Cancun - part of journey, impasse or breakdown?

Geneva, 8 Oct (Chakravarthi Raghavan) - The developed and developing countries both need the multilateral trading system (MTS), and the frustration and disappointment as a result of the impasse at Cancun should not be allowed to engulf or paralyse the process, but viewed as a wake-up call to draw the right lessons and move forward on the MTS and the core agenda and level of ambition set in the Doha Work Programme (DWP), the UNCTAD chief said Wednesday.

The Secretary-General of UNCTAD, Mr. Rubens Ricupero, was speaking at the Trade and Development Board which is reviewing and assessing at a plenary session the outcome of the Fifth Ministerial Conference at Cancun.

Unusually for him Ricupero spoke almost from a prepared text, occasionally departing from it, on the challenges ahead in the wake of Cancun and how to move forward, using the Board session as an opportunity to clear the air and create a favourable opportunity for the success of the efforts of the WTO General Council Chair and the Director-General (to resume the negotiations).

In offering some views on the way forward after Cancun, Mr. Ricupero in effect punctured, diplomatically, the efforts of the major industrialized nations, and particularly the US and EU, to propagate the view that the developing nations need the WTO more than the majors, and if the developing countries or any groups of them stand in the way and the WTO and the multilateral trade negotiations cannot deliver what the majors want, the latter can use the bilateral and regional trade negotiations route to achieve their objectives.

However, some of Ricupero’s views, and well-intentioned suggestions to shift the discussions on the Singapore issues (like investment, competition, trade facilitation) to UNCTAD, and some widely circulating reports that the EC views him as favouring a two-track WTO and supporting plurilateral talks and accords on these at the WTO, may in fact end in creating problems for UNCTAD itself, which is now preparing for its next conference in the Sao Paulo region of Brazil.

Since the failure at Cancun, a range of institutions and financial media gurus have been promoting the view that the ‘poor countries’ were the real losers, and the US and EU have been trying to point the finger at the core group of nations in the G-21 alliance on agriculture, and at India and other developing countries as seeking to ‘protect’ their markets from foreign competition.

Ricupero’s speech, and the introduction of a secretariat note and paper by the Director of the Trade Programme, Mrs. Lakshmi Puri, was followed by statements and views of Group of 77 and its constituents, as well as by the European Union and its Commission, and several individual country delegations.

In the nature of things, and so close (nearly four weeks) to the Cancun meeting and its abrupt end by the Chairman of that Conference, Mexican Minister Luis Ernesto Derbez, these assessments and views differed, some rather sharply, with the European Commission (the principal demandeurs, and self-acknowledged driving force behind the Doha agenda) still seemingly shell-shocked, and providing yet another version of why it thinks things went wrong from its perspective at Cancun.

Several explanations have now come out from the EU side: the EC Commissioner, Pascal Lamy’s speech before the EU Parliament on 24 September, another on 29 September at Brussels (Policy Briefing at the European Policy Centre, with an unofficial summary by the organizers), the EC trade directorate official Mr.  Peter Karl’s note to the EU’s 133 Committee last week at Brussels (very widely leaked and circulated), and a de-briefing at Geneva to EU member-missions to WTO by the EC’s Ambassador Carlo Trojan on 23 September and an internal note or minute of it that has now hit the NGO list servers last week.

Collectively they sound like the evidence before the UK Hutton Inquiry by Ministers and Senior Officials, and the variations are such that it is difficult to know what the EC leadership believes and what it wants others to think it believes. And sometimes, the EC seems to end up with believing what it wants others to believe.

However, unlike the ordinary public following TV news or the media reports, by and large diplomats of developing countries are quite savvy to this game and can piece together the various views to make their own assessments. And the NGOs following these issues are often more knowledgeable and well-read on political development economics and the politics of international negotiations.

An European NGO who has been following these versions and explanations, said in a communication to the SUNS, that it is difficult to know what is in Pascal Lamy’s mind. He has come under tremendous pressure with the EU states due to his performance in Cancun. And as for what happened there, “he is hindered by two facts: one is that he is not able to listen to people south of the Mediterranean, east of Greece and south of the US, and he is also not able to understand what they say. The other is that neither he nor the EU was consulted before the collapse of the meeting at Cancun, and he seems just too surprised by what happened.”

Although the impasse at Cancun on key elements of the Doha Work Programme has led to some frustration and disappointment, Ricupero told the Board, “we should not allow these to engulf the system or paralyse the process”, but should be seen as a “wake-up call” and an opportunity for “constructive soul-searching,” and this should point to “what should be done right in the future, in a timely manner.”

Mentioning some of these aspects on how to move forward, Ricupero said:

·        it was necessary to be faithful to the mandate and ambition on core issues, where it is clear and unambiguous, and “all concerned should be willing to make specific commitments, down payments and compromises.”

·        strive for a balanced outcome within each negotiating area, “keeping in mind the carry over of the previous rounds and the overall cost/benefit of the spectrum of issues being negotiated.”

·        deliver on the development expressed not only in the traditional S&D and Implementation issues, but also in market access and level playing field issues, and thus live up to the expectations of the majority of the WTO stake-holders.

·        try to increase the inclusiveness, transparency and democracy of negotiating processes, procedures and decision-making, to reflect the burgeoning democracies around the world that are represented in the growing membership of the WTO.

·        concentrate on the basics of trade liberalisation and border measures agenda, completing the unfinished business of the previous rounds especially in agriculture, textiles and Mode 4 in services.

·        address doubts and concerns of developing countries on more complicated issues on which no consensus exists for WTO disciplines, in other relevant fora such as UNCTAD, with its well-established expertise as in investment, competition and trade facilitation.

·        put in place credible and ex ante systems to provide adjustment, comfort and support to developing countries as they are asked to make commitments and incur short and long-term costs in the different areas of the negotiations.

·        pursue coherence and synergies between national trade, financial, monetary and technology policies of developed and developing countries, international systems and processes that affect them and the development harvest that the developing countries can reap.

·        take into account the implications for the multiple issues that operate in the intersection of trade, development, globalization such as poverty, environment, health, culture, gender, migration, food security and rural development, competition, technology, enterprise, employment and public interest.

·        provide concrete help to developing countries to develop, enhance and diversify their productive capacities so that they perceive tangible and sustained benefits for them from trade liberalization and the MTS.

Earlier, stressing the common stake for all in the MTS, Ricupero said there was no alternative to moving forward on the MTS, needed by both developing and industrialized countries.

The developing countries, he said, need the MTS as “a shelter against arbitrariness and guarantor of fairness and equity” in their trade relations, more so since trade was becoming more and more a determinant of their economic growth and development and their ability to escape the poverty trap.

What the trading system delivers or fails to deliver can now make a difference.  And since the MTS is purporting to go beyond border measures and into other areas, it affects crucial development policy choices, Ricupero said.

The engagement of developing countries in South-South or North-South regional and bilateral trading arrangements does not automatically reduce the salience of the MTS to them. It can still set benchmarks for the terms they can negotiate in these arrangements, and can in any case affect their trade with the rest of the world, and the nature of competition in global markets. In reality, there is no replacement for the MTS if there is to be real convergence of all efforts towards a system that will be open and non-discriminatory, he added.

The UNCTAD head then went on to point out that the developed countries too need the MTS, to engage the developing countries in ever-expanding circles of trade liberalization and openness so that their economic operators can trade and invest with greater freedom, certainty and security. The majors too use the MTS as a check and balance mechanism and in making vigorous use of the dispute settlement mechanism. Despite the involvement of the majors in bilateral and regional trading arrangements, the MTS has had the utility for them of roping in non-members.

“It is only in the MTS that the industrialized countries could have successfully pursued important negotiating objectives in TRIPS, ITA, telecommunications services and financial services, for example,” Ricupero added.

So despite the frustrations that might be felt by WTO members about insufficient progress in the DWP, there is no escape from doing everything that is reasonable to uphold the MTS. And what applied to the MTS would be equally, if not more relevant in terms of what is at stake in the successful conclusion of the DWP.

In the discussions that followed, developing countries - in the statement by Thailand on behalf of the Group of 77 and China, as well as some regional statements and that by individual delegations - sought to place Cancun in perspective, and the MTS as no stranger in the past to impasse scenarios.

They underscored the need for achieving the ‘development objectives’ promised at Doha and moving ahead on the agriculture issues (for which the developing countries had already paid a price and on which the developed countries had committed themselves at Marrakesh to further agricultural reforms and cut their domestic support and export subsidies, and market access barriers).

A key message from Cancun, said the Thai ambassador Mrs Lalyanachantorn Laohaphan is that “developing countries are equal partners in the WTO and that their voice and interests must be reflected as an integral part of any outcome.” Developing countries had not shied away from making significant contributions to liberalization in the past, “often without getting credit”, and were seeking for the future “an equitable trading system that takes into account our inherent difficulties and complexities.” The developing countries had a positive agenda on trade liberalization - particularly on agriculture, textiles and Mode 4, and finding modalities for agriculture and non-agriculture negotiations, with a “comparable level of ambition” that will take into account “our interests and provide for special and differential treatment (S&DT).”

The developing countries also expect concrete responses in respect of S&DT and implementation issues, without which the DWP’s “development emphasis” will ring hollow. The issue of compensation to cotton producing countries and elimination of subsidies on cotton was yet another manifestation of the wider commodity problems, and for which the G77 and China seek international recognition and renewed attention at the WTO and in the UN system, she added.

The European Community’s ambassador to WTO, Mr. Carlo Trojan, said he fully agreed with Mr. Ricupero’s views on the MTS, but went on to speak of it in terms of its benefits to developing countries and how outside the MTS, the LDCs would be left out in the margins or even in the cold.

He however spoke of Cancun in terms of a ‘breakdown’, and that the EC had been the main driving force behind the ‘Doha Development Agenda’ and hence the deep disappointment of the EC for the lack of an outcome. No one can gain from the breakdown of the negotiations or failure of Cancun, he said, and went on to speak of the need for full integration of the developing countries into the global economy, and that the uncertainties would only help those who preferred protectionism over true liberalization or unilateralism or bilateralism.

Cancun, he insisted, was a serious setback and everyone had to reflect on how to put the negotiations back on track. There was need to address both the substance and the process at the WTO. He spoke well too of the group of LDCs and the ACP countries (and how they functioned at Cancun).

This was in some sharp contrast to the internal debriefing done in Geneva to the EU missions to the WTO, where the EU Commission blamed also the ACP and LDCs, and their leaders at Doha - it was not clear whether the EU Commission was referring to the ACP and LDC representatives inside the green room, and others who wanted to go back and consult their constituents or something else - having to repeatedly go back and report to their constituents and get endorsement as among the causes. Though Lamy at the Brussels briefing on 29 September set out several conspiracy theories, at the debriefing in Geneva (23-24 Sep), the commission had reportedly said that no one pre-determined the failure (no conspiracy in advance), and it was eventually the result of “an involuntary homicide”.

Outside the EU, the commission saw four major players (US, India, Brazil and China) as being better off with the results: the US, it said, was under strong pressure over its agriculture domestic support and to its subsidies on cotton.  India’s sole objective was presented as seeking to avoid opening up its market, be it on agriculture or on non-agricultural products. If negotiations had moved forward on agriculture, Brazil would have found it difficult to maintain the political cohesion of the G21. And, China, as a newly acceding country, was reluctant to take up additional commitments.

The Commission also suggested apparently in the de-briefing that in general terms the African countries have more to fear than to gain from the Doha Round.  They had almost no offensive interests and, on the contrary, a lot of defensive interests (fear of losing their preferences on the EU markets, wish to protect their infant industries; general problem of supply side constraints). Their only offensive initiative at Cancun was on cotton, an initiative emanating from poor African countries. This cotton issue, the EC felt, was badly handled by the WTO Director-General as facilitator, presenting a text that corresponded more to the US views than to the expectations of African countries, and was considered provocative by those countries.

The EC also spoke of “cumbersome” negotiations at Cancun, owing to the WTO’s working methods and participants having “too much tendency to refer back to regional groups (which is a new practice compared to the past).” The result was a hardening of positions in the regional groups (in particular African and Asian groups and among the group of LDCs), and making it much more difficult to initiate real negotiations. “There was also clearly the influence exerted by NGOs in certain of these regional groups.” As for the Singapore issues, in the view of the EU, it was the subject of a lot of North-South rhetoric. The EC could not have moved earlier on them, since overall negotiations did not begin until Saturday night.

The EC also seemed to blame the WTO head and the fact that his chef de cabinet Mr. Harbinson doubling up also as the head of the special sessions on agriculture and leading those talks something that trade diplomats note was insisted upon by the EC, when they persuaded Supachai to name him as his chef de cabinet, and the issue of the agriculture negotiations cropped up.

In short, judged by the various versions of the Commission thinking in various internal de-briefing, everyone is marching out of step, and everyone is at fault except the EC. – SUNS5436

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