The Collapse of Cancun: Prospects for Countries and Peoples Third World

The blow-by-blow account of how the WTO negotiations in Cancun actually came to an end has been scrutinized in detail. Cancun collapsed over two major issues that are at the heart of the international trading system governed by the WTO. First, is the  “Singapore issues” so-called because these issues were first brought up in the second ministerial in Singapore.  This is a bunch of issues concerning government procurement, trade facilitation, investments, and competition. The second is over agriculture particularly over the massive subsidies being paid by the US and EU allegedly to their farmers, but which, in reality, is captured by multinational corporations.

Some suggest that the failure is the result of such minor oversight like the chair should not have ended the meeting that early there was still enough time to forge an agreement. The EU’s chief negotiator Pascal Lamy’s in a very much-publicized statement puts the blame on the WTO’s negotiating procedures, which are medieval and not conducive to building consensus. Then there is also the US trade negotiator Zoellick blaming the can’t-do countries for the collapse of the talks and then the open threat that the US will go it alone with the can-do countries. 

The analyses that point to procedural causes of the collapse of Cancun miss the point as much as the “can’t-do and can-do” simplistic explanation.  The collapse stem from a fundamental flaw of the WTO.  The point that has to be grasp is that the WTO, the so-called rule-based trading system, is thoroughly incompatible with the reality that its members are divided into developed and developed countries. It is simply absurd to think that a single rule that applies to all should work positively and in the same way for all countries at varying levels of development.

Cancun was divided into developed and developing countries over issues that clearly affects the two groups of countries in completely different ways.  The Africa, Caribbean and Pacific countries walked out of the negotiations because the EU (together with the US and Japan) insisted that the “Singapore issues” be taken up in the current negotiations in spite of the opposition of about seventy countries. 

The Singapore issues had they been taken up would have greatly expanded the power and scope of the WTO and would further encroached on the sovereignty of member countries.  Consider a situation where government procurement or customs procedures (under trade facilitation), which are traditionally the exclusive domain of a sovereign government, should come under the domain of the WTO. Consider too that the proposed new rules on investments have been rejected a long time ago when it had a different label (Multilateral Agreement on Investment or MAI) but were recycled under the “Singapore issues.” Seventy or so countries held that these issues should not be brought into the negotiations because they needed more “time to study these.”  

It is not that the WTO is infringing on the sovereign rights of the third world states for the first time that generated widespread opposition. The WTO rules and agreements have done exactly that from the beginning. But the issues were this time clearly outside the traditional scope of trade that incursion into purely domestic affairs of the states was even more blatant. 

The “Singapore issues” are apparently dead but we should not under estimate the ingenuity of the negotiators of the imperialist powers to come up with a more palatable presentation with the hope that the ACP countries would accept it. After all it has been recycled in the negotiations several times.

Let us take a look at the second issue, agriculture.  More than 20 countries (G20+) banded in August, on the eve of the talks, to take the collective position that agricultural subsidies of the developed countries must be reduced as a condition for the talks to move on to other issues.  This from the start was a tall order considering that the EU has made the hollow gesture of reform but after 10 years and the Bush administration has just given its farmers USD70 B in subsidies for the next 10 years. Then there was the urgent (and emotional) specific demand of the central African countries to at least reduce subsidies to US cotton farmers, which has been responsible for the low prices of cotton even lower than the cost of production.

It is doubtful if the elimination of subsidies will actually redound to the interest of peasants of the Third World since they are first, isolated from the world trading system by layers of merchant and trading monopolies and secondly because the MNCs can put a tight squeeze on former by the control of both the input end as well as the output end of agriculture.  That is to say they monopolize seeds, fertilizers, pesticides on one end and the market, transportation, storage etc of farm products on the other end. If anything at all it is agribusiness in the third world together with the trading elite with their links to multinationals that will benefit from the elimination of subsidies. 

But this is beside the point for the moment.  The fact is that the MNCs through their political representatives opposed changes in an arrangement that have for decades proven to be profitable for them. This is the reason why the US and the EU, rather than reduce subsidies, were more preoccupied with out witting each other in maintaining their high level of subsidies as a weapon for capturing markets at the expense of the developing countries as well as the developed countries’ weaker rivals like Australia, New Zealand and Brazil. This was unacceptable to the G20+.

Given the fact that most developing countries rely on agricultural exports to earn their foreign exchange, and given too that majority of their populations are dependent on agriculture as a source of livelihood, agriculture will be one of the most hotly contested issues in the negotiations.

So what do we make out of the results of Cancun? The Financial Times in criticism of the proposals to reform the WTO said “… the main problem is not the WTO procedures: it is the gaping disparity between its members’ levels of development which has grown still wider with the admission of steadily more poor countries. Any attempt to restart the Doha round must grasp that central point.” It goes on to say, “It is absurd to push as the EU has done to impose rules in complex areas such as competition and investments on countries so poor that some could not even afford WTO diplomatic representation.”

In our view the basic problem is the total incompatibility between “ the rule based trading system” which is the WTO and the concrete reality of the “gaping disparity between members’ (of the WTO) level of development.” To put it bluntly “free trade” as the WTO is wont to establish is a farce given the fact that there do exist monopolies, which are capable of dominating the market at the expense of others. The assumption that rules work equally and positively for all is false. “Free trade” as it exists today is a one-way street where the economies of the weak developing countries are pried open for goods and more significantly investments from the developed economies.

In the same article the Financial Times proposes that there be two set of rules for the WTO – one for the develop countries and another for the developing countries: in other words a two tier WTO.  But then this is another way of saying that the rule based international trading system has to go. 

The US negotiator Zoellick, immediately after the collapse of the Cancun negotiation, threatened that the US will proceed along the same track of trade liberalization with the “can-do” countries.  The EU on the other is reconsidering its policy of prioritizing multilateral negotiations in favor of one that would put more weight to bilateral and regional agreements.  Indeed, the US strategy is a three-pronged approach of combining multilateral, regional and bilateral arrangements.  Should they fail in one then they have two other tracks for a fall back.

There are those who believe that the US actually caused the negotiations to fail and point to the premature termination of the talks by the chairman as instigated by the US.  They believe that the US did not want to give any concession on the question of agricultural subsidies at this time given the elections next year.  Given the position of developing countries on the question of agricultural subsidies the US finally gave up going for an agreement. True or not, the present US administration is not known for respecting reason or international opinion as it was in the war on Iraq and other multilateral concerns.

 There is the real possibility that the US and other powers would relegate the WTO to secondary importance as a mechanism for achieving their economic agenda especially in the face of a growing opposition from developing countries.  The WTO can also be rendered obsolete by the US when it sees the WTO as a fetter vis a vis its competition with other economic powers.  Then such competition will have to be played outside of the framework of the WTO.  

This is what many well meaning opponents of the WTO fear – a shift into regional and bilateral trade negotiations in which it would be easier for the imperialist powers to extract onerous agreements from the developing countries who will then face the former on their own without the benefit of numbers as it was in Cancun.  The shift in emphasis is a distinct possibility and one that will be decided by the economic powers by themselves.  Indeed bilateral agreements are proliferating some even outdoing the WTO in some respect. Should this materialize then competing trade blocks possibly antagonistic to one another are more likely to develop as the imperialist powers try to expand and protect their own turfs.

It is important for the developing countries to develop further the newfound unity in Cancun.  They must struggle for reforms within the WTO as far ranging and thoroughgoing as possible. 

But it is not for us to revive a dying WTO simply out of fear of trade wars after all this can happen with or with out the WTO. The regional trade agreements led by the competing powers are instruments for this competition.  But fierce competition between giant monopolies is not necessarily bad for a developing; one can turn this into an advantage, a respite from the unified attack on the developing countries, as is the case within the WTO at present.

There are strong moves to revive the WTO and put it back on track. As matters stand the world’s economic powers are still insisting on the agenda over which Cancun negotiations collapse coupled with pressure on the developing countries especially those belonging to the group of twenty (G20+) to abandon their opposition.  Some countries have succumbed to these pressures but so far the G20+ is in tack on the main.  Assuming that the WTO will survive the present crisis the fundamental source of its collapse would not be diminished.

There is no use reviving the WTO in its present form nor should there be hurry for the developing countries to go back to the negotiations only to be confronted with the same intransigence of the world powers as it was in Cancun. At the least the countries negatively affected by trade liberalization through the WTO can take advantage of the present impasse by reviewing and undoing certain things including a reversal of policies that opened up their markets at the expense of their local producers.  They can for example put up tariff and non-tariff walls to protect their agriculture especially upon the expiration of the peace clause next year.

In the final analysis, it is far fetch that the WTO can be reformed even with the overwhelming number of developing countries demanding reforms. In fact, the stronger the unity of the developing countries become, the more they muster the courage to stand up for their common interests against the bullying of the big economic powers, the greater is the chance that the big economic powers will discard the WTO for something else. So why not allow the WTO to die a natural death? Or let it pass into a talk shop akin to the original GATT in which case it will be more benign.

After all, the demise of the WTO will not be the end of the world.  Trade has expanded for most of the last century without the WTO. And any country or group of countries can always initiate bilateral, regional, plurilateral agreements based on mutual recognition of negotiating parties’ interest and benefit. Here too the areas covered by the agreements can be limited to those acceptable to the parties involved.  This is unlike the WTO where agreements cover practically all sectors of the economy including those that have nothing to do at all with trade and where countries are force to accept the whole package or accept nothing at all.   Trade can be strengthened between the developing countries, or the developing countries can take advantage of the competition between different capitals to their benefit. Such a framework is more appropriate for a weak and developing country like the Philippines.

Whether trade negotiations are conducted within the WTO or in regional and bilateral settings, the crucial thing for government is its commitment to the national interest.  This is not s superfluous statement especially in the light of the fact that in the name of the principles of “free trade” which they have abstracted far away from reality, our negotiators signed away the birthrights of many economic sectors from, entrepreneurs to peasants and workers. Then there is small section of the Philippine business that is strategically positioned in the economy and government that profit from “free trade” of the WTO to the disadvantage of the overwhelming majority.  More often than not the interest of this elite is misrepresented as the national interest.

This is not to discredit the negotiating stance of the Philippine negotiators in Cancun. The Philippines government’s opposition to the Singapore issues in Cancun must be commended. But we have to challenge government to be consistent with their position and uphold the national interest at all times.  It did not serve to strengthen one’s negotiating position when immediately after the collapse of the Cancun negotiations the chief Philippine negotiator was calling for bilateral talks between the US and the Philippines and echoing the position of the US chief negotiator.

As for the Philippine (as well as the international) movement against “neo-liberal” globalization the challenge is to build a national movement of sufficient strength to be able to influence government position on trade and ultimately reverse the government’s adherence to the “free trade” dogma of the WTO and blind subservience to American dictates.  In the remote possibility that it reverses its policies we must encourage and support such policy reversal. But pending such reversal we must hold the government responsible for the havoc “free trade” has brought to large sections of the national economy.