Global Economy
20 SEPT 2003
Poorer nations celebrate trade talks failure
By Anil Netto

[rizzn’s note: i know this goes over a lot of heads and just plain goes around most of the others. The truth is that despite all protestations to the contrary, there is a lot of conspiracy that surrounds the World Trade Organisation, and I can’t help but think it’s a Good Thing that the talks broke down. There is something scary when the whole of the world’s developed nations can get to the same table with the worlds ‘developing nations’ as they call them and shove an agenda consistently down their throat. This is not a goverment body, and this is not a government organisation. At best it is a quassi-government organisation. These people determining how you and I interatct and trade with countries outside our own are not elected individuals. They are appointed. Sure, they vote on concensus on the issues, but it’s kept under lock and key how exactly that voting process works. I will not cry for this organisations demise, if it comes to this. By the way, if you want to hear about the WTO from the horses mouth, you should go here. ]

PENANG, Malaysia – The collapse of the Fifth Ministerial Conference of the World Trade Organization in Cancun, Mexico, last week may signal a dramatic change in the way the world’s trade rules are being formulated. It could also spell the beginning of the end of the WTO as a negotiating forum for world trade unless new impetus gets underway to change the situation.

The failure of the talks is regarded by the developing nations in Africa and Asia as a signal of their arrival as a new force to be reckoned with in the global economic stakes. The collapse of the talks follows a similar breakdown in 1999 in Seattle, Washington and of a later meeting of the United Nations Conference on Trade and Development (UNCTAD) in Bangkok.

But there is a growing danger that the WTO will recede into the background, regarded by the developed nations as an irrelevant talking-shop for protesters, even as they negotiate the real business of international trade under divide-and-rule tactics to cut even more lopsided bilateral deals than in the past. There is already serious and growing concern about the tendency of developed nations to negotiate bilateral trade treaties with poorer countries of their choosing, at the time of their choosing, to their advantage.

The Cancun meetings collapsed when the world’s poorer countries closed ranks and refused to discuss new issues until some basic issues such as agricultural reforms had been tackled. They refused to accept a proposal
that would have meant only small cuts in developed nations’ agricultural subsidies and that too only if developing nations agreed to open up on the new issues to allow foreign firms easier access into developing markets.

For now, the developing nations are celebrating their ability to stop the powerful European Union-United States-Japan juggernaut in its tracks. Countries such as Brazil, China and India flexed their muscle to draw impressive support from other developing nations, which represent more than half the world’s population. Backed by vociferous campaigners and protestors outside, delegates argued that stalling the talks was a far better option for developing nations than reaching a lopsided agreement stacked in favor of developed nations.

The talks collapsed when a “Green Room” of 33 countries failed to agree on contentious “Singapore issues” that the rich countries wanted discussed, dealing with investment, competition, trade facilitation and transparency in government procurement. That prompted the chair of the ministerial to declare an end to the conference. The proposals created far deeper disquiet than the disputes over agriculture.

The impasse came despite concessions from EU Trade Commissioner Pascal Lamy, who agreed that the negotiations should treat the four issues separately in Cancun. The developing-countries bloc flatly rejected these issues, arguing that there was no clear understanding that the Doha Declaration required negotiations on these new issues.

This solidarity among developing nations was in sharp contrast to the past when similar groupings cracked under pressure from developed nations, which customarily have dominated the direction of previous negotiations under a veil of secrecy.

Certainly, the developing nations’ success in blocking Cancun is a severe blow not only for the WTO but also for other regional multilateral trade agreements. Some analysts worry that the very future of rules-based multilateral trading as exemplified by the WTO is now at stake. Proponents of the old order complain that the influx of poorer nations into the WTO’s privileged ranks has transformed the once-focused trade body into a 148-member mishmash of conflicting players who are more interested in “pontificating and not negotiating”.

Those against the existing setup regard Cancun as a huge victory for the united power of developing countries to stand up to arm-twisting by the US and the EU. This process, they argue, is vital in creating a more democratic setting for world trade negotiations that would go a long way in promoting real economic justice globally. These critics say the developed nations should stop trying to pin the blame for the Cancun failure on developing nations and instead examine how they have been trying to protect their own economic interests.

Certainly, these economic dislocations are serious. According to the World Bank’s 2004 report on Global Economic Prospects, published in early September in advance of the Cancun meeting, protectionism hits all of the world’s developing nations hard. Protection facing developing nation-exporters in agriculture is four to seven times higher than against manufactures in the north, and two to three times higher in developing countries. Tariff peaks are particularly high in rich countries against the products of poor countries. Hefty specific duties are particularly common in rich countries.

In fact, US subsidies to cotton growers – a staple of African agricultural production – totaled US$3.7 billion in 2002, three times total US foreign aid to Africa. Those cotton subsidies depress world cotton prices by an estimated 10 to 20 percent, reducing the income of thousands of poor farmers across the globe. In West Africa alone, according to the World Bank, where cotton is a critical cash crop for many small-scale and near-subsistence farmers, these US cotton subsidies cost them about $250 million a year.

The problem in Cancun was that the draft text did not call for serious reforms in domestic support for agriculture within the EU, the United States and Japan, while developing nations were told to decrease their tariffs sharply. Developing countries led by China, Brazil, India, South Africa and Argentina, under the newly formed Group of 22 (G22), were not impressed. Little was given to developing countries in the way of concessions on strategic products and safeguard mechanisms, they argued.

Crucially, the draft had insisted on at least two new issues at the start of negotiations: government procurement and trade facilitation. It also attempted to impose a deadline for reaching agreement on the mode of negotiations on the equally contentious competition and investment issues. Negotiations hit an impasse, with some 90 developing countries opposing the launch of negotiations on the Singapore issues.

The developing countries complained that they simply did not have the capacity to handle these new issues on top of the existing WTO negotiations. They also said that agreements on these new issues would have further restricted their domestic economic policy options and jeopardized domestic industries.

Despite the impasse in Cancun, many ministers have indicate

d that they are still committed to carrying on with the Doha Round in some form, raising hopes for what they regards as a more democratic, transparent
and participatory WTO to emerge from the ashes.