World Trade Outcry

How inevitable was the collapse of talks at the World Trade Organization? How engineered was it? CLIFFORD POLYCARP reports from the streets and conference centres of Cancun

Last Updated: Sunday 07 June 2015 | 21:11:47 PM

World Trade Outcry

-- (Credit: REUTERS)The first day of a multilateral conference involving most of the world's nations is usually spent on procedural matters. So it was at Cancun, Mexico, where the Fifth Ministerial Conference of the World Trade Organization (WTO) was held from September 11 to September 14, 2003. After the usual ceremonial inauguration, work began on forming working groups. Each working group had to negotiate on a particular issue -- or a set of issues, such as the working group on development had to -- and come to an agreement that would form the basis of formulating a Draft Cancun Ministerial Text to be adopted by ministers. This text would represent how the world was positioned on managing global trade. It would represent global consensus. As it turned out, such consensus completely eluded the conference.

The explicit intention of the Cancun conference was to take stock of progress made on issues germane to the 2001 Doha Round of negotiations, and provide direction on points of contention. (The Doha Round is also called the 'development round' because it called for the special concerns of developing countries to be taken into account in formulating rules for the world trading system.) More specifically, Cancun was a mid-term review of how to move forward in key areas such as lowering tariffs on industrial products and agricultural reform. Three days of closed-door negotiations -- with no independent media access -- led to a draft that imploded the negotiation process. Thus, on September 13, the world fell apart.

"There was quite a bit of anger at the lack of progress on the development issues, and what they [developed countries] don't realise is that anger and bitterness can make a very bad cocktail," said Jaya Krishna Cuttaree, minister of international trade and industry, Mauritius. Explained Ugandan delegate Irene Odida: "We have had many countries putting in their positions even before we came to Cancun. Our delegations have said what they want. Groups of countries have said what they want. But, all of that disappeared from the text. What was in the text was biased and slanted towards the Quad, the big countries and the issues that they were raising."

Nations were especially riven on the question of launching negotiations on the four Singapore issues of investment, competition, transparency in government procurement and trade facilitation. Positions on agriculture remained violently different. Whereas developing countries had asked for negotiations on the Singapore issues not to be launched, the 9/13 text envisaged the opposite. On agriculture, the onus was on developed countries to eliminate their export subsidies and substantially reduce domestic subsidies (the kind of help these states provided, for instance to farmers or industry, to keep the prices of commodities down). Developed countries were expected to lighten up on their maniacal insistence that developing countries rush to lower tariffs. On these -- and other demands -- the text failed to meet the expectations of the greater part of the world (for details, see next section: In the snakepit).

The next day, the conference ended. Some felt it ended with a whimper. Others celebrated.

Why not?
Consider, for instance, the manner in which negotiations moved on what was called the Cotton Initiative. In June 2003, four African countries (Benin, Burkina Faso, Chad and Mali) presented a proposal for WTO members to resolve. The exorbitant subsidies the United States (US) doled out to their cotton farmers (US $3.7 billion for 25,000 cotton farmers in 2001-2002, more than Burkina Faso's 2002 GDP of US $2.8 billion) had so depressed world cotton prices that the economy of these countries -- all cotton-growing and cotton-exporting West and Central African nations -- was speedily cracking up. Could economic disaster be halted? To be sure, this matter wasn't technically a part of what members had agreed to discuss at Cancun, but could WTO members ensure relief and so include it in the agenda?

Members agreed to do so. The Cotton Initiative was forwarded to Cancun. The day before the conference, the US held informal consultations with the four countries. The next day, at a plenary session especially organised to discuss the issue, the US made its position clear. Commiserating with the plight of these nations, the US clarified that subsidies were hardly the problem. The real enemies were synthetic fibre, and policies governing value-added products made from cotton. The real McCoy was to find ways to boost demand for cotton fibre, re-think the entire sector -- cotton, man-made fibres, textiles and clothing.

Meanwhile, all these countries had to do was switch to making cotton textiles. Under the US African Growth Opportunities Act, the US would be more than pleased to consider giving Benin, Chad, Burkina Faso and Mali preferential access to their market.

The Cotton Initiative quickly became a test case for the WTO's ability to resolve the real needs of developing nations. The US solution was to change the focus of the Cotton Initiative. The solution pushed the immediate crisis into a rigmarole of words and intent. It didn't mention that value-added products attracted higher tariffs. It overlooked the possibility of these four countries becoming net importers of cheaper (US) cotton.

Generously continuing to twist the issue beyond what the African nations had wanted, the 9/13 draft reference to the Initiative toed the US line. The African nations had wanted a phase-out of cotton subsidies within three years. The text, instead, recommended a look into trade distortions in the entire sector (much as the US had wanted). The African proposal had asked for financial compensation in the interim from "certain WTO members, cotton-producing developed countries", clearly a reference to the US. The 9/13 text, on the other hand, wanted organisations such as the Food and Agriculture Organisation to help these nations in "diversification of their economies".

It wasn't surprising, then, that the Cotton Initiative quickly became another riftline irreparably damaging the conference outcome.

It wasn't surprising
It wasn't surprising that developing countries came extremely well prepared to Cancun. Twenty-one months of negotiations before the conference had led to some insights. Their interests had always to be hard-fought for. They had to negotiate on their own terms, and not merely react to the fare developed countries put on the table. They had to be organised amongst themselves and negotiate en bloc.

After all, issues of interest to them had been consistently sidelined. For instance, the December 2002 deadline set to resolve the 'implementation' issues -- including the question of 'special and differential treatment'-- was missed. This set of issues was ignored thereafter. The resolution of 'implementation' issues would have helped developing countries in two ways: (a) tackle existing imbalances of the (1986-1994) Uruguay Round agreements; and (b) address the difficulties of meeting the obligations agreed to under that round of talks. Under the Uruguay Round of talks, developing countries were promised increased trade in agriculture, textiles and apparel in exchange for agreeing to new rules in services, intellectual property and health, and safety measures. But this liberalisation never happened. Consequently, developing countries began to demand rollback on some rules.

Also, on the matter of poor countries' access to cheaper medicine, there had been endless delays before negotiations reached an outcome. A roadblock called the US had effortlessly stymied progress. It was the only nation that hadn't agreed to the December 16, 2002 draft decision proposed by the chairperson of the Trade Related Aspects of Intellectual Property Rights (TRIPS) Council (The draft decision sets out how poor countries without the ability to manufacture generic versions of patented drugs could acquire them in a time of health crisis). Even when nations finally reached a consensus barely ten days before Cancun began, it was clear that (a) the US had conceded only to gain brownie points (which it could deploy to force a compromise on some other issue, such as agriculture, at Cancun); and (b) countries' access to medicines hadn't actually been made easy as conditions tied up the agreement in knots.

New coalitions
The US, at Cancun, was categorical. It had an agenda it was pursuing, more aggressively, outside the WTO through bilateral and regional free trade agreements and it didn't really care at all if others weren't willing to go with it wanted see done in the WTO.

The US approach to liberalisation includes aggressively cutting tariffs and opening markets. It wants to do more than others are willing to do on this front, but only if others moved along with it. But the reduction or the elimination of tariffs is not the central issue in agriculture; the issue is subsidies. Zoellick said that the US was willing to cut subsidies, too, but only if the EU did so. "So that's the formula. It is on the table. People will have to decide if they want to engage in it. But, I'm not waiting forever." He added that the message he received from countries at Cancun was "not now". But that wouldn't affect the US. "The US trade strategy includes advances on multiple fronts. We have free trade agreements with 6 countries and we're negotiating free trade agreements with 14 more," he proclaimed.

All this meant that developing countries had no choice but to get their act together. At Cancun, three developing country coalitions negotiated on specific issues with well-defined positions:

There was the so-called G-21 group of developing countries. It had come together as a group of sixteen members under the leadership of Brazil and responded to the August 15 US/EU proposal on agriculture. At Cancun, it consistently tackled the issue of agriculture and became a 22-strong coalition by the time the conference ended

On September 12, another coalition took shape. Comprising the African Union (AU); the African, Caribbean and Pacific (ACP) nations and the Least Developed Countries (LDCs) -- 90 countries in all -- it presented joint-position papers on development issues.

On Singapore issues, another 70-strong coalition of developing countries had mobilised under the leadership of India, much before Cancun, to oppose the launch of negotiations on these issues at Cancun.

In the snakepit

Beyond failure

-- (Credit: REUTERS)What kind of ripples were let loose by the breakdown of talks? Celso Amorim, Brazil's minister of external relations and leader of the G-22 group, felt that the lack of engagement (of developing nations) in the Singapore issues, which mirrored the lack of engagement (of the developed world) on agriculture, caused negotiations to fall apart. Robert Zoellick, however, blamed countries for treating the negotiations like a "freebie". "[Some countries thought] they could have the points they suggested, argue and not offer and give. And now they are going to face the cold reality of that strategy: go home with nothing." Lamy didn't want to play the blame game; he said. "This [the failure of Cancun] is not only a severe blow for the WTO, but also a lost opportunity. All of us, developed and developing countries, we could have all gained here and now we have all lost."

Representatives of civil society were more critical of the trade superpowers. "Rich countries overplayed their hand and misjudged the strength of feeling and unity of the developing world who want to make trade fair and have a stake in global prosperity," argued Phil Bloomer, head of advocacy, Oxfam. Agreed Barry Cotes, the director of London-based World Development Movement: "Quite simply, walking out was better than the deal on the table. The US and the EU played Russian Roulette with the WTO, and the bullet was in the chamber."

On what the future held for the Doha Round, Derbez was optimistic. "If we keep pushing, if we keep working together and if we learn the lessons from here in terms of how to go and find consensus, we will be able to advance the round again by December and set back on track what we proposed in Doha," he remarked. For Zoellick, however, the January 2005 deadline for completing the development round may be in jeopardy. "Its hard for me to believe that the position we are in now, we will be able to finish on time," he said.

Contrasting voices were heard. Amorim felt that "the pieces will be picked up again as they have been picked up after Brussels, as they have been picked up after Seattle, and the negotiations will go on." Pascal Lamy, on the other hand, was quite worried that while "the Doha round was not dead, it certainly was in intensive care."

The WTO itself came in for criticism. "Rules need to be introduced because the WTO is supposed to be a rules-based organisation. But, it is a power-based organisation," argued Irene Odida. Zoellick, however, was not keen on changing the rules of play. "The WTO is an organisation that works by consensus. I don't think that is going to change, and so I don't think it would be very fruitful to try to spend time trying to move to voting patterns or others," he emphasised. But strangely, EU's Lamy wanted a revamp, "The WTO remains a medieval organization," he said. "The procedures and rules of this organisation have not supported the weight of the task and there is no way to structure and steer discussions amongst 148 members in a manner conducive to consensus." His statement showed he didn't like what happened at Cancun, and that he was prepared for a more rigourous, dangerously exclusivist, WTO.

Civil society groups were optimistic that the resolve of the developing world would make the organisation better "World trade negotiations will never be the same again. On paper, this meeting has failed but the new power of developing countries backed by campaigners around the world has made Cancun a turning point," argued Bloomer. Bello, too, felt that the "bad multilateralism" the WTO represented was dead. "I think, we will now see a future of real multilateralism," he claimed. There would now be multilateral organisations, "which are not ruled through power relations, and are not anti-democratic or non-transparent."

The unilateralist route has become a real worry, given the intransigent manner in which the US likes to conduct its affairs. But as Youssef Boutros-Ghali, minister of foreign trade, Egypt, says reassuringly, "There is this tendency occasionally to go through regional and bilateral agreements but ultimately a viable trading system must be multilateral. It is in everyone's interest that a multilateral system, rule-based, organised with the jurisprudence that is acceptable to everybody, is the future of the trading system."

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