Global Trends by Martin Khor

Sunday 21 September 2004

Behind the Collapse of the Cancun Ministerial

BLURB:    Malaysia played an important role in mobilizing the strength of developing countries at the WTO’s Ministerial Conference last week.  Because the developing nations spoke up for their rights, there was a deadlock as the rich nations kept piling the pressure.  The meeting collapsed spectacularly last Sunday not only because the countries could not agree on key issues but because of the undemocratic system of decision-making and of drafting the texts of agreements.  MARTIN KHOR reports from Cancun, Mexico. 

By Martin Khor

The dramatic collapse of the WTO’s Cancun Ministerial meeting last Sunday had many causes. It is vital to identify them and learn the lessons so as to avoid further damage to the multilateral trading system.

It is still unclear what happened in the meetings’s last hours, whether the talks broke down due to any specific issue or whether time simply ran out with serious divisions on many issues unresolved.

The immediate reason for the collapse was the inability to agree on whether to start negotiating new WTO agreements on the “Singapore issues” (investment, competition, procurement and trade facilitation), so-called because they were first introduced at the first WTO Ministerial meeting in Singapore in 1996.

The EU and Japan have been championing negotiations, but over 70 developing countries were strongly opposed.

Malaysia has been one of the key leaders of these 70 countries.  International Trade and Industry Minister Datuk Seri Rafidah Aziz chaired the meeting of the countries just before the Ministerial began, and was their spokesperson at a press briefing to announce why the coalition was opposing the starting of negotiations on these issues.

Through the leadership of this grouping of countries, Malaysia became one of the prominent players at the Cancun meeting.  Rafidah and her officials played a significant role in mobilizing the developing countries to stand up for their rights, and not to be bullied as happened in past WTO Ministerial meetings.

The resistance of developing countries to intense pressures was one of the important features of Cancun, and perhaps a major reason why the talks reached deadlock.

On Sunday morning, the Conference chair, Mexican foreign secretary Luis Ernesto Derbez convened an exclusive “Green Room” meeting of about 30 Ministers to discuss the outstanding issues. He started with the Singapore Issues as they were now the main issue of contention.

At the meeting, many developing countries reiterated opposition to expanding the WTO’s mandate to the four new issues.  EC Trade Commissioner Pascal Lamy reportedly agreed to drop investment and competition, but wanted to proceed to negotiations for the other two issues.   After a lunch break when Ministers consulted with their regional groups,

there was still no agreement.  Derbez then said a consensus was not possible for the whole package of issues and decided to close the Conference.

The lack of consensus on the Singapore issues may have been the immediate cause, but the meeting’s collapse had broader and deeper roots.  For the first three days, the conference focused mainly on the controversial agriculture issue, with the main protagonists being the EU and US on one side, and the Group of 21 developing countries led by Brazil and India on the other side, and a grouping of 32 other developing countries fighting for for stronger mechanisms to protect small farmers from a flood of cheap imports.

A revised draft of the conference Declaration, issued at lunchtime on Saturday, had the effect of intensifying rather than reducing the polarization in the Conference.  The developing countries were unhappy that the agriculture text did not answer their concerns.  They were outraged with the sections on Singapore issues, as the views and formal proposals of 70 of them (not to launch negotiations) had been swept aside.  And they were also angry at the poor treatment of the African proposal to end cotton subsidies in the text, which one Minister proclaimed to be an insult to Africans and unworthy of the WTO.  

The atmosphere was already on the boil when one by one the developing countries took the floor at a lengthy Saturday night meeting to criticize the draft Declaration.

The issue of the WTO’s manipulative decision-making process, particularly in the drafting of texts, was then coming to he fore. 

“Here we are with 70 or more developing countries speaking up clearly in the consultations, having a consensus document with language on the Singapore issues, clearly expressed, and the draft just ignores our position and takes the opposite position,” said the Minister of a Carribean country on Saturday night, while having a coffee break.  “What kind of organization is this?  Who does it belong to?  Who does the drafting? Who appointed them?  Why waste our time engaging seriously in consultations only to find our views not there at all in the draft?”      

In the end it was the WTO’s untransparent and non-participatory decision-making process that led to the collapse the Cancun talks collapsing.

The WTO’s Ministerial meetings have been characterized from the first by the lack of democracy.  In Singapore (1996), most Ministers were shut out of the negotiations as only 30 countries were invited to exclusive consultations known as Green Room meetings throughout the Conference. 

The uninvited Ministers were angry when they were told at a last plenary that they should adopt to a Declaration they had no hand in drafting. They reluctantly agreed only after the then Director General, Renato Ruggiero, promised that exclusive meetings would not happen again.

But in Seattle (1999), the Green Room meetings to which only a few were invited  operated again from the start to the end of the meeting.  Ministers of the ACP and Africa groups were so outraged at being shut out that they issued a statement they would not join the consensus on any Declaration.  The talks collapsed.

At Doha (2001), Ministers were all invited to informal consultations and kept busy.  But the drafting of the various versions of the Declaration were undertaken in an untransparent and exclusionary manner, starting with the WTO General Council chairman submitting an unpopular draft “under his own responsibility” to the conference as the basis for negotiations, and ending with a final draft issued on the last day which everyone was urged to adopt as there was no alternative at that late hour.  Until now it is not known who drafted this final text and on what authority.

After Doha, the practice of Chairs of the WTO councils and negotiating groups writing and submitting texts “under their own responsibility” became widespread.  Many developing countries voiced their unhappiness with it, but the major countries found it convenient to get their positions adopted through this undemocratic practice.

The drafts for agriculture and industrial products and later for the Cancun Text itself, were all drawn up by Chairs and not by the members.  Under this drafting system, all it needed for the major powers’ interests to be satisfied were:  a Chair coming from the circles of the majors or compliant to their views;  a Secretariat condoning or promoting the practice;  and a membership that is willing (or at least that does not successfully object) to being part in the process.

The drafting by Chairs has shifted the WTO from a member-driven to a Chair-driven organization.  Instead of negotiating with one another, members are now negotiating with the Chair, hoping he or she will take their views on board.

But the drafts, because they usually reflected the views of the powerful minority, have lacked the support of most of the developing country members (who are often outraged that the texts were one-sided and did not reflect their positions) nor public legitimacy.

In Cancun, this Chair-driven process continued and became the norm.  The appointed (and thus unelected) Facilitators of the five working groups became all powerful as they not only conducted consultations but were responsible for drafting the groups’ reports and texts.  The Conference Chair himself was responsible for drafting the revised Ministerial Text.  

No one among the participants is sure how the drafting is actually done, or who does it.  It is known that the Secretariat plays a major role.  And when the revised Ministerial draft came out on Saturday at 1pm, it again revealed biases (some of them blatant) towards the developed countries.

By now, there were only 28 hours before the scheduled end of the Conference.  It was evident that the developing countries were this time much better organized and prepared to face the unfair processes and the debates.

An attempt to reproduce a Doha ending (i.e. to ram through an unpopular Declaration on the grounds that there is no alternative, and that a “collapse” of a Ministerial would lead to the breakdown of the trading system and the global economy) would have led to an open revolt by developing countries. 

Thus, the Mexican Minister made a rational decision that the best option is to close the Conference with a simple statement instead of risking a real catastrophe.

With the Cancun Ministerial collapse, the issue of the WTO’s decision-making and text-drafting process has again emerged to the fore.  That the Ministerials are run without rules and proper procedures can no longer be ignored if the system is to survive.

Having a failure rate of two out of three of the most recent Ministerials is not a record any organization can be proud of.

European Commission Trade Commissioner, Pascal Lamy, at a closing press conference, himself termed the WTO as having a “medieval organisation” which is “not so rules based”.  But it is a system which he has himself made use of in Doha to great effect, to ram through the unpopular decision on Singapore issues.

Lamy called for reforms to the decision-making system of the WTO.  He forgot to mention that after the Doha experience, many developing countries had put forward a set of proposals (in February 2002) on establishing procedures for Ministerials and their preparatory process, and that the EU with other developed countries had blocked these proposals from being adopted.

Just a few weeks before Cancun, developing countries again tried to raise the issue of the need to have proper procedures for Ministerials, including for drafting texts.  Several international NGOs also launched a campaign for internal transparency and participation in the WTO.

But these attempts for more democracy in the WTO house were again swept aside by the major developed countries and the Secretariat.   They wanted to retain their grip over the drafting of texts and the operation of Green Room meetings.

If this system continues, then each Ministerial would be a poker game, characterized by uncertainty and fraught with risks of failure, and whose fate depends on last-minute brinkmanship, with powerful countries trying their luck and using various methods to push their way through, and developing countries organizing themselves to resist the pressures.

In Doha it worked for the majors.  In Cancun it didn’t.  If things don’t change, it will be another gamble wherever the next Ministerial is held.

Holding the trade system hostage to the poker-like game of brinkmanship is however full of risks, as the record of two failures out of three meetings shows.

The ultimate lesson of Cancun is that the organization must change its “medieval ways” and democratize to accommodate the developing countries (who after all form the majority of members) or perish.