Despite a series of intense negotiations, world trade talks were derailed and came to an abrupt end when a large number of representatives from African, the Caribbean and Asian countries decided to walk out of the convention hall in Cancun.

In this failure of the talks, the 146-nation World Trade Organization, based in Geneva, has suffered a major setback. The failure to keep the ongoing Doha Round moving forward is a monumental failure.

Three basic questions need to be addressed now: (i) why did the talks collapse?, (ii) what are the consequences of the failure in Cancun? and (iii) what are the next steps to pick up the pieces and forge ahead even in the face of the huge setback to the WTO efforts to achieve trade liberalization at a wider scale?.

It is important to raise these questions because a successful conclusion of negotiations at Cancun would have provided the much-needed boost to the fizzy and fragile world economy that, in turn, would have benefited both the rich and poor nations. That did not happen and hence the world economy would remain in the doldrums for quite some time. Consequences of this phenomenon for many a developing country are very severe. The World Bank considers government subsidies in the US, Europe and Japan — more than one billion dollars a day — particularly hurtful to the cause of the poor countries’ farmers because these subsidies prevent them from successfully competing and strengthening their weak economies.

The principal reason why the talks did not end on a positive note was the unwillingness of the rich countries to offer substantial and meaningful cut in the over $300 billion a year farm payments that depress worldwide crop prices. Instead of treating this issue seriously, the rich countries decided to launch another set of trade and investment enhancing issues that suited them most— such as new rules that provided better protection to foreign investments, reduction of tariffs on industrial goods, and relaxed government regulations for foreign procurements.

The developing countries insisted, and rightly so, that the above issues could not be considered without discussing the agricultural subsidies first. Also the newly formed group of 21 developing countries (G-21) felt that the new issues raised by the rich countries would make the WTO even more cumbersome and unwieldy to play the role for which it has been established.

In order to test whether the WTO members’ commitment to the creation of a level playing field is genuine or not, four African countries brought the cotton case to the centre stage for discussions. Since the US and European countries had great difficulty in defending subsidies of over $3 billion to a few thousand of their farmers which regularly injures to the interests of almost 10 million cotton growing farmers in the African countries, the rich countries ignored the African countries plea and went ahead with other issues mentioned above.

Living with the depressed world cotton prices because of the cotton subsidies was an uphill task for the African commerce ministers to sell at home. The Africans wanted the cotton subsidies to be clearly phased out over the next three years and asked for $250 to $300 million a year in compensation payments to their farmers in the interim.

Even though the current Secretary General of WTO, Supacahi Panitchpakdi—a Thai economist— took the unusual bold step to support the African delegates’ proposal in principle, the rich countries showed a height of insensitivity and brushed aside the proposal.

A new factor in the resort city of Cancun was that, unlike the previous rounds of discussions when the rich countries generally held sway, an alliance of 21 developing countries surfaced in Cancun to fight for their proposals in a unified way. Surprisingly, the alliance was well organized, articulate and forceful in defending their position against the agricultural subsidies that in the US were raised by $40 billion in 2002 alone.

This was the first time in the WTO history that the poor countries had put a comprehensive case for their position, laced with passion and credibility, that the delegates to the Cancum meeting could not ignore. The unified alliance of the developing countries on agricultural subsidies did not yield to a lopsided draft proposal that was presented in the dying hours of the meeting, and led to the impasse at Cancun.

It was impossible for many a developing country representatives to expose their poverty-stricken farmers to the flood of cheap subsidized products from the rich countries and risk their livelihood. The delegates in general knew that Cancun meltdown was a blow to the WTO but many of them also felt that liberalization of trade without any steps to simultaneously eliminate agricultural subsidies would be even a greater disaster.

I do not see the failure of talks at Cancun as serious and distressing as the one at Seattle a few years ago. But at the same time it is quite clear that the progress that started two years ago at the WTO meeting in Doha, Qatar, could have been more impressive if both the parties had shown greater flexibility and a genuine spirit to compromise. It is quite clear that one of the first outcome of the failure of talks is the painful inability of the world economy to become more buoyant and resilient in the near future. That alone will dampen the growth of many developing countries around the world well below their potential levels.

Another serious danger is that the US would now tilt more and more towards bilateral and regional deals which would put smaller countries at a greater disadvantage. The US has already started bilateral talks with half a dozen countries.

Also, a new wave of protectionist mentality would grip the policy makers in the largest economy of the world, thereby making a further dent on multilateralism. It looks like that these hurdles created by the Cancun meltdown would not be easy to surmount. The Seattle debacle would revisit us with even greater force. At the same time one cannot disagree with the observation that the failure of “unjust talks” is not a disaster and that “no deal” is better than a “bad deal”.

The unfortunate outcome of talks at Cancun is painful to digest but all is not lost. The Doha Round is not dead yet. However, I feel that the deadline to reduce barriers to trade by January 1, 2005, just cannot be met because of the setback in Cancun.

The countries have to think-through the five days experience and see why the Conference objectives were not achieved. As Supachai Panitchpakdi , the Director General of the WTO, has said, “ we must return to the task before us with renewed vigour”.

The trade negotiations would now shift to Geneva. All components of the level playing field must be reconsidered with open minds, and with particular concerns for the plight of the poor farmers in developing countries around the globe.

Then and only then the next round of negotiations can be expected to yield a mutually acceptable and just deal. Since the 146-nations negotiating process to build consensus in trade policies is too unwieldy to proceed smoothly, it seems more advisable for a select group of rich countries representatives to negotiate and work out an acceptable draft proposal with G-21 and then present it to a larger group of all the member countries for minor modifications in the next WTO meeting.