Global Trends by Martin Khor

Monday 10 November 2003

European and Brazil trade chiefs have a Halloween Day debate on WTO

On Halloween Day last week in New York, two men who played leading and opposite roles at the failed Cancun conference of the World Trade Organisation squared off again in a debate on what happened at that fateful meeting,

On one said was Pascal Lamy, the powerful Trade Commissioner of the European Commission.  On the other was the Brazilian official in charge of WTO affairs, Ambassador Clodoaldo Hugueney, Under-Secretary General at the Foreign Ministry.

Providing commentary was Roberto Bissio of the Third World Institute.

The occasion was a “Special Event on Trade” held at the United Nations.

As it was Halloween, the speakers made good use of references to horror, death and ghosts rising from the dead.

It was an interesting exchange not only between the two men but between two different perspectives on what went wrong and what the future of the trading system should be.

In Cancun, Lamy led the EU delegation, one of the two major developed country blocs (the other being the US).   Brazil was the leader of the newly formed Group of 20 developing countries, that were fighting against the continuation of high agriculture subsidies in the rich countries.

The clash between the EU, US and the Group of 20 (as well as other developing countries) is usually cited as the cause of the Cancun failure.

Last week’s debate at the UN was a chance for the two sides to tell the UN delegates what happened at Cancun and why.  Asking the question "who killed Cancun?", Lamy said what happened there was "not an accident".  On the other hand, Hugueney said the Cancun events were like "the chronicle of a death foretold," the title of a famous Latin American novel.

Lamy started by saying that since it was Halloween that day, he would liken Cancun
to a cheap Halloween horror movie, and address the theme, who killed Cancun and
is there life after Cancun?

He rejected the view that Cancun failure was an accident which could have been
avoided. This explanation, he said, put too much weight on blaming individuals like the conference Chairman or on himself making a tactical error.  (There has been widespread criticism of Lamy for his not making his offers until the last minute, which then proved too late to save the meeting).  

In his view, there were serious problems that blocked the negotiations.  This included the emergence of new groups in the WTO, with developing countries setting the agenda. This was like in the UN and was now emerging in the WTO too.

He said it would be a mistake to view the Group of 20 as simply an agriculture
phenomenon, as it was also geopolitical. "We have to respect and welcome the
emergence of this group as a counterweight to the G8," he said.

There was also the emergence of the Group 90, of ACP and African countries and
LDCs, to which not enough attention had been paid.  "Their demand was less visible
and audible until the last night session in Cancun when delegate after delegate stood to denounce the draft Cancun text.”

There are, he said, institutional problems in the WTO - of not a having a proper mix
between legitimacy and efficiency.

For the future, Lamy said, it was important to judge if Cancun was an accident or part of a deeper evolution.  If it was an accident, "we can mount the horse, go ahead and with a decent down payment bring the Round to conclusion. The second theory says hard thinking is needed first; otherwise we fall from the horse again or go in the
wrong direction. I think we should have reflection."

In his view, "Cancun was not an accident, and there are deep seated problems we need to consult on."  The barometer is rising with some countries signalling they are ready to get back to work in Geneva.  "If this is matched by substance in their positions, we can come back."

Lamy also took a controversial stand on the “Singapore Issues” (investment, competition, government procurement and trade facilitation).  At Cancun’s last hours, Lamy had dropped his insistence that two of the issues be negotiated.  But many developing countries wanted him to drop all four.  The disagreement over these issues was the immediate cause of the talks collapsing.

At the debate, Lamy insisted the issues were still part of the negotiating agenda of the WTO and that the EU would reconsider its Cancun position of dropping some of them.

Brazil's Ambassador Hugueney said if the rich countries liberalized their agriculture, developing countries would benefit up to US$400 billion by 2015.  The continued protection  represented massive losses to the poor countries, explaining why they took such a strong stand at Cancun on agriculture.

His interpretation of Cancun is that it was like the title of the novel, "chronicle of a
death foretold."  The failure was due to many reasons. Some are long-term - the
transition of GATT to WTO, the decision making system, the larger membership.

"It was the sense of developing countries that this Round would correct the
misgivings they have on the Uruguay Round, and the concept that development is at
the center of this Round.  But most issues were not resolved before Cancun.”

Thus there were too many points for the Ministers to solve in too few days. “Frustrations piled up. There was a feeling that the development dimension was
being lost."

He added that the EU-US stand on agriculture (which enabled their continuing high protection) should not be imposed on others, and could not be accepted by many developing countries.

Thus, Cancun was not an accident but was well foretold before the meeting.

He added that the emergence of the G20 was one of the factors that made him see
Cancun not as a failure but a meeting that did not conclude.

On the Singapore issues, he said that "when the developing countries rebelled on the last night in Cancun against the text on these issues, it was better that they did
this than their agreeing in silence to what did not reflect their own interests."

He added the G20 played a very positive role. The G20 is an attempt to reconcile the interests of different members. This is the essence of negotiations of multilateral
setting - "to be inclusive".  The EU and US failed to do that in their text.

He said that Japan, EU and US can afford to reduce their domestic support and open their markets as they have only few farmers and are high income societies, so they would not suffer so much from trade liberalization. This is not so for developing
countries, so we have to be inclusive of their interests.

On the prospects for resuming negotiations, he recognized that the EU needs time for reflection.  "Everyone needs to reflect.  I am comfortable with the idea that people
need  time.  But we must have positive signals soon to avoid a more difficult situation in 2004.”

Referring to Lamy's statement that the EU has to reconsider its position on Singapore issues, he said:  "But the EU withdrew at least two items in Cancun. Let us see what outcome we can have.”

Roberto Bissio, as lead discussant, referred to Lamy's query of who killed Cancun,
and said it was widely thought that the Singapore issues were dead, but they seem to be reviving like the monster character Jason in the movie 'Friday the 13th'.

Replying, Lamy said that on the death of the Singapore issues, Lamy said: "I don't think they ever died. I dropped two of them in Cancun.  It didn't work  so I got to go back to square one and go back to my constituents and ask what stand to take now."

On the WTO process being frozen, he said maybe it is.  "For Europe, it was a big
shock to us .  We are old enough to weather it."  But he had to go back to the member states, Parliament, business and NGOs to relook the 4-year-old European mandate.

 Bissio also highlighted several procedural problems in decision-making and the way the WTO is run.  "If a football club in my country had the same processes as WTO it would not be granted legal recognition," said Bissio.

"Each member has a vote, meeting records are kept, elections are open, in
associations.  None of this applies in WTO.  There are Green Rooms, secret meetings, decisions by consensus but they are not seen by members before hand, procedures that are hard to conceive.

"Ninety members in Cancun said clearly they are against the Singapore issues. How
can the opinion of 90 not be known? They asked the Minister concerned to take note
of their views. But the text does not take this into account, even though decisions are
supposed to be by explicit consensus on these issues.

"Yet when 90 countries said No, their views are not reflected in the text. Someone
said the procedures in WTO are medieval. In the UN, the texts are put on the screen,
and everyone knows what modifications are going on. In the WTO no one even
knows who drafted the text in Cancun."

Another participant said the non-transparent processes in Cancun and WTO in general were responsible for its failures.  Moreover the developed countries had pressed the developing countries too hard, to open up their markets for agriculture and industrial products, which would have damaged or destroyed the domestic economies of the poorer countries.

He said that the Singapore issues were not part of trade, and should not have been
placed in the WTO in the first place. The EU should withdraw these issues altogether, since it had already shown its hand by withdrawing three of them in Cancun. It would be difficult or impossible to reintroduce them for discussions in Geneva. Their withdrawal would be them best measure to get the talks moving again.

In his reply, Lamy said he agreed he was the author of using the term the procedures
are "medieval" to describe the WTO procedures. He had said for four years now, the
procedures need serious updating.  "Everyone agrees we have a serious problem here but no one agrees to tackle the problem.”

On the Singapore issues, Lamy said it had been agreed they would be negotiated after Cancun. 

"The Singapore issues were part of Doha agenda.  That 90 countries cannot start negotiations on these issues in Cancun does not mean they did not agree it is part of the single undertaking in Doha."

Lamy's view contradicts that of the representatives of many developing countries in the WTO who do not see the Singapore Issues as part of  the single undertaking.  According to this perspective, it was agreed in Singapore  that the four issues would only be the subject of discussion, and any decision to negotiate them into agreements would have to be taken by explicit consensus.

At Cancun there was no consensus to start the negotiations.  Indeed 90 countries opposed these issues, as Lamy himself has admitted.

It would thus be divisive if the EU were to insist now that the talks on these issues resume, especially since it waqs the EU itself that agreed to drop two or three of the issues in Cancun.

The New York debate is a foretaste of what may happen when and if the WTO talks resume in Geneva.