Cancun

September 16th, 2003

Like most people, I suspect, I find the details of international trade negotiations eyeglazingly boring. So, I was as surprised as anybody when the WTO meetings in Cancun suddenly collapsed, with less developed countries walking out en masse.

The immediate cause seems to have been the fact that the meetings focused on liberalised investment rules (pushed by the Europeans) while the poor countries wanted to talk about agricultural barriers and to have their proposal treated equally with a joint EU/US offer.

The underlying cause, in my view, is that the WTO now lacks a real backer, that is, a rich and powerful country or group of countries who want it to play a central role. The UN is backed by the Europeans, the IMF (with occasional qualms) by the US and the World Bank by both. Until recently, the WTO had the backing of the US which was historically the world’s biggest exporter and stood to gain a lot from expanded trade.

But now the US has switched to a strategy of bilateral negotiations like the proposed FTA with Australia where it can extract better terms. Moreover, like most net importers, the US is becoming more protectionist as its trade deficits build up.

Finally, the aggressive overreach by the WTO itself (things like the tuna-dolphin decision, that led to the Seattle explosion a few years ago means that the organisation has few real friends among NGOs and the broader public.

Given that, in the dispute over US steel tariffs, the WTO is bound to rule against the US, and the US seems unlikely to back down, it’s conceivable, though still improbable, that the organisation could collapse completely in the next few years.

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  1. September 16th, 2003 at 10:31 | #1

    Ta muchly!

  2. Brian Bahnisch
    September 16th, 2003 at 11:17 | #2

    John, I appreciate that most people find trade boring. I’m cursed by the fact that I don’t, so with the usual caveats about my lack of expertise, here goes.

    I think you’re on the mark about the WTO lacking an effective sponsor, so let’s start there.

    Until recently you could have said the WTO was sponsored by the “Quad”, ie the US, the EU, Japan and Canada, plus the WTO Geneva office, which is supposed to be neutral but is wall to wall with neoliberals, mostly from the major powers. Canada is actually fairly irrelavant in the context of the Quad.

    Since Doha in 1991 a major faultline has opened between the EU and the US over agriculture. In the last three months there has been a concerted effort to paper over the differences and a combined position paper was developed. The problem here is that Doha, launched as the “development round”, mandated the greater market access for farm produce to the advanced economies (ie lower tariffs and improved quotas, as well as reduced domestic subsidies and export subsidies). The problem is that because of domestic politics in France, the US and Japan there is no chance that the Quad would deliver.

    The US made a big play of opening up and reducing subsidies, but they only did this after ramping up the subsidies and any change would be at glacial speed.

    Europe is stuck with their CAP and subsidising each cow at $2 per day, essentially because of the role of the French countryside in the national psyche and the effectiveness of the farm lobby.

    There have been major public stoushes between the EU and the US, inflamed further by differnces on GM food and US action on steel etc.

    This has left the Japanese off the hook. Should the EU ever give ground on farm products, the focus would turn to the Japanese. Hell would freeze over before they opened up the farm sector IMHO.

    There were two other main power groups at Doha, the Cairns Group, led by Australia, and the Leased Developed Group (LDC), led by India and Pakistan.

    The Cairns Group is supposed to be based on efficient farm exporting countries and they want all subsidies gone and open slather. This would wipe out millions of small farmers in Indonesia, Japan, Korea, Africa, Europe and would actually threaten both family farms and larger automated farms in the US. It is no surprise that the Cairns Group largely waste their time.

    The Least Developed Group was subject to major diplomatic assault from the big guys before Doha, and India ended up isolated. At the end of the extended 36 hour continuous session in Doha, India eventually agreed to abstain, which was all they had to do voting-wise, basically because they could not afford the revenge that would have followed.

    The story of how Doha was won is best told in Aileen Kwa’s “Power Politics in the WTO” available at Focus on the Global South (www.focusweb.org). Doha happened in November 2001, two months after 9/11, and was won by some very brutal diplomatic softening up by the US prior to the meeting, and a complete abomination of reasonable procedure on the part of the WTO before and during the meeting.

    Doha overreached and created a lot of new bad karma (there was plenty there already stemming out of the 1990′s, partly from the WTO and partly from the IMF and the World Bank, where “loan conditionalities” were used to open up developing countries to subsidised farm exports from the big guys.)

    A recent power shift has been the creation of the G21 (and growing) under Brazil’s leadership, but including India, China and South Africa. This effectively replaced the LDC. It has held together under pressure and has made the Cairns Group irrelevant. In fact 11 of the 17 members of the Cairns Group have also joined the G21.

    The G21 differs from the Cairns Group in that they they want to retain protection on developing country agriculture while gaining a better deal from the big guys. They also want nothing to do with the “new issues” or “Singapore issues” ie investment, competition policy, government procurement and trade facilitation. It is not particularly necessary to understand what these mean apart from the notion that they would open the soft underbelly of any country to full exploitation by the TNCs (transnational corporations) the major beneficiaries of everything the WTO does. (The elites in poor countries have sometimes done OK too.)

    The poor countries have also wanted two other things since before Seattle. They have wanted attention to “implementation issues” (these are problems in the system as it is supposed to work now wrt trade in produce and manufactured items) and a reform of WTO procedure (see Aileen Kwa). The bottom line with procedure is that the WTO is supposed to be member driven and work on consensus, ie. the smallest country can hold up the whole show. What happens in practice is Macchiavellian in the extreme and an affront to reasonableness and common sense.

    Real decisions were typically made by a small, ever changing kitchen cabinet outside official structures. Meanwhile at the WTO in Geneva there are up to 40 official meeting a week. Small developing country delegations either have to be very selective or run around the corridors trying to find out what is going on. Then most of the information they get is misleading anyway!

    Doha was conducted in the shadow of 9/11 and bush succeeded in making it part of his war on terror. The marching orders from the “capitals” was that a successful outcome was essential to restoring confidence in capitalism.

    At Cancun the marching orders from the national governments were so much in conflict that a successful outcome was never possible. Mahathir, for example, told his reps that under no condition were they to admit investment to the negotiations. It is arguable that the big guys also came with mutually exclusive bottom lines. So the Quad busted open and the G21 prevailed.

    This can only be good in the long run, but it must be said that the G21 only scored second prize in their book. First prize was to get their agenda up. Second prize was, no deal is better than the wrong deal.

    The only thing they could have agreed on at Cancun was on socalled “modalities’, that is, decisions on how they were going to make decisions. This would have been hard enough, but they made the mistake of trying to make real decisions. It was never on.

    It is pretty clear to me that the Yanks saw this coming and didn’t have their hearts in making it work. They want ‘high quality’ trade rules or none. Or as George Monbiot put it, the unfair WTO rules were never going to be unfair enough for them, so they would rather do the whole thing bilaterally.

    There are two underlying problems with the WTO. One is that it was built on a foundation of false promises, broken promises, lies, and hidden agendas. This has caused the whole thing to crumble.

    Secondly, there are probably a billion or more farmers in the world, producing in aggregate more food than the world needs. If these are to be opened to Darwinian competition and capitalistic consolidation, there will be many dead farmers, more labour available for sweat-shops (100 million are said to have been shaken loose in China) women working in advanced countries as domestics and in the sex industry. World, please pause and consider where you are going with this one!

    Where to from here?

    Multi-lateralism will stagger on but the emphasis will be on bilateral and regional agreements.

    And for Australia? We’ll take Ziauddin Sardar’s advice (talking to Phillip Adams) and have a really good learning experience. We’ll do an FTA with the US and learn what it is like to be screwed by them. And we’ll be left out of an Asian grouping and learn what it is like to be marginalised.

    Sorry to take up so much of your space, and time if you read this far!

    Finally, some sources.

    The ABC RN interview with Mickey Kantor on AM this morning was good.

    So is the Fin Review editorial today, except for the last three paragraphs, where they go on a Cairns Group, neoliberal type rave about opening everything up.

    Oxfam’s Make Trade Fair site(www.maketradefair.org) is worth a look. Don’t miss the issues page and click on products such as milk, corn and coffee.

    For a developing country point of view, I like Focus on the Global South (www.fucusweb.org).

    Have a look at ‘Cancun Diary Day Three’ by Raghav Narsaly. It reports how the Indian guy stopped Pascal Lamy in his tracks – probably the only time in his life he was lost for words.

    Have a look also at ‘Confronting the 13th September Draft Text’. It shows the crap that was served up on Saturday on agriculture, and consider that by Sunday 3pm they hadn’t even started on it. They were still arguing with the EU on the “new issues”.

    Last of all at the Guardian there is an article by Patricia Hewitt, the British trade minister, entitled ‘Make Trade Fairer’ on her visit to a rice farmer in Honduras on the way to Cancun (see http://www.guardian.co.uk/wto/article/0,2763,1041047,00.html.) Mark Vaile should take similar side trips.

  3. Brian Bahnisch
    September 16th, 2003 at 11:48 | #3

    The URL for Focus on the Global South should of course be “focusweb” not “fucusweb”

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