THE CANCUN CHECKMATE

The developing world beats back the encroaching threat from the World Trade Organisation to its autonomous policy spaces, through a positive affirmation of its cohesion.

in Cancun

AN unmitigated failure, a breakdown that sows seeds of hope, or a portent of greater trials in future? Days after the Fifth Ministerial conference of the World Trade Organisation (WTO) broke up without decision at the picturesque seaside town of Cancun in Mexico, varieties of diagnoses compete for attention.

There is little argument that after years spent on the margins of the WTO's arcane processes of decision-making, developing countries managed to achieve a forceful affirmation of their interests. Further, there could be little argument over the proposition that for all the ritual genuflection at the altar of "development", the industrialised West is no closer to accepting that it needs to make substantive changes in its global policy outlook to accommodate developing country aspirations.

Concessions in nomenclature come easy. Clever drafting skill is all it took to name the ongoing round of global trade talks the Doha Development Agenda (DDA) after the capital of Qatar, the Gulf Emirate, where the Fourth Ministerial was held in 2001. But when Cancun called on them to deliver on the promises of Doha, the industrialised world chose evasion.

Early on the evening of September 14, the United States' Deputy Trade Representative was concluding a media briefing with a hesitant prognosis. The Cancun conference was into the final hours of its schedule and the 148 delegations assembled from across the world had not found a consensus on the "Singapore issues". Once a pathway was found through the four issues - investment, transparency in government procurement, trade facilitation and competition policies - that go under this collective title in WTO councils, the smaller group of Ministers assembled in the so-called "Green Room" would move onto the trade in agriculture. The entire process could take the gathering through the night and beyond. If consensus on the Singapore issues proved elusive, there could well be an early conclusion.

Events outside the media room were overtaking these scenarios even as they were being constructed. Just as the U.S. briefing ended, delegates from a number of African countries were storming out of the "Green Room" consultations, declaring the talks over. Yash Tandon of the Kenyan delegation proclaimed that three groupings with partly overlapping memberships - the African Union (A.U.), the Africa, Caribbean and Pacific (ACP), and the Least Developed Countries (LDCs) - had decided that there was nothing left in the talks for them. Negotiations could conceivably be resumed if there was a serious effort to restore the centrality of development concerns in the ongoing round of trade negotiations. But there would be little hope if the focus remained on issues of only peripheral interest - or even potential hazard - to the developing countries.

The draft Ministerial declaration, as revised for the second time and submitted to the membership on September 13, envisaged that negotiations on trade facilitation and transparency in government procurement would begin immediately after the Cancun meeting. Competition policy would be referred back to a working group of the WTO, with the understanding that it would consider "possible modalities for negotiations". And investment would go into a phase of "intensified clarifications", so that "modalities" for commencing negotiations would be agreed concurrently with similar milestones being reached in agriculture and non-agricultural market access.

These rather tortured formulations on the Singapore issues reflected a careful balance between the interests of the WTO's most powerful members. The European Union (E.U.) had been insistent on taking up all four issues. This was an imperative, in E.U. Trade Commissioner Pascal Lamy's words, to maintain the "careful balance" between trade liberalisation and rule-making, a balance which would be seriously upset if any one issue - or more - were to be taken off the agenda.

The U.S. remained lukewarm on the package of issues, insisting that it was not a demandeur and only a facilitator of dialogue. Its Deputy Trade Representative Peter Allgeier clarified early at the Cancun conference that it would be "appropriate" to commence negotiations on all four issues. However, the degree to which the work programme had moved in the four areas differed significantly, as did the level of consensus achieved. This inclined the U.S. to the belief that there was an immediate basis for negotiations only in government procurement and trade facilitation.

Developing countries remained sceptical or worse. A group of 15 nations - including India and Malaysia - had coalesced around opposition to the Singapore issues early at Cancun. There was no room for qualification here. As articulated by Rafidah Aziz, the leader of the Malaysian delegation, the Singapore issues bore no relation to trade. Neither was there any implicit bargain between the Singapore issues and the negotiations in agriculture. India had insisted at Doha on "explicit consensus" as a condition for negotiations on the Singapore issues. The phrase was put through much scrutiny and analysis at Cancun, and the general agreement was that every member of the WTO needed to affirm positively that it had no objection to negotiations beginning. The conventional artifice of construing silence as implicit approval would not work. And the group of 15 was clear that explicit consensus had not been forged. Besides, there was a lack of capacity in the developing countries to deal with these four new elements in a terrain already bedevilled with complexity, said Aziz.

The contours of a compromise between these three clearly marked positions were already taking shape in the mind of Pierre Pettigrew, the Canadian delegation leader who was nominated as "facilitator" for the talks on the Singapore issues. It was evident to all that a proposal to undo the package and move two issues to the table for immediate negotiations would clear the U.S. veto. To clear the E.U. hurdle, investment needed to be placed on a different footing. But precisely because this was the issue on which the developing countries had the strongest reservations, a linkage had to be forged with the E.U.'s prospective concessions in agriculture. Although developing countries explicitly rejected any such trade-off, Pettigrew asserted at his first media interaction that the negotiations on agriculture could conceivably move ahead if the Singapore issues were to yield a result.

The second revision of the Ministerial declaration reflected this balance between contending interests. In opening discussions on the draft, the conference chair and Mexican international relations secretary, Luis Ernesto Derbez, made the tactical decision to seek a way through the Singapore thicket before turning to agriculture. This was perhaps a serious error of judgment.

Developing country resistance to the Singapore issues had been forcefully summed up at the September 13 plenary session by India's Commerce Minister Arun Jaitley. Discussions at the WTO headquarters in Geneva and the consultations at Cancun had shown that the "clarification process on the Singapore issues has not yet run its course", said Jaitley. In the circumstances, "a majority of the membership of the WTO have rejected the launch of negotiations on these issues and sought a continuation of the clarification process". But the second revision of the draft declaration had utterly disregarded this fact. "Explicit consensus" had been ignored as a requirement for negotiations and effectively dismissed from all future deliberations of the WTO. This was a clear instance of the "deliberate neglect of the views of a large number of developing countries", an obvious attempt to "thrust the views of a few countries on many developing countries".

When confronted with such resistance, the big players in the WTO have conventionally deployed a rather effective device of persuasion. Plenary sessions are allowed to meander on while the core of the deliberative process moves to the so-called "Green Room". The choice of membership in the "Green Room" is always selective, governed by prevalent contingencies. Usually, it includes the key countries from every major geographical or economic bloc and the member-states seen most likely to resist any given WTO decision. Gathered in a small enclosure, these countries are put through a sustained barrage of legal-speak and moral bluster about the imperatives of free trade.

These murky and opaque proceedings are usually accompanied by far more unsavoury bilateral meetings, where the hidden persuaders of international diplomacy are deployed: prospective aid cutoffs and the withdrawal of preferential trade concessions. With countries like India, which have strong reservations about the WTO process and greater resilience in standing up to the blandishments of the industrialised countries, the strategy adopted is usually an encircling manoeuvre. Any unity of purpose India may have achieved with other developing countries would be directly targeted through bilateral deal-making. The outcome finally, as repeatedly witnessed during the Uruguay Round negotiations and until as recently as Doha, would be to leave India as the sole holdout, compelling it finally to yield or sue for agreement.

Matters took a different course at Cancun. Among the developing countries, there were few who were willing to accept the formulations on the Singapore issues. Early in the afternoon of September 14, Derbez called a recess to allow the delegates participating in the "Green Room" discussions to consult with their regional partners and allies. On returning to the consultations, the E.U. signalled that it would be satisfied with two of the Singapore issues and would not be averse to expunging all reference to investment and competition policy from the Ministerial declaration.

Botswana's delegate immediately spoke up on behalf of the Africa group, dismissing this compromise proposal and demanding that all four issues be deleted from the WTO agenda. And with the E.U. adopting a more conciliatory attitude, the countries that had until then been sheltering behind its hardline posture showed their hand. With Japan in staunch support, South Korea dismissed all possibility of a deal that did not include specific negotiating mandates on all four Singapore issues.

South Korea and Japan are among a bloc of countries with strong protectionist interests in agriculture. They had been relatively subdued through the initial phase of bargaining because core interests in agriculture were not yet under threat. With the glimmer of a breakthrough on the Singapore issues in sight, they had to move rapidly to pre-empt the possibility of the discussions moving on to focus on agriculture.

Stretched on a rack between the inflexible postures of Japan and South Korea on one side and developing countries on the other, Derbez announced that he saw no possibility of agreement. With the E.U. and China arguing feebly that they saw no need for the precipitate step, Derbez proceeded to close the conference. An anodyne six-paragraph declaration was drafted, commending the Mexican organising committee for its efforts and calling for further efforts at Geneva to take the Doha agenda forward. A short while later, WTO Director-General Supachai Panitchpakdi addressed the final plenary session and Derbez brought down his gavel on the Fifth Ministerial conference. Cancun 2003 had joined Seattle 1999 as a famous debacle in the fluctuating course of the WTO's history. But more than Seattle, Cancun has occasioned far more serious interrogation of the future of the WTO as a body.

A diehard element continued to insist that Derbez had shown undue haste. Patricia Hewitt, the U.K. Trade Secretary, saw a deal as imminent when the E.U. chose to dilute its posture on the Singapore issues. "There was a deal to be done," she complained, "and it is a bitter disappointment that we haven't reached agreement." Others were convinced that Derbez had erred in scheduling the discussions on the Singapore issues ahead of agriculture. Over four days of hard bargaining, they claimed, the WTO membership had heard numerous proposals on agriculture. Although divergent on matters of detail, the various frameworks proposed on agriculture followed roughly the same format. An agreement on agriculture would potentially have animated other debates for the better, much like the agreement on public health and intellectual property rights at Doha had opened the door to a wider agreement.

Derbez was dismissive of such scenarios. He had structured the discussions after appropriate consultations and with proper regard to the difficulty of specific issues. He had received no proposal to invert the order of precedence between agriculture and the Singapore issues. And it was his considered judgment, after hearing all sides to the debate, that a consensus was simply not possible.

CELSO AMORIM, the head of the Brazilian delegation, arrived for a press briefing shortly after Cancun had been consigned to history. It was a moment that underlined how failure could be received in several parts of the world as success. Along with four other delegation heads from the developing world, Amorim was greeted with a spontaneous ovation. For the many advocacy groups gathered in Cancun, who had tethered their campaigns closely to the cause that India, Brazil and other developing countries were pursuing, it was a moment of cathartic release of tensions and emotions that had been brewing for five days.

Amorim was appreciative of the applause, though he counselled circumspection and admitted that an agreement would have been more valuable. The talks had collapsed but a group of developing countries had established themselves on the world stage as a credible platform for articulating long-neglected issues. Numbering 20 at the beginning of the talks, the group had expanded in numbers and its appellation at the end of the conference, G20+, left open the possibility of more countries coming on board. Agriculture, Amorim pointed out, remained the most serious "unfinished" and indeed "unopened" issue in international trade. The G20+ had advanced a "serious and business-like" proposal on reforming global agricultural trade, and kept its unity in the face of daunting challenges. The grouping would continue to play a major role in future negotiations, he affirmed. And new pathways to agreement would be found, as they were after setbacks at Brussels in 1988 and Seattle in 1999.

Moments later, U.S. Trade Representative Robert Zoellick was putting a rather different perspective on events. He said that irrespective of development status there were two kinds of countries at Cancun: the "can do" and "won't do". The U.S. arrived with an ambitious agenda of trade liberalisation and a readiness to aim for aggressive time schedules for concluding agreement. Unfortunately, some of the larger developing countries had arrived with the intention of making a point rather than progress. If the partiality for tactical rhetoric was not curbed, he warned, it would be very difficult for the WTO to make progress. All members needed to get to work, said Zoellick, but the U.S. for its part was not going to wait forever. "We are going to move on," said Zoellick. "We have free trade agreements with six countries and we are negotiating with 14 others. We have been approached by various other countries that are interested in free trade and in opening up their markets, with expressions of interest in free trade agreements."

If lofty disdain was the underlying motif of Zoellick's remarks, Pascal Lamy on behalf of the E.U. was sounding the theme of collective failure and contrition: "We would all have gained from an agreement. Now we all lose. We will not play the blame game and we will remain open to reviving this process." Lamy's suggestion that the WTO was a "medieval organisation" that could not support the tasks it was entrusted with, suggests that the E.U. may soon table proposals to reform the organisation. But it remains a tall order to put in place a mechanism that could fruitfully steer discussions among 148 disparate members towards consensus, especially when the global economic environment is rapidly turning inclement.

The two preceding instances of failure mentioned by Amorim deserve attention just for the insights they could offer into the future course of the WTO. The Brussels Ministerial conference was held under the WTO's predecessor body, the General Agreement on Tariffs and Trade (GATT) and it broke up in acrimony over agriculture. This was a source of quiet satisfaction for the developing countries, which had begun to react in alarm to some of the more ambitious items that had been smuggled into the agenda of the Uruguay Round. The U.S. and the E.U. subsequently stitched up a discrete arrangement among themselves, known as the Blair House accord, which was seamlessly transported into the draft agreement prepared by GATT Director-General Arthur Dunkel and presented as a fait accompli to the rest of the world. With a few minor amendments, the Dunkel text came to be accepted as the Final Act of the Uruguay Round.

Seattle was the point at which the mandate of Uruguay had to be reviewed in two respects. The Agreement on Agriculture (AoA) in the Uruguay Round mandated a renewal of negotiations in 2000 to advance the process of trade reform. Developing countries, which had seen through the pretence of agricultural trade reform by then, also began, in the months before Seattle, to press the case for a review of the entire process of implementation of the Uruguay Round agreements. Promised benefits had failed to materialise and the commitments undertaken by developed countries had been diluted significantly. Seattle was dominated by the East-West split between the E.U. and the U.S. on agriculture and the North-South split between developed and developing countries on implementation. Failure was built into the Seattle conference, especially since the U.S. believed in the flush of the transient miracle economy of the 1990s, that it could add on several new elements of its choice and bundle them all up into a comprehensive new round of trade talks.

Doha brought the process back on track but only by making several concessions to the interests of developing countries. First, the declaration on public health affirmed the rather obvious verity that nothing in the WTO's intellectual property rights regime would impede the access of needy populations to essential medicines. Then there was the agreement that implementation of the Uruguay Round remained an integral part of the work programme for the next round of negotiations. Central to Doha too was the affirmation that all countries would work towards the reduction of export subsidies in agriculture, with a view to finally phasing them out.

From the very beginning of the Cancun conference though, it was evident that the developed countries were intent on the evisceration of the more inconvenient parts of the Doha declaration. Lamy denied that there was any kind of a polarisation of interests between developing and developed countries. What the case was rather, was a "variable geometry" of interests, with sections of the developed world standing with developing countries on specific issues. The pseudo-scientific terminology had a recurrent appeal through the Cancun conference. Allgeier, for instance, characterised the process of negotiations as one of finding the "centre of gravity on each issue" and then defining how these individual centres of gravity could be aligned to create a "balance across the whole agreement".

Developing countries remained unpersuaded since individual centres of gravity were seen to be shifting against them. The process had caused serious dissension from the very beginning, when facilitators were nominated for various segments of the talks. Pettigrew was regarded as an inappropriate choice since he had a well-stated position on the Singapore issues, couched in terms of a trade-off with agriculture. The other nominees - George Yeo of Singapore for agriculture, Henry Tang of Hong Kong for non-agricultural market access (NAMA), Mukhisa Kituyi of Kenya for development issues and Clement Rohee of Guyana for other issues - were not distinguished for either their sympathy for the developing world or for their ability to stand up to the pressure of the developed countries.

An early source of discord was the formal submission of the draft Ministerial declaration that had been assembled at Geneva on August 24, to the opening plenary session at Cancun, with the implicit understanding that it would serve as the basis for negotiations. The G20+ put forward its claims to be heard, since it believed that the August 24 draft had been prepared in an opaque and unaccountable fashion, without due regard for specific proposals it had tabled on agriculture. Perez del Castillo of Uruguay, chairman of the WTO General Council, sought to assuage this grievance by mentioning "other contributions" that had been received on agriculture. Derbez later came out with the explicit assurance that all contributions would be considered, with no a priori exclusions.

The procedure as outlined by Panitchpakdi was to have the facilitators hold intensive discussions with members who represented strong and distinctive views. These so-called "confessionals" would go into the drafting of a daily report to meetings of the heads of delegation. A report summarising the essence of the discussions would be made out by the third day of the conference, from which a further refinement of the Ministerial declaration would be extracted. This was a method of avoiding the frenzy of discord and forced consensus of the last day that has been typical of earlier WTO Ministerial conferences, notably in Doha and Singapore.

Early responses from the U.S. and the E.U. were dismissive of the possibility of the G20+ holding together. At his first formal media briefing, Lamy pronounced himself perfectly at ease with the existence of the group, though rather sceptical of its resilience. "We will see how far this alliance will hold," he said. "I am not sure that the strategic positions of Brazil and India are that similar." Allgeier was more explicit, confessing himself rather "perplexed" at the emergence of the group since it included some of the most ambitious advocates of agricultural trade reform and many of the known recalcitrants on improving market access.

Initial probing missions proved fruitless and, midway through the Cancun conference, Lamy conceded that it was not part of E.U. strategy to seek to "explode" G20+ unity. The U.S. though, was less inclined to accept the reality of developing country unity. Feeling the heat of U.S. pressure, Brazil on September 13 called for an end to "distracting and divisive tactics" in the Cancun talks. That was a rather delicately phrased exhortation to avoid the intrigues that normally animate WTO talks. A coalition of U.S. advocacy groups saw no reason to adopt the same subtleties of diplomatic expression. "We are outraged by the threats and attacks made by the U.S. against the group of 23 (sic) developing countries in the WTO seeking important changes to the WTO's farm trade rules," it said in a statement issued on September 13. "We call on the U.S. to stop these shameful attacks and to refrain from using bilateral pressure as a means to strongarm other nations, including backroom coercion, calls from the White House and threats to terminate other trade benefits."

Finally, on September 14, the U.S. was left in isolated and offended hauteur, while the E.U. lamented the collective failure of the WTO, and the developing countries celebrated the triumph of their unity. Unlike Brussels and Seattle, the developing world had beaten back the encroaching threat to their autonomous policy spaces from the WTO, not by capitalising on divisions within the industrialised West, but through a positive affirmation of its cohesion. That may yet be the most valuable legacy of Cancun, which the developing world and their allies in the West could build upon in a future bedevilled with economic uncertainties.