September 22, 2003	Monday	Rajab 24, 1424

The fifth ministerial session of the World Trade Organization held at Cancun from September 10 to 14 met the Seattle fate on the last day of their crucial talks when the member countries failed to make headway on an issue that could have made a huge difference to the developing world — farm subsidies.

As the World Bank has noted, 144 million people would have been lifted out of poverty if a deal on agriculture had been clinched.

The collapse, however, did not come on this count. It came when the EU tried to rush with an agreement on investment and other Singapore issues which meant providing an obstacle-free passage to the multinational corporations in the developing countries. In other words, the West offered little and wanted to take away everything. So, the African countries walked out of the conference in disgust and the chairperson declared the conference closed without any agreement.

An immediate outcome of the deadlock and the bitterness it has caused is the all-pervasive uncertainty about meeting the deadlines of several pending agreements and the implementation of various WTO regimes. Although the General Council of the WTO will meet in Geneva in December this year to proceed ahead with the negotiations already in the process, the breakdown of talks at Cancun virtually rules out the prospect of the Doha round finishing on schedule by January 1, 2005, and raises the possibility of the talks dragging on for years.

The collapse was, in effect, hardly a surprise. It was very much on the cards because both the US and the EU are deeply committed to provide subsidies to their farmers on long-term basis. The recent Franco-German deal at the Brussels summit delays any substantive reform in EU’s Common Agricultural Policy until 2006. At the most, a few cosmetic concessions would have been offered for the sake of the conference’s success. What, however, surprised everybody at the conference was the brave resistance the weaker nations put up to the dictatorial machinations of the strong nations. That tilted the balance of power in favour of the former.

Although Cancun met the Seattle fate but where it differed significantly from the 1999 summit was the nature of the cause of the breakdown. At Seattle, it was the great anti-globalization stir, the first of its kind, that prevented the summit from proceeding ahead, although inside the conference hall it was the bitter divide between the US and the EU that simultaneously contributed to the ultimate failure.

Cancun was absolutely different. One witnessed a harmonious equation between the US, Europe, Japan and other countries of the developed world. And there was stubbornness and arrogance in their attitude as well. But what was missing at Seattle was the emergence of a new power and clout of the developing countries which was seen coming into play at Cancun right from the outset. These nations formed a coalition and established themselves as a potent force, challenging the traditional supremacy of the United States and Europe in trade talks.

Many of the moves of what is now known as G-21 signalled a profound power shift within the WTO that could have broad implications, at least, for the US policy. They had the support of more than 80 countries as the alliance of the Third World continued to grow throughout the conference duration, drawing in Malaysia, Africa, the least developed countries, and Asia.

Led by Brazil and India, according to The Guardian, the balance of trade power has now shifted strongly away from rich countries, marking the most significant change in the WTO for 50 years. Throughout the talks, poor countries held out for sharper cuts in the West’s lavish farm subsidies and a blocking of the EU’s demand for new talks on a global investment and competition treaty. The overwhelming message coming out of the talks in Mexico was that the developing world is united, organised and not to be messed with.

The western camp tried to give an impression that China, which became a member of the WTO only two years ago, was supporting the US position in an attempt to prise the world’s fastest-growing economy away from its allies in the developing world. But it was, in fact, the presence of China at Cancun that profoundly altered the dynamics of the 146-member organisation.

Oxfam, in a statement, said: “World trade negotiations will never be the same again. On paper, this meeting has failed but the new power of developing countries backed by campaigners around the world has made Cancun a turning point”. In the past, it said, rich countries made deals behind closed doors without listening to the rest of the world. They tried it again in Cancun. But developing countries refused to sign a deal that would fail the world’s poorest people. Fred Bergsten, director of the Institute for International Economics, a Washington-based think-tank, said, in the past if the United States and Europe agreed, the deal was done even if others were to grumble. This was the first time that there was a third party with crucial veto power.

The talks will now return to diplomats at the World Trade Organisation’s Geneva headquarters, leaving them to try and salvage something from the rubble. But there is virtually little chance the countries will meet a self-imposed deadline of completing a binding treaty by the end of next year.

There are reasons for some comfort for poorer countries. Under an earlier agreement, rich countries have agreed to full opening of textile and clothing markets by the end of next year and that the WTO has agreed to finalise the deal on the imports of generic drugs to meet medical emergencies such as HIV/Aids.

The chairperson of the conference, Mexico’s foreign minister Luis Ernesto Derbez, while explaining the cause of failure, in his concluding remarks, observed that despite considerable movement in consultations, members remained entrenched, particularly on the “Singapore” issues — a reference to European delegates’ anxiety to have a quick agreement on investment. Describing the failed summit as “a once-in-a-generation opportunity”, he thought that the negotiations may now take a long time to recover.

WTO director-general Supachai Panitchpakdi was frank to observe that the deadlock was a setback. He was disappointed but thought it was important to ensure the negotiations were put back on track. The ministerial statement, issued later, asked the director-general, WTO to convene a meeting of the General Council at senior officials level no later than 15 December 2003 to “take the action necessary at that stage to enable us to move towards a successful and timely conclusion of the negotiations.”

The key source of conflict during the five-day talks, as expected, was the $300 billion annual subsidies that the United States and Europe give their farm businesses. These subsidies allow wealthy nations’ food to be dumped on poor countries’ markets, causing misery to their farmers. The rich countries refused to concede any ground to developing countries on agriculture.

The US Trade Representative Robert Zoellick has meanwhile clarified his country’s position saying Washington would continue to pursue bilateral trade talks with other nations in addition to participating in the WTO. Many saw this comment as a veiled threat to those developing countries that stand for a multilateral trade pact. Mr. Zoellick said he would move ahead on free-trade agreements with individual nations or regions, noting he had a long list of countries that wanted to negotiate with the United States.

The New York Times has described the breakdown in talks not as disastrous as it was in Seattle four years ago. The newspaper thought the group based in Geneva will now almost certainly fail to make its self-imposed deadline of January 2005 for reaching a new agreement that dismantles global trade barriers.

The failure at Cancun, the NYT said, also means the faltering global economy will not receive a jump-start by the expansion of markets, which some economists contend would inject hundreds of billions of dollars into international commercial activity. The global economy , according to The Guardian, received a damaging blow when trade talks collapsed in Cancun. With the world economy already fragile, analysts fear the collapse could further damage business confidence.

Politically,the developing countries have found a new assertiveness with the formation of the G-21, an alliance led by China, Brazil and India. The third world has tried to adopt a unified front before. In 1964, developing countries formed the G-77, a group that has since expanded to over 130 countries. In the 1970s, the group called for a new international economic order to redress the global economic imbalance but failed to make much headway. What has changed since then is China’s growing economic clout. With China’s active role in the new alliance, the poor nations could expect to win concessions from the US and the EU.