World Trade Talks collapse

[I, Brian]

I'm not quite sure what to make of this yet.

On the one hand, agricultural subsidies are an obvious injustice in the "free trade" movement - which is especially espoused by those very nationals most repsonsible for it, despite the damaging effects imports of such artificially cheap produce can have on local communities.

Yet the West has often run a political game of "poker" - where hands are dealt by governments to their dioplomats, who must then play a game of bluff, coercion, and shared hands, to ensure that everyone mostly enjoys the game - and, more imporantly, gets something out of it, even if they plainly lost.

I somehow suspect there's a lot of truth in the accusation that developing nations are refusing to negotiate properly - more likely, they do not acknowledge the subtleties of this game of Western Political Poker, and instead instead that face-valie issues are treated at face value.

However, of course, there remains the continuing intransigence of the riher nations, such as the EU and USA, who will continue to instance on the historical precedent - that the poor must be obedient to the rich.

It will be interesting to see how well the poorer the nations can play on the other historical precedent - that with proper organisation, even rich masters can be overthrown.

Definitely some interesting developments for the future to watch out for - assuming the Western nations do not pick off the G21 group one by one, through clauses in inidividual (and no doubt somewhat favourable) trade agreements.

Here's the story:

World trade talks collapse

World trade talks in Cancun, Mexico, have collapsed amid serious differences between rich and poor nations.

The breakdown of talks could be a major setback for the world economy, which has been teetering on the brink of recession for the past two years.

The main sticking point - after four days of wrangling - was the refusal of rich countries to cut huge subsidies they give to their farmers.

Developing nations were also angry about European proposals for new rules on foreign investment, which they feared would open their industries to control by foreign multinationals. In other developments:

• Ministers agreed to reconvene in Geneva by 15 December to reassess the future of the trade talks
• Rich and poor countries blamed each other for the breakdown
• The deal to provide cheap medicines to developing countries will still go through

There is now a danger that the world trade system will fragment into regional and bi-lateral agreements, which will hit the poorest nations hardest.

The World Bank has estimated that a new global trade deal would lift 144 million people out of poverty.

The US trade representative at the Cancun talks, Robert Zoellick, said the collapse had been caused by too many delegates pontificating, rather than negotiating.

"The differences were very wide, and it was impossible to close the gap," said Kenyan delegate George Odour Ongwen.

And EU trade commissioner Pascal Lamy said: "There are only losers, in the same way that everyone would have emerged as a winner if we had been able to reach agreement at Cancun."

The blame game

Recriminations came quickly. Ugandan delegate Yasphal Tondon said: "The blame for the collapse must go to the Western countries, because they insisted on putting their issues first."

Dave Timms of the British development lobby group, the World Development Movement, agreed, telling BBC News Online: "The collapse of the talks was the only option for the developing countries - walking out was better than the deal on the table. It is the EU that must take responsibility for the failure."

Rafidah Aziz, Malaysia's trade minister, said rich countries "kept demanding things that others couldn't deliver".

For once, a coalition of developing countries, led by Brazil, China and India, worked as a bloc to counter-balance the weight of the much richer US, EU and Japan.

"It was not possible to get a concrete result," said Brazilian Foreign Minister Celso Amorim, "but we think that we have achieved some important things: firstly, the respect for our group."

However, Argentina's chief negotiator, Martin Redrado, said: "When there is a failure, one has to blame everybody".

The US said too many countries were unwilling to make concessions. "Whether developed or developing, there were 'can do' and 'won't do' countries here. The rhetoric of 'won't do' overwhelmed the concerted efforts of the 'can do'," said Mr Zoellick.

New issues - and old

The deadlocks centred on the four so-called "Singapore issues", pushed by Japan and the European Union, which were first proposed at an earlier meeting in 1998. The four issues are:

• How countries treat foreign investors
• Standards for anti-monopoly and cartel laws
• Greater transparency in government purchasing, which might help foreign companies win public sector business
• Trade facilitation - making things like customs procedures simpler

The issues were passed to Cancun from delegates at the last WTO meeting in Qatar because they were so contentious.

Developing countries balked at including these issues in the trade talks, especially investment rules, because many want to retain control over their own key industrial sectors.

They also argued that the complexity of negotiating in completely new areas would leave them at a disadvantage compared to the rich countries who would be able to take advantage of their greater technical expertise.

Echoes of Seattle

Some movement had been achieved in Cancun with the EU agreeing to some of the Singapore issues from the final communiqué. But Brazilian Foreign Minister Celso Amorim said some developing nations would not accept even one of the issues in the text.

The developing nations wanted much more movement on the issue of rich nations paying subsidies to farmers but delegates said that failure to achieve success on the Singapore issues scuppered any progress there.

A draft communiqué circulated on Saturday called for an end to export subsidies on farm products of special interest to developing countries, but fell far short of the elimination of all subsidies urged by the G21 group of developing nations.

The failure echoes a similar result at the infamous WTO talks in Seattle in 1999 where divisions between rich and poor nations were accompanied by violent street protests.

In Cancun, thousands of protesters armed with stones and shields and chanting "WTO murders" marched on Saturday to denounce the talks - but were kept away from the conference centre.

[Baud]

As a first analysis (I didn't investigate in details that particular WTO meeting), I would say the following.

The developping countries are generally right to require the developped countries to stop subsidizing their agriculture, would it only be as a matter of principle. However, it is well-known that agriculture is certainly not what helps a country to develop its economy. Suspending subsidies would temporarily help the developped countries gain a foothold in Europe, Japan and the US agriculture markets, but no state has eever grown rich recently by exporting beef and maize. Agriculture in developping country creates low-pay, labor-intensive, low-education, low added value jobs... not what one needs to develop and raise the living standand of the population.

It is interresting to note the three "developping" countries who took the lead in defending developping countries: Brazil, China and India. Although these countries have an important agricultural production, they are far from being dependent on agriculture and are quickly joining the ranks of developped countries, producing airplanes, software and electronic equipment that is currently sold all over the world.

Although it is painful for developping countries, where very often the industrial market is very much controlled by the state, to see the risk of foreign multinationals taking control of local production, one must realize that these companies actually are the ones who have the money and investment to help developping countries create new industries, raising education standards, and creating new and better paid jobs. But obviously these industries will not go somewhere where investment is not protected and where trade barriers are actually hindering import and export.

In any case, it is not in the interest of the poorer nations to abandon the trade talks. They need the technology from the richer nations to develop their economy, and they need the markets of the richer nations to sell their current products. On the other hand, richer nations need the poorer ones because of the availability of cheaper labor and as a future export market (China, India and Brazil... interesting market potential).

This is a typical exmaple of what economists call the "reef theory". Once the sea withdraws, the reefs become apparent, and are much more dangerous to the boats. In economic terms, the most important barrier to trade fifty years ago were customs tariffs. These are dramatically lower now than then thanks to the first GATT negotiation rounds. Other aspects, like quotas, came to the surface. These were partially taken care of in more recent negotiation rounds. Now we face the issues of subsidies and legal barriers to trade (IPR, investment protection, etc.) which are more and more difficult to negotiate.

In case I bored everybody, I apologize...

Baud