South China Morning Post | By M.J. Akbar | December 30, 2003
No matter what your point of view, it was obvious that the collapse of the most recent round of global trade negotiations, held in September in Cancun, Mexico, marked a crisis in the march towards a truly global trade order.
Oddly, it could be argued that the conference's collapse was attributable not to any one of the 148 nations present in Cancun, but to the world's non -governmental organisations. It was groups such as Oxfam that provided the incentive for the world's smaller, less affluent nations to finally stand up for their rights against the United States, Europe and the world's other economic giants.
Cotton is the vital cash crop of four African countries - Benin, Burkina Faso, Chad and Mali. But their farmers have proven unable to compete against American cotton, which - due to lavish government subsidies - is available at prices that have wrecked the international market. Each year Washington gives as much as US$ 3.7 billion to a mere 25,000 American cotton farmers, most of whose product is then dumped on the world market, artificially depressing prices.
Pushed by the NGOs, the African nations ensured that cotton became an explicit item on the World Trade Organisation's Cancun agenda. The Bush administration responded with light-fingered economics and heavy-duty preaching, a combination unlikely to produce anything but sullen bitterness in the African delegates.
The WTO seeks to create, with unanimous consent, a rule-based system for international trade. That is the good news. The bad news is that the rich want to make the rules.
A key litmus test was American subsidies for agriculture. On August 14, exactly a month before the Cancun meetings were to convene, the US and the European Union released an uncompromising document that set the terms of combat. They did not budge on subsidies, but nonetheless demanded that tariffs be reduced to provide greater market access for their subsidised, low-priced agricultural products.
The world has long understood the need for realism on agricultural subsidies. At earlier talks held in Uruguay there was tacit acceptance of this practice, so long as the richer nations limited their subsidies to known commitments - the famous "peace clause".
But peace did not imply permanent acceptance. America and the EU were supposed to reduce their subsidies, but instead America actually raised subsidies to its farm lobby, by $ 80 billion in 2002 alone.
The simple numbers are enough to explain the conflict. In America and Europe, an estimated 30 million people depend on agriculture for their livings, compared to 600 million people in India. And while America gives farm subsidies worth $ 360 billion a year, Indian subsidies amount to only $ 5 billion or so.
To have any hope of success against the US-EU phalanx, Indian Minister for Commerce Arun Jaitley, who co-ordinated India's anti-subsidies strategy at Cancun, needed allies. One vital link was already in place, however. When Indian Prime Minister Atal Behari Vajpayee visited China in June, the points of agreement included a commitment to co-operate on WTO issues.
Brazil also emerged as a leader, and the three nations became the core of what grew into the G21, so called because initially it consisted of 21 nations determined to hold out for better terms. By the conference's end, this "rainbow alliance" included Argentina, Bolivia, Brazil, Chile, China, Colombia, Costa Rica, Cuba, Ecuador, Egypt, Guatemala, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Peru, the Philippines, South Africa, Thailand and Venezuela.
At Cancun this group gathered every morning at eight, and then again in the evening. Their efforts bore fruit. Though at Doha opposition to America had been muted, at Cancun the overwhelming majority of the 58 Muslim countries joined the now-bulging ranks of the G21.
"Doha was after 9/11," one key player at Cancun told me. "Cancun was after Iraq."
While attempting to assuage the rebels' concerns, America and the EU began to call in IOUs from the least developed countries. These nations were in a particular dilemma, because most are beneficiaries of positive discrimination. The EU, for instance, gives special access to bananas from Europe's former colonies. Textiles, driven by tariff exemptions, constitute $ 6 billion of Bangladesh's $ 9 billion in exports, with America being a favoured market.
For such nations, any deal was and is better than no deal at all. If there is no agreement by January 1, 2005, all multilateral rules will simply disappear, positive and protectionist alike. No wonder Bangladesh's trade minister was seen weeping in public when the Cancun meetings ended without a pact.
But even the poorest nations hardened their stand after a "compromise" draft was circulated halfway through the Cancun sessions. Smudged by the heavy paw of the American farm lobby, it was vague at best and patronising at worst. Instead of addressing the African "Cotton 4" nations' concern over American cotton, for example, the draft advised them to diversify out of cotton.
Resentment turned to bitterness, ending any hope that an agreement could be reached. Most of the least developed countries joined the developing nations to block the next big thing on the agenda, the so-called "Singapore issues" - dealing with foreign investment, competition, transparency and facilitation.
The WTO had failed at Cancun, everyone agreed. But the G21 had succeeded, and was now effectively the G100-plus. For the first time, the west found itself unable to prevail, or even to arrange a "compromise" essentially in its favour, because of the new coalition instigated by Brazil, China and India.
The WTO has only a year in which to reach agreement or self-destruct. Negotiations will inevitably resume, but under an unaccustomed time pressure that will test nerves. Brazil, China and India proved at Cancun that they have the power to change the course of trade winds. But they did not unite in order to break the WTO - only to demonstrate that the world had become a different place, one in which new voices were overdue to be heard.
M.J. Akbar is the editor of The Asian Age, an English-language daily based in New Delhi and available throughout India and in London. Copyright 2003 The New York TimesSouth China Morning Post:
