Memorandum submitted by the Consumers'
Association
EXECUTIVE SUMMARY
Consumers' Association were and are very concerned
that the collapse of the Cancún talks came at a particularly
inauspicious time for the trading system. The approach of elections
in many of the major negotiating parties from the USA through
France and India makes progress outside of a Ministerial remote.
The gap between the end of that period of elections and the putative
conclusion of the Doha Development Round is so short as to make
a process of catch-up difficult in the extreme.
We are also concerned that the recent penchant
of the USA for unbalanced bilateral and regional agreements will
only grow with the collapse at Cancún. The potential for
the EC to focus increasingly on such deals is a real one and should
not be discounted. We continue to believe that multilateral processes
offer the best chance of significant forward movement on a freer
trade agenda for all parties. The hopes that such a momentum will
build again in the near future look, however, remote.
WHY CANCÚN
FAILED
The reasons for the failure of the talks at
Cancún are many and varied. They are loosely grouped into
two areas: underlying factors and strategic mistakes.
The underlying factors that contributed to the
failure of talks included:
1. A lack of real US commitment to the WTO;
2. The limited, tortuous and only recently
completed EU CAP reform process;
3. The other protected agricultural markets
hiding their protectionism behind that of the EU;
4. Key developing countries building coalitions
during negotiations;
5. Negotiating tactics that did not move
with the mood of the talks;
6. The structure of the mini green rooms.
In addition there were a number of specific
strategic mistakes at Cancún that amplified the impact
of the underlying problems:
1. An economically/morally/ethically correct
but politically unrealistic agenda on cotton;
2. A particularly poor mini green room result
on Singapore Issues;
3. An unexpected decision to close the conference.
The collapse of talks at Cancún were
not a victory for anyone as they have come at a time where building
a positive trade agenda is about to become very much more difficult.
The key lessons looking ahead for the WTO process
are as follows:
1. Trade policy is a primarily domestic
issue and we need to recognise this in designing liberalisation
efforts.
2. In the US civil society groups able to
form common cause with developing country exporters are thin on
the ground and politically compromised.
3. Any Round of negotiations relies on crass
mercantilism as its engine.
4. We need to gain greater understanding
of the process of national trade policy formation in developing
countries.
5. More basic resources, like a pool of
admin staff and computers, are needed for smaller developing countries
during Ministerials.
6. At Ministerials the segmentation of the
Green Room discussions must not be absolute and efforts must be
made to integrate the issue areas more fully into a single undertaking.
7. Geneva General Council meetings should
be used more effectively by major trading parties to offer concessions
ahead of Ministerials.
Our submission is very weighty which reflects
our concerns, in order to assist with assessing our views the
following points will be addressed:
2.3 Everyone else's agriculture
2.4 Coalition building and negotiating parallels
3.2 The new issues green room
5. Lessons for the future
5.1 Trade policy is a primarily domestic
policy
5.2 US domestic reform movements are weak
and compromised
5.3 The WTO process requires base mercantilism
to progress
5.4 Developing country policy formation
needs closer scrutiny
5.5 NGOs will fill capacity vacuums
5.6 The modified Green Room process needs
to be modified
5.7 Mechanisms for pre-Ministerial trade-offs
must be developed
1. SOME THOUGHTS
ON WHY
CANCÚN FAILED
The failure of the Cancún talks has effectively
put the Doha Development Agenda on ice. The impending elections
in the USA, France, India etc, etc make any progress on the Doha
agenda extremely unlikely. The failure however warms up the likelihood
of bilateral and regional agreements becoming the main focus of
US policy and the real risk that the EU will change its 1999 policy
direction and focus on them as well.
Many commentators have claimed Cancún
as a great success for developing countries. In one way it was—in
the sense that they appeared more united than ever before. However,
the unity is still of the sort seen in Seattle—a blocking
unity. The positive agenda of the developing world has not emerged.
It is still surprising that the biggest developing countries seem
unable or unwilling to develop the "offensive" trade
agenda that the developed world has had for so long. One of the
lessons of Cancún is how a worthy agenda (on cotton) can
fail at the first step because of the lack of political pressure
within the target country. Trade negotiators often appear to forget
that trade policy is a profoundly national policy that has international
dimensions, not the other way round. For trade reform to occur
in the advanced developed economies the demandeurs need to be
able to ride a wave of reform within those countries. The CAP
process, the textile industry restructuring all helped get these
issues on the international agenda. There is an urgent need here
for developing country trade officials and developed country reform
forces to co-ordinate their efforts.
While the existence of a more powerful blocking
group of developing countries was undoubtedly a positive move,
it did have some negative outcomes. The focus of this group on
agriculture did not really test the likely reach of the group
and even here is started to unravel at the latter end of the talks.
The divide in interest between the biggest developing economies
(often the largest markets for many smaller states) and the smaller
developing countries became more apparent as the week progressed.
The lack of a positive agenda combined with
the blocking style rhetoric created a spiral of opposition to
progress that in the end helped stop talks, despite many capitals
having authorised the giving of concessions. While some have blamed
NGOs for whipping up the developing countries it is unlikely that
their message would have had such an impact had the ground not
been ripe for that message. While their impact may have been noted,
it probably operated as a reinforcement of an underlying discontent.
Those that seek to blame NGOs for the collapse need to look more
closely at the underlying discontent.
The discontent on the part of developing countries
was plain for all to see. The main area of contention was undoubtedly
agriculture with the half hearted CAP reforms, that fell well
short of what European reformers wanted, disappointing all but
the hopelessly optimistic. Added to this was the problem, exacerbated
by European negotiating tactics of a division between those smaller
developing countries in the ACP that benefited from preferential
access schemes and those outside of this group that did not. The
clear divide and rule approach, underlined by a real strategic
difference between the groups, made any compromise on agriculture
difficult. This was amplified by the fact that the Commission
position was that its stance was a fait accompli driven by its
internal reform processes. While there was more than a grain of
truth in this it makes negotiations difficult.
In attempting to work through the reasons for
the failure of Cancún and what should be done on a broader
policy basis, we have divided the underlying issues from the strategic
mistakes at Cancún.
2. UNDERLYING
FACTORS
2.1 US lack of involvement
At Ministerials it is usually almost impossible
to avoid the US delegation. This is a combination of its size—usually
well over a hundred officials and observers—and its prominence
around the conference. What was notable from Cancún was
how low the profile of the US was. Partly this would have been
triggered by the post-September 11 security situation; however,
this is unlikely to be the main cause. From reports of bilaterals
at Cancún between the US and other countries it appears
that the US was not in full negotiating mode. The poor text on
cotton was an example, par excellence, of the nakedness of the
US stance. It clearly refused to give an inch to the demandeurs
among African states on the cotton issue and simply imposed its
enormously patronising response on the text. The recent focus
of the US on bilaterals and regional agreements in Latin America
was perhaps the most important driver of the US attitude in Cancún.
The noises before Cancún and indeed immediately afterwards
underpins this approach. In the press conference immediately following
the collapse of the talks Mr Zoellick clearly stated that the
US would seek market access one way or another, and in his Financial
Times article of 22 September he clearly argues that the US will
focus on working with countries that are willing to talk. Irrespective
of the general administration scepticism of multilateralism the
approach on trade clearly seems to be running to the old GATT-plus
agenda around the doldrums of the Uruguay Round. The rampantly
anti-Japanese rhetoric in the mid 1980s appear to be re-appearing
with recent anti-Chinese rhetoric, the setting up of an "unfair
trade practices unit" and the focus on Latin America for
regional agreements. This approach has more parallels than just
rhetoric with the mid-80s. It is clear that trade has again become
part of the electoral battleground and as a bit part in the general
anti-multilateralism of the administration. Once they had given
way on TRIPS it was never entirely clear that the USA was really
fully engaged in the Cancún process and did not appear
unduly concerned when it collapsed.
The questions/issues that arise are:
1. Has the US given up on the WTO process
entirely?
2. Will the regional agreements/bilaterals
be totally one sided?
3. What is the US agenda on trade anyway?
Beyond the simple mercantilist (exports good/imports
bad) trade-off game it has never been entirely clear what the
US trade agenda is. In bilaterals/regionals the agenda tends to
be quite broad and covers all manner of economic policy issues.
At the WTO it appears to be basically mercantilist and little
more. Whatever you think of it the EC tends to have a consistently
broad agenda for regionals/bilaterals and the WTO. While both
use regional/bilaterals to force through an even broader agenda
it would appear that the US has very limited demands of a multilateral
system. The "success" in the NAFTA on investment, social
and environmental provisions showed the division between US regional
and multilateral stances. Many developing countries tend to view
the "real" strategy of the US and EU as being revealed
in their broader demands in bilaterals; the US demands ever higher
degrees of intellectual property protection and investment guarantees;
the EU a closer approximation to a social democratic governance
structure. The US also appears increasingly unwilling to invest
any domestic political capital in the process.
The key problem we face over the next couple
of years is that there is no compelling reason for the US to engage
in any way at the WTO. The 2004 election campaign has started
and the stoking up of the campaigning fires has begun in earnest.
The chance that the US administration will cut any deals that
harm US farmers, cotton interests, industry between now and the
election is pretty much zero. The timing of Cancún was
ideal to squeeze the US administration, with that opportunity
gone the chance of US movement is nil. The chance, however, of
heavily weighted/biased bilateral/regional agreements is much
higher; both as a means of boosting domestic constituencies and
to force through deals that are of direct benefit to US businesses.
2.2 EU Agriculture
Many have pointed to the EU stance on agriculture
as the real reason for the collapse at Cancún. The last
version of a text was rather timid to say the least. However,
it did mention a phasing out of export subsidies and had a skeletal
outline of an agreement that may deliver if numbers were inserted.
Of course it could have been a lot better, but whether we like
it or not, the EU CAP reform process had to circumscribe whatever
agreement would be signed. It was here that the real reform chances
in EU agriculture was lost—in Brussels not Cancún.
There is also the unpalatable, but unavoidable fact that it took
almost fifty years to get the EU, and its member states, to allow
the GATT system to deal with agriculture at all. In effectively
the only round since the Uruguay Round finished it was extremely
ambitious to set an end date for the CAP or export subsidies.
As much as we would have liked to have seen such a commitment
it was never likely to have been made. There was a more fundamental
problem for the agriculture talks in that the CAP reform process
finished very near the WTO discussions; the agricultural reformers
in the EU were thus too close to the deal they had negotiated
to be able to step back from the WTO process and take a cool look
at the negotiating positions. The tenor of Franz Fischlers remarks
immediately prior to the Cancún Ministerial bore all the
marks of someone who had only recently emerged from one battle
who was facing another. It appeared that the EU member states
and agricultural negotiators almost felt slighted that no one
appeared to be giving them credit for having done something on
the CAP before Cancún. Their ability to recognise the validity
of opposing positions (a pre-requisite for negotiations) was thus
impaired by the recent wounds of intra-EU negotiation.
The immediate aftermath of the collapse of Cancún
is the need to shore up the results of the CAP reform process.
A number of Southern European countries are already talking of
possibly watering down the CAP reforms as a result of the Cancún
failure. It is also interesting to note that Franz Fischler claimed
that he was relieved that the CAP reform process was sold on a
domestic EU ticket, rather than tying it to the WTO process.
The key lessons/issues are thus:
1. Any EU internal CAP process needs to
be carried out some way distant from WTO talks.
2. The focus on EU CAP reform must be internal.
That is, it must not be held hostage to WTO talks.
The key and immediate problem with EU agriculture
it to stop backsliding on CAP reform. The absence of the external
pressure for reform could make the next stage of CAP reform more
difficult still and this is something we need to guard against.
The chance of using the possible non-renewal of the peace clause
at the end of this year must be used as a negotiating chip to
try and get the ball rolling on the phase out of export subsidies,
although this may be easier said than done with many countries
seemingly willing to try and avoid using the "nuclear option"
on agriculture so soon after Cancún's collapse.
2.3 Everyone else's agriculture
Of course it was not just the EU that presented
problems on agriculture. The final text was far from easy for
the US to live with as its' limits on subsidies appeared to cover
the entire US farm bill expenditure. It is also far from inconceivable
that the real reason that South Korea and Japan stuck out their
necks on the new issues was that they were really worried about
giving any ground on agriculture.
2.4 Coalition building and negotiating parallels
The arrival of the Group of 21, or 23 or whatever
number we ended on, has been hailed as the key step forward of
Cancún. Of course we have had negotiating blocs of this
sort before, but few have been as aggressive and well co-ordinated
as the G21 became. There were some problems that came with the
G21's arrival, though. Firstly, the group was negotiating its
own stance at the same time as negotiating with the US and EU
on agriculture. The tasks of building a group as well as agreeing
a stance and negotiating on that basis may have been simpler had
the coalition building occurred earlier. Secondly, the G21 struggled
to extend its reach beyond the agriculture issue. The existence
of other "G" groupings, while nothing new, made coordination
difficult between the developing countries. Thirdly, the initial
success of the G21 formation emboldened the negotiators to a degree
probably in excess of their ability to actually effect change
in the EU and US positions. The momentum of the G21 process also
made some delegations reject the need for a fall back position.
As all negotiators know before you can conclude a deal you must
have a clear idea of your bottom line and a fall back position
from your first offer. It appeared towards the end of the week
that some developing country ministers, buoyed by the success
of the G21 and their seizing of the agenda and moral high ground
from the EU and US negotiators , had rejected the idea of a fall
back position. It thus became unclear to some negotiators what
the bottom line of these countries really was.
It could be argued that some developing countries
wanted to block the talks because their bottom line was that they
were unlikely to gain from the deal. However, this is unlikely
given both the reactions of some of the larger developing countries
and the fact that in advance few countries appeared willing to
block progress. This is supported by the (sotto voce) statements
by Brazil and India immediately after the collapse of the talks
that both saw a deal as being possible. Indeed Brazil thought
a deal on agriculture was achievable within five hours. While
this is unlikely it signals a couple of things. Firstly, Brazil
clearly wanted to deal but was unable to get the remainder of
the G21 to follow its lead. This has implications for the longevity
of the grouping. Secondly, the fact that Brazil and India were
prepared to deal would appear to suggest a larger split between
the smaller developing and least developed members and their larger
counterparts. There could be two reasons for this. Firstly, it
may be simply that they had different bottom lines and strategies
for the meeting and these split the group towards the end of the
meeting. Secondly, and perhaps more worrying, some of the smaller
countries with less physical capacity for negotiations may simply
have misread the signals and thought a deal impossible. This latter
explanation was seized on by some commentators as signalling "naivety"
on the part of some of the smallest countries in the discussions.
This problem was amplified by the apparent belief of some of the
smaller African states that the Singapore Issues would be the
only ones that they would be allowed to negotiate on.
The capacity problem in negotiations is one
that is rightly made much of by development NGOs. It is interesting
to note, however, that the capacity problem is addressed in part
by a "privatisation" of the technical assistance programme,
with many NGOs offering direct "aid" to some delegates.
In Cancún a number of official delegations carried NGO
representatives; among the developed economies this was in a largely
advisory capacity, but in some smaller developing countries the
involvement was much closer. While such a development may not
be necessarily a bad thing the role of many NGOs is primarily
campaigning and lobbying, while developing countries need negotiation
and analytical skills. The mismatch between the two perhaps amplified
the momentum built up behind the G21 formation. The spiral of
rhetoric appeared to develop a life of its own and may have contributed
to the "last stand" mentality that seemed to pervade
the process towards the end of the Sunday talks.
The key issues/questions that arise from this
aspect are:
1. Will the G21 remain solid (with bilateral
pressure) and extend into issues beyond agriculture?
2. Now Brazil has failed to use its leverage
within the G21 to negotiate a deal will it become embroiled in
a bilateral fight with the US?
2.5 Negotiating tactics
The stance of the G21 is analysed above, so
we will not look further at that group. The EU and US maintained
their usual negotiating positions of dogged refusal to budge before
the last possible moment. Because the US agenda was so limited
it was able to focus its efforts on agriculture and industrial
tariffs. There is an unanswered question regarding the real willingness
of the US to negotiate given the fact that it had just "given
way" on TRIPs and public health immediately prior to Cancún.
Having done this it appeared that the US was unwilling to give
too much more to break the logjam. Indeed it appeared that the
US was treating the TRIPs concession as part of the Cancún
meeting. The US was not particularly publicly visible in the talks
and tended to use bilatarels and phone calls from Washington to
impress its points.
In contrast the EC had a large agenda but a
similar tactic. The signals that had emerged from many member
states that unbundling of the Singapore Issues was a real option
undermined the ability of the EC to successfully play a classic
brinksmanship game. The bilaterals that their member states held
will have further undermined this. The fact that the EC continued
with a brinksmanship game right to the end both produced a text
that was destined to produce failure and an atmosphere that militated
against success. If the EC had signalled that it would drop investment
and government procurement transparency at the start of the meeting
then progress could have been made on trade facilitation and competition,
as these were the two issues that ended up being least controversial.
The Commission seriously underestimated both the mood of the meeting
and the degree to which the outside world understood the Commission/member
state bottom line.
The questions/issues for the future:
1. The schism between member states and Commission
on agenda and negotiations may rein in the agenda of the EC.
2. The Commission need to amend their negotiating
style if they want real progress on the Doha agenda.
3. Brinksmanship only works if the opposition
do not know your bottom line—in Cancún everyone knew
where the Commission would end up on the Singapore Issues—except
apparently the Commission.
2.6 Mini green rooms
The decision to set up mini-green rooms for
the issue specific talks and then report back to a Heads of Delegation
meeting each day was generally welcomed by members. However, it
may have created a problem for a single undertaking approach that
was not considered at the time. While the mini-green rooms produced
a text, they produced a text that was by its nature extreme. The
need to separate and focus lead to an undue emphasis on particular
issues (like investment) that may not have been as highly promoted
had a normal trade off process occurred. The problem became even
more acute when the mini-green room format was moved into the
HODs meetings for concessions and negotiations. The focusing on
single issues clearly undermined the single undertaking approach
and forced trade-offs within groups of issues rather than across
these issues. As the EC approach required them to move on Singapore
issues at the same time as clawing back on agriculture, the architecture
of the meetings made it almost impossible for them to come out
with a satisfactory deal. The undue focus on one sub-set of issues
naturally then became embroiled in the positioning of the negotiating
blocs and the new found self confidence of the G21. The mini-green
room approach thus created a need for every country to "win"
each sub group, while the WTO process needed wins and losses to
be pooled in the single undertaking.
The key lessons/questions for the future are:
1. Will the mini-green room become standard
process? It is in many ways a replication of the existing WTO
Geneva process (that does not negotiate agreements) and includes
more countries; but undermines inter issue trade offs.
3. STRATEGIC
ERRORS
While the above factors set the tone for the
Cancún meeting there were a number of specific factors
and circumstances that made the finding of a deal more difficult.
3.1 Cotton
The Cotton producers of West Africa have an
unanswerable case against US subsidies. The problem is that we
are only two years away from US elections and indeed are at the
start of the nomination process. The chance of the US moving against
cotton subsidies before an election (given the location of the
cotton states) is about as likely as Chirac moving against French
farmers before an election. There was never any chance that the
USA would agree to a significant cut in its protection. The fact
that the domestic pressure for reform is limited and indeed is
not tied into any particular process and we have an interesting
contrast with the EU on agriculture. Here there is pressure for
reform and a process focused upon it. In the case of cotton we
had a very late submission, not tabled until just before Cancún,
and no domestic reinforcement process. The DG of the WTO Supachai
placed a good deal of personal credibility on the cotton producers
getting their way, despite being warned by secretariat staff that
he was on a hiding to nothing. The late tabling, lack of domestic
US backup and timing of US elections made this a non-starter.
The best we could have got was considerably greater than the US
was offered—but this would have taken time and coalition
building with US domestic reform groups. So the question remains
as to why the West Africans pushed this as a deal maker/breaker
and why Supachai put so much personal prestige into it. The chances
of success tend to be low for these sorts of initiatives. Add
in the US political situation and its chances were always zero.
Fail to build a coalition in advance and you end up with the Draft
Text which was little more than an insult to the African delegations
that asked for movement.
The questions/issues that arise are:
1. Why did Supachai hitch his wagon to an
issue that, although worthy and right, was never going to fly?
2. Why did no-one bother to check the US
domestic political situation?
3. Why was the issue tabled too late?
4. Was any attempt made to build links with
potential domestic reformers?
The key lesson from the failure of the cotton
initiative is that trade policy is domestic policy. A country
can only negotiate within limits set by domestic politics. Only
autocracies and countries with ill developed domestic political
systems can sign agreements that are not agreed to in advance
by key domestic stakeholders. If the cotton initiative is to proceed
US domestic interests must be engaged to drive a wedge between
the cotton growers and the US administration. In the run up to
an election this is unlikely to work.
3.2 The new issues green room
The process by which the final text was arrived
at was problematic to say the least. The man responsible, Pettigrew,
asked all parties for their favourite of the four. He did not
ask for the ones that they were least opposed to. The answers
he got dictated the text. The problem is that the ldcs and G21
refused to play ball at all and did not name any—continuing
to state that they opposed any talks. Whether he could have probed
and got a different answer is impossible to tell. Perhaps the
question was wrongly phrased, perhaps the developing countries
were simply unwilling to signal their preferences at this stage.
In essence the final text reflected the priorities only of a few
of the demandeurs—or rather it expressed the extreme end
of the demandeurs wish list. Because they were asked to name their
favourite the result was completely biased in the wrong direction.
Despite being warned that investment was the least favourite of
all developing countries and the most contentious, Pettigrew produced
the text that focused all efforts on investment. The text made
the geometry of green room negotiations very difficult, if not
impossible. A number of the key developing countries clearly indicated
that they could live quite happily with competition talks, as
they had been described in the first draft. There was also considerably
less opposition to trade facilitation and government procurement
transparency. What was clear to anyone that had followed the issues
for the last few years was the investment was a real deal breaker.
The Commission had not built a strong case and the opposition
was very clear.
The questions/issues that arise:
1. Why did Pettigrew produce a draft text
that was clearly unacceptable? It may have been because:
a. he hoped that the extreme position
would focus discussions clearly;
b. he took a literalist view of
his role as reflecting member views (even when they refused to
give them);
c. he simply got it wrong.
The key lesson for the long-term viability of
the WTO system is that when it is time for countries to place
their cards on the table—they really need to do so. Or perhaps
it needs to be made more explicit that the time has arrived. It
is not clear that the "final" chance to influence the
text was actually seen as such by all participants. Once the text
is written half the battle is over. If you allow the proponents
of an agreement to have untrammelled influence over a text you
are forced to rein them in rather than start from a more balanced
position. The apparent unwillingness to state a final position
made the final text totally unbalanced and for those countries
that actually wanted a deal, it made the last few days very difficult
indeed. Of course, if the country believed that the agriculture
text was too unbalanced to warrant further discussion then a blocking
position was sensible. The problem is that most countries both
during and after Cancún appear to view the collapse of
talks as a bad thing.
3.3 Closing the talks
Perhaps the most bizarre and unexpected turn
of events in the conference came when the Chair of the conference,
Mr Derbez, decided to close it. The immediate chain of events
came after he chose to focus on the Singapore Issues as the first
group of issues of the modified green room discussions (to be
followed by agriculture, nama, development issues etc). It was
reportedly chosen in this order so the most contentious issues
could be got out of the way first, before proceeding to the most
difficult. Of course, choosing between the issues is a matter
of opinion, but it may have made some sense. The final trigger
for collapse reportedly came when Pascal Lamy made his compromise
offer following a Council of Ministers meeting on the Sunday morning.
He stated in the meeting that personally he thought that keeping
trade facilitation and competition policy made most sense for
developing countries, an argument that has considerable merit.
However, he had been authorised to offer up competition and investment.
When he offered up the sacrifice he was met with a resounding
NO from the African group of countries; they wanted all issues
removed. This was swiftly followed by a NO from South Korea and
Japan; they wanted all four issues on the table. At this point
Mr Derbez decided that no progress could be made and closed the
conference.
There are a number of questions/issues that
arise:
1. After the EC "blinked" and
offered a sacrifice why did Mr Derbez not park the discussions
in that group and move on to agriculture and NAMA? Perhaps he
could have got agreement on the Singapore Issues after progress
had been made elsewhere.
2. Did Korea and Japan really demand all
four issues remain because of fealty to the four issues or because
they did not want progress to occur in agriculture?
3. Did having the modified green room make
progress across the agenda impossible? In essence taking the issues
in sequence undermined the functioning of the single undertaking
approach and made each country focus on trade offs within each
group of issues rather than between each group of issues.
4. Why was the decision of one person allowed
to stand? It was clear by Sunday morning that countries were after
a deal; many countries signalled this willingness to talk by rebooking
tickets for Tuesday from Monday. It was also reported that at
least one country was flying in new negotiators to help hammer
out a deal. Everyone in the conference was aware of this and was
expecting progress. Given all this why was the conference not
extended one day or even two?
The key lesson from the break down in the Singapore
group is cumulative. Firstly, the modified green room approach
produced a disaster of a text that made progress tough. Secondly,
the modified process forced trade offs within rather than across
groups, undermining the single undertaking. Thirdly, no one person
should be able to close a conference when a deal is still possible.
It was clear after the meeting that many of the key players, developed
and developing thought a deal still possible.
4. CONCLUSION
ON CANCÚN
To recap; there were a number of underlying
structures and problems that underpinned the Cancún discussions:
1. A lack of real US commitment to the WTO;
2. The tortuous and recent EU CAP reform
process and its results;
3. The other protected agricultural markets
hiding behind the EU;
4. Developing countries building coalitions
during negotiations;
5. Negotiating tactics that did not move
with the mood of the talks;
6. The structure of the mini green rooms.
In addition there were a number of specific
strategic mistakes at Cancún that amplified the impact
of the underlying problems:
1. An economically/morally/ethically correct
but politically unrealistic agenda on cotton;
2. A particularly poor mini green room result
on Singapore Issues;
3. An unexpected decision to close the conference.
The reason for the Cancún failure cannot
be "blamed" on any one thing. The background factors,
some of which are general, some Cancún specific, could
have been ameliorated had other paths been taken. For example
if the meeting had not been closed then perhaps an agreement could
have been reached. This was certainly the view of some of the
larger developing countries. Perhaps if the EU had not played
brinksmanship right up to the end we would have had a different
Singapore Issues agenda which was more palatable earlier. If the
G21 had formed more solidly well in advance of the Cancún
meeting then perhaps less time would have been spent on internal
dynamics. Perhaps if the developing countries had been more open
in the mini green room on Singapore issues then the final text
would have been less traumatically poor. Perhaps, perhaps, perhaps.
We could spend a good deal of time in "what
if" territory and perhaps more than any other recent WTO
Ministerial we are forced to wonder what on earth went on.
In the rush to judgement by many commentators
there has been an apparent desire to find a culprit. For many
Mr Derbez fits the bill, for others the Singapore Issues. In many
ways this splits the world into the pre-Hegelian "great man
of history" approach to historical events and the post-Hegelian
systems people. Mr Derbez obviously does bear some responsibility
for shutting the meeting before all possibilities for a deal were
exhausted. This was a clear mistake and potentially a very major
one. How major it was we will never know.
The position on the Singapore Issues is more
complex though. They were certainly the element of the talks that
became the sticking point. However, the final point of breakdown
was about bigger issues than the Singapore issues themselves.
In essence the debate about the Singapore Issues came to encapsulate
the wider undercurrents of the meeting. The failure to deal effectively
with developing country concerns, exemplified by the Cotton case,
amplified the collective indignation of the G21. This fed into
a structure of negotiations that militated against a cross-issue
trade off game that all previous successful negotiations relied
upon. Making each sub-game (mini green room) the sole focus of
attention in a sequential manner raised the stake so high that
every player operated on the assumption of having to "win"
each sequential game. The lack of effort or ability to suspend
talks in one area to move to another exaggerated this problem
in a manner no one probably could have foreseen. At base the Singapore
Issues became the touchstone for all the other problems of the
talks. It is unlikely, given the underlying structural problems
combined with Cancún specific events that a different result
would have been arrived at had the first group been on agriculture
or non-agricultural market access. Forcing the overall WTO negotiation
game into a sequence of smaller games simply makes trade-offs
between issues almost impossible. Such an approach fundamentally
changes the dynamics of the negotiation process.
So much for why we got to where we are. We need
to think about where we need to go now. The lessons from the Cancún
process should not be overdone. It is true that we have been here
before and we have had low points in the GATT/WTO process lower
than this. However, the peculiar confluence of circumstances that
lead to Cancún do not appear to have dissipated and indeed
they are likely to grow over time. The key lesson of the Cancún
process is that, to borrow the title of a fine Robert Paarlberg
book, leadership abroad begins at home. Trade policy is and always
has been a fundamentally domestic policy regime. It has a peculiar
external focus, but is driven by domestic considerations. The
inability to shift the EU on agriculture and the US on cotton
is proof positive of the primacy of the domestic over the foreign.
If we want to make real progress in these areas we have to marry
the external and internal reform processes more closely. This
means that a WTO proposal should follow a process of coalition
building for reform in advanced economies, not be the start of
it.
The second key lesson is that process matters.
The more inclusive mini green room process certainly helped produce
a text. It was also a lot more transparent and open—everyone
go to see what was going on much more clearly. At the time it
appeared that the text was similar in some ways to the doomed
final text at Seattle—a large piece of work that covered
a lot of ground but looked less than likely to make it through
to the end. The difference with Seattle was that this time the
text did not really reflect all the positions, partly because
some countries point blank refused to put their cards on the table,
and partly because the drafters ignored advice from wiser heads
that the final text would be too unbalanced. There are two possible
routes out of the this problem—an internal and external
route. The internal route is to ensure that everyone puts their
cards on the table, that the drafter listen to wiser heads and
that we ensure a mechanism to switch between mini green room texts
on a regular basis. We have to avoid a sequential game that starts
from a biased text.
The external approach relates to the range of
issues covered in mini green rooms. One simple way of limiting
the chance of a sequential game is to limit the number of issues
up for discussion. The effective unbundling that the Commission
proposed for the Singapore Issues did not work in breaking the
process. On a structural basis the failure of Cancún makes
a stronger case for the unbundling of the Singapore Issues and
the breaking of the link between them and the single undertaking.
The third lesson is that something must be offered
up to get some progress. It is extremely unlikely that anything
will happen between now and Hong Kong. The timetable for the Doha
Development Agenda (DDA) is well behind and the chance of playing
catch-up is remote. In many ways the EC and the USA are in a position
where they will have to make a pre-emptive move to get us back
to the situation pre-Cancún, let alone move ahead. Realistically
the US is unable to offer anything on cotton ahead of an election.
It could, however, offer a less offensive text than the appallingly
self-serving nonsense it served up in Cancún. For the EC
the chance of offering more on agriculture is similarly circumscribed,
first of all by the bounds of the CAP reform process and perhaps
more urgently by the upcoming French elections.
The chance of progress can only be grasped if
the EC and US can be given room to offer some concessions in a
way that does not involve too obvious a climb down. They need
to climb down, but need to be given a comfortable ladder. Of course
a natural reaction to this on the part of many developing countries
and development groups is that the EC and US should be forced
to climb down. While attractive this is not constructive. In the
current political climate and with the existing election timetable
we have no choice but to find a constructive way to get ourselves
out of this situation.
Unfortunately we have a problem of what the
starting point for the climb down should be. For some the final
offer of the EC should be that starting point. This would kill
all discussions on competition and investment policies. However,
as Pascal Lamy himself argued it would have made more sense to
offer up government procurement and investment as the sacrificial
lambs. So do we take as the starting point the desperate last
throw of the dice or the more considered considerations of what
actually makes most development sense. It is clear a sacrifice
must be made, the choice is which one.
For consumers trade liberalisation can only
bring benefits if domestic markets are sufficiently competitive
to ensure that those benefits are passed through to them. Anything
that can help to foster a wider and deeper competition culture
must be supported. The work of the existing competition working
group has been impressive in building support for domestic competition
enforcement and indeed forging links between agencies. From a
development perspective the competition agenda offers the possibility
of going after international private cartels that cost developing
countries billions of dollars a year. The alternative fora for
this agenda simply does not exist in a manner that will deliver
benefits for developing countries and for consumers in all countries.
In contrast the development case for the investment
talks is very low. The fact that the majority of investment is
already covered by the GATS and the rest covered by bilateral
deals has always presented a problem for investment talks proponents.
They essentially had no case for a WTO agreement, or a weak one
at best.
On trade facilitation there is a pretty iron
clad defence on there being a benefit for developing countries.
Indeed some saw this as the biggest possible gain from Cancún.
Getting customs procedures more efficient can offer large benefits.
For government procurement transparency talks there is a residual
suspicion that this is a market access agenda in transparency
clothing. A friend on one of the African delegations recounted
a conversation with a trade diplomat that started on transparency
and slipped into market access quite easily. While this may have
been an inadvertent slip it certainly raised the concern level
on the issue.
Given this mixed bag on the Singapore Issues
we need to make a case to ensure that we do not throw the baby
out with the bathwater. The case for effective competition enforcement
and action against cartels is strong from a development perspective
as well as from a consumer perspective. The combined need to make
a public sacrifice but not damage the long-term focus of the trade
system requires as a bare minimum an accepted unbundling of the
Singapore Issues. Investment talks should be abandoned even at
a working group stage. Competition discussions should continue
on the basis of the draft Cancún text, which simply requires
the group to report to the Hong Kong meeting. Trade facilitation
and government procurement discussions should continue in working
group mode, although government procurement may well have been
holed below the water with the suspicion that this is a market
access agenda in disguise. Commissioner Lamy was right to argue
for trade facilitation and competition as being in the interest
of all parties. The agenda is a long-term one, but one that can
deliver outside of the DDA process. It must be time for the Commission
to follow its instincts and drop investment and transparency in
procurement.
In contrast the US has to offer something on
cotton which goes beyond the paltry and insulting offer in Cancún.
However, there is no chance of this happening before the election.
This has to be recognised and discussions should be held in a
totally untransparent way to allow the US to signal the chance
of movement.
In summary:
1. The WTO system will effectively be in
stasis for some time because of upcoming elections.
2. If we want to make progress on cotton
and agriculture we need to build coalitions between developing
country exporters and developed country importers and civil society
groups.
3. The mini-green rooms can only work within
a single undertaking if we either strip the agenda right down
to its bare minimum or create a more explicit mechanism to allow
cross issue trade offs to be offered and made earlier in the process.
4. The EC must sacrifice investment talks
and possible government procurement to engender some good will
and the US must be more emollient on cotton subsidies—even
if has to be done on a private basis.
5. We must not over-react by killing the
potentially beneficial working groups on competition and trade
facilitation if we are to underpin the long-term viability of
the trade regime.
5. LESSONS FOR
THE FUTURE
The rush to judgement on the meaning of Cancún
was almost impossible to resist for the multitude of commentators
that were present and indeed those that were not. Much of the
commentary has been facile and focused on the specific of the
Cancún meeting itself.
The reasons for the failure of Cancún
are many and varied. However, as we know from Karl Marx, history
has a tendency to repeat itself: "Hegel remarks somewhere
that all great, world-historical facts and personages occur, as
it were, twice. He has forgotten to add: the first time as tragedy,
the second as farce[59]."
If the failure of Seattle was the tragedy then the failure of
Cancún was truly the farce. Few who were there for the
premature ending of the talks or the chaotic scenes as delegates
were held at the bottom of the escalators to the Heads of Delegation
meeting when the closure was announced.
If we are to avoid this farce again there are
a number of factors we need to take into account.
5.1 Trade policy is a primarily domestic policy
There is a fundamental mistake made in trade
policy discussions. Many participants are under the mistaken impression
that trade policy is foreign policy with a domestic impact. It
is not; it is domestic policy with a foreign impact. This is enormously
important for how one views negotiations. The whole history of
multilateral trade policy has been predicated on the mutual interplay
of domestic policies and agendas. Even when the policy that over-rode
trade was military (the US essentially paying to get Japan into
the GATT) it is unavoidable that trade policy was driven by domestic
policy imperatives.
Conclusion 1: trade policy has to be more fully integrated
into domestic reform efforts
If we are to embed domestic reform efforts and
embed trade policy that aims to bolster this we need to bring
the two together. Efforts have to be made to be more strategic
in building coalitions able to bolster reform at home to allow
it to be offered to demands from abroad. Similarly, more effort
needs to be made with overseas companies to build domestic links
to help channel demands for improved market access.
Proposal 1:
— Northern consumer and other civil
society groups need to focus on building alliance with southern
producer groups and administrations.
— Anti-dumping cases and WTO panels
offer the most immediate route to such alliance building.
5.2 US domestic reform movements are weak
and compromised
In what is a reverse of the position in Europe,
there appears to be little effort among non-governmental groups
in the USA to attack domestic subsidy and support regimes from
inside. There are few groups who take the stance of the combined
forces of Europe's NGOs that reform of agricultural support is
in the domestic interest of the country concerned. This lack of
a constituency for domestic reform weakens the ability of other
countries to lobby for reform. Only when reform is based on an
assessment of domestic interest can trade negotiators trade away
domestic protection in return for a similar effort in other countries.
Each trade demand from a third country is in essence a domestic
deregulation demand for the receiving country. The chances it
will be accepted can only be enhanced if the constituency receiving
the protection is under attack domestically. This attack can be
a market attack (retailers importing from abroad) or political
(CAP reform coalitions).
What is perhaps interesting about the US political
situation is that there is less apparent willingness on the part
of those groups working on trade to attack domestic sources of
protectionism. Indeed many of the groups "most likely"
to fill that role are compromised by being close to labour unions,
small framer groups or other sources of opposition to trade liberalisation.
The reason for this is not clear, but in Europe there is a clear
and broad coalition of groups that effectively act as an adjunct
to demands from third countries for trade liberalisation. They
may be weaker in most cases than those seeking protection (a golden
rule if ever there was one!) but at least they are present. In
the US they appear to be almost absent. This leaves the field
empty but for the domestic market actors seeking to maximise their
returns. While important, such groups either do not occupy the
moral high ground or are unable to express their impulses in any
other way than references to their bottom lines.
Conclusion 2: US groups have to be lobbied to tackle
domestic reform
Without a civil society bolstering demands for
domestic US reform it is unlikely that efforts to tackle domestic
US protectionism will be successful in "problem" areas.
The inability to make progression cotton subsidies is a case in
point. There is a case that US groups working on trade matters
would be better placed working on domestic reform efforts. This
would be a much better guarantor of improved developing country
access to their market.
Proposal 2:
— Pressure must be placed on US civil
society groups working on trade to focus more aggressively on
internal politics as a route to delivering reform
5.3 The WTO process requires base mercantilism
to progress
The argument that the Doha Development Agenda
is a development round and therefore fundamentally different to
preceding rounds is dangerous. This is because the fundamental
architecture of the multilateral trading system has remained the
same. Whether we like it or not the WTO system depends on base
mercantilism to work. It is only through a mutual exchange of
bids and offers (bolstered by domestic constituencies seeking
more liberal trading conditions) that progress can be made. The
muddle of Cancún across many delegations appeared at least
in part from a political desire to avoid having too explicit a
mercantilist agenda for fear of being branded anti-development.
This left things like NAMA as almost an afterthought to the talks
because it did not really fit the model of talks that participants
almost wanted to believe they had.
The sad truth is that the WTO system requires
countries to be self centred and mercantilist. Without that self-centredness
the system simply cannot move forward. Once we start to undermine
the base mercantilism that built the system we either have to
widen the agenda ever more to accommodate the needs of developed
world negotiators to come away with "something" for
their efforts, or fundamentally change the WTO system does business.
Conclusion 3: a development round depends on self
interested mercantilism
Giving the Doha Round a development-friendly
name does not change the fundamentals of the system. It is a bit
like renaming Windscale to Sellafield—it is still the same
place whatever name you give it. To move forward in trade negotiations
you either have to rely on bid/offer or widen the agenda to allow
unilateral disarmament on the part of those with most to give.
In the case of the former this requires each country to aggressively
negotiate from a classical "national export interest"
position. Pretending that a national export interest does not
exist does not make it so. If the system is based on mercantilism
then the primary agenda must be a mercantilist one. Secondary
agendas based around one off disarmaments (such as TRIPs) may
be useful in a development agenda—but cannot be the centrepiece
of the process as they do not fit into the fundamental architecture
of trade talks. It could be argued that part of the reticence
of the US was exactly the fact that they saw the TRIPs agreement
as part of the bid/offer process and were expecting something
in return.
Proposal 3:
— The need for crass mercantilism as
the motor of trade rounds should be explicitly recognised. The
primary role of trade negotiators should be focused here.
— A development agenda can only piggy
back on a mercantilist trade negotiation without fundamental and
unrealistic reform of the WTO process.
5.4 Developing country policy formation needs
closer scrutiny
We generally know a good deal about how trade
policy is formulated in the advanced economies, although probably
more about the USA than the EU. There is considerably less knowledge
about how trade policy is formed in developing countries. One
would assume that the formation of policy mirrors the wider political
system and is subject to the usual pressure of domestic coalitions
and interest groups. There is no reason to believe that developing
countries are any less prone to doing the bidding of interest
groups. Indeed there is evidence that they are more likely to
do so. This is because the economic systems of most developing
countries are focused on a small number of sectors. The links
between these sectors and the political systems tend to be close.
There is, of course, nothing particularly new or surprising about
this. However, there appears to be a belief prevalent among many
NGOs that it is only the developed world negotiators that have
vested interests to protect. The argument runs that developing
countries represent their populations while developed world politicians
represent the interests of industries only. While this is rather
an unlikely position it is not immediately capable of being countered
without any clear research based arguments.
Conclusion 4: greater study must be carried out of
developing country trade policy formation
Given the funds available for research and capacity
building more needs to be funnelled to investigate the manner
in which trade policy is made in developing countries.
Proposal 4:
— Development departments should fund
an in-depth programme of research to allow us to understand the
process of policy formation in developing countries.
5.5 NGOs will fill capacity vacuums
Being the policy entrepreneurs that they are
many NGOs have sought to fill the vacuum in policy making that
exists among developing country delegations. The offer of help
from an NGO must be seductive; their message is pitched as being
in the interests of the developing country. The seemingly selfless
agenda of the NGO endears it further. Given the resource constraints
in many developing country trade authorities any offer of help
will be welcomed, particularly if it appears to be "free"
advice. While many of the NGOs that offer such help do indeed
possess expertise in some of the areas they are not focused on
the same goal as the countries themselves. There is a fundamental
mis-match between the desire of an interest group to further a
particular campaign and the much more nuanced position of a country
seeking to negotiate a trade agreement. What became clear at Cancún
was that there was a blurring of these roles as the momentum of
the G20+ generated a nose-thumbing atmosphere that was fed by
the campaigning focus of the NGOs that had inveigled their way
into the orbit of the national delegations. Some Ministers from
the smaller developing countries indeed seemed to run their negotiations
more as a campaign than a negotiation.
Conclusion 5: More basic resources are needed for
smaller developing countries
While the technical assistance programmes are
important for building capacity in developing countries for negotiations
they cannot plug all the holes. What was clear at Cancún
was that many developing countries did not have access to simple
support services. Some NGOs ended up doing the typing for some
developing countries because they had no secretarial support.
The lack of computer facilities (the NGO centre had more than
the conference centre) forced many delegates to use the computers
in the press room.
Proposal 5:
— Every developing country that meets
established funding criteria should be provided with secretarial
support, computer equipment and support and other basic support
materials.
— The WTO needs to establish a formal
process to identify truly global and representative NGOs and involve
them more closely in consultations. The UN system has a model
that would allow the truly representative organisations to be
separated.
5.6 The modified Green Room process needs
to be modified
The desire of the WTO to be more inclusive in
the Green room discussions at Cancún was laudable. However,
the partitioning of the Green Room into discrete subject areas
had the unintended consequence of segmenting the single undertaking.
This had the effect of making a single negotiation, with trade-offs
across the range of issues, into a sequential negotiation game
that focused discussions so closely on individual issue areas
to such an extent that it undermined the ability to get trade-offs
across groups. The problem in the Singapore Issues group exemplified
this problem. In advance we knew that a number of the leaders
among developing countries were primarily concerned about investment
and secondarily about government procurement (for fear of a market
access wolf in transparent sheep's clothing). There was less concern
on competition and trade facilitation. The faulty text that emphasised
all the wrong things made a deal difficult, but the structure
of the modified green room imbued discussions with an importance
they probably should not have had. The ability to make cross-issue
trade offs was always going to be the "saviour" of discussions
on the Singapore Issues as the real targets of all parties, agriculture
and Nama required some give on the secondary agenda to make progress.
This "saviour" was important for the EU to be able to
offer concessions on agriculture (no matter how measly they were).
In a normal green room such a trade-off would have been easier;
with the issue specific green rooms this was made more difficult.
The atmosphere generated in the Singapore discussions then appeared
to block any possible progress in the other issues when their
mini green rooms were mooted.
Conclusion 6: negotiating architecture must be able
to provide trade-off opportunities
We cannot return to the lack of transparency
and exclusivity of the Green Room discussions. Conversely we cannot
have a process that segments and separates the trade-offs and
thus makes an overall deal that much more difficult to achieve.
Operating the entire agenda through one Green Room is probably
unwieldy. The openness of the new process is good—but makes
a deal more difficult.
Proposal 6:
— Concurrent talks across mini Green
Rooms is probably impossible given the small size of many developing
country delegations.
— Perhaps each subject group should
stake out positions at the start of a Heads of Delegation meeting
and only then a front runner picked.
— As soon as an impasse is reached
or appears in one group, then the next should start immediately.
5.7 Mechanisms for pre-Ministerial trade-offs
must be developed
Many complaints were made in Cancún that
the end result and indeed the earlier drafts were little advanced
from the position in Geneva before the delegations boarded their
flights. The same problem arose at Seattle. The difference with
Cancún was that in a sense we had the political stalemate
of Seattle over-riding the preparatory work of Doha; we had the
preparation but not the will. There was considerable criticism
of the brinksmanship played, in particular, by the EC in its negotiating
stance. This brinksmanship relied on the willingness of other
negotiating parties to recognise a concession when it was offered
and a willingness to reciprocate. That willingness was simply
not there.
Part of the reason for that lack of will came
from the fact that the Commission and its member states signalled
some way ahead of Cancún that it was either willing to
offer concessions, particularly on the Singapore Issues, or would
be forced to do so. In many ways the Commission got itself into
the bind that the Indian government are accused of—it said
no right up until the last minute and was then forced to concede
more than it wanted to because of an unwillingness to negotiate
seriously until the last minute. The fact that Commissioner Lamy
clearly signalled that his personal choice of a sacrifice was
not the one on the table shows how little control the Commission
had over the process at the end. This must raise questions about
a strategy based on brinksmanship in an atmosphere not conducive
to such tactics and a ever increasing group of countries wishing
to engage in a negotiation.
Conclusion 7: the Geneva process must allow earlier
concessions
There is no sign that the number of developing
countries wishing to engage in negotiations is going to decrease.
There is also no sign that the basic rules of the WTO will be
amended to allow weighted voting or a legislative role for the
General Council. If this is the case then a strategy based on
brinksmanship at ministerials must be under severe question. If
ministerials are to work in the future or indeed the trade system
is to progress then more use must be made of Geneva negotiations
to clear up more basic ground for negotiation. If the EC had agreed
to drop investment talks from its demands for Cancún it
is unlikely that we would have ended up in the mess we did.
Proposal 7:
— The EC and other major states should
use the General Council meetings in the run-up to Ministerials
to offer concessions ahead of the meeting.
October 2003
59 The Eighteenth Brumaire of Louis Bonaparte (1852;
repr. In Karl Marx: Selected Works, vol. 2, 1942). Back
| 
