WASHINGTON — Weary trade negotiators from 148 countries last week returned home from the collapsed trade talks in Cancún and started the process of trying to pick up the pieces.
Among the questions they are addressing is whether global free trade has reached its limits and whether rich and poor countries can bridge the divide that crippled the Cancún talks.
Trade negotiators will strive to find the answers to those questions in Geneva, in a negotiating environment in which developing countries have made clear their ability to affect the agenda.
In the meantime, the fate of the current Doha Round of global talks is up in the air.
World Trade Organization officials have called on trade officials to continue working on differences in Geneva and set a tentative deadline of Dec. 15 for a consensus on how to proceed.
The WTO will continue to function as a global body governing trade disputes among member nations even if the Doha Round fails to be reignited.
Trade officials will try to regroup and decide whether there is any room to maneuver or if there is any chance to save the round, which aims to pry open markets around the world to foreign trade by 2005.
Most analysts claim that the deadline will come and go and nothing will move on the global trade agenda until 2005 because of the setback in Cancún as well as the presidential election in the U.S., which will hamper any progress and tie the hands of U.S. negotiators.
The big question now is how the developing world will approach the talks if and when they resume.
In Cancún, many developing countries were reluctant to make concessions to open their markets to foreign goods, claiming the industrialized nations were not giving enough in the way of cutting agriculture subsidies, which they said are hurting millions of farmers.
On the flip side, the U.S. and EU claimed developing countries were shooting for the moon and unwilling to give any reciprocal market access.
The rhetoric from both the developing and developed world was deafening, but the signals the top negotiators sent are worth noting because if the stances don’t change, the entire Doha Round could fail.
“I think one of the problems we ran into was that a number of countries just thought it was a freebie — they could just make whatever points they suggested, argue and not offer and give,” said U.S. Trade Representative Robert Zoellick after the collapse of the Cancún meeting. “There’s been some good work done, particularly on the agricultural topic, but one thing I am totally convinced of is that if large members of the WTO want to continue to engage in tactical rhetoric as opposed to negotiations, I think it’s going to have a hard time reaching results.”
The dynamic of the global trade body has changed over the years, and Cancún proved the days of U.S. and EU domination are ended.
In addition, the U.S. and EU have slashed tariffs and quotas on trade over eight rounds of global negotiations and the politically sensitive sectors are all that remain.
For the EU that means agriculture and for the U.S. it means agriculture and sectors such as textiles and apparel, which many developing countries see as their best areas for economic development.
“What has to happen is the big, wealthy countries have to realize they can’t replay the game they played at the end of the 1980s or early 1990s where they promised they would do agriculture reform but didn’t, and expect the rest of the world to buy off on it,” said Ed Gresser, director of trade policy at the Progressive Policy Institute, a Washington think tank. “Some bigger developing countries like India, Egypt, Brazil and South Africa have developed a strong consciousness of rights and equal standing in the trading system.”
A group of developing countries dubbed the G-22 and anchored by Brazil, India and China emerged in Cancún and called for more radical agricultural cuts in subsidies than the joint proposal offered by the U.S. and EU in advance of the meeting.
In the end, their alliance held together as did other alliances between African, Caribbean and other least-developed countries.
Gresser noted that big developing countries like Brazil and India will have to compromise more on their own markets in order to push the agenda forward.
“If you see them as saying solely rich countries need to do more for us, that is not a great recipe to make it work,” said Gresser. “If they say everyone has to do more and rich countries in particular have to bite the bullet on farm subsidies, that is a fair negotiating position.”
Gary Hufbauer, senior fellow at the Institute for International Economics, also said the group of big emerging developing countries such as South Africa, Brazil, China, India, Pakistan and Indonesia will have to decide whether they are willing to negotiate on a reciprocal market access basis.
“If there are a substantial number of…big emerging countries that will negotiate on a reciprocal basis, the talks could get started again in 2005,” he said. “If the U.S. and other industrialized countries conclude, however, that these countries are trying to get away with a non-reciprocal deal, there will be no basis for proceeding.”
For their part, trade ministers from developing countries claim they are still seeking to reach a deal despite their push to rupture the talks in Cancún.
Brazilian Foreign Minister Celso Amorim said trade negotiators would pick up the pieces and negotiate.
This isn’t the first time a WTO round has collapsed or been delayed.
The Uruguay Round, which was completed in 1994 and led to the creation of the WTO and established the time line for the phaseout quotas on textiles and apparel, stumbled several times.
Negotiators set a four-year deadline for the Uruguay Round, but wide splits between rich and poor nations led to several extensions. Ultimately the round took seven years to complete.
Negotiators have a big task ahead of them in repairing the damage done in Cancún.
Trade envoys could not even reach a consensus on skeletal blueprints on how to reduce and eliminate tariffs and subsidies on agricultural products and how to eliminate tariffs on industrial goods, including apparel and textiles.
An outcry by four West African countries over rich nations’ cotton subsidies contributed to the breakdown, but it was a set of issues known in trade parlance as the “Singapore issues” that stalled the talks and led to the walkout.
Those issues — government procurement and the easing of Customs rules, as well as cross-border investment and competition — became the 11th-hour deal breakers. Developing countries feared investment rules would benefit industrialized nations at the expense of their own industries.
The fate of the Doha Round and global trade rules governing commerce is watched keenly by textile groups as well as apparel importers and retailers, which have a big stake in the outcome. While the Doha Round deadline of 2005 coincides with the year that quotas on textiles and apparel will be dropped among WTO nations, the quotas are no longer on the official agenda. That decision was made in the prior Uruguay Round of talks.
Importers hoped progress would be made on a U.S. proposal to bring tariffs on all industrial goods to zero by 2015, while domestic textile groups hoped developing countries would give reciprocal market access and reduce high tariffs on U.S. textile imports.
But the deadlock on the other issues silenced the market access talks.
“I’m disappointed things digressed in Cancún rather than progressed,” said Kevin Burke, president of the American Apparel & Footwear Association. “What I observed in Cancún is [that] this was well orchestrated on the part of developing nations to send a message to larger industrialized nations.”
Burke said he doesn’t think the setback is fatal to the talks, although he acknowledged there is hard work ahead to get negotiations back on track.
Jonathan Gold, director of international trade at the International Mass Retail Association, echoed the U.S. stance on the global talks.
“Trade negotiations have to be a two-way street,” said Gold. “There has to be give and take from everyone. The developing countries can’t expect the U.S. to concede and give them everything they want without offering anything in return.”
Gold said it remains to be seen whether the G-22 becomes more powerful and obstinate as a result of Cancún or realizes the entire round could be in jeopardy and decides to make more compromises.
“Everything is on hold,” he said.
But Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles and Apparel, said the 2004 deadline for Doha was too ambitious.
She said despite all of the rhetoric to make the Doha Round a “development agenda,” the reality is, it didn’t happen.
“The developing world was watching closely and wanted to be treated as equals,” she said. “They were looking for positive signals from the U.S. and EU.”
The litmus test for the U.S. was the issue of cotton subsidies and whether the U.S. would make some concessions to African countries that sought immediate elimination of subsidies and $300 million on compensation.
The U.S. answered with a vague proposal to include cotton subsidies in a sectoral initiative with textile and apparel tariffs, which pleased no one.
Augustine Tantillo, Washington coordinator for the American Manufacturing Trade Action Coalition, said the WTO will have to undergo structural changes before it can accomplish anything.
“You can’t have a system where 148 countries all are pulling the ship or directing the ship,” Tantillo said. “What we saw in Cancún was the inability to get a consensus on anything, and the WTO needs a smaller group that is charged with formulating policy and making decisions, similar to the United Nations’ Security Council.”
Tantillo said he was not surprised that agriculture contributed to the collapse in Cancún.
“Agriculture was a key component in the Uruguay Round but they ended up not making any significant decisions,” he said. “They put off the pain to a later date and now it has come home to roost.”