09-23-03

THE CANCUN FAILURE: NO GOOD REASON TO DANCE

Ernesto Zedillo is the former president of Mexico and heads the Yale Center for the Study of Globalization.

By Ernesto Zedillo

NEW HAVEN -- It is hard to understand why some self-appointed representatives of the peoples of the world danced jubilantly in celebration of the failure of the World Trade Organization (WTO) ministerial meeting earlier this month. The meltdown of the global trade talks was one more blow to the poor masses of developing countries who are persistently deprived of jobs and better incomes by the protectionism of developed countries and also of their own countries. The only winners from the collapse are those who want the privileges they now enjoy -- at the expense of others' opportunities and taxpayers' money.

The sad truth is that after almost two years of negotiations, the developing countries have not got a single point of the WTO Doha Declaration of November 2001 settled in their favor. On top of this, they are now being blamed by some influential trade negotiators for the failure at Cancun for their alleged inflexibility and inflammatory rhetoric. True, developing countries have not been ambitious trade reformers before Cancun or at the talks when they got there. Usually, they have been more active in seeking their exemption from WTO obligations than in pursuing trade liberalization that would enhance their economic growth potential.

The old and very wrong mercantilist idea, that you win if the others open to trade while you don't, seems to have dominated developing countries' tactic at the Doha Round. But to be fair, this tactic, if regrettable, is quite understandable in light of the rich countries' dismal performance during the Doha talks.

To begin with, the European Union and Japan went along with the launching of the round only in exchange for burdening it with several issues of unclear benefit for developing countries, particularly if those issues were to be inserted into the WTO framework, like the multilateral agreements on investment and competition policy. Unfortunately, those observers -- like me -- who predicted that the inclusion of these topics in the Doha agenda could become a poison pill or a Trojan horse to be used against agricultural liberalization have proven right.

Next, the United States, a few months after having championed the cause of free trade at Doha, crippled its credibility with the adoption of the steel tariffs and the farm bill, and later, in December 2002, further damaging its leadership when it blocked the deal on essential medicines for poor countries that had already been accepted by all other WTO members. When, finally eight months later, the United States decided to concede on this deal, it was too late to avoid leaving a bitter taste in the mouth of developing countries.

As could be expected, the U.S.' recent disregard of multilateralism in handling other important matters has not been auspicious for a constructive leadership in the trade talks. But, to be accurate, it was the rock of agriculture that derailed the round. As feared from the start, the role of chief villain has been played by the EU, not surprisingly with Japan in a strong supporting role and, recently, to the surprise of many, with the United States as main ally. The European negotiators were prolific in speeches and in opinion-page articles about the EU's commitment to agricultural liberalization but absolutely frugal in substantive proposals. In fact, during the agreed period for negotiations, the EU never produced by itself an agricultural proposal truly consistent with the Doha agenda, supposedly because an internal agreement to change its Common Agricultural Policy (CAP) was first needed. The new CAP -- by the way, lacking impressive improvements over the old one -- was announced only in June 2003.

The debacle was really triggered, however, when a few weeks before the Cancun meeting the EU and the United States joined hands on the agricultural front. They agreed on a common proposal that proved very vague in terms of commitments to open markets and very precise in avoiding real reform of domestic subsidies to farmers. In a matter of days, another coalition, led by Brazil, India, China and South Africa, was formed to oppose the emerging transatlantic alliance for agricultural protectionism. At this point it became clear that the Cancun talks would open in a highly polarized state and that it would take lots of vision, courage and boldness on the part of the major players to avoid a disaster.

We now know, sadly, that those ingredients were either absent or arrived too late to the Cancun gathering. So, what's next for the Doha Round? A big lesson of almost two frustrating years of negotiations is that no other issue of the Doha agenda will be solved unless the agricultural stumbling block is removed. It is thus tempting to suggest that to save the round, countries should hurry to at last start negotiating seriously about agricultural liberalization, and that the ball is in the court of the rich countries. The developed countries should come forward with something that signals their willingness to effectively cap -- within a reasonable period -- the value of their farm subsidies, decouple it from production and significantly lower their barriers to agricultural imports. However, at the present juncture, trying to relaunch immediately the agricultural talks might prove a futile exercise.

Domestic politics, always a problem for any serious farm reform in any country, will be even less propitious in the year ahead, certainly so in the United States, gearing up for its November 2004 elections. It might also be wise to allow some time for developing countries to cool down from their Cancun clamor. Therefore, formally postponing the deadline -- say for one or two years -- to finish the Doha talks could be a first decision to be taken by the WTO's General Council at its next session. Then, a general strategy to resuscitate the talks could be discussed and agreed upon. In view of the short-term adverse political circumstances, it is more realistic and auspicious to relaunch the round by first going back to discuss principles instead of details.

Paradoxically, WTO members may find that, for the time being, it is easier to agree on the essential features that a truly pro-growth and development multilateral trading system should have in the long-term, which is by no means a minor question, rather than trying to agree on details that can only be the result of a tedious give-and-take inherent to trade negotiations. If trade ministers were to gather at the WTO headquarters any time soon, they would find it useful to look beyond the horizon of the Doha Round. They could envision a trading system that would maximize global prosperity in a future sufficiently distant to allow for reasonable adjustment to trade liberalization among and within both developed and developing countries.

The international community should set itself a goal that the world should be free of all barriers to trade in goods and services by not later than 2025. The simultaneous adoption of intermediate targets to be accomplished by 2015, that reflect the differential capacities of adjustment by developed and developing countries, would make more credible and palatable the final goal. Were this bold vision to be adopted at the right political level, negotiators would be less likely to be shipwrecked again when they return to sail in the stormy waters of the Doha Round. All dancing had better be postponed until this journey is over with results that are patently good for the poor of our planet.

(c) 2003, Global Economic Viewpoint. Distributed by Tribune Media Services.
For immediate release (Distributed 9/23/03)