Global logo
GLOBAL ECONOMICS LTD.

GLOBAL ECONOMICS COMMENTARIES



Patrick Grady and Kathleen Macmillan

"The WTO under Renewed Attack in Cancun"

August 25, 2003.

The Fifth WTO Ministerial Conference to be held in Cancun from September 10-14 will again be a target for globaphobic protestors. This time we're likely to see fewer colourfully costumed dancing butterflies and turtles demonstrating against the WTO and more white-clad campesinos still mad over NAFTA. This is fitting as the middle-class issues of environment and labour standards, which took center stage at Seattle, will be yielding pride of place to agriculture, the main bread and butter issue for the developing world's rural poor.

The Mexican Federal Police, and other security personnel numbering 20,000, will have their hands filled maintaining order as tens of thousands of demonstrators parade down Kukulcan Boulevard and rally outside the Convention Centre where Mexican President Vicente Fox will officially open the conference. Twice in recent years that boulevard, which provides the only route into and out of the hotel zone, has been blocked by protestors, once triggering a brutal confrontation with police that we hope will not be repeated.

Mexico with its history of large and sometimes violent demonstrations and uprisings is not Qatar, the site of the last Ministerial, which was held two years ago and successfully launched the Doha Development Round. In the shadow of September 11, the Emir of that splendidly isolated Arab Gulf mini-state was able to seal off the convention areas from those few protestors that were even allowed into the country, while U.S. warships stood by watchfully in the harbour. This guaranteed that there was no repetition of the ugly riots led by black-garbed anarchists in Seattle that so disrupted the previous ministerial conference. Hopefully, it will be possible to say the same for Cancun and our Trade Minister Pettigrew won't be forced to scale any walls to get in and out of his hotel as he was forced to do in Seattle.

The biggest problem facing the WTO may not be on the street in front the Convention Centre, however. It's no secret that the trade round is not going well. Almost all the negotiating deadlines have come and gone. The waffly negotiating text for Cancun released last week underlines the extent of the disagreements among WTO members. The scheduled completion date for the round of January 2005 looks more and more like a pipedream.

The post September 11th international harmony that produced Doha was badly disrupted by an increasingly unilateral United States bent on waging war against Iraq in spite of the objections of key allies like France and Germany. It is only now that Iraq is starting to look more like Vietnam that the United States is again becoming more receptive to multilateral approaches. Whether this will spill over into the trade talks remains to be seen.

The main stumbling block for the negotiations is agriculture. It was only in mid-August, well past the March 31 deadline, that the European Union and the United States were able to cobble together a framework for the agriculture negotiations. And it fell far short of the required agreement on "modalities," which for the uninitiated are targets (including numerical) for meeting the objectives of the negotiations. The framework has taken flack from all quarters. Japan objects to the US-EU proposals and adamantly opposes any reduction in agricultural import barriers. Brazil has called the US-EU plan "too timid" and has, together with 16 other developing nations, crafted a more ambitious alternative. Generally speaking, developing countries are looking for a stronger commitment from the developed world to improve market access for their agricultural products, eliminate export subsidies and reduce trade-distorting domestic support. Africa's call for abolition of cotton subsidies is one symbolic specific demand. At the same time, it must be admitted, the developing countries are seeking continued protection for "special products" and wanting "special and differential treatment."

The developing countries are also digging in their heels on the so-called "Singapore Issues," which have been championed by the EU. These include investment, competition policy, transparency in government procurement, and trade facilitation. A group of 11 African nations have called for the Singapore issues to be dropped from the negotiating agenda arguing that they lack the resources to properly negotiate on these matters or implement any measures that might result from the negotiations. The United States for its part is not averse to "unbundling."

A bottom-line issue for the developing countries particularly in Africa that will fortunately not be on the table at Cancun is TRIPs and public health. A last-minute deal was reached last week that will make it easier for developing countries to acquire essential medicines to deal with their growing public health crises in AIDS, tuberculosis and malaria.

The question of China's role in the WTO looms largely in the background leading up to the Cancun meetings. Its vast economic and trade potential threaten to overwhelm the agenda. To date, China's role leading up to Cancun has been very low key. When it does adopt a stand, it has tended to side with the developing countries. Irritants such as China's trade surplus with the U.S. and the undervalued yuan featured prominently in the discussions that the U.S. Treasury Secretary held in Beijing last week.

What is Canada's stake in this potential repeat of the battle of Seattle? The surprising answer we were given to this question by a group of French journalists visiting Canada to attend the July informal mini-meeting of WTO trade ministers held in Montreal was that Canada has no real stake in or commitment to multilateral trade negotiations. Instead they maintained that Canada really only cares about its trade relationship with the United States. Their view was that the current round of WTO negotiations counts for Canada only if it provides us with some leverage in our dealings with the U.S. and helps us to bring pressure to bear on issues that we are unable to resolve through bilateral negotiations. As such, the journalists implied, Canada is not a real player at the multilateral table and can safely be ignored by other more serious contenders such as the EU. Ouch!

We refuse to accept this humbling, shall we call it, French view of Canada's role in multilateral trade negotiations. Canada remains a major player in the global trading system and must be seen to be one. It is time to reaffirm our commitment to the multilateral trading system based on a serious examination of our trade policy objectives. In the fine tradition of Canadian trade policy-making of the past, our ideas must, of course, be creative, constructive and principled.

Trade Minister Pettigrew has succinctly set out three overarching objectives for Canada in the current negotiating round: a fundamental reform to the agricultural trade regime; better market access for goods and services; and improved trade rules.

In the market access negotiations, Canada has already displayed leadership in putting together, with the EU and US, a comprehensive proposal that could serve as a basis for the discussions in Cancun. Chalk up one for us. Sadly however, progress on market access is being tied by the developing country bloc to the outcome of agricultural negotiations. The developing countries view the West's continued insistence on lower industrial tariffs while maintaining high agricultural and textile restraints to be nothing less than hypocrisy of the first order.

On agriculture, our role has been less heroic. We have, perhaps prudently, kept our heads down recognizing the very political nature of this issue in Brussels and Washington. Although we are no where on the scale of the EU, the US, Japan and others, we still have trade-distorting agricultural programs of our own. At an appropriate time, we will have to stick our head up and then we can use these as bargaining tools to try to get others to dismantle their programs. In the meantime, we have to recognize that we probably lack the credibility and the weight to be major players in the agricultural negotiations. We'll have to bide our time here.

Concerning trade rules, Canada has been an active supporter of moves to improve transparency of the WTO, to tighten up the Dispute Settlement Mechanism and to weaken the Anti-Dumping regime, and has developed excellent proposals for these areas. While the United States is strongly resisting changes to the trade remedy system, Canada can do much in a low key way to reform this system by continuing to advance creative ideas in the hope that some of them will eventually attract sufficient support to overcome the opposition of political forces south of border.

In the final analysis, Canada can best contribute, as we did in the past with the creation of the Dispute Settlement Mechanism or even of the WTO itself, through good ideas and hard work. This requires looking beyond the narrow confines of our bilateral trade priorities and seeking solutions to multilateral impasses. There is a need to keep negotiations as broad as possible for as long as possible. Only by doing so will it be possible to make the required trade-offs across WTO members that will be necessary to reach a single undertaking Doha Development Round Agreement.

The important thing will be to make sure we come out of Cancun with everyone still talking to one another and a workplan for the next stage of the negotiations and of course no blood in the streets. If the negotiations don't come to a head until 2006 or 2007, so what? The Uruguay Round negotiations lasted eight years.

Back to Index

Global Economics Homepage