Ramifications of the Cancun Ministerial Talks
Reasons for Doha and Cancun Rounds
Agriculture is the susbsistence of most developing nations. With low domestic demand, most of the developing nations look towards international markets for their agricultural products. But, the strict and heavy import duties levied by the developed nations (U.S, E.U and Japan) prevent agricultural exports and hence constrain the development of the poor countries. Moreover, U.S and E.U. also provide farm subsidies to their farmers that creates an artificial trade distortion and artificial lowering of prices of agricultural goods made in U.S.
For example, U.S was mostly a land of cotton importers. It was turned into a cotton exporter with the help of heavy subsidies to the cotton farmers (which enabled them to price their products lower than the rest of the world) from U.S Government .
Another method used by E.U and U.S to prevent cheap products manufactured in developing countries from invading their markets, is the "Anti-Dumping" Law- the imposition of import duties on goods that are "ridiculously cheap".
The collapse of the global cotton prices a few years ago spelt doom for West African cotton farmers. This was mostly seen as the result of U.S protectionist subsidies to U.S cotton farmers. These interventionistic acts, committed by the nations who want free trade markets in the developing world, smack of hypocrisy.
Most developing nations (African and Asian nations) are fighting hard to combat the scourge of AIDS with the help of foreign aid which is mainly used up for buying expensive AIDS drugs. If the drugs were to be produced in developing countries (like India and Brazil) they would be much cheaper and hence reduce the cost for developing nations. But the patents for these drugs exist with the expensive drug manufacturers, preventing the manufacturing of these drugs by any other manufacturers.
The Doha round, led by U.S.A, promised to reduce these trade distortions and give concessions especially to the poor and developing countries. The scene was set for complex negotiations in several areas including cheaper drugs for developing nations, anti-dumping policy restructuring and of course agricultural liberalisation. The real implementation issues and consensus to be reached were left out to be decided at Cancun Ministerial Talks.
The Doha Ministerial Declaration made special and differential treatment for developing countries integral throughout the negotiations, both in countries? new commitments and in any relevant new or revised rules and disciplines. It said the outcome should be effective in practice and should enable developing countries to meet their needs, in particular in food security and rural development. The ministers also took note of the non-trade concerns (such as environmental protection, food security, rural development, etc.) reflected in the negotiating proposals already submitted, and they confirmed that the negotiations would take non-trade concerns into account, as provided for in the Agriculture Agreement.
In Cancun, the rich and poor countries were unable to agree upon the nature and the ambition of the Doha Round.
Reasons for the failure
Several reasons abound. There were too many issues that developing and developed nations did not want to compromise on. The crux of the matter was Agricultural liberalization.
U.S and E.U agreed on reduction of agricultural tariffs. U.S also went on to say at the Doha rounds that it would eliminate Export subsidies all together. But the words were not matched with action, as soon after the Doha Round, U.S President signed a bill that led to the increase in farming subsidies by upto 80%. France and Germany , on the other hand, signed an agreement stating that the EU's subsidies will not be cut .
The issue of cheaper drugs to developing nations was almost settled when the deadlock was broken with a special declaration that would arm a developing nation to produce drugs to combat a national epidemic without the approval of the drug patent holder. This rule had the consensus of all nations save for U.S, which led to the scuttling of this issue.
U.S and E.U were more intent on getting a consensus on the "Singapore Issues" . Singapore issues dealt with the transparency and easing of international rules among the member nations. For example, the passing of goods through Indian Customs would take ten to fifteen days depending on the whims of the customs officers. Hence, the institutionalised corruption and lack of transparency (not just in customs but also in negotiating import duties through the government of developing nations) has been a bottleneck for true and fair globalization.
The "Singapore Issues" focus on government transparency, as general rules can have only a limiting effect and governments are free to carry on at their discretion. They were created to cut the red-tape that was restricting proper trade development in all countries. Transparency and duplication of document requirements while dealing with international trade were responsible for the restriced international development of small and medium scale enterprises.
But most of the developing nations have very little infrastructure to police their bureaucracy or to even check corruption. Moreover, the scarce resources could be used up in combating nation-wide corruption in different part of the trading sectors (which have extensive heirarchies of corruption and hence much more difficult to weed out). Even if they do agree, the failure to check corruption may result in unwelcome sanction and backlash which may spell their downfall.
These fears were not addressed at the Cancun Talks. The U.S and E.U. insist on discussing Singapore Issues while the developing nations would rather discuss the lowering of tariffs by U.S and E.U. In fact, the opposition to E.U. and the U.S led to the formation of G22, a group of developing nations. They are unanimous in their demands on the implementations of the declarations of the Doha round. This stringent opposition combined with the refusal of U.S and E.U to lower their trade barriers has led to the deadlock at Cancun.
The Future of Free Trade
Cancun Talks revealed the inability of the WTO to be a vehicle of Multi Lateral Trade Agreements. Infact, every where protectionist policies seems to be more politically supported and hence the global environment is becoming more hostile to free trade -shaking the foundations of the WTO.
America with its growing trade deficit finds it tough to argue for free trade and European union with appreciating Euro would find it hard to agree to reduction of farm subsidies as this will result in Euro Farming Products becoming expensive (i.e. reaching their actual value).
The implications of the failure of Cancun Talks has wide ramifications for the Global Economy. The failure has dealt a big blow to the WTO as well as to the era of multilateral trade agreements. This would result in the nations taking the same route that led to the two world wars-protectionism, bilateral trade agreements and disputes settled bilaterally. Hopefully, the nations would be aware of this danger and navigate more carefully through the spagetti bowl of bilateral agreements.
But, on the brighter side, the Cancun Talks were supposed to be one of the several talks before the Doha declaration gets implemented. Perhaps, given the numerous issues which seem to be confronting the nations more time and patience is required to resolve them and let everyone realise the benefits of having a multi lateral trade agreements.
It also reflected the growing strength of the unity of developing nations who could capitalise on this unity to form regional free trade agreements and agree to lower their respective tariffs for goods made by the developing countries. Such an endeavour would go a long way in the development of poor nations.