Volume 23 No. 36 -- September 15, 2003

SPECIAL REPORT: BEHIND THE SCENES AT FAILED CANCUN MINISTERIAL

IN THIS ISSUE:

* Special Report on WTO Ministerial Meeting
* Singapore Issues Became Surprise Stumbling Block
* U.S. Had Fewer Objections Than Most to Draft Declaration
* Zoellick Claims Cancun's Failure Was Different from Seattle
* Collapse in Cancun Reflects Late Start to Serious Talks
* China Played Positive Role at Cancun Meeting

The World Trade Organization (WTO) Ministerial in Cancun, Mexico, collapsed Sept. 14 over the fundamental question of whether there will be a single set of global trade rules for all members or a two- or three-tier system.  While trade ministers appeared ready to bend the rules to accommodate many different interests, in the end, least-developed countries claimed the draft ministerial declaration did not bend far enough and they precipitated the demise of the talks.

These nations and a group of more advanced developing countries wanted fewer or no obligations for themselves, while insisting developed countries, primarily the U.S. and European Union (EU), drastically reduce their farm support and open their markets to developing-world goods and workers.  The U.S. and EU couldn't accept that deal.

The meeting's collapse heightens the recognition that the Doha Development Agenda won't finish by the end of 2004 as scheduled and may need an extra two years to complete.  This means Free Trade Area of the Americas (FTAA) talks will miss their 2004 deadline as well.

A bright note among all the gloom was sounded by one former U.S. trade official who asked not to be identified.  "The meeting at least identified all the tough issues that will have to be addressed before the end of the round," he told WTTL.  "The talks will now head into the bilateral mode where countries can make requests and offers in the areas that concern them," he said.  He said he doesn't expect the talks to end until 2007 when fast-track legislation expires.

The outcome of Cancun will now accelerate Washington's march toward an ever-expanding series of bilateral free trade agreements (FTAs) with willing partners.  Even as the WTO meeting was falling apart, new countries were approaching U.S. Trade Representative (USTR) Robert Zoellick asking to be put on the list of potential FTA candidates, Zoellick reported.

Before leaving Cancun, WTO ministers issued a statement instructing trade negotiators in Geneva to keep working on the issues raised in Mexico, building on the areas where some progress appeared to be made.  The ministers directed the WTO General Council to meet no later than Dec. 15 "to take action necessary at that stage to enable us to move towards a successful and timely conclusion of the negotiations."
 

SINGAPORE ISSUES BECAME SURPRISE STUMBLING BLOCK

Although agriculture was the central issue in Cancun, the meeting collapsed over the so-called Singapore Issues, which entailed proposals for opening new talks on investment, competition, transparency in government procurement and trade facilitation.  Even after the EU dropped its key demand for talks on investment and competition, Malaysian Trade Minister Rafidah Aziz said Malaysia wouldn't negotiate on government procurement.  Then a group of least-developed countries (LDCs) refused to start talks even on trade facilitation.  On the opposite side of the debate, Korea insisted on going forward with all four topics.

The LDCs made their opposition to the Singapore Issues clear on the second day of talks, declaring they would refused to support a ministerial declaration that included any of the four subjects.  Egged on by several nongovernment organizations (NGOs), they stayed true to their threat.

Privately, U.S. officials were furious at the LDC action.  EU Trade Commissioner Pascal Lamy "bent over backwards in a very difficult situation to try to show as much flexibility as possible and on even the simplest of issues, and what should have been the least controversial, the developing countries were more interested in posturing than negotiating," one official told WTTL.  "I think they overplayed their hand with a lot of encouragement from the NGOs, who don't mind seeing trade negotiation go down," he added.

The decision of the chairman of the Cancun meeting, Mexican Foreign Relations Secretary Luis Ernesto Derbez, to call an end to the ministerial at 4:00 P.M. on Sunday caught most delegates by surprise.  Questions were raised about why he didn't give the negotiations more time, particularly since talks on the key issue of agriculture had not yet entered their final stage.  Derbez defended his decision.  "I don't think I made a rash judgment," he said after the close of the meeting.  "Looking at all the overall elements we were working on at the time, it was clear that there was no possibility of having, at that point in time, consensus," he contended.

Behind the LDC position was their anger that the revised ministerial declaration that Derbez released on Saturday appeared to renege on a promise made at the Doha Ministerial that there would be a separate decision on whether to include these issues in the round on the basis of "explicit consensus."   The draft text proposed linking them to a "single undertaking" with agriculture and tariff-cutting and setting a common deadline for decisions in all three areas.

After the meeting, Caribbean officials, whose countries are part of the African, Caribbean and Pacific (ACP) group of nations that also rejected the Singapore issues, defended their stand.  "We were not saying no to the issues.  We were simply saying not now," said Trinidad and Tobago Trade Minister Kenneth Valley.  He said the Caribbean countries came to Cancun to deal with agriculture and special and differential issues.  The debate on Singapore Issues "was used simply to avoid the real issue of dealing with agriculture," he asserted.

Keith Desmond Knight, Jamaica's foreign affairs minister, claimed the ACP had concerns that were not addressed about the scope and framework for talks on Singapore Issues and whether they would be subject to cross retaliation in WTO dispute settlement.  "There must be greater clarification before we can agree on the modalities," he said.

Nor were they happy with the offers on agriculture and non-agriculture market access (NAMA) issues, they reported.  Barbados Trade Minister Billie Miller said the group met with Zoellick and Lamy.  "The reality was that what was offered to us in agriculture and in NAMA was just so minimal," she said.
 

U.S. HAD FEWER OBJECTIONS THAN MOST TO DRAFT DECLARATION

Going into what turned out to be the final day of talks, the U.S. officials used a coy strategy to keep the spotlight off Washington's demands for changes in the draft ministerial declaration and to keep it on the EU, which was under the gun for its positions on agriculture, Singapore Issues and new proposals to protect geographical indications (GIs).  U.S. officials claimed they were ready to work with language proposed by the meeting's chairman, Luis Ernesto Derbez, and assiduously avoided identifying publicly the problems they had with it.

Even in private, U.S. officials gave the impression they could live with the text as drafted, with the expectation that important changes could be made later when the talks go back to Geneva.  This strategy may have made the U.S. less energetic in fighting for a compromise deal than it would have been if it had a lot at stake.  While USTR Robert Zoellick said he tried to be a facilitator in reaching a compromise, he did not seem to bring the same whirlwind force to Cancun as he did to Doha, where he was determined to get a new round launched.

The primary U.S. goal in Cancun was to keep the Doha Round moving and to avoid clashes that would deadlock the meeting (see WTTL, Sept. 8, page 1).  When the draft Derbez text was released on Saturday, Sept. 13, USTR Robert Zoellick said: "There are positive elements and there are other elements we will work to improve and clarify."

Calls for improving the agriculture section of the draft came from members of the House Agriculture Committee who were in Cancun and from representatives of U.S. manufacturing industries.  Some of these statements clearly reflected the U.S. negotiating position.

"We have put everything on the table.  Unfortunately, other countries have not," said a joint statement by committee chairman Bob Goodlatte (R-Va.) and ranking member Charlie Stenholm (D-Texas).  Meeting with reporters, Goodlatte said he wanted to see greater commitments from the EU to harmonize its farm supports down to U.S. levels.

He urged U.S. officials to be cautious in handling newly proposed language calling for a review of so-called "green box" subsidies that supposedly don't distort trade.  Goodlatte said he also was concerned about proposals that would allow developing countries to protect "special products."

With the Doha Round delayed, Congress won't have to worry about revising the subsidy-laden 2002 Farm Bill and the EU can continue its farm reforms at its own pace.  Developing countries will be able to keep their trade barriers untouched for another three or four years.
 

ZOELLICK CLAIMS CANCUN'S FAILURE WAS DIFFERENT FROM SEATTLE

After the meeting, USTR Robert Zoellick didn't try to hide his frustration at the failure of the talks.  "One of the problems we ran into was that a number of countries just thought it was a freebie," he said.  These countries just wanted to argue, make points and not give, he argued.  "Now they are going to face the cold reality of that strategy and come home with nothing."

The failure of the meeting has to be considered a personal disappointment for Zoellick.  Nonetheless, he wouldn't admit its collapse was similar to the failure of the Clinton administration in Seattle, which he often mentions.

Nor would he acknowledge any greater sympathy for the problems his predecessor, Charlene Barshefsky, had in Seattle.  "It's a small but hearty band of former trade negotiators, so we have a lot sympathy for one another," was all he would concede.  Morever, Cancun was different from Seattle, he argued.  "The reasons Seattle failed are very different from the reasons why this has failed," Zoellick argued.  "One of the differences from our predecessor was that we plan to run on multiple tracks so we can help a lot of developing countries around the world who do want to open up," said Zoellick, apparently forgetting talks on the FTAA and with Jordan, Chile and Singapore started during the Clinton administration.
 

COLLAPSE IN CANCUN REFLECTS LATE START TO SERIOUS TALKS

The main reason the WTO Ministerial failed was the slow progress made in Geneva over the past 18 months and the inability of negotiators to meet key deadlines for deciding negotiating modalities or frameworks on agriculture and non-agriculture market access (NAMA).  That left trade ministers with too many technical issues to address.  Many LDCs decided it was better to make no decision than to accept commitments whose consequences they didn't understand.

Talks in Geneva were stalled waiting for the EU to complete its latest reforms of the Common Agriculture Policy (CAP) in June and for the U.S. and EU to reach a joint stand on agriculture in August.  Only then did heavy negotiations start.

But the effort came too late for officials to do the groundwork needed to make Cancun a success.  Because of the delay, developed country officials didn't have enough time to focus on Singapore issues in Geneva and to gauge the degree of unhappiness in the Third World.

Nor did they prepare to have an adequate response ready to demands from four poor cotton-producing nations in Africa for the elimination of cotton subsidies and other barriers that have cut world prices for cotton and severely damaged their economies.  The pleas of the Africans drew strong sympathy from many developing countries and their case became a rallying point against the U.S. and EU.  "Cotton was the tip of the iceberg," one delegate from Senegal told WTTL.

The U.S. and EU "did not realize that the anger of developing countries is so much, because they were treated so badly even before they came to Cancun," said a Ugandan delegate.  When the U.S. and EU asked Derbez to put the Singapore Issue on the "Green Room" agenda ahead of agriculture "that was the last straw," he said.

There was unprecedented unity among developing countries, including the ACP countries, members of the African Union and nearly two dozen middle-developing nations that banded together as the Group of 21.  Lead by Brazil and India, some G-21 member were not pleased with the collapse of the Cancun meeting because they still hadn't had a chance to start final talks on their primary goal: getting the U.S. and EU to make more concessions on agriculture.

U.S. and EU officials kept expecting this coalition to break apart toward the end of the meeting, but it didn't.  In fact, the failure of the meeting seemed to energize the groups.  "On issues of common interest, developing countries began to realize that if they spoke with one voice, they could make a difference," Malaysian Trade Minister Rafidah Aziz said.  "That to me is a very good thing.  Then the WTO becomes an organization where no one feels marginalized or left out of the process," she said.

NGOs also played a key role.  The influence of such groups as Doctors Without Borders, Oxfam International and Third World Network has grown significantly since the Seattle Ministerial.  These NGOs provided extensive negotiating assistance and research to several LDCs and helped harden their opposition to U.S. and EU proposals.
 

CHINA PLAYS POSITIVE ROLE AT CANCUN MEETING

Fears that China would become the leader of opponents of further trade liberalization in the WTO after it joined the trade body in 2001 did no materialize in Cancun.  Although Beijing aligned itself with the G-21 group of nations seeking greater concessions from the U.S. and EU in agriculture, it also became one of the nations urging compromise in the closing hours of the talks.  "China has played a very positive role," said one WTO observer at the meeting.

U.S. officials said China's posture reflected its understanding of American public sentiment and its desire to avoid being labeled as an obstacle to trade liberalization. Beijing also recognizes that it will be at a disadvantage, if it must comply with more market-opening requirements while competitors, such as India , Brazil and Malaysia, can hide behind the special and differential treatment given developing countries.

In bilaterial meetings between the U.S. and China earlier in the week, American officials made it clear to the Chinese that their role in Cancun could affect public and congressional attitudes toward Sino-U.S. relations. "The Chinese are certainly very aware of the political discussion in the United States, looking very carefully at our China trade and the large trade deficit we have, and people are inquiring as to the causes of that," said Deputy USTR Peter Allgeier. "So we have certainly reminded them of that and reminded them that people will be looking to see their contribution to the trade liberalization at this conference," he added. We have been very clear about that, but I think they are not under any illusions either as to the intensity of the discussion in the United States," he continued.