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Split Derails WTO Talks

Poorer nations join to insist that developed countries reform their farm policies. Collapse threatens a new set of world trade accords.

September 15, 2003|Chris Kraul | Times Staff Writer

CANCUN, Mexico — With poorer countries demonstrating newfound unity and power, talks on a new world trade agreement collapsed here Sunday as participants failed to reach agreement on agricultural and investment policies.

The stunning breakdown of the World Trade Organization talks attended by 148 countries cast doubt on the agency's goal of crafting a new set of trade accords by January 2005 to benefit mostly poorer, developing nations, mainly by phasing out farm supports in the developed countries. It also seems to leave in jeopardy future multilateral trade deals in general, including the U.S.-backed Free Trade Area of the Americas.

The breakdown represents a political embarrassment for the Bush administration, which has promoted the WTO as an engine of global growth. Although in recent weeks U.S. officials had sought to lower expectations for the Cancun meeting, Washington had hoped to generate goodwill by agreeing three weeks ago to permit the manufacture of prescription drugs in developing nations at cut-rate prices.

The goal in Cancun was not to finalize a trade deal but to make enough progress on key issues to get halfway toward an agreement on the new set of accords, known as the Doha Development Agenda.

Agricultural supports were a key sticking point in Cancun. Although most countries subsidize their farm industries in some way, the United States and European Union spend far more than poor countries, thereby making it difficult for developing nations to compete in the global market. Combined U.S. and EU farm supports total $150 billion a year; EU dairymen, for instance, get $2 per day per cow.

Although the United States and European countries were prepared to give up some of the subsidies, in return they wanted to push forward a new set of trade agreements dubbed the "Singapore issues." These issues mainly concern giving European and American financial companies more access to foreign markets and requiring greater transparency in how governments evaluate and award procurement and supply contracts.

The poorer nations, led by China, Brazil, India and some African nations, remained adamantly opposed to considering the financial issues until an agricultural pact was dealt with. The richer countries wanted to settle the Singapore issues first, partly because they promised to be the stickiest and partly because the wealthier nations wanted to know that they had won some benefits before making farm concessions.

Although wealthy countries including the U.S. described the collapse of talks as a failure, poorer nations saw it as a healthy expression of unity on the part of developing countries.

"The demands and tough rhetoric are easy, and negotiations are hard work," chief U.S. Trade Representative Robert B. Zoellick said. "All walked away empty-handed."

EU Trade Commissioner Pascal Lamy was more pessimistic, describing the WTO negotiating mechanisms as "medieval" and incapable of bearing the weight of the issues that representatives of the 148 member countries have to deal with.

"I don't think we have to beat around the bush," Lamy said. "Cancun has failed."

But Beatrice Matumbo, Tanzania's delegate, said the collapse was positive in the sense that it showed poor countries did not "succumb" to the pressure and agenda of richer nations.

"I was afraid I would have to go back to my people and say we didn't gain anything," she said. "But instead we stood up to the manipulation. I am very happy."

In acrimonious comments after the meeting adjourned, Zoellick said U.S. offers of concessions in erasing or reducing farm export subsidies and some domestic supports fell on deaf ears. He added that Washington might pursue bilateral trade deals if multinational trade pacts couldn't be agreed to. He noted that the U.S. has 14 bilateral deals pending and has signed six.

Asked if the WTO could meet its January 2005 target date, Zoellick responded, "It is hard for me to believe that we will finish on time."

Washington believes a new WTO accord could help pull world trade out of the slump it has been in for two years. After growing 6.5% on average each year in the 1990s, world trade volume declined 1% in 2001, its first decrease ever, and rose just 2% in 2002.

Meanwhile, Washington has been pushing for an agreement on the Free Trade Area of the Americas. The FTAA is an ambitious proposal to expand the 1994 North American Free Trade Agreement among the U.S., Canada and Mexico to include all countries in the hemisphere except Cuba. But some nations, such as Brazil, have been resistant because of agricultural issues similar to the ones that bedeviled the WTO talks in Cancun.

Although farm supports were a key source of contention in Cancun, delegates did not even begin considering agricultural issues before the negotiations broke down.

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