The European Commission has recently circulated a think-piece on the failure of the Cancun Ministerial Conference of WTO. In this early reaction paper the Director General, European Commission, has described what went wrong in Cancun and put forward some ideas about the future course of action at the WTO (click here to view/download the report). This report is of the opinion that the failure of the Ministerial is an important setback for the Doha Development Agenda. According to this report, the failure at Cancun can be attributable to three sets of reasons. First, are the 'reasons of substance' which basically refers to the differences of opinion among the WTO members about various negotiating issues, second are the 'reasons of tactics', which refers to the problems that cropped up in Cancun because of the North-South divide among the WTO members and finally are the reasons of organizational mismanagement of the Cancun conference.
Reasons of Substance
Among the reasons of substance, the paper argues that
the inability of the members to arrive at any agreement
on the four important issues of cotton, agriculture,
Singapore Issues and non-agricultural market access
have played a major part at the Cancun fiasco.
Cotton: Regarding the
failure to reach an agreement on cotton, it blames
the United States for taking a position which was
totally insensitive to the proposals made by the four
West African states. It may be recalled that four
West African countries, Benin, Burkina Faso, Chad
and Mali pointed out that as a result of huge subsidies
given to cotton in richer countries, cotton exports
of these four West African countries have suffered.
These countries argued that the subsidies given to
the cotton farmers in developed countries should be
drastically reduced and these four African countries
should be compensated for their loss. This argument
gained considerable support among WTO member countries
during the ministerial. USA, however, underplayed
the demand to reduce support to cotton farmers by
saying that subsidies play only a very minor part
in the problems of international cotton trade. On
14th September, one day before the end of the Cancun
Ministerial, the WTO issued a draft ministerial declaration
which, in its paragraph 27, included some proposals
about the cotton initiative. The official draft virtually
rejected the appeal of the African states and echoed
the arguments of USA and suggested that distortions
of cotton trade are unlikely to come down in near
future and the West African countries should not remain
too dependent on cotton and should try to diversify
towards other crops. The EC report rightly points
out that the "manner in which this rejection
was conveyed through a Chairman's draft text reflecting
a position virtually identical to that of the United
States (and rejected earlier by the Africans) clearly
contributed to the development of a charged emotional
atmosphere during the last 24 hours of the Conference,
and of a feeling amongst the Africans and the LDCs
of being pushed around and manipulated".
Most developing countries took strong objection to
the poor handling of the 'Cotton Initiative' by the
WTO officials and it increased the mistrust about
the multilateral trading system among these countries.
Agriculture: The EU think-piece
is of the opinion that, a major breakthrough in agriculture
was in the offing as EU and USA mended their differences
and tabled a proposal which, this report considers,
was a good 'starting point' for the Cancun negotiations.
This report blames the group of twenty one developing
countries (now referred to as 'G 21') for rejecting
the EU-US joint text and thereby missing a "great
opportunity to move forward" in agricultural
negotiations.
However, it should be pointed out here that the joint
EU-US draft on agriculture was not acceptable to most
developing countries for some very valid reasons.
Developing countries found it difficult to accept
the content of this modalities framework because it
did not address some of their major concerns. Key
shortcomings of this proposal were:
• It was extremely lenient about the reduction
of domestic and export subsidies in developed countries.
The latitudes provided in the existing AoA allowed
developed countries to highly subsidize their agricultural
sector even after the implementation of AoA (see WTO
Annual Report 2003). Unless more stringent disciplines
are imposed on subsidization, developing countries
are unlikely to benefit from further liberalization
of agricultural trade. If the EU-US joint text was
accepted as the terms of reference for the future
course of negotiations on agriculture, it would have
meant that the root causes behind the prevalent distortions
in the current global agricultural trade would have
remained untouched.
• It diluted the concept of 'Strategic Product'(SP)
introduced in the Harbinson's text. According to the
Harbinson text, developing countries were allowed
to declare a certain number of agricultural products
as SP. These products were to have lower tariff reduction
commitments as well as Special Safeguards (SSG) provisions.
The new proposal removes the SSG provisions for these
products.
• The EU-US framework did not adequately deal
with the concepts of the 'Food Security Box' or the
'Development Box' proposed by a group of developing
countries. These concepts were floated to promote
a more development friendly set of trade-rules.
During the Cancun Ministerial, a revised version of
the Draft Ministerial Text was tabled by the Chair
of the Cancun Conference, Mexican Foreign Minister
Luis Ernesto Derbez. The Annex A of this declaration
contained a new framework text on agriculture. Though
this new text incorporated some of the suggestions
made by developing countries, it was still largely
drawn on the joint proposal submitted by the EU and
the US. Developing countries were not in a position
to accept this text because by doing so they would
have, on one hand, legitimized continued use of high
subsidies and on the other hand, had to open up their
own markets significantly.
Singapore Issues: The
Singapore Issues, which officially got the blame for
the Cancun failure, was sited as the third reason
for the failure by this EC report. In the Cancun Ministerial
meet, the four Singapore Issues (Competition Policy,
Transparency in Government Procurement, Multilateral
Agreement on Investment and Trade Facilitation) received
maximum opposition from the member countries. In the
conference, approximately 70 countries led by India
and Malaysia were explicitly against inclusion of
the Singapore issues in the WTO's agenda.
The EC report has blamed almost everybody for the
deadlock over the Singapore issues. It blames the
African and least developed countries for stubbornly
opposing these issues. The report point out that these
countries have objected to the Singapore Issues because,
in their opinion, they lack technical capacity to
participate in these negotiations. The report goes
on to suggest that the logic given by the African
countries and LDCs are flawed because none of the
four Singapore Issues is any more complicated or technical
than the existing WTO agreements. The report also
criticizes India and other developing countries for
opposing these issues over the reasons of national
sovereignty. It also condemns the USA for showing
"little enthusiasm" over the Singapore issues.
Korea got the flak for not being flexible when EU
decided to drop MAI and competition policy from the
negotiating agenda (incidentally, Japan also said
that they would not accept the exclusion of any of
the four issues).
However, according to most economists, the position
of EU on the Singapore Issues is not justified. According
to them, the real reason behind the failure of Singapore
Issues is that there was never a compelling case for
including these issues in the WTO. It was evident
from the Cancun conference that a large number of
WTO member countries were not convinced that the 'Singapore
Issues' are trade-related issues and should be dealt
under the WTO auspices. As a result, for most representatives
from the developing countries, Singapore issues were
not a priority. They were more keen on resolving the
outstanding issues in the already agreed agenda of
agriculture and textiles. According to Hoekman
(2003), the discontent over the 'Singapore Issues'
stems from the fact that these issues were never seen
to be relevant or potentially beneficial to all WTO
members. Some members see them as a negotiating ploy;
others are of the opinion that they are not of significant
economic value to them.
As Jomo (2003)[1] points out, the difference of opinion
between the EU and the developing country members
on the 'Singapore Issues' is largely due to their
different perceptions about the extent of trade liberalization
that was carried out in the Uruguay Round. The EU
is of the opinion that trade liberalization had been
largely completed with the conclusion of the Uruguay
Round. Therefore, to carry forward the reform process
and to achieve deeper economic integration, EU wants
to involve the so-called 'non-trade issues' of investment,
environment, labour and intellectual property rights
in the new WTO agenda. On the other hand, most developing
countries feel that many outstanding trade liberalization
problems are still unresolved. They feel that the
Uruguay Round has not achieved meaningful trade liberalization
in some important areas including agriculture, textiles,
garments and services. The dejection of developing
countries about the Uruguay Round is summarized in
the latest Trade Policy Review of Pakistan. It says:
"… Uruguay Round had not brought fundamental
changes, and the disadvantages faced by developing
countries had been further exacerbated; these countries
had not gained any meaningful increase in market access
in the key areas where they have a clear comparative
advantage (textiles and agriculture). Services had
been liberalized in sectors of primary interest to
developed countries (e.g. telecoms, financial services).
The costs to developing countries of the WTO Agreement
on Intellectual Property (TRIPS) Agreement were becoming
evident, and the Agreement on Trade-Related Investment
Measures (TRIMs) was having an equally harmful effect
on the endeavours of developing countries to build
their industrial base. The asymmetries in the multilateral
trading system had contributed to the growing inequalities
and asymmetric benefits between countries; "unfair"
implementation of multilateral trade rules had to
be rectified before addressing new areas of liberalization."
WTO Document number WT/TPR/S/95, pp. 16.
Given these outstanding problems with trade liberalization
and WTO, it was unfair to expect in Cancun that developing
countries would be willing to bring in the Singapore
Issues in the WTO agenda before the outstanding S&D
and Implementation issues are resolved. Instead of
pushing new issues in WTO, EU should have focussed
their attention on addressing these issues.
Reasons of Organization and
Tactics
Along with these 'issues of substance', the EU think-paper
also blames some organizational and tactical aspects
of the Cancun ministerial. Among the organizational
factors, the report points out that the agenda for
the Cancun Ministerial was too ambitious. The initial
Cancun draft had a large number of extremely contentious
issues to resolve in five days. The sheer volume and
complexity of the issues made the organization of
the ministerial a difficult matter. Secondly, as the
report points out, there were no meaningful discussions
on the first three-four days of the conference. More
importantly, discussions on the extremely contentious
Singapore issues did not start till the very last
day of the conference. The report also criticizes
the Chairman of the Cancun ministerial for unexpectedly
abandoning the ministerial after the African group
refused to accept negotiations on trade facilitation.
However, the most critical remarks of the EU think-piece
were reserved for the group of developing countries
(known as the G21 countries), which refused to endorse
the ministerial draft in Cancun. The report alleges
that the developing countries converted the trade
talks to a UN-style North-South confrontation in WTO.
It blames the G21 countries for taking a hypocritical
stand where the whole burden of adjustment was put
exclusively on developed countries. According to this
report, the G-21 countries took an offensive-defensive
alliance, which was achieved "by accumulating
in one single position all of the main offensive demands
of the Cairns Group but with disciplines only for
developed countries, and incorporated the very defensive
Indian positions on market access and China's request
that newly acceded countries be made subject to no
new liberalisation commitments".
This EU think-piece holds the G21 group of countries
responsible for the Cancun failure. It criticizes
Brazil and India, the leaders of the G21 group of
developing countries who, according to this report,
have stalled the negotiations for their own narrow
national interest. The report says:
"It is, however, clearly arguable that the main
leaders of the G-21 have much less of an economic
interest in making these negotiations move forward,
India because of its largely defensive objectives,
Brazil because of its strong competitive position
which puts it in a much more comfortable position
than any of the other significant net food exporters."
It goes on to conclude that most WTO members stand
to lose from the stalemate at Cancun. However, the
major losers will be the developing countries, which
let go the "concessions" offered to them
by developed countries in the form of cuts in agricultural
subsidies, lowering of protection in the textile industry,
and relaxation of the TRIPS agreement in relation
to vital drugs.
This is an extremely narrow and arrogant view of the
proceedings at Cancun. The failure at Cancun happened
because of two interrelated factors. First, the Doha
Ministerial Declaration set target deadlines in three
areas which are of particular interest for developing
countries. Deadlines were set for addressing the issues
of agriculture negotiations, special and differential
treatment, implementation issues and the ambiguity
regarding compulsory licensing and TRIPS. The WTO
negotiations failed to meet the deadlines in almost
all these areas. This happened because the major developed
countries did not show any willingness to meet these
deadlines. This made the developing countries weary
about the motives of the major developed countries.
Secondly, the draft ministerial text in Cancun was
fully loaded in favour of developed countries and
was unresponsive to the specific demands of developing
countries. It provided too much leeway to US-EU to
retain their subsidies in agriculture, but on the
other hand, asked the developing countries to significantly
cut their tariffs in agricultural products and virtually
eliminate tariffs on industrial products. It also
asked the developing countries to relinquish their
power to regulate foreign investment. Most developing
countries found these too high a price to pay for
the minor concessions they were getting from the developed
countries.
As a result, in Cancun, the developing countries were
determined to resist the pressure exerted by developed
countries and were more prepared to face the negotiations
as a group. As Das
(2003) points out, over the years, the major developed
countries have managed to extract significant concessions
from the developing countries. But with better understanding
of the dynamics of WTO, developing countries have
started to resist this pressure. Awareness about WTO
at the domestic and political level has provided them
an added leverage. The resistance in Cancun was more
determined than the Doha ministerial because, a large
number of the developing countries were not prepared
in Doha to handle the pressure tactics of the US-EU,
whereas, after having learnt their lesson in Doha
and later, the developing countries managed to stick
together and stay on their determined track in Cancun.
As a recently published report in 'The Guardian'[2]
points out, a confidential post-mortem examination
prepared by the Department of Trade and Industry concludes:
"At the heart of the collapse was a clash between
the approach of the EU and US and others, expecting
a traditional brinkmanship style negotiation and the
approach of many developing countries who were not
willing to play this game, and were prepared to hold
out if they weren't satisfied".
The think-piece by EC could not judge the significance
of this new development properly. As with other issues,
it only gives a one-sided view of the picture. This
is a weakness of this piece and as a result, it fails
a give an unbiased view about the true reasons behind
the failure of the Cancun Ministerial.