TCS Daily


Hurricane Madness Hits WTO

By Alan Oxley - September 15, 2003 12:00 AM

CANCUN, Mexico -- Bad weather drives people crazy. It's hurricane season in the Caribbean and the Mexican resort of Cancun is in the zone. This must explain the crazy behavior here this week, because nothing else does.

 

First, a Korean farm leader committed suicide during an anti-WTO protest. He reportedly mounted similar near-death acts at two previous WTO meetings. This time he got it wrong. Second, developing countries have taken the most stupid international trade action since the US imposed the Smoot Hawley tariffs in 1929 and drove the world into the Great Depression. They trashed the WTO negotiations for no good reason.

 

There is no way the Doha Round can now finish on time by the end of 2004, something that was going to be difficult enough to begin with. But the cavalier attitude of the developing countries poses new questions: is it worth ever again trying to secure greater trade liberalization in the WTO? Do developing countries care? Evidently not. This is the real madness. They are the ones who will lose out.

 

What Went Wrong?

 

What went wrong? Unbreachable differences over agriculture? No effort was even made to finish those negotiations. They had been proceeding nicely. A new version of the mandate for the negotiations had been developed, and most negotiators believed it would get them back on track. It had clear benefits for developing countries.

 

The sticking point was over two issues. They are basically a yawn: making government procurement more transparent and "facilitating" trade (that is, easier customs clearances). These are dreary issues, but that is where the developing countries drew the line in the sand: No negotiations on these.

 

Why on earth not? You shout the question when you understand what the EU offered to withdraw. These two issues were part of a package that was originally an EU initiative. It included much more serious issues: investment and competition policy.

 

To bring the negotiations to conclusion, Pascal Lamy, the EU Trade Commissioner, offered to withdraw investment and competition policy provided the other two remained. The developing countries went away to think about it and came back with a "No!" The Mexican Minister De Brez promptly wound up the talks. "If we can't agree on those [soft] issues, there is no point talking about agriculture," he said.

 

The first round of negotiations on agriculture had been productive, despite Brazil's hard ball tactics (more of that later). It produced a working text with a road map on how the negotiations should proceed. Most trade experts thought it would have given valuable benefits to developing countries. But they never got to it.

 

Was this the result the Brazilians and the other developing countries wanted? In one sense, yes. Brazil was adamant that it should not be required to liberalize. It's worth noting that it is the world's most competitive producer of oilseeds, chicken meat, citrus and sugar. It also has high trade barriers.

 

So it maneuvered other developing countries into a bloc to oppose demands on developing countries to cut trade barriers -- a bloc that was in fact supporting Brazilian protectionism! Did India know it? Sure -- it is also protectionist. How about China? Ask them.

In a twist that may have been more revealing than intended, Malaysia's outspoken Trade Minister, Rafidah, declared that Malaysia would never accept negotiations on government procurement. Was she saying what many government officials think -- it would put the spotlight on certain practices best left in the dark?

 

What Now?

 

What now for the WTO? Of course the anti-globalization NGOs are pleased. Worldwide Fund for Nature said this proved the WTO agenda was "overloaded." Of course, they have unrelentingly attacked the WTO for not adding environment, biodiversity and environmental certification to its agenda.

 

Oxfam said it was the rich countries' fault (yet again). The "agricultural subsidy superpowers refused to concede any ground to developing countries on agriculture." Maybe Oxfam was another victim of the weather. The draft text on agriculture plainly conceded ground. Of course, Oxfam encouraged developing countries to believe they should not cut their own trade barriers. Maybe the developing countries were too preoccupied with Oxfam's lobbying efforts to actually read the agriculture negotiating text.

 

The WTO will not disappear. But its more serious members might be tempted to give up negotiating further cuts in trade barriers in the WTO. If that happened, the rich countries would benefit. They have already cut trade barriers and they are locked into WTO law. They will get the benefit from the organization. It is the developing countries who need global liberalization in the WTO. But evidently they don't think so. The result will be more sluggish growth in Asia and Latin America and more failed states in Africa. Well, it's their choice.

 

Alan Oxley is a former Ambassador of Australia to the GATT.

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