The World Trade Organisation at Cancun

Written by Vincent Cable MP and published in House Magazine on Fri 3rd Oct 2003

The breakdown in the Cancun ministerial talks on a new round of World Trade Organisation multilateral trade negotiations is a triumph for protectionists everywhere; in particular the improbable alliance of vested agricultural interests in the EU, the US and Japan and the 'anti globalisation movement'. At best a prolonged stalemate in trade negotiations could lead to a gradual, slow unravelling of the multilateral system and a growth of discriminatory and one side bilateral agreements. At worst it could lead to serious trade conflict and major economic damage.

Trade negotiations are complex and impenetrable and, until the recent protests, tended to be the preserve of trade policy anoraks. I was one such, as a special adviser to the Secretary of State for Trade (John Smith) at the end of the GAA Tokyo round and, then, working with the Commonwealth Secretariat and the World Bank to build up the developing country case in the - last - Uruguay Round in fields such as textile liberalisation. Broadly speaking these earlier negotiations made real headway in removing quota and tariff barriers on industrial goods and creating a rules-based system of dispute settlement while opening up, for the first time, services to greater liberalisation.

But there have been two major limitations. The first was that negligible progress was made in dealing with the morass of trade distorting subsidies and trade barriers in agriculture. Despite some very modest reforms the EU remains the main offender though the Bush administration has taken some highly retrograde steps towards subsidising politically important farming interests and Japan is notoriously protectionist in farming. Great harm is being done, not just to consumers and tax payers in the countries which offend but to other countries as a result of the dumping of agricultural surpluses or market access barriers. The EU's sugar regime, US cotton subsidies and Japanese rice quotas are extreme examples of a bigger problem.

The second problem is that, while developing countries have become progressively more important in the world economy and trade, especially major players like China, India, Brazil, Malaysia, South Korea and South Africa, they have been largely bypassed in the key decision making processes. In particular there has been mounting frustration that the rich countries will not move on agricultural liberalisation while demanding that new issues - rules for investment and competition policy, especially - be introduced and negotiated. It is certainly the case that some of the economically more sophisticated developing countries like India should liberalise themselves and are in a different position from the very poor, commodity exporting countries of Africa. Nonetheless they are currently making common cause and represent a powerful new force in trade negotiations. It is probably true also that some of the new issues would be of wide benefit by bringing multilateral rules to areas of policy subject to complicated bilateral arrangements; nonetheless most developing countries are ill prepared for serious negotiations on these conceptually tricky issues and are suspicious of the motives of the developed countries for promoting them so aggressively.

It is probably not productive to rehearse at great length the precise reasons for the failure of the talks. But the crass behaviour of the American negotiators in demanding that the developing world adjust to take account of US cotton subsidies was a major factor. And the EU negotiators seem to have totally misread the mood of the talks, coming forward with minimum commitments to liberalise the CAP while pressing forward with the new issues (rather bizarrely demanding that a new investment code was a key bargaining demand for Europe while insisting that it is primarily in developing countries interests). At a time when the Bush administration is seemingly happy to undermine multilateral institutions - be they the WTO or UN - so as to use greater political leverage in bilateral negotiations there was a great opportunity for the EU to play a statesman-like role. But it blew it.

All is not lost. The ministerial meeting was a staging post, not an end point. But the EU in particular now needs to approach these talks in a much more imaginative and liberal spirit. The new issues have been seriously shelved. But the bigger issue is agriculture. The most reactionary and protectionist interests of French (and German) farming must not be allowed to hold the rest of Europe - and the world - to ransom. Now is the time for the Prime Minister who has been eloquent in the past on liberal trade and helping developing countries to use his influence with George Bush and his weight in Europe to secure a satisfactory outcome.