The Hindu : Old economy of agriculture is key at Cancun meet

Online edition of India's National Newspaper
Monday, Jun 23, 2003

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Old economy of agriculture is key at Cancun meet

Irrespective of the outcome of the WTO inter-ministerial meet at Cancun in September, the Doha round of trade talks will remain alive, says C. Rammanohar Reddy.

IF THE results of the ministerial conferences of the World Trade Organisation have anything to do with superstition then the Cancun ministerial meet of the Geneva-based trade body, to be held in early September, is headed for failure. Singapore 1996 saw a consensus agreement, Seattle 1999 a failure, Doha 2001 a decision to launch a new round, and now Cancun..?

But superstition does not have anything to do with the WTO ministerial meetings. The history of the WTO/GATT shows that major decisions are finally influenced by what the U.S. and the E.U., the two biggest trading powers in the world, want of the organisations and how far they are willing to go to accommodate each other's interests. The rest, the developing countries, the least development countries and even advanced countries like Japan, Canada and Australia, can at best modify the outcome at the margin and they are drawn in by the U.S. and the E.U. to suit their interests.

Huge Doha round agenda

The Doha round of trade negotiations, the seventh in the history of the WTO/GATT, was launched in 2001 in the capital of Qatar after the abortive attempt at Seattle in 1999. Welcomed as the "development" round of trade talks by all but those countries which it is supposed to benefit, the agenda is possibly as huge and definitely as controversial as that of the Uruguay round (1986-93). It aims to carry out the task of trade liberalisation in agriculture (which was fudged during the Uruguay Round), further reduce import duties on industrial products, expand the scope of global trade in services, possibly begin negotiations on global treaties on foreign investment, on competition policies, on transparency in government procurement and customs procedures (the last four are called the "Singapore issues", because they first entered the WTO talks at the 1996 Singapore conference). Other areas include addressing developing country concerns about past WTO agreements, codifying concessions for these countries, trade-related environment measures and a review of WTO rules on anti-dumping duties.

The Cancun ministerial meeting will more or less mark the half-way mark before the scheduled conclusion of the Doha round in January 2005. The meeting will not see any formal WTO agreement. The exception, hopefully, will be the 2001 TRIPS and Public Health declaration which was a very modest attempt at formalising the scope of compulsory licences but which was subsequently sabotaged by the U.S. acting on behalf of the powerful domestic pharmaceutical industry. However, this WTO conference is important because it will be a test of the member-countries' ability to break the log-jam in agriculture. For India, Cancun may be equally important for the decision it will take on beginning formal talks on the Singapore issues — especially the controversial issue of FDI. But for everyone else, the issue at Cancun is agriculture.

Crucial issue of agriculture

No item on the Doha agenda has seen significant progress during almost 18 months of negotiations. This is in spite of three informal mini-ministerials during the past eight months at Sydney, Tokyo and over the weekend at Sharam-al-Sheikh, Egypt, with another to be held at Montreal in July. But no issue is as critical as agriculture. It may appear strange that the "old economy" of agriculture dominates the first WTO round of the 21st century. This is because the issue of farm subsidies in the E.U., U.S. and Japan has always been swept under the carpet and now the major trading conglomerates in the U.S., and farm lobbies in Australia and Canada have begun to assert themselves.

The issue of farm subsidies has also become the key to minimising developing country opposition to the larger Doha round. The "development" aspect of the Doha round is supposed to be the promise to reduce some agricultural subsidies and eliminate others in the advanced countries. This, it is said, will make agricultural products of the developing and least developed countries internationally competitive and raise incomes in these countries. (The concern with which the LDCs now view farm subsidies was underscored earlier this month when the President of Burkina Faso addressed a WTO meeting on cotton subsidies, an event that was rare since heads of government do not normally participate in WTO negotiations.)

Powerful subsidy lobby

However, there is a deadlock in agriculture. A draft proposal drawn up at the WTO earlier this year to find a middle road was dismissed as being too weak by the U.S. and the Cairns group of agricultural exporters (consisting of developed and developing countries like Australia, Thailand, South Africa, Brazil and Canada) and as being over-ambitious by the E.U. and Japan, the two blocs with the strongest interest (along with South Korea) in maintaining subsidies. The Harbinson text, as that proposal was called, did offer elements of comfort for the developing world, especially in giving them the freedom to control imports of a certain number of "strategic" products. But these proposals are for now as good as abandoned.

It will be up to the trade and commerce ministers at Cancun to give the political input to end the impasse in agriculture, which ultimately comes down to resolving the differences between the U.S. and the E.U. Today that does not seem likely, because of the near-bitterness that governs trans-Atlantic trade relations. The two are raising more and more contentious disputes at the WTO, the latest being last week when the U.S. finally decided to take a long-standing complaint against the E.U.'s ban on import of genetically-modified foods to the WTO's dispute panel. There are other high-profile disputes which are supposed to have been settled, but have not been implemented by one or the other behemoth. And last week, a meeting of the E.U. in Luxembourg that was supposed to result in an agreement among its members on how to reduce these subsidies was a failure, meaning that the E.U. will go to Cancun without anything to offer other members of the WTO or to bargain in exchange for its interests.

A collapse at Cancun, as at Seattle, therefore looks likely. There are still 10 weeks to go before the conference and that is a long-time in the WTO even where contentious issues are involved. Three months before the Doha ministerial conference in November 2001, the U.S. and E.U. were occupying as stubborn a position as they are today. But then they decided to accommodate each other's interests. The E.U. decided to let the agriculture issue be explicitly framed for the next round of trade talks, and in exchange the U.S. decided to support E.U. demands for negotiations on global rules on the Singapore issues and environment. The reasons?

There were two of them. One, the world was threatening to slip into a recession and the two deemed it important to send out to the world economy a "positive" signal of future trade liberalisation. Second, the E.U. and the U.S. used the 2001 terrorist attacks in the U.S. to raise fears of a worsening of economic uncertainty if no agreement was reached at Doha. Once the two trading powers decided to come together, everything else fell into place — the least developed countries were offered concessions and promises in the new round, the TRIPS declaration was drawn up as a sign of good faith and those who remained defiant were pressed to agree.

Hopes kept alive

Can a similar confluence of events take place at Cancun? This time there are no major economic events pressuring the U.S. and E.U. to come together — and political events like Iraq have only taken them apart. But one should not rule out some kind of paper agreement promising to work together in the future. And failure at Cancun does not mean the end of the Doha round. History has some lessons here as well. A 1989 ministerial review conference of the Uruguay Round at Montreal was a colossal failure — over the same issue of farm subsidies. Yet, four years later the U.S. and E.U. drew up a compromise on agriculture, and everything else fell into place and every other country fell in line. So either way, irrespective of the Cancun outcome, the Doha round of trade talks will remain alive.

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