Thursday, April 19, 2007

Q&A: How world trade talks affect you

The World Trade Organisation (WTO) is meeting in the Mexican resort of Cancun this week with the aim of liberalising trade between rich and poor countries. BBC News Online explains why the talks matter for ordinary people in both North and South.

Why do the trade talks matter?

Trade has been the engine of economic growth in the past 50 years.

Countries in the North such as the US, Germany and Japan have prospered through an expansion of trade, which was driven by negotiations that lowered tariff barriers.

Some developing countries, especially in Asia, have also raised their standard of living by being able to sell more abroad.

But many have been left behind.

Now the WTO is trying to forge a deal to open markets to more poor countries, especially in agriculture.

Who would gain most from a new trade deal?

The World Bank says that a new trade deal could lead to a reduction in world poverty of 144 million people.

The boost to world economic growth could lead to higher living standards in both rich and poor countries.

The biggest gainers could be countries which are major agricultural exporters, such as Brazil or Australia.

Poor countries in Africa, which are suffering from major epidemics including Aids and TB, could also gain from a deal to make cheap generic medicines available, by-passing patent protection.

And the end of agricultural subsidies - which cost households in the North $1,000 each - could lead to cheaper prices for food.

Who might lose out?

Textile workers in Northern countries fear that their jobs are at risk from plans to open their markets fully to developing country exports.

Farmers in rich countries fear that the abolition of subsidies could lead to an end of the rural way of life.

Some developing country farmers also fear that they will lose out if highly subsidised agricultural products from the North flood their countries.

Other developing countries worry that proposals to open their countries to foreign investment could mean they will lose control of their strategically important industries.

And there is controversy over proposals to open up public services such as water, telephones and public transport to foreign competition, which could improve services but might also raise prices for the poor.

What are the chances of success?

This round of trade negotiations - which began in 2001 - has already missed several key deadlines.

The Cancun talks are seen as vital to get momentum going again.

Countries are unlikely to abandon the talks at this stage.

But there is still a deep divide between the approach of rich and poor countries.

With any trade deal requiring consensus and unanimous agreement among all 146 members of the WTO, no one is expecting an early deal.

As trade talks have expanded to range across many issues, such as environment and investment, they have become more closely tied to domestic political issues - and much harder to resolve.