Cancun collapse should be a wake-up call for the WTO

By Shefali Sharma

September 17, 2003, Trade Information Project, IATP Geneva: The sudden end of the unsuccessful WTO talks in Cancun was news received in starkly contrasting perspectives by different players in the negotiations of the Fifth Ministerial round.

Glossary of Acronyms

ACP -African, Caribbean and Pacific grouping of countries

G21 - Leading developing nations with powerhouses such as China, Brazil and India

LDCs - Least Developed Countries

NAMA - Non-Agriculture Market Access

NGO - Non-governmental organizations including farmer groups, trade unions, multi-national environmental groups or faith-based organizations.

Singapore issues - Rules governing investment, competition, government procurement and trade facilitation.

“The collapse of the Ministerial, following from that ofSeattle for similar reasons, should serve notice to the rich and powerful countries of the international trade system that the time is running out for their narrow interests on the rest of the world,” the Africa Trade Network said. “It should signal the beginning of a new way of interaction in international affairs based on a relationship of genuine and mutual respect.”

Yet within hours of the WTO Ministerial’s collapse, United States Trade Representative Robert Zoellick gave a press briefing to the stunned media with a harshly different twist. Non-governmental group leaders huddled around a screen in the Convention Center to watch the live broadcast of the press conference.

Accusing, in particular, a new and significant alliance of 21 developing countries that include China, India and Brazil, he said, “We came ready to negotiate, but we can’t do it by ourselves. Their tactics or logic hasn’t produced anything for them.”

And in a reprimanding message to developing country WTO members, Zoellick threatened that the United States would “move on multiple fronts” to open up developing country markets through bilateral and regional avenues. He added, “We are going to open markets one way or another.”

European Commissioner Pascal Lamy, on the other hand, stressed that the multilateral trading system was a priority for Europe, but that the WTO “is a medieval organization” whose rules and procedures “need to be revamped seriously.”

“There is the potential for a real positive outcome following this collapse in Cancun. Now we may get real negotiations on the difficult issues confronting the global trading system,” said Mark Ritchie, President of the Institute for Agriculture and Trade Policy.

“It is clear that we are seeing a shift in the power dynamic at the WTO. No longer are developing countries going to roll over for the U.S. and EU – particularly on issues of vital importance to them,” Ritchie said. “How the WTO ponds as an institution to this breakdown over the next few months will be critical.”

ANALYSIS: Why Cancun was doomed from the start

Both the US and the EU used bully tactics in this meeting similar to 4th Ministerial Meeting in Doha through phone calls at the heads of state level and taking advantage of their regional partnerships. However, this time the intense pressure that was applied by the US and the EC to pry apart developing country groupings failed to deliver.

This is partly because some of the coalitions like the G21 had major powerhouses such as China, Brazil and India who came together and agreed to negotiate jointly on the issue of agriculture and they refused to respond to rumors about various members defecting from the group. Similarly, the African Union, the ACP (African, Caribbean and Pacific grouping of countries) and the Least Developed Countries (LDCs) joined in an alliance (totaling 61 WTO members) and put forth their joint positions during the ministerial itself. Though intense pressure was on them to accept negotiations on the Singapore issues by the EC, they faced different pressures from the United States in terms of market access commitments.

The Alliance was able to stand together and also gain support from other major developing countries that opposed the Singapore issues. At the same time, they gained support from the G21 who demanded that both the EU and US put their houses in order first in the agriculture talks.

The EC and the US did not have completely similar objectives in the Singapore negotiations since the US could do without investment and competition. The US wanted unmitigated market access in agriculture and was not concerned about its domestic subsidies (one of the three pillars of the agriculture talks), while the EC was defensive on domestic subsidies.

The pressure applied on countries was diffused by the fact that both strong regional and issue-based groupings existed in Cancun. Developing countries were able to maintain cohesive coalitions with clearly articulated goals and concerns.

The WTO’s role

There are numerous systemic and political reasons for the collapse.

Perhaps the biggest two reasons are: 1) the failure of the institution to acknowledge that developing countries have different needs and expectations from the WTO: and 2) the WTO’s practices for manufacturing consensus are undemocratic.

This was clearly illustrated during the Cancun Ministerial. Both the US and the EC came empty handed to the meeting i.e. they had very little to offer developing countries apart from promises that increased liberalization will benefit them. This rhetoric has not delivered.

Since the Doha Ministerial in 2001, the WTO has asked countries to move ambitiously and quickly on numerous areas where developing nations are not ready to negotiate. The US agenda was simply aggressive-- market access to developing country markets in the areas of agriculture, services and industrial goods. They were also happy to support the EU in pushing for Government Procurement and Trade Facilitation.

The European Union similarly wanted developing countries to accept four more issues, make concessions in market access while maintaining its defensive stance in agriculture. For most developing countries, the key area of concern was agriculture and the various problems they face in this sector.

Ambitious agenda and flawed process

The WTO set itself up for failure. The WTO spent the past year downplaying the significance of the 5th Ministerial Meeting as a “mid-term review” where Trade Ministers would give the institution the impetus it needed to remove the deadlock in virtually every area of negotiations. The past six months in Geneva have been a strange process of undocumented meetings where chairs of various committees assumed the tremendous responsibility of drafting language for the Draft Ministerial Declaration that Ministers would negotiate here in Cancun.

By the last month in August, it was clear that major differences could not be resolved amongst groups of countries in a short period of time in areas of extreme importance such as agriculture and Non-Agriculture Market Access (NAMA) and the fate of the so-called
Singapore Issues (investment, competition, government procurement and trade facilitation).

In spite of this, the chair of the General Council and the Director General with the help of the “Friends of the Chairs” and the Secretariat, drafted an ambitious declaration with technical annexes on their “own responsibility” to forward to Ministers. The text was not a negotiating document where different positions are clearly laid out through several options, but largely their own interpretation of what a “compromise” could look like. Only the text related to the Singapore Issues had two options—to continue examining the issue or to negotiate. The option to negotiate was backed by annexes that brushed through what might be potential items to negotiate.

Clearly, this text was highly problematic for several blocks of countries. And the “framework” approach for the agriculture, NAMA and Singapore Issues negotiations contained highly detailed elements that WTO Ministerials are ill prepared to handle given their short duration.

Because of the WTO’s failure to reflect a balanced draft text, several countries submitted their own proposals to be attached to the Chair’s text for Ministers to address. As a result, there were still numerous proposals on the table in Cancun. A streamlined and transparent process in Geneva where positions of all members are fairly reflected could have avoided this. It could have also been avoided by not expecting Ministers to make large compromises in 5 days on an extremely ambitious agenda when members are nowhere near compromise.

The way forward

The G21 are a promising development in the WTO. If they can manage to stick together, they will serve as an important counterbalance to the economic and political muscle of the US and the EC. Their union also has positive implications for broader global governance where some sort of balance is urgently needed to prevent superpowers from dictating the terms of trade, aid and international policies in favor of their own interests.

The WTO needs to acknowledge and understand that civil society interested in safeguarding the public interest is not going away. It is better to internalize the critiques that are resonating from both within and outside WTO walls, than to continue ignoring them for the sake of “efficiency” and liberalization for itself.

During a year where the UN itself has been challenged by the world’s biggest superpower, the role and responsibility of major powers is being questioned worldwide. The Cancun collapse is another big signal that it is time for introspection about the world order and the role that international institutions must play to guard against the abuse of power of a few.

The WTO is due to reconvene Senior Officials in three months to “move towards a successful and timely conclusion of the negotiations.” It would be wise for the WTO to learn from this ministerial and focus more on the quality of the work that gets done in the next year rather than eagerly push for the completion of the talks.

It is conceivable that the political statement developing countries made in Cancun will elicit a backlash from the superpowers. It is also possible that in the next months, we will see a stronger attempt by both the US and the EC to “punish” or “teach a lesson” to countries that have stood together. It is up to the WTO to ensure that this type of behavior is exposed and understood and members are allowed to make decisions without coercion.

For the WTO, it’s a matter of survival. It has already struck out twice. It may not survive the third time.