Thursday, April 19, 2007

Cancun raises five crucial questions

The Guardian

1 Is the WTO just too big and cumbersome to work?

Yes. The WTO has 146 members, rising to 148 when Nepal and Cambodia take their seats in a month. Decisions are taken by unanimity, which means that any deal can be voted down by just one state.

The WTO faces a classic dilemma of trying to balance efficiency with democracy. Smaller countries fear (with good reason) that leaving the real decision-making to a core group leaves them out in the cold. But giving everybody a say makes for institutional paralysis. That is why Pascal Lamy, Europe's trade commissioner, calls the WTO a medieval organisation.

2 What difference has the new coalition of developing countries made to the WTO?

It's hard to exaggerate the importance of the new G21 coalition that formed around Brazil, China and India. For the first time in any international organisation, the developing world managed to unite around a common position and that allowed it finally to punch its weight against the US and the EU.

Attempts by Brussels and Washington to prise the coalition apart came to nothing. The west's trade ministers were surprised by the negotiating skill of the G21 and by the ease with which it dominated the news agenda. The WTO is no longer a bipolar institution.

3 What have developing countries gained from Cancun?

In the short term, nothing.

Some developing countries, particularly smaller, poorer WTO members, were angry when the talks collapsed, arguing that a deal advantageous to them was available. The breakdown in Cancun is by no means cost free.

In the longer term, however, the developing world may come to see Cancun as a defining moment. Cancun was intended to be a staging post in the round of trade talks launched in Doha two years ago, not its climax.

The negotiations of the past week have been about the scope, range and ambition of the rest of the round. Developing countries believe that a show of strength now will allow them to win bigger concessions when the talks eventually resume. Provided the G21 sticks together, they could be right.

4 Was Europe to blame for the failure of Cancun?

No, or at least not exclusively to blame. The European Union had a weak bargaining position ahead of Cancun. It stood to lose most in one area of talks - agriculture - and it wanted most in the area where hostility among developing countries was most vociferous: enlarging trade agreements into the four new areas of investment, competition, rules governing trade, and government procurement policies. Mr Lamy sought to use his demands on the so-called "new issues" to limit the losses to Europe's farmers.

By the time he made concessions on his demands on Sunday, it was too late.

The US, for its part, missed an opportunity to provide the talks with a symbolic - and economically beneficial - gesture to four of west Africa's poorest nations when it gave only lukewarm support to a proposed deal on cotton exports.

Signs that the west was ready to respond to the needs of poor cotton farmers in Mali, Benin, Burkina Faso and Niger could have broken the logjam.

Ultimately, Cancun failed because the agenda was too big, the countries were too far apart and the system could not take the strain.

5 What will happen now that the Cancun round has collapsed?

The WTO will spend the next three months assessing the fallout from Cancun. Though the meeting has failed, the round will continue, albeit at a slower pace.

The WTO will be forced to look at its own structure to see whether reforms can prevent another Cancun-style failure. There may also be demands for a slimmer agenda. The outcome will depend on the willingness of Washington to engage in a multilateral process and the ability of the G21 to stick together.