Davos 2024: Addressing the North-South Schism

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Martin Wolf, Associate Editor and Chief Economics Commentator, The Financial Times: My name is Martin Wolf and I have the great honour and pleasure of moderating this really important panel with very distinguished participants. And our subject is very timely and globally important, which is the North-South schism. And before I introduce the discussion, I just very briefly wish to introduce the panellists. although I think they are sufficiently famous that you will know who they are. To my left is Ngozi Okonjo-Iweala, who’s the Director-General of the World Trade Organization (WTO) and a member of the Board of Trustees of this distinguished institution.

To her left is Gustavo Petro, who's president of Columbia; to his left is Paul Kagame, President of Rwanda; to his left is William H. Gates, or Bill Gates as most of us know him, who is, among many other things, Co-Chair of the Bill and Melinda Gates Foundation; and, finally, to his left is Mark Rutte, Prime Minister of the Netherlands.

And, we're going to proceed. We won't be doing a Q&A. We won't have time, we're going to discuss first, the overarching problem of governance, each of them will make a short contribution to that, and then we're going to have specific interventions on four big themes: trade, finance, health and climate. And after that, if everybody's been very good on time, we will have the opportunity to have an interchange amongst us.

I just thought I'd make a minute's worth of introduction because for me this is a very, very interesting topic. There are many disadvantages of becoming older, but one of them is that you remember things that are relevant. When I started working at the World Bank in 1971, this was right at the beginning of the ‘70s and this seems to me a period which has some similarities. Not only were there the oil shocks, the war in the Middle East, inflation and all the instability associated with these things; we also had an institution or grouping called the Group of 70 and they were arguing very, very powerfully for a new international economic order. This was a North-South schism and one very interesting book at that time, which was published in the middle of the 70s, was called the United States in Opposition.

Of course, you know, that what subsequently happened in the ‘80s and ‘90s was not a new international economic order, but the era of globalization, and we now feel at the end of that, but I think it is important to remember that we have seen problems like this before and we have managed them really successfully. And, it is immensely important that we do, though, of course, our challenges today include things like climate and health, which were less obvious then.

And we also have to say that over the last 50 years, there has been staggering progress in development, which of course, is now significantly troubled. So with that introduction, let me ask the panellists in order to make their brief comments on what is from their perspective, the governance problem today in this context of North-South relations. And may I start with you, President Kagame?

Paul Kagame, President of Rwanda, Office of the President of Rwanda: Thank you very much. Let me address this by starting with the two crises that define the pessimism in the South about this international cooperation. One is COVID, another is what happened with inflation and interest rates and the interest rate crisis that followed.

With COVID, it was clear that access to vaccines and therapeutics was a problem and it was mainly concentrated in the North, the South was to be considered much later, even then, it was very slowly and nearly too late because the South did not have this capacity to produce their own vaccines or therapeutics.

And then, coupled with many years of fiscal stimulus by the West, we saw that there developed an inflation crisis and the response to that was to raise interest rates, which many in the South are still paying a very high price for now.

We cannot address this inequality by just mitigating the crisis. But, rather we need to integrate, to bring in, to involve developing countries, like Africa and other developing countries, from the beginning to have the conversations around how these inequalities should not be developing and later on. affecting their particular parts of the world. So it has to be from the beginning, it's not just at the time when the crisis has happened, that then you start making consideration of what to do for the South, but rather they should be involved and Africa should be given tools, that are there that are available to actually work on some of these things that are needed to be addressed. And Africa will, therefore, stand to gain and have access to most of these things that are required.

Martin Wolf, The Financial Times: Thank you very much. That's very clear, and very helpful in this discussion. May I turn to you Prime Minister Rutte for your perspective, perhaps in response, what do you think are the really big issues in this context that we now face?

Mark Rutte, Prime Minister of the Netherlands, Office of the Prime Minister of the Netherlands: Let me be slightly provocative, I think for all of us, being the President of Rwanda or Colombia, Prime Minister of the Netherlands, we have basically two tasks. One is to make sure that our countries are safe and secondly, to make sure that the economy is doing well and that people have a job and can take care of their own lives.

In that sense, I have a bit of an issue with constantly talking about a schism, the divide between the North and the South. I hope we are moving beyond that now because we need each other and we have seen so in Dubai at the COP 28 that you can do that even successfully.

And, that will be my second comment, because constantly this debate also in my country between multi-nationalism, should we stay a member of the EU and the role of WTO and the UN etc., as if that is something you can oppose being interested in at a national level.

You cannot be a politician working at a national level taking care of the national interest if you are not part of a strong multilateral system. And for a strong multilateral system, we have to invest in it. It has to be rules-based. We have to make sure that we have enough discussions and talks on how to progress it, like the WTO, which has had some difficulty but on the current leadership, I'm happy to say we see progress in a number of important fields.

So, there is not a schism between North and South, I would argue for this debate. There is not a schism between the national level and multilateralism. If we want to be strong politicians and provide the jobs, provide the collective safety and security at a national level, we need both strong countries and strong multilateral organizations. And, I think in following on this first round Martin, I think we have many subjects and examples of where we are successfully doing it, be that fisheries and the WTO to even getting an agreement on loss and damage at COP 28 and Dubai, we have done that.

Martin Wolf, The Financial Times: Thank you very much. for that. Now. It's your turn, Director General.

Ngozi Okonjo-Iweala, Director-General, World Trade Organization (WTO): Well, thank you, Martin, and it's very nice to say thank you for the kind comments of Prime Minister Rutte and progress at the WTO. But I just want to build on what President Kagame and Prime Minister Rutte said, to say that if we look at some numbers of what is happening in terms of shares of global output in the world, we see that in 1995, emerging markets and developing economies accounted for about 42% of global output of global GDP, and developed country countries for about 58%. And now, in 2022, we see a situation where this is inverted.

And, so these changing shares of world output, and we see it mirrored also in some of the shares of trade, which I'll come back to later, speak to the multipolarity of the world that we are now in a multipolar world. There is no one power centre and what worries me with global governance is how we manage this multi-polarity.

There is no one centre that can solve all the problems of the world. We are interdependent and we need to work together. That speaks to the issue of how do we do it. And this is where multilateral organizations need to be strengthened, of course, they need to be reformed to move with the times there in, but we absolutely need them because we have to solve some problems of the global commons, like climate change, which you alluded to, the pandemic, that President Kagame talked about, and how do we manage this to solve global problems? This multipolarity? That's my issue.

Martin Wolf, The Financial Times: Thank you very much. And I think we're getting to a certain, so far, degree of agreement. May I now ask President Gustavo Petro to make his contribution? He will be talking in Spanish.

Gustavo Petro, President of Colombia, Office of the President of Colombia: Thank you so much. There's not a single path. There are two open paths. We are actually moving in this path of a schism between North and South. However, there is another pathway with this agreement, an agreement between equals, and a year ago, this forum coined a word poly-crisis. We talked about the war, we talked about famine, that waged the world as a result of the pandemic, as a result of diseases, poverty and economic stagnation.

Today, after one year, the situation has become worse. In terms of the fact then, from war, we have moved into genocide, bombarding children, voting in the United Nations around this problem has divided physically and politically, the North from the South, Europe and the US have voted in favour or against, depending on how you look at it, on a policy to solve the problem of Palestine and there is a real political divide.

The issue of vaccines was also a divide, in terms of care for life in the North and in the South. We were imposed a commercial relationship to save the lives of COVID patients. And what we see today is a crisis of civilization. Not only a poly-crisis, but a crisis of civilization that has its origin in the climate crisis, because depending on how we tackle the climate, or not to tackle the climate crisis will lead to a democratic agreement among humankind or to a situation of barbarism.

I call it, the new 1933, which is the year when Hitler raised to power. We could choose between the two paths and the choice is there to be made. The economic, political and social world paradigm is changing. The very human existence is being questioned and with that we question everything that was built around in the last 50 years, for the better or worse. For instance, the concept of cooperation, which is one of the topics of this panel discussion, cooperation is a concept that was built with the idea of a very wealthy North and a very poor South and the idea of bringing money from North to South and I call that charity and the idea that the North was helping the South.

And this is being placed at the centre of the climate crisis. It is thought that the climate crisis will be overcome if there is a charity given by the North to the South. Those millions that were promised in 2015 in Paris, for instance. So this paradigm of cooperation, this idea of cooperation, crashes against the reality of the world civilization crisis, not only because these figures are much bigger than those 100 billion a year decided in Paris that we consider a handout, but also, because what is needed to overcome the climate crisis, which is at the essence of today's crisis, is not only that chimneys are in the North.

Let me explain it, CO2 chimneys are pumping CO2 in the North. So what it takes now is to stop these fumes and if we don't put off these smokestacks, we will be choking and bringing to extinction the forests in the South that absorb all the CO2. So from a technological and political standpoint, the North needs to change radically to sustain life on the planet and it's the South that needs to help the North in that purpose.

It's the other way around. Why? Because Africa and South America are the regions with a higher potential in generating clean energies across the planet. This changes the world geopolitics completely. We are the ones who can generate clean energy with which the smokestacks of the North will be able to put out their fires. So we need to cooperate with the North. And further ahead, we will be able to talk about what it means in terms of changing power relationships across the world.

Martin Wolf, The Financial Times: Thank you very much. That's a really valuable contribution. I hope somebody would talk in that way. Finally, Bill Gates, your response or points.

Bill Gates, Co-Chair, Bill & Melinda Gates Foundation: There's no doubt we find ourselves at a juncture where the demand for resources exceeds the resources available and the needs coming out of Ukraine, the Middle East, climate mitigation, climate adaptation, you know, so many things, including basic development, healthcare systems, education systems, all of these, the needs are pretty incredible.

And, I'd say there are three things we can do to improve that situation, where we have a shortage. The first is, we should try and be more generous. Those who have the most, whether it's countries, companies or individuals, should be pushed to be more generous. For example, in the aid category, getting up to point 7%, or like Sweden and Norway, getting even beyond you know, that's imperative.

The second thing is to focus in on the highest impact areas, where $1 of resources is effective. I would say that there's almost a factor of 100 difference between some initiatives versus others and we really need to study that and do well. Foremost in that is going to the countries, including in Africa, and saying what are your priorities, you know, health, nutrition education, where would you like to have these partnerships focus?

The final area is innovation. There's been far too little innovation on the needs of the Global South. Whether it's malaria, whether it's their crops that go way beyond the big three – rice, wheat and maize – they have unique ecosystems, and the amount we put into improving that agricultural productivity is dramatically less than it should be.

I'll just finish with one example that should remind us that the system of cooperation sometimes achieves miracles. Gavi was announced here at Davos in 2001. It raised money to buy vaccines and everyone here has had some engagement with Gavi, we're all proud of that. And, at that time, over 10 million children died every year. And largely because of getting these vaccines, which were only available in the rich countries, getting them out to all the children, Rwanda is an exemplar with a 97% coverage rate, those deaths have been reduced to 5 million a year. The Sustainable Development Goals, which are timed for 2030, have a goal of getting that to two and a half million, because of the pandemic and many other things, we won't achieve that, but the question is, do we keep going down? Do we get there during the 2030s or not? With the right prioritization, with taking innovation, including the latest AI innovation, I think, despite all these challenges, we can still do that.

Martin Wolf, The Financial Times: Okay, We've slightly over them, but we'll do our best. Can we turn very, very quickly and I think please keep these remarks to a minute each just very pointed. What on the base of what you've heard, does this mean for the future of trade,

Ngozi Okonjo-Iweala, World Trade Organization (WTO): Wow. Well, I just need a minute to illustrate what I want to talk about with some numbers. I come back to the issue in 1995, North-North trade, between the developed economies, accounted for about 54% of global trade. In 2022, this has come down to 39%. During the same period, that's in 1995, South-South trade was less than 10%. In 2022, it's now almost 25%.

In the same period, North-South trade has been stable, at about 35% or so 39% actually. So, if you look at these numbers, you will see again, some of the versions that I was talking about. The South is now trading much more with itself, becoming a power block. The North's share is diminishing. And it comes back to the issue I spoke about about different centres of power, that there is no one centre of power and that we need to cooperate.

But that being said, we find that at an organization like the WTO, where the global trading system comes together, the multilateral trading system, we've managed to cooperate. 75% of world trade today is done on WTO terms. Just think about that, the bulk of world trade is still done on multilateral terms. So, even though we have this multipolar world and these power blocks, we've managed to find a place where we can collaborate, cooperate and deliver just like Bill had said about there are places where we've been able to demonstrate that we can work together.

So on the trade front, we are doing that. That does not mean that we don't have issues, that we don't have emerging fragmentation, that we don't have vulnerability of supply chains, we need to build resilience. But we often forget the good parts of what's happening in trade and that cooperation in favour of the worries about protectionism and about unilateral actions. So I wanted to put a marker on that.

Martin Wolf, The Financial Times: Thank you very much. And now to you President Petro, I'd like you, if you could, to just very briefly indicate, based on your radical and critical view of what's going on, how, and I know you'd much rather have half an hour, but unfortunately they don't give us that, how do you change the global financial arrangements. President Kagame has already referred to the interest rate shock and the impact that has had on developing countries. There are many issues here debt, how the IMF works, the monetary dominance of the developed countries, just focus on what seems to you to be really important.

Gustavo Petro, President of Colombia, Office of the President of Colombia: Thank you. I may continue with what I said earlier on, if we look at the chimneys in the North that contribute to the climate crisis and the potential of clean energy in the South, when it comes to cooperation, this system of handouts from North to South this cannot help us resolve the issue. We need to free the potential in the South to resolve this, perhaps in delocalization of production from North to South, or perhaps freeing the potential of the South to generate clean energy and to put out the chimneys in the North and this entails changing the whole financial system.

For instance, the WTO has to subject these efforts to the Paris agreement. This should be binding and not just an expression of goodwill. If we do not change this and take into account climate change, we won't be able to do so. In the financial system, we could trade the potential of the South to generate clean energy and to decarbonize our economies and this means liberating our own resources.

We don't need any handouts. We do have our own resources, but our resources are currently subjected to debt and to these interest rates that we have to pay. For instance, Colombia pays a premium, because we are considered to be at risk, such as Brazil or Ecuador or any other countries within the Amazon region.

But we don't pose the risk in the Amazon, it was rather the countries in the North that pose a threat to the Amazon and you pose a greater threat to life. We are managing to absorb CO2 emissions, therefore, this premium should be zero. And, if there is no premium, our debt will drop and, therefore we will free our resources and instead of paying that debt we can invest that on climate action.

If we do this for the whole planet and we reform the whole financial system, we will free the potential in the South so that we can generate clean energy and put out the chimneys in the North. So, this is the path to reaching an agreement and not the path to a further schism. Otherwise, we raise walls and throw bombs. Currently, there is a schism, on the other hand, there is a political agreement in our humankind that we can achieve.

Martin Wolf, The Financial Times: You are the next speaker, Prime Minister Rutte, and I think, as you and your chimneys are the source of the risk in the world, although I think that the Netherlands has fairly few chimneys now, but I might be wrong on that. So, how do you respond on climate and specifically on what the President has been very challenging on, and he's absolutely right, there's no doubt the Amazon mega-region is immensely important.

Mark Rutte, Prime Minister of the Netherlands: It's always good to have the Colombian President on the panel and I'm always willing to oppose his views if necessary. But I do not disagree completely, because I agree with him on the necessity to reform the multilateral banking system. He is absolutely right in that sense, but I fundamentally disagree on his chimney point and the handouts. And why is that?

Because if we for example, in the Netherlands close down our steel mill, which employs 10,000 people directly and 40,000 people indirectly, there is this risk of a huge carbon leakage to other parts of the world, because that steel is still necessary and it will then be produced somewhere else. So what he needs here is innovation, to make ourselves less dependent on particular types of products, for example, from the chemical industries, but innovation is the key. You're not closing down the chimneys altogether.

And the second thing where I disagree is on handouts. It's not handouts. There is a phasing issue because the South is developing rapidly, in Africa and Latin America, everywhere. But at this moment, there is still an issue to comply with the Paris Agreement, to make sure that we can bridge the gap and that is why the $100 billion pledge was created. That is why we have an agreement in Dubai on loss and damage and I think that is very good and it's going help us to really move forward.

And, I see him nodding yes, so he is letting go of his previous position and agreeing with me! That's good. No, I'm kidding. But now, to sum up, I think when we talk about multilateralism and the WTO, is a case in point, because it is not easy at this moment to deal with world trade. But, for example, with fisheries subsidies, we have been able to come to agreements and there are other subjects and there are still countries joining the WTO, but I think what you need here is rules. You need trust and you need to discuss to talk.

So, for example, the WTO, but also the Paris Climate Agreement and the COP. The COPS coming from them and the latest one in UAE, which was very successful as a case in point, show that you can get there, that you are willing to have a rules-based system and you're willing to discuss, sit together, like we are doing at this moment, and hammer out issues, have our differences and then come to an agreement. And that builds trust. That is the only way to move forward and that is why I say again, there is no schism between North and South. There is no schism between multilateralism and the national interest and parties like my own, the centrist party should be much more forcefully put forward that case in point, because it is not a populist saying, oh, multilateralism is crazy, get rid of it, it's yesterday's story. No, you need both sides of the coin, multilateralism and strong nation-states.

Martin Wolf, The Financial Times: Bill Gates, finally on health on this round. I think President Kagame and President Petro both mentioned that during the COVID crisis, developing countries, many developing countries, probably most, felt they were treated as second-class citizens of the world. The developed countries got all the vaccines first, they had all the technology and vaccine rates fell far behind in many important parts of the world, notably in Africa. Will we do better next time? Are we really set up and determined to treat a global health problem as a global problem? I wrote a lot about this at the time, and I wonder whether we really have learned the lessons?

Bill Gates, Bill & Melinda Gates Foundation: Well in some respects, people don't want to talk about the pandemic at this point and how we built the capacity to do trials where we practice.

Okay, are we ready? What would we need to do? And then we need to build better tools. For many of these problems, where the total amount of money is going to be super limited, and some elections would make the money even more limited than it is today, we have to innovate and a great example of that is now the factories that make mRNA vaccines. A group in Belgium, funded by the Foundation can make those very inexpensively. And for me, the issue is not having vaccine factories in matching places, it's having enough capacity in the entire world that we can get vaccines to everyone, because who do you want to discriminate that against? If the factories are cheap, you're going to have that capacity.

In fact, more vaccines were made in India, we funded serum two months into the pandemic, they created a factory. We had a challenge that those vaccines which we're going to Africa for a period became unavailable, but that was a South-South issue that challenged that. We really need to up the dialogue of given limited resources, where should the grant money go?

I would claim that nutrition and vaccines will always rise to the top of that list. And so as we see is Gavi replenished later this year? It'll show are we maintaining the very highest impact investment that was ever made. And, likewise, on the innovation agenda, President Kagame and I were talking about how Rwanda is moving forward on these digital initiatives and making multiple places in the South, including Rwanda, India and many others, a laboratory where AI healthcare, AI education, is done not five or 10 years after it's done in the North, but done at the same time. And, in fact, given their shortage of doctors, in some sense, you could say it should be even faster. And, if we can find the right cooperative effort, I think we can surprise people on how quickly we provide benefits there.

Martin Wolf, The Financial Times: So we have, unfortunately, only five minutes left and I know how strict they are and people want lunch, so you've got a minute each. And so what I would like you to focus on, I knew this would be a problem, because there's so much to talk about, in the light of what you've heard, in the view that we have to solve these problems, you're actually doing things, what is the most important single thing that you want to see happen, which will make things better from where you sit? President Kagami.

Paul Kagame, President of Rwanda: Well, I'm an optimist, as well as a realist. So I see things, for what they are. There are problems and they can be addressed. The underlying importance lies in cooperation and people can still cooperate, but you cannot deny the fact that there are differences within nations, whether in the South. but more significantly the South and the North. There's no question about that. And there is domination, if you will, at times that dictates what people bring to play into whatever is happening every day. And these debates have been there for a long time. This is not the first debate about it, but that means if the essential debate has been there for a long time, it also means the problem is continuing. But we can address these matters through cooperation and also through looking at the root cause of whatever problem we are talking about.

Martin Wolf, The Financial Times: Thank you very, very much. Your last word on the single most important thing you want to have happen if you could.

Ngozi Okonjo-Iweala, World Trade Organization (WTO): Let me start by saying, that, in spite of the numbers I gave of the inverting shares of trade between North and South, we have to acknowledge that there are parts of the world that haven't benefited as much.

If we look at least developed countries, their share of trade has been 1% and has remained stagnant. Africa's share of trade has remained also stagnant at 3% or less. So my big wishes, how can the trading system be reformed or moved in such a way that those countries that have not benefited as much, even with these changing shares, can benefit more from the trading system? And, how do we do it in such a way that we cooperate and collaborate?

And, I just want to put a shout out for my own organization. I think Prime Minister Rutte has been doing it mostly, but to say that yes, we have difficulties at the WTO, because developing countries do not see themselves benefiting and there was this trust issue. At the same time, developed countries feel that some emerging markets are benefiting maybe too much from the system. So, what I'd like to see is us coming together as we did at our last ministerial working in an interdependent way with strategic cooperation to deliver more for those who didn't benefit from the system.

Martin Wolf, The Financial Times: Thank you very much. President Petro, really briefly you can see the time, ,ake one powerful, simple point about what you think can be done now.

Gustavo Petro, President of Colombia, Office of the President of Colombia: I would like to say two things. Well, there is an democratic danger in the world. And, therefore, we have to restore the democratic order in the world. This is a challenge and currently this is fragmented. We have to restore this order, freedom or liberty or egalitary. I know this French principals, they don't have their headquarters in Paris, but in South Africa and Africa. And another issue or another point to mention, how we address climate change. The 100 billion from Paris are no longer important, we need 30 times more funds for this. If we manage to establish some sort of policy and to reach an agreement to offset debt for climate action, we could reach this figure 30 times higher than what was pledged in Paris. And that can be generated with public resources from everywhere in the world and this can be invested in a major Marshall Plan on climate action in the world so that we can preserve life on the planet.

Martin Wolf, The Financial Times: Mark Rutte.

Mark Rutte, Prime Minister of the Netherlands: Obviously, here in Davos, we are very worried about Ukraine and we are very worried about the Middle East, and, at the same time, we are thinking of the energy transition and the need for fighting the warming of our planet, so climate change. And I would hope for two things. One is to reform the multilateral system and it's tilting too much at this moment to the North. And it should incorporate the fact that the world has changed, including the IMF, including the whole system of development banks, it should tilt more to the South. And secondly, we need to invest in the quality of governance at a national level where ever necessary and we need to help each other also in that respect.

Martin Wolf, The Financial Times: Bill Gates, very last word. Okay. One sentence if possible.

Bill Gates, Bill & Melinda Gates Foundation: Well, sadly I'd say that the resources coming from the North, there's not much upside. And so the idea of using the power of innovation, whether it's in climate or health or in education and prioritizing properly by listening to what the countries are asking for, what their priorities are, I remain optimistic and that's partly from the great successes that we can build on.

Martin Wolf, The Financial Times: Thank you very much. I'm not going to summarize except to make three points. I know we have already exceeded time, a bit better than the last session I should say.

There is obviously an immense amount of frustration and anger. The system is obviously still very heavily weighted in many ways to the countries of the North. It will be very nice to think we can fix that. We've been in these discussions a lot, we can probably improve it, but I would endorse a very important point made at the end by Bill Gates, that a lot of what we're going to have to do will be being very, very clever in the way we innovate, both in the economy and in our institutions. It's going to be an immensely difficult struggle to manage these people, to manage these problems and we have to recognize that we have to do almost everything to do so.

Thank you very much. I think it's been a wonderful panel if far too short and I think a lot of very important points and ideas have been put forward.