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The Cancun Debacle |
| Published On: 10-07-2003 |
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The World Trade Organization's (WTO) ministerial conference held in Cancún, Mexico from September 10-14, 2003, ended on a disappointing and controversial note. Rich and poor countries failed to find compromises on agricultural subsidies and other key issues and left the meeting without an agreement on moving forward the current Doha Round of world trade talks. The failure has important implications—delaying, if not totally scuttling, the round and inflicting damage on the (WTO).
The Cancún negotiations were premised on a possible tradeoff: rich countries were willing to exchange a reduction in agricultural protection for concessions by developing countries on the four so-called Singapore issues—foreign investment, antitrust/competition regulation, transparency in government procurement, and trade facilitation (that is, border and customs controls). Prior to the meetings in Cancún, WTO Director General Supachai Panitchpakdi expressed confidence that differences on these issues could be worked out, partly based upon a joint U.S. and EU announcement in early August on reduction of their agricultural subsidies and trade barriers, opening up agricultural trade opportunities for developing countries.
It became very clear at the ministerial that this optimism was misplaced. The ministerial turned into a clash between the rich countries—mainly the European Union, the United States, and Japan—a broad coalition of developing nations, called the Group of 22 (G-22), led by Brazil, and including major countries such as India, Argentina, and South Africa as well as smaller countries such as Costa Rica and Botswana. The G-22 felt that the United States and the EU did not offer enough specific guarantees of an end to subsidies and more access to their markets in their joint August announcement.
Cotton, in particular, became a serious sticking point for delegates from the four West African countries of Benin, Burkina Faso, Chad, and Mali. These countries contended that U.S. and EU subsidies have crippled and nearly destroyed the cotton farmers in the world’s poorest countries. Combined, the U.S. and EU spend nearly $3 billion on subsidies to cotton farmers--according to the African countries leading to global cotton price at all-time lows. U.S. negotiators, however, refused to discuss the issue and denied that subsidies were the cause of low cotton prices.
Despite these disagreements, a leading participant at the meeting, EU Trade Commissioner Pascal Lamy, indicated that “a deal was nearly there” on agriculture. Indeed, after a few days of delegations merely restating their well-established positions, some compromises were appearing.
Nevertheless, sessions on the Singapore issues were highly contentious and led directly to the failure of the Cancún meeting. Fierce opposition to Japanese and EU positions on these issues had arisen earlier, with 77 developing countries stressing that they lack the financial or technical expertise to pursue extensive negotiations on these issues. These countries are especially concerned that new rules on investment could limited the flexible policy responses of governments to regulate the flow of funds, to ameliorate balance of payments problems, and erode the ability of governments to regulate the entry and operating of foreign firms in their countries.
When it looked as if failure at Cancun was imminent because of this dispute, the EU offered a last bid effort to drop talks on investment and competition policy. African countries, however, represented by Botswana, flatly refused to go forward on any of the Singapore issues and insisted on referring them back to working groups for further clarification.
Who, then, is blame for the failure of the talks? Some analysts have said the developing countries were at fault for their intransigence over the Singapore issues. Prior to the Cancún meeting, India had succeeded in making negotiations on the Singapore issues subject to an explicit agreement by all countries before these issues could be discussed, almost guaranteeing stalemate.
Others have pointed to the EU. Despite the early warning of a failure on the Singapore issues, the EU insisted that negotiators address them. This insistence by the EU, combined with the seemingly insufficient reductions in agricultural subsidies to act as a bargaining tool, solidified the position of the G-22 countries against granting any concessions whatsoever.
The collapse of the talks in Cancún does not immediately translate into an outright failure of the Doha Round, but it does carry serious implications. First, a new world trade agreement by the original January 1, 2005 deadline is nearly impossible. Second, the WTO’s prestige and role in international trade have been hurt. EU Commissioner Lamy, for example, stated that it was a “medieval institution” because it depends on consensus of 148 members to initiate actions. U.S. Trade Representative Robert Zoellick derided the lack of negotiation and obsession with “inflammatory rhetoric” by the G-22.
Most importantly, the usefulness of multilateral negotiations is in question. The United States is now even more interested in using bilateral negotiations to press its trade agenda. Having recently concluded bilateral free trade agreements with Chile and Singapore and currently engaged in talks with Morocco, Australia, the Dominican Republic, and Bahrain, the United States government is especially in bilateral talks because the president’s “fast track” trade negotiating authority expires in 2007. By that time, the WTO Doha Round might not be finalized, so more immediate bilateral treaties become crucial to promoting the U.S. trade agenda.
For his part, Lamy warned that the EU would also re-examine its commitment to multilateral trade talks, although his colleague Franz Fischler, the EU farm commissioner, said, that “all the [EU] member states stick to the principle of the multilateral approach and they have said very clearly that bilateral agreements are not an alternative.”
Meanwhile, the G-22 countries, most notably Brazil, have claimed victory in the wake of Cancún, believing that they have proved their ability to be a counterweight to the United States and EU and exposed what they consider injustices within the WTO system. This victory may be short lived, though. Developing countries have the most to gain from multilateral talks, since small countries can be overwhelmed in bilateral talks with the United States or EU.
Furthermore, the United States has indicated that the G-22 countries harmed their relationships with America. Senator Charles Grassley (R-IA), chairman of the Senate Finance Committee, said that the United States should exclude Brazil and all other Latin American G-22 countries from the FTAA.
In the larger sense, the whole world trading system may suffer from the delay or possible collapse of the Doha Round. The World Bank released a report called Global Economic Prospects 2004: Realizing the Development Promise of the Doha Agenda, on the eve of the conference, saying that a successful WTO round could raise global incomes by as much as $500 billion a year by 2015. With the failure of the Cancún negotiations, those benefits are at risk. |
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