BusinessWorld | By Dean O. de la Paz, III | October 9, 2003;
The first sign that something was seriously askew was when both sides had returned from a failed conference ecstatic and beaming with the smiles and the euphoric taunts of victory.
The developed nations had returned with their controversial subsidies intact and still in place as it continued to not only protect farmers of wealthy nations but also ensured that their lopsided advantages would continue on and wreak havoc on the economies of fragile and developing countries.
On the other hand, representatives of the underdeveloped and developing nations were even more jubilant to the point of ecstasy. They hogged the front pages of reports everywhere, equally exhilarated and positively victorious as if they had actually won a significant round in the ongoing battle against economic globalization and the spread of the free trade ideal worldwide whether economies were ready or not.
Representatives from these countries had an even stranger spin on the failure of the Cancun Round of the periodic World Trade Organization's (WTO) conferences as the body tried to once more enforce a new world economic order heretofore unknown in scale and intensity. The announcement that no deal was better than a bad deal permeated the press and the spin's poetic and wisecracking soundbyte made headlines and provided the failure with the type of guise a la The Emperor's New Clothes - it must have even looked well in print even as it left us naked.
The bare-knuckle fights had began as far back in Seattle in 1999 where a new round of talks and conferences had begun with an ambitious agenda and the almost impossible charge of ridding the world of the remaining barriers to free trade. These had stemmed from earlier disputes that can be traced as far back in the last century as Geneva in 1993 or even farther back to Uruguay in 1986 and running up to Marakkesh, in Morocco in 1994.
That round had been called the Uruguay Round and had produced the strangest and most controversial list of agreements and non-agreements that precluded the events of Cancun and the ridiculous cheer that accompanies victory when it is cloaked in the mantle of a cop out.
By at least seeing what had come out of the Uruguay Round we might understand why both sides in the Cancun Collapse would be ecstatic at the failures to compromise and would return to us totally exhilarated with such soundbytes as "no deal is better than a bad deal."
The complex set of agreements and outcomes of the Uruguay Round includes the deal to cut and reduce tariffs by one-third on the part of the industrialized countries. The round, however, also included the replacement of many agricultural import quotas with totally new tariffs. At first blush, that appeared to be a balancing act.
Voluntary export restraints were also supposed to have been placed on a predetermined deadline and eliminated by 2005. Other non-tariff barriers were also set on a course towards partial and complete elimination.
Add to these other agreements and another set of deadlines, the historic Uruguay Round that ended in Morocco in 1994 had envisioned a global economy where many of the gains were to redound almost exclusively or, at least, substantially to industrialized countries making most of the liberalization.
Studies by economists suggest that these, all told, might produce welfare gains that ran up to as much as 1 per cent of the world's gross domestic product at the turn of the century in 2000. This is, by all respects, a hefty figure that runs to the hundreds of billions of positive economic inflows all fattening and beneficial to the developed economies.
From where exactly would these gains have come from had the Uruguay Round been religiously followed? The answer to this brings us face to face with the debacle in Seattle in 1999 immediately prior to the targeted dates of the gain's effectively and the strange turn of events in the WTO that culminated in Cancun last month.
Most of the gains were to come from the reduction of subsidies worldwide and the opening up of Asian grain and rice markets plus the elimination of voluntary export restraints in textiles and clothing.
Let us take these in reverse order and see how these have led us to the failures in Cancun and our strange reactions to that failure.
Voluntary export restraints are limits on exports imposed at the insistence of the importing country. In the aspect of textiles and clothing, prior to the Uruguay Round, these had been carried out using a complex web of export restraints that blocked the cheaper goods from underdeveloped economies from entering the developed economies. As these restraints were phased out, more goods were seen to be entering such countries as the United States. So far so good for the third world.
Agricultural subsidies in the developing economies were, in return, to be reduced and the opening up of grain and rice markets in Asia was to the be the quid pro quo with cheaper grains from the developed economies being traded to the Asian countries at better and more equitable rates.
This is where the strains emanate.
Subsidies in the industrialized and developed economies had, in fact, not been reduced even as markets had opened to accept the lower priced agricultural products thereby causing a virtual dumping effect. Grains and other agricultural products from the subsidizing economies competed unfairly with the opened markets of the developing countries and thereby caused economic failures in the importing country.
While the Cancun Round was supposed to have tackled these aberrations head-on what we now find is that the status quo persists as both sides are happy with the failure to agree. Unfortunately, the last laugh may not be with the developing nations in the long run and our immediate ecstasy may be mere whistling in the dark.
The result of the Cancun failure would be increased bilateral negotiations as well as free trade pacts with individual countries. Where one side might be the United States, the agreements would almost be certain to be lopsided as trading economies are never on the same level.
Developing economies would lose the advantage of multilateral coalesced strengths and bargaining powers and the resulting agreements would most certainly include such extraneous variables a national security, terrorism, arms trade as well as a host of political and non-economic issues.
Instead of multilateral globalization we might end up with a convoluted brew of one-sided bilateral agreements that can only benefit the developed economies more and provide them with the last laugh in the long run.BusinessWorld:
