15 September 2003

Split Derails WTO Talks

The goal in Cancun was not to finalize a trade deal but to make enough progress on key issues to get halfway toward an agreement on the new set of accords, known as the Doha Development Agenda.

Agricultural supports were a key sticking point in Cancun. Although most countries subsidize their farm industries in some way, the United States and European Union spend far more than poor countries, thereby making it difficult for developing nations to compete in the global market. Combined U.S. and EU farm supports total $150 billion a year; EU dairymen, for instance, get $2 per day per cow.

Although the United States and European countries were prepared to give up some of the subsidies, in return they wanted to push forward a new set of trade agreements dubbed the 'Singapore issues.' These issues mainly concern giving European and American financial companies more access to foreign markets and requiring greater transparency in how governments evaluate and award procurement and supply contracts.

The poorer nations, led by China, Brazil, India and some African nations, remained adamantly opposed to considering the financial issues until an agricultural pact was dealt with. The richer countries wanted to settle the Singapore issues first, partly because they promised to be the stickiest and partly because the wealthier nations wanted to know that they had won some benefits before making farm concessions.

Although wealthy countries including the U.S. described the collapse of talks as a failure, poorer nations saw it as a healthy expression of unity on the part of developing countries.

'The demands and tough rhetoric are easy, and negotiations are hard work,' chief U.S. Trade Representative Robert B. Zoellick said. 'All walked away empty-handed.'

EU Trade Commissioner Pascal Lamy was more pessimistic, describing the WTO negotiating mechanisms as 'medieval' and incapable of bearing the weight of the issues that representatives of the 148 member countries have to deal with.

'I don't think we have to beat around the bush,' Lamy said. 'Cancun has failed.'

But Beatrice Matumbo, Tanzania's delegate, said the collapse was positive in the sense that it showed poor countries did not 'succumb' to the pressure and agenda of richer nations.

'I was afraid I would have to go back to my people and say we didn't gain anything,' she said. 'But instead we stood up to the manipulation. I am very happy.'

While this is bad news for Australian agriculture, which does not enjoy the level of protection that US and EU farmers do, it is a short-term catastrophe for the developing world. For many years the IMF has been pushing developing economies to expand their agricultural exports. All that has a achieved is a glut of primary products that has driven down the price of those goods.

Meanwhile the rich nations subsidise their farmers heavily and impose non-tariff protection on agro imports. Apparently free trade is only for those markets where the rich nations can make a buck.

In the long term the resistance by developing countries may lead to fundametal reforms in the terms of trade.

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