	China	State-owned
Plexus Cotton	UK	Private, cotton
Ecom	USA	Private, multi-commodity firm
Calcot	USA	Cooperative
Joint-Stock Company Uzinterimpex	Uzbekistan	State-owned
State Joint Stock Foreign Trade Company, Uzmarkazimpex	Uzbekistan	State-owned
Uzprommashimpeks	Uzbekistan	State-owned
Toyo Cotton	Japan	Private
COPACO/DAGRIS/Geocoton	France	Private

Adapted from:  Guitchounts (2008)

*

This list is based on estimated market share in 2007. This reflects firm rankings during the height of the negotiations described in this case. The top 16 firms, their rankings, and the geography of their headquarters have since shifted, specifically to include more Asia-based firms; however, the governance institutions that resulted from the struggles described here remain in place despite these shifts.

The shifting geography of the cotton trade not only consolidated the power of Northern merchants, it also reshaped the governance of cotton quality. Facing growing competition from East Asia, U.S. textile manufacturers sharpened their competitiveness by replacing their traditional ring spinning technology with the faster, more automated, open-end rotor spinning technology. However, increased economies of speed degraded yarn strength and created incentives for textile manufacturers to switch from cotton to synthetic fibers with made-to-order fiber strength that could withstand higher spinning speeds. In response, the USDA, which had historically governed the hand-classing of cotton, cooperated with cotton farmers to develop a new, mechanized quality classification system in the United States, called the High Volume Instrument (HVI) system that could provide information on cotton fiber quality more on par with that available for synthetic fibers (Jacobson and Smith 2001). Through the HVI system, the USDA introduced a new definition of cotton that included five characteristics—strength, length, length uniformity, micronaire, and color—and assumed the task of creating calibration cottons, or physical samples of the standards that would be used to calibrate the machines (USDA 1984:48-9). The final governance task—the settlement of disputes—had historically been delegated to private, nationally-based trade associations. Given their growing integration through mergers and acquisitions, large U.S. and European cotton merchants harmonized their dispute settlement practices within the Liverpool Cotton Association (LCA), and their growing consolidation allowed them to impose the LCA rules on smaller textile manufacturers and cotton producers around the world (see Quark 2013).

CHALLENGING THE U.S.-LED COALITION

The rise of China in the cotton trade, however, challenged the governance of cotton quality within the institutions of U.S.-led hegemony. From the perspective of many countries, China included, the United States’ definition of quality and related measurement instruments had been developed to reflect the technological choices of U.S. textile manufacturers. While U.S. textile manufacturers required strong fibers, manufacturers in China used ring spinning technologies that required long, smooth fibers. The U.S. definition of quality and related measurement system did not measure fiber characteristics, such as short-fiber content and neps (tangled fibers), that would enhance the competitiveness of Chinese textile manufacturers (Estur 2004; Perkins, Ethridge, and Bragg 1984). As a representative from an inter-state cotton organization explained: “there is suspicion, a perception, that, because the United States has developed all the tests, if they had an interest in developing a nep-o-meter, they would have.” Indeed, maintaining the United States’ definition of quality was critical to the thinning ranks of U.S. textile manufacturers and, perhaps more importantly, to the export competitiveness of U.S. cotton producers as their existing cotton varieties and production technologies privileged fiber strength over length (FAS 2004).

With its growing power in the cotton market, the Chinese state launched an effort to take greater control of cotton quality governance to enhance the competitiveness of Chinese manufacturers (see WTO 2002). This included changing the definition of quality to include short fiber content and neps, developing instruments to measure these characteristics, and, perhaps most critically, assuming a new leadership role in the creation of calibration cottons. “They don’t want to trust our standards,” a USDA official explained, “I don’t blame them, I don’t know if I would trust China sending us samples … Someday you’ll be buying your [calibration cottons] from us—that’s pretty much what they told us.”

In addition to challenging the USDA’s definition of quality and control over calibration cottons, Chinese textile manufacturers and the Chinese state considered the LCA’s dispute settlement rules to be trader-biased—developed by, and in the interests of, Northern merchants and in relation to Anglo-American legal professions, practices, and legal systems (see Dezalay and Garth 1995). One of the LCA’s own arbitrators corroborated this view: “It’s because [the LCA rules] are trader-biased!” For example, Western merchants and Chinese textile manufacturers had vastly different views on appropriate quality penalties, or the penalty to be paid per bale if the quality of the shipment is found to be below the quality range stated in the contract. As a vice president of a Northern merchant explained: “There are huge penalty differences [between the LCA rules and China-based manufacturers’ preferred contract]. $30 per bale vs. $3 dollars per bale!”

As the global capitalism perspective would predict, Northern merchants sought to protect their private authority over dispute settlement amid these challenges by engaging in coalition-building vis-à-vis textile manufacturers and merchants around the world. As the LCA was perceived as a biased organization, Northern merchants endeavored to construct its impartiality by changing some of its rules and procedures and diversifying its directorships and network of arbitrators to represent more geographic regions (LCA 2003:26–27). As an ICA representative explained, “we need arbitrators in China, in India. We’ve got to do it … We need the credibility.” Re-branding itself the International Cotton Association (ICA), the organization cast transnational harmonization around its rules as the only way to ensure “ethical” trading practices and a level playing field in the uncertain global economy (LCA 2003; ICA 2004). During this period, ICA membership grew 34 percent and included numerous Chinese firms (ICA 2012).

However, for Northern merchants, it was not enough to shore up their private authority over dispute settlement. While not particularly concerned about whether the definition of quality privileged US producers or Chinese textile manufacturers, Northern merchants maintained a preference for US leadership over the quality governance system given their historical investment in political influence within the United States. Northern merchants had played a critical role in overseeing USDA’s cotton quality classifications since the turn of the 20^th century (see Quark 2013: chapters 2 and 3), and merchants were concerned that, if the Chinese state manipulated measurements in favor of Chinese textile manufacturers, they would have little recourse. Indeed, as the Chinese state introduced rule changes signaling its growing intent to assume control over quality governance, an editorial in a major industry magazine explained that “the biggest concern for larger, reputable merchants is the amount of sovereignty given to the Chinese government in this matter… . How much transparency can merchants expect?” (Barnes 2009). While Northern merchants and U.S. cotton producers in the US-led coalition diverged over the importance of the definition of quality, they shared a preference for U.S. leadership over quality governance amid inter-state competition.

Minimizing and Accommodating Inter-State Competition

Given their preference for continued U.S. leadership, Northern merchants pursued strategies that would minimize inter-state competition. First, the merchants worked with the USDA to promote the adoption of HVI classification based on the USDA definition of quality and calibration standards through the International Cotton Advisory Committee (ICAC), an international commodity organization that brought together cotton-producing countries around the world. The USDA created an institutional infrastructure within the ICAC to help countries adopt, and demonstrate the reliability of, their classification systems, as long as they used the U.S. definition of quality and calibration cottons (CSITC Task Force 2007). By stressing the value of this infrastructure to the “global cotton community,” the hope was that cotton-producing countries would support continued U.S. leadership, and, in the words of a U.S. official, “make it harder for China to take over.” The USDA also began to study short fiber content in the event that they would choose to integrate these Chinese preferences for the definition of quality in exchange for continued U.S. leadership over the measurement system (CSITC Task Force 2009:6). A representative of a U.S. cotton industry association summed up this long-term view by saying that the system was more important than the standards, but that he hoped U.S. standards would prevail.

In addition to minimizing inter-state conflict through coalition-building, Northern merchants also worked with the USDA to establish institutions that would accommodate continued competition with China. First, the USDA created a set of standards to verify the validity of calibration cottons and had them approved through a private standards development organization (see ASTM International 2011). These validity standards did not preclude the Chinese state from introducing new measurement instruments or creating its own calibration cottons – indeed, they facilitated such developments. The standards did, however, demand transparency, including using USDA calibration cottons as the underlying reference material. As a USDA official explained: “This is important if the Chinese ever decide not to use our system. Our verification system will set up procedures for how to establish the reliability and validity of a classification system… . So China will be using our system essentially, even if they change their calibration.” The validity standards could further serve as the basis of a WTO challenge to standards deviating from the USDA’s.

Second, Northern merchants used the USDA’s validity standards as a basis for an international laboratory certification program. In this program, the merchants’ trade association, the ICA, could audit classification laboratories around the world using the USDA’s validity standards to ensure standard levels of quality assurance, regardless of whether they were operating on U.S. or Chinese standards and calibration cottons. If a quality classification was challenged, the ICA’s classification laboratory made the final judgment (ICA 2011). By enrolling cotton producing countries from around the world into this certification program, Northern merchants sought to strengthen a coalition that would recognize the dispute settlement authority of the ICA even if control over the definition of quality and calibration cottons shifted to China. This demonstrates the emergence of new spatial configurations of power, even through the agency of Northern merchants to maintain U.S. leadership.

CONCLUSION

The key conclusion emerging from our comparative analysis is that, while transnational firms in the global North and South increasingly share preferences for trade liberalization, the way in which these firms pursue that goal vis-à-vis states and inter-state organizations is shaped by firms’ historical relationship to the institutions of U.S.-led hegemony. In the WTO case, we saw that Brazilian agribusiness firms aggressively stoked inter-state competition in order to decenter U.S. leadership and promote agricultural liberalization. In the cotton quality governance case, as the Chinese state and Chinese firms challenged the leadership of U.S. firms and the United States in the sector, transnational merchants from the global North sought to minimize this inter-state competition through coalition-building.

An important implication is that future research must give greater attention to the agency of transnational firms in the global South. The global capitalism perspective has importantly emphasized transnational capitalists’ agency, but has tended to cast capitalists in the global South as “junior” partners who are progressively integrated into a TCC. Yet, in the WTO case, it was Brazilian agribusiness—not its Western counterparts—that were aggressively pushing the liberalization agenda. This analysis thus demonstrates how a non-Western faction of an emerging transnational capitalist class has become adept at shaping not only its own state’s trade policy but that of powerful inter-state coalitions and multilateral governance institutions in favor of liberalization. This reflects insights from the nascent literature on the non-Western origins of the free trade regime (e.g. Bockman and Eyal 2002).

Perhaps more critically, our study demonstrates that transnational firms in the global South do not simply seek deeper liberalization; they also seek to decenter or even replace US leadership over the institutions governing the global economy. In the WTO case, Brazilian agribusiness developed the technical expertise necessary to empower the Brazilian state and the G20 and launch them into leadership roles within the WTO. In the cotton case, efforts by Northern firms and the US state to offer concessions did not relieve the perceived threat of continued challenges from China to control quality governance. In this respect, our study is in line with the work of Oliveira (2017, 2019) that reveals the combative nature of Southern capitalists through the emergence of a Brazilian-Chinese fraction of the transnational capitalist class. Oliveira demonstrates how Chinese and Brazilian “transnational agribusiness professionals” (2017:22) formed networks of “boosters, brokers, bureaucrats, and businessmen” (2017:4) in an explicit effort to contest “the hegemony of Global North actors in agroindustrial markets” (2017:22). Such an approach emphasizes the importance of historical legacies to contemporary conflicts that others have emphasized recently (see Komlosy, Boatcă, and Nolte 2016; van Veen, Sahib, and Angeenbrug 2014).

This is not to say that the shifting balance of economic power between transnational capitalists across the global North and South can predict the future of governance in the global economy. The assumption that fractions of a potential TCC can simply direct states to pursue their preferences neglects the autonomy of states and the contradictory dynamics of coalition-building that both cases reveal (see Evans, Rueschemeyer, and Skocpol 1985). The cotton case reveals the ability of Northern merchants and the United States to shore up their institutional power even as the balance of economic power shifts. In the WTO case, while Brazilian agribusiness successfully organized the G20 to pursue agricultural liberalization, this effort also empowered the Brazilian, Indian, and Chinese states to pursue a broader, and not always neoliberal, agenda within the WTO. While these new coalitions and institutional configurations we are seeing today may not be determinant of a future hegemonic coalition, they may serve as “tracklaying vehicles” which can lead the system in a new direction, and, in doing so, transform it (Arrighi and Silver 2001:261). As both cases reveal, the agency exercised by transnational firms in the global North and South involved the construction of new coalitions and the reconstruction of existing institutions. From this view, any new hegemonic coalition is likely to bring together capitalists from the global North and South and involve inter-state coalitions that supersede any single nation-state, just as the U.S.-led hegemonic coalition did.

Footnotes

1

The G20 is a coalition of developing countries within the WTO, not to be confused with the G20 Leaders Summit.

2

UN Comtrade Data.

3

USDA Data, 2012–2016 average.

4

Calculated from Valor 1000, 2019.

5

Calculated from Valor 1000, 2019.

6

OECD Data, 2014–2016 average.

7

Brazil’s agroindustrial cooperatives are wealthy organizations, representing the interests of large-scale, export-oriented farmers (Chase 2003).

8

Interview, Geneva, May 2009.

9

As a customs union with a common trade policy and tariffs, the European Union negotiates as a single bloc at the WTO.

10

Interview, Geneva, May 2009.

11

Interview, Brasilia, May 2010.

12

Interview, Sao Paulo, May 2010.

13

Interview, Geneva, May 2009.

14

Interview, Geneva, March 2009.

15

This figure represents an estimate of the Big 3’s market share cited by industry players, including executives from the Big 3 themselves. It also reflects rough estimates of market share based on trade data cited on the Big 3’s websites and Guitchounts’ (2008) report on the structure of world trade.

ACKNOWLEDGMENTS

The authors would like to thank Brent Kaup and Matias Margulis for comments on earlier drafts of this paper. We are also grateful to the editors of Social Problems and the anonymous reviewers for their helpful suggestions. Any errors are our own. The authors recognize the support of the UK Economic and Social Research Council Award ES/N017390/1.