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SPEAKING FREELY
The rocky road to
Cancun
By Suranjan
Gupta
Speaking Freely is an Asia
Times Online feature that allows guest writers to have
their say. Please click here if you
are interested in contributing.
Preparations for Cancun, Mexico, where the World
Trade Organization (WTO) is scheduled to hold its latest
round of meetings on September 10 through 14, make
interesting times for economic diplomacy. The developing
countries, some of which are extremely minor players in
world trade, have begun to realize their potency in the
WTO and are certain to test the skills of the two major
trade blocs in the days ahead.
Every two years,
trade ministers of member countries meet to set the
agenda for trade liberalization and to take stock of
steps taken thus far. In November 2001, the fourth
Ministerial was held in Doha in Qatar, which produced
the Doha Ministerial Declaration. At Doha, the
developing world had expressed strong resentment that a
number of the original Uruguay Round Agreements that
turned the General Agreement on Tariffs and Trade (GATT)
into the WTO at US president Bill Clinton's signing in
1994 had not been implemented properly and that there
were a number of gray areas.
Also, the
development aspect of trade liberalization was being
ignored. To redress this imbalance, the Doha declaration
laid considerable emphasis on what are known as
"implementation issues" and "special and differential
treatment", particularly around development. The Doha
declaration set specific deadlines for generating
consensus amongst countries on specific issues such as
agriculture, trade related intellectual property rights
and public health, special and differential treatment,
dispute settlement mechanism, etc.
The Cancun
meeting is named for the Mexican resort where the latest
negotiations are to be held - probably because it is
easier to defend against the hordes of
anti-globalization protesters who will find it more
difficult to reach than sites in, say, Seattle or
Geneva.
The time has come for trade ministers of
146 countries to take stock of the negotiations so far.
What are they going to see before them?
First,
none of the deadlines for consensus on major issues have
so far been met. Second, on agriculture, the two major
trading blocs, the EU and the US, have landed a
bilateral deal between themselves and expect their own
respective interests to prevail on farmers the world
over.
Third, on allowing poor developing
countries access to cheaper medicines, especially at the
time of national emergencies, the US pharmaceutical
companies are not expected to allow their government to
be flexible.
Fourth, forget "implementation"
issues, it is make-or-break time for some of the
developed countries to begin negotiations on new issues
such as multilateral treaties on investment,
competition, trade facilitation and government
procurement, despite the strong objections from certain
Asian and African countries that their levels of
development require that their policy space with regard
to these issues not be curtailed.
Fifth, with
regard to industrial products, substantial reduction in
tariffs is called for though some leverage can be given
to the developing world, especially the poorest of their
lot, to reduce tariffs less slowly.
Sixth,
linking environment to trade is critical for the
northern countries. After all, newer methods of
protective instruments will have to be devised from an
early stage so that with the help of technology or more
correctly, environment-friendly technology, imports from
some of the countries from the South can be blocked when
tariffs fall.
Is there a method in this? In a
neo-mercantilist era, countries with major trade
imbalances look to encourage exports while frowning on
imports. Despite the so-called "development" aspect of
the Doha round, increasingly it is clear that the more
powerful you are, the greater need for you to protect
those industries or products which are already enjoying
protection through existing tariff peaks or where
restructuring is urgently called for!
Witness
the Bush administration's protection of the steel
industry in the US and the plans afoot in the OECD to
"rationalize" steel subsidies. Textiles and garments,
leather and footwear are all well known for their quota
regimes and the ubiquitous "graduation mechanisms" have
kept exports of these products from developing countries
on tenterhooks. The US farm bill and the hypocrisy over
the CAP reforms in EU countries can also be politically
rewarding, especially for "democratically" elected
representatives. Competition and free trade theories are
good textbook models, which do not work in the short run
political framework of nation states, so it seems.
The $300 billion-plus annual subsidies rich
countries pay their farmers dwarfs the $50 billion they
give in assistance to the developing world. Trade not
aid has long been a catchphrase for trade liberalizes.
Indeed, as Cordell Hull, the former US secretary
of state had once observed: "where goods cannot cross
borders, armies will". The last half a decade has been
witness to his prophetic words and this has been no less
evident in the economic diplomacy surrounding the trade
liberalization efforts under the auspices of WTO and its
predecessor, the GATT.
Hype and professed
commitments to trade liberalization are the usual noises
that the North makes prior to any ministerial meet.
Cancun is no exception. The Northern countries are after
all in an advantageous position. Most regional trade
arrangements benefit them. This apart, they hold the key
to the exports of many of the developing countries,
through various bilateral and multilateral trade
preferential systems such as the Generalized System of
Preferences (GSP). They can and have divided developing
countries through such preferential schemes. They can,
therefore live without Cancun or the DDA being a
success.
But can they? Nearly a decade of global
integration has increased competitive pressures,
especially in the developed countries. Extraneous shocks
such as 9/11 have further accentuated the pressures on
world output. The political war between the US and the
Continent is more pronounced though less subtle in the
economic sphere. The European disease of free trade
pacts has now afflicted the Americans. The North
American Free Trade Act, the treaties with Mercosur,
Chile, etc point to the fact that the US is no longer
banking on WTO-led trade liberalization.
China
and India are increasingly cozying up to the US. So the
continent needs to ensure that its place in the sun is
not completely usurped, despite the British.
Multilateral trade liberalization is their best bet,
especially with regard to new issues, such as, on
investment. What the OECD could not do, surely can be
brought back through the WTO!
Suranjan
Gupta is an Economic Analyst based in India
Speaking Freely is an Asia Times
Online feature that allows guest writers to have their
say. Please click here if you
are interested in contributing.
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