Cancun Trade Talks Fail

Everyone loses, but the world's poor are hurt most


Cancun—Ambitious trade negotiations at the World Trade Organization's fifth ministerial conference fell apart over irreconcilable differences between the demands of rich countries and poor countries. In a case of cutting your nose off to spite your face, the trade negotiators from the poor countries are tonight celebrating what they will all too soon realize is a Pyrrhic victory over the rich WTO countries. The fact that the lobbyists for American cotton farmers, European sugar beet growers, and American textile manufacturers are also celebrating the collapse should really frighten the poor countries who forced the talks into collapse. New, liberalized trade rules could have increased world income by $230 billion annually and, according to a recent study by the Center for Global Development, could have lifted 200 million of the poor in developing countries out of poverty. Instead, the poor countries left Cancun with nothing.

Specifically, the talks collapsed over disputes about how to liberalize agricultural trade. The developing countries were essentially demanding that the European Union, the United States and other rich countries totally eliminate their domestic agriculture subsidies and export subsidies. Conversely, the poor countries—organized as a bloc called the G20 (also known as G33) that Brazil, China, India, Kenya, and South, Africa—insisted that they be allowed to "protect" their farmers by maintaining tariffs against agricultural imports from the developed countries. In other words, the G20 countries were demanding that the rich countries open their markets while they kept theirs closed.

By the end of the talks, the poor countries had in fact extracted significant concessions from the European Union and the United States to lower their domestic agricultural subsidies and to reduce their export subsidies. In return, rich countries were asking that the poor countries lower their tariff barriers on agricultural imports in return. The European Union is also especially to blame for the collapse because of its insistence throughout the Ministerial that investment rules and trade facilitation be included in the negotiations, despite the fact that 100 members of the WTO had rejected the idea of negotiations on these items. These so-called Singapore Issues diverted the focus and attention from the all-important negotiations over liberalizing world agricultural trade, so that when the EU finally agreed to drop them, it was too late.

What about the future? First, the collapse means that protected industries and sectors all over the world will still get their subsidies and still overcharge consumers for many more years to come. In fact, a new and very damaging wave of protectionism could sweep the globe given the current shaky world economic situation. Second, rich country anti-globalization nongovernmental organizations (NGOs), will take this opportunity to continue their campaigns to undermine the legitimacy of the WTO and free trade while promoting their trade-killing environmental and social concerns into any future WTO agreements. Third, the focus of trade negotiations will shift to bilateral and regional agreements. When that happens, the poor countries with small economies will find that the rich countries have very little interest in negotiating separate trade treaties with them. Consequently they will be stuck for years to come facing high tariffs and other trade barriers for their goods. The only official statement from the Cancun meeting was that the WTO executives will gather in Geneva on December 15 to see if they can devise a way forward.

The only winners at Cancun are the vested interests such as moribund protected industries, highly subsidized rich country farmers, and anti-globalization ideologues. The real losers are hundreds of millions of poor people who would have benefited from the jobs, the higher incomes and lower prices that liberalized trade brings.