The Hindu Business Line : Pseudo-victory at Cancun?

No doubt, the firm stand by the G-21 was a major moral victory for the developing world at Cancun. But the latter also lost out by the sidelining of other issues vital to their progress. As much as the rich countries need to pay serious attention to the problems of the developing nations, the latter must, without being stubborn, co-operate in making the Doha development round a reality, say Geethanjali Nataraj and Pravakar Sahoo.

THE fifth ministerial of the WTO at the Mexican resort of Cancun came to end amid confusion and disappointment among the developing and least developed countries and anger for the developed world.

The only group that seems to have gained some kind of victory is the anti-globalisation lobby. It is being splashed across the media that the ministerial was a victory for the developing countries. The ruling coalition is happy that the delegation led by the Commerce Minister, Mr Arun Jaitley, held its ground and did not sacrifice the interests of the country's 650 million farmers.

But the real question is: Is this victory real? Is it not a pseudo victory? Agreed that the developing countries `won', but at what cost? It is a classic case of moral victory at the cost of substantial gain for the economy, which could have maintained the trajectory of high growth coupled with increase in exports and foreign investment.

The ministerial had its share of both negative and positive aspects. A revelation was the cohesion and coming together of the developing world as a united force to oppose the contentious issue of domestic support and subsidies given by the EU and the US to their farm sectors. In fact, subsidies were one of the most controversial issues in the negotiations.

Developing countries say that farm subsidies, running to over $300 billion a year in the developed world's farm sector, prevent them from competing on equal terms globally. It was time the developing countries opposed this measure, and the fifth ministerial turned out to be a powerful platform to do just that.

The coming together of three major developing powers — China, India, and Brazil — proved a formidable force for the EU and US. But two issues emerge from this: first, how long will the developing countries stand united? Is this cohesion among them short-lived or long-term? Second, how are the developed countries going to retaliate?

This is where the negative dimension of the ministerial creeps in. The developed world will now more aggressively pursue the regional track and is likely to make market access difficult for the developing world. As one is aware, the proliferation of RTAs in recent years poses a threat to the multilateral trading regime and raised questions about the efficacy of the WTO as a body governing world trade rules.

It is clear that the eastward expansion of the EU and America's free trade areas will be expedited by the two mega blocs.

Another negative aspect of the ministerial is that because there was no progress on talks with regard to agriculture and severe opposition to the inclusion of Singapore issues in the agenda by the developing countries, other important items that could have resulted in substantial gains for developing countries such as India — including services, liberalisation and market access of industrial goods — did not feature in the discussions. For instance, India has been bargaining for liberalisation of Mode 4 (which refers to the movement of natural persons, or of individuals from country to country) under GATS, which may be difficult to achieve in the near future.

The lack of discussion and negotiations on all the important issues is definitely a setback for developing countries because, according to the WTO, if tariffs are eliminated completely, the range of estimated economic benefits ("welfare gains") could range from $80 billion to $500 billion.

Estimates of the share going to developing countries are in the 40-60 per cent range. Further, the gains from services trade liberalisation are estimated to be 2-4 times the gains from merchandise trade liberalisation.

Due to the failure of the Cancun ministerial, the debates surrounding the benefits of globalisation have also re-surfaced. It has been pointed out that "The international agreements, particularly under the WTO, have not helped the developing countries as was professed at the time of establishment of the WTO" (Vyas, 2002).

This has resulted in the erosion of faith in the WTO and more so in "globalisation" for stimulating development in India. Many would argue saying that it is multilateralism that has helped India forge ahead economically in recent times and India's proactive stand on issues of TRIPS and public health in WTO forums has proved that India is capable of bargaining for what is good for the country.

It is believed that India is no longer isolated in its endeavour to bring about fair trade, as was the case in Doha in 2001, but now a collective leadership has emerged and nearly half the WTO members support and stand alongside India on many issues of interest to the developing world, the foremost being agriculture and the Singapore issues.

It is also argued that the failure of the Cancun ministerial has actually not caused any damage as it was a round whose basic objective was to take a mid-term review of the work-plan launched in Doha. Therefore, perhaps, the next and final round will prove more crucial and in reality will test the credibility of the WTO as an organisation promoting multilateral trade.

This brings us back to the basic question: Who is to blame for the failure of the ministerial? Many would criticise the European Union for contributing to the failure of the talks by not compromising early enough on the four so-called Singapore issues to allow a deal.

But can the developing countries be let off? No, the blame equally lies with the developing countries, which were unwilling to move away from established positions. Every member of the WTO would agree that the Doha negotiations are critically important because they establish a clear mandate for increased trade and economic growth throughout the world. If the Doha negotiations succeed, WTO members will cut tariffs in manufactured products such as processed food and textiles.

Agreed, that the EU and the US have gone overboard in protecting their agricultural sector at the cost of hurting the interest of the developing world for too long, but if the developing countries continue to maintain such stubborn positions and cannot bridge the differences with the developed world, the inequality between the poor and rich will only worsen.

It is indeed unfortunate that we have lost an opportunity to narrow the gap between the rich and poor.

At the moment, there is a lot of discussion and confusion as to what should be the future course of action and how the talks can resume when the members meet in Geneva in a few months.

One thing that emerges is that the Doha round of negotiations will certainly get postponed, and the chances of its concluding by 2005, at the sixth ministerial in Hong Kong are remote. Though the ministerial was a victory for the developing world, the positions of certain countries and members are still not clear.

One can foresee some differences in the G-21 countries and the position of the Cairns group, especially on agriculture issues. The group of 21 represents a cross-section of the WTO membership and accounts for nearly 51 per cent of the world population and 63 per cent of all farmers who live in the group of countries comprising, among others, India, China, Brazil, Argentina and South Africa. The group accounts for more than 20 per cent of world agricultural production, 26 per cent of total agricultural exports and 17 per cent of the world imports of agricultural products.

However, different members in this group have different interests and, therefore, this collective leadership being talked about may not be witnessed for too long.

Everyone is bargaining hard, and the least developed countries, especially from Africa, made it clear by staging a walkout that they do not support either the developed or the developing world. The process of negotiation has become more and more complex.

To conclude, there is no doubt that the firm stand was a major moral victory for the developing world at Cancun — more so because it came as a surprise to some of the superpowers, which, perhaps, had underestimated the strength and the bargaining power of the developing world, especially the G-21. Butwho has lost in the whole process? Obviously, the developing and the least developed countries. The developed world continues to sit pretty. There is no doubt that some reduction of farm subsidies in rich countries and lowering of tariffs on agricultural imports would pave the way towards a more fair and equitable trade regime. But, for that, the developing countries need to re-think their strategy and not hold on to such stubborn positions as they did at Cancun.

There can be no gain without some loss. On its part, the developed world also needs to pay serious attention to the problems of the developing world and co-operate in making the development dimension of the Doha development agenda a reality.

It is up to the members themselves to come out of the Cancun crisis and adopt a fresh approach to restoring their credibility in the multilateral framework that currently stands a bit shaken. As for India, it should continue to pursue the dual strategy of joining more and more regional blocs and continue to be a proactive player at the WTO, bargaining hard in areas where it stands to gain the maximum.

(The authors are faculty at the Indian Institute of Foreign Trade and the Institute of Economic Growth, New Delhi, respectively.)

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