The After Effects Of Cancun

The Economic Times, September 20, 2003

By Pradeep S Mehta

The solidarity shown by the poor countries at the Cancun trade meet, which came as a surprise to many, is a genuine reason for pride in the developing world. It showed what can be achieved in a democratic institution. If only trade negotiations were truly a democratic business!

No sooner was the meeting over, both the United States and the European Union expressed their intention to find other ways to achieve their aims of opening markets for their goods and services. This would mean that countries like India which are without any regional or bilateral arrangements would suffer more than they would have under a multilateral regime.

How did this situation come about? The Cancun WTO ministerial was trapped in some contentious North-South issues and even before the meeting began many had wondered whether common ground could be found. Two of these issues revolved around the age-old subject of agriculture and the Singapore Issues: investment, competition, trade facilitation and transparency in government procurement. Apparently, the resolution of one was tied with the other as the draft declaration had specified a common target date for concluding the negotiations. For a long time the EU, the main demandeur for the Singapore Issues, has been insisting on such a trade off.

When the negotiations on a draft declaration could not succeed, the Green Room process (where few influential countries meet to sort out the differences) was launched. To begin with, the Mexican host started discussions on Singapore Issues rather than the more important subject of agriculture — perhaps at the insistence of few interested countries.

On Singapore Issues, EU eventually agreed to unbundle and drop investment and competition from the WTO agenda entirely. The US was also ready to go along with the EU. Some of the developing countries such as India and Malaysia could live with this. However, the African group did not want any, while the other two EU supporters: Japan and Korea insisted on all four. It is interesting to note that while EU was ready to move on agriculture, both these East Asian countries were immovable. When the discussions appeared to be blocked, the leader of the African group, Kenya, walked out of the Green Room.

In the face of this breakdown, the Mexican chair decided to call the meeting to a close, declaring that the whole ministerial negotiations were impossible. This was immediately rebutted by India and some EU member states, when leaving the meeting, who said that if only the chair had extended the discussions a deal could have been struck. Alas!

This leaves us to wonder what was behind the chair’s seemingly hasty decision; perhaps it’s strong northern neighbour!

Looking at the statements made by the US officials before and since the meeting, it appears as if they were only waiting for an opportunity to move away from the multilateral to the regional and bilateral track. Washington has promised to pursue these negotiations with renewed vigour in the FTAA and elsewhere. Having suspended such a strategy since 1999, the EU has also now announced that it will pick up deals on a bilateral basis from 2005.

What is bad about bilateralism as against a multilateral forum? In bilateral deals, it is the strong which dictate both the policies as well as how they will be interpreted. It is less likely that a poor country is able to make the same show of strength in a one-to-one negotiation with a rich country. The situation is perhaps worse for the countries that will be ignored in the surge of bilateral deals as their markets are too small to interest the big players. Secondly, under a bilateral deal the victimised country cannot even approach the WTO dispute settlement forum, which has earned a good reputation for fairness.

On the other hand, there are small African countries who are quite happy with the failure of the Cancun meeting, because they feel that they would not have gotten anything from it. Their gloom is worsened by the US response to their demand on ending cotton subsidies. Cotton is one area of agriculture on which many of the smaller African countries are highly dependent.

Some commentators have also linked the failure of the Cancun meeting to cotton. Just as the issue of TRIPs and access to medicines had become a symbol of the success of the Doha meeting — held two years ago from which the Doha Round draws its name — the plight of cotton farmers in West Africa became the acid test of the rich countries resolve to support development as an agenda of the WTO. All hopes were dashed when the US backed off on offering anything to the African demands, saying that the cotton issue can only be discussed under agriculture talks. This was perhaps a reason for the Africans to walk out when Singapore Issues were being discussed.

It may never again be possible for the South to achieve the same co-ordination at the WTO because international economic relations are so dynamic and often situations change with so many variables which influence their management. The institution of WTO is itself set to change, as both the two trading powers want sweeping changes in the way it operates. Consensus visibly doesn’t work according to the EU, that promises to come up with a proposal for dramatic reforms. Without the principle of consensus, democracy will make way for the rule of jungle, where might is right.

Back in 1971, at Cancun, North-South economic relations were discussed by heads of government such as Ronald Reagan and Indira Gandhi in the hope that a clash between north and south could be avoided. In 2003, it seems as if polarisation between the rich and the poor may still be deeply entrenched. We cannot forecast the impact of this in future in either of the areas of economic and political relations, but if this new-found developing country solidarity can be sustained, it could bring in a new power equation among the rich and the poor countries of the world.