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The Cancun standoff reflects a shift in the balance of power at the WTO

By Ross Buckley - posted Friday, 19 September 2003

Last Sunday, the meeting of the world's trade ministers in Cancun, Mexico concluded. This was the first full meeting since the current round of WTO negotiations were launched in Doha in late 2001.

Developing countries primarily wanted improved access for their agricultural exports to the markets of rich countries.

The U.S. and E.U. wanted improved access into developing countries for their multinational corporations. Each side got nothing.


A real opportunity has been missed for the world's poor countries, for Australia - particularly our farmers, and for the US and EU And you can lay the blame at the feet of the Americans and Europeans.

The previous trade round, which ended in 1994 was based on a fundamental agreement. The poor countries agreed to extend the trade regime to intellectual property rights and trade in services. This did not serve them. Poor countries generate almost no intellectual property, and can rarely compete in the export of services. They did this because they were promised substantially increased access for their agricultural exports to the US and EU.

The developing countries kept their promises. The US and EU did not. Agricultural subsidies have increased since the previous round.

This time around the US and EU wanted to open national markets to their multinationals by extending the trade regime to national investment laws, national competition policies, transparency in government procurement and national measures to facilitate trade.

These measures offer little to poor countries except the prospect of increased competition in their domestic economies from foreign multinational corporations. There had to be a carrot to entice agreement, and the US and EU failed to offer a reasonable incentive.

Instead the US and EU tried tactics that have worked in the past: exclude most countries from the negotiations that really matter, hammer out a deal between the major players, then force others to comply by a combination of promises of aid and threatened withdrawals of credit.


These tactics failed this time for two reasons. First, the developing countries found common cause in their sense of grievance at the hands of the US and EU in the previous trade round. Second, the developing world this time had strong leadership behind which to unite: that of Brazil, China and India. China has long proven itself to be the most astute developing country in dealing with foreign investors. China's size gives it advantages in attracting foreign investment - and China has made the most of them. Foreign investment has come to China on China's terms or not at all.

Now China's accession to the WTO two years ago is reshaping the institution as China brings its astute negotiating skills, and considerable economic clout, to the WTO.

This is the first trade round in which the developing nations have been a coherent, and not a fractured, force and much of the credit must go to the leadership of Brazil, China and India.

The bottom line is that no agreement is a better result for the poor nations than the deal the US and EU were trying to force them to accept. The tragedy is that a fair agreement would have been good for poor and rich countries alike and recovery from this setback will likely take a number of years.

Before the meeting the President of the World Bank estimated that a good, but realistic, outcome from the meeting would have the effect of lifting 140 million people out of poverty in the next 12 years. Reasonable reductions in export and agricultural subsidies by the US and EU would have had this effect. Agreement was impossible because these reductions were not offered.

This is bad news for Australia. We would have gained far, far more from these reforms than from the proposed free trade agreement with the US - and at significantly less cost than the Americans will impose in those bilateral negotiations.

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This article was first published in The Courier-Mail on 17 September 2003.

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About the Author

Professor Ross Buckley is Co-director of the Tim Fischer Centre for Global Trade & Finance at Bond University.

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