Split Derails WTO Talks

With poorer countries demonstrating newfound unity and power, talks on a new world trade agreement collapsed here Sunday as participants failed to reach agreement on agricultural and investment policies.

The stunning breakdown of the World Trade Organization talks attended by 148 countries cast doubt on the agency’s goal of crafting a new set of trade accords by January 2005 to benefit mostly poorer, developing nations, mainly by phasing out farm supports in the developed countries. It also seems to leave in jeopardy future multilateral trade deals in general, including the U.S.-backed Free Trade Area of the Americas.

The breakdown represents a political embarrassment for the Bush administration, which has promoted the WTO as an engine of global growth. Although in recent weeks U.S. officials had sought to lower expectations for the Cancun meeting, Washington had hoped to generate goodwill by agreeing three weeks ago to permit the manufacture of prescription drugs in developing nations at cut-rate prices.

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.”

In acrimonious comments after the meeting adjourned, Zoellick said U.S. offers of concessions in erasing or reducing farm export subsidies and some domestic supports fell on deaf ears. He added that Washington might pursue bilateral trade deals if multinational trade pacts couldn’t be agreed to. He noted that the U.S. has 14 bilateral deals pending and has signed six.

Asked if the WTO could meet its January 2005 target date, Zoellick responded, “It is hard for me to believe that we will finish on time.”

Washington believes a new WTO accord could help pull world trade out of the slump it has been in for two years. After growing 6.5% on average each year in the 1990s, world trade volume declined 1% in 2001, its first decrease ever, and rose just 2% in 2002.

Meanwhile, Washington has been pushing for an agreement on the Free Trade Area of the Americas. The FTAA is an ambitious proposal to expand the 1994 North American Free Trade Agreement among the U.S., Canada and Mexico to include all countries in the hemisphere except Cuba. But some nations, such as Brazil, have been resistant because of agricultural issues similar to the ones that bedeviled the WTO talks in Cancun.

Although farm supports were a key source of contention in Cancun, delegates did not even begin considering agricultural issues before the negotiations broke down.

Meeting Chairman Luis Ernesto Derbez, Mexico’s foreign minister, said he decided to adjourn the meeting after it became clear at midday Sunday that “consensus was impossible.... It was not a rash decision. It was a rational decision.”

The breakdown of talks is sure to disappoint high-tech, financial and construction firms in California that have been eyeing Asian markets that are, to a large extent, still closed to foreign competition.

The collapse was reminiscent of the failure suffered by the Clinton administration in 1999, when global trade talks in Seattle broke down amid chaos in the meeting hall and rioting outside it by antiglobalization protesters. The demonstrations brought to the forefront opposition to trade rules by critics who said free trade favored rich countries over poor.

The Cancun meeting saw developing countries band together to push their interests as never before. The alliances included the Group of 21, a collection of the most populous developing nations, including China, Brazil and India; the African Union, and the Asian, Caribbean and Pacific Alliance. Contrary to expectations that the member nations would peel off to pursue parochial interests, they remained cohesive.

A number of nonprofit and advocacy groups that have raised concerns about the effect of free trade on developing nations blamed the EU and the United States for wrecking the trade talks. They applauded poor countries for resisting pressure from wealthy nations to forge an agreement.

“The U.S. and Europe must come back to the negotiating table acknowledging the new reality and embracing a new commitment to multilateral cooperation,” said Phil Bloomer, head of advocacy for Oxfam, a development and relief organization that aims to fight poverty around the world.

Signs that the Cancun talks were in trouble surfaced Saturday, when a draft agreement document raised strong criticism from poor nations that wealthier countries were not going far enough to erase the farm supports and were not living up to the stated goal of tending to the trade needs of poorer countries.

Poor nations demanded an end to such supports, and many of them complained that they needed technical assistance from rich countries just to analyze the complex Singapore proposals. Although the EU offered to drop two of the four Singapore issues, talks stalled.

Observers said that Botswana delegate Jacob Nkate was a key player who told other negotiators that he could not agree to the Singapore issues.

Although many participants saw the talks’ breakdown as a serious development, others said the process would be resurrected.

“The pieces will be picked up again,” said Celso Amorin, Brazil’s foreign minister. “They were picked up after Seattle, and the negotiations will go on.”