Reflections On Cancun: Where To From Here?

Reflections On Cancun: Where To From Here?

Bulletin # 9

By Jane Kelsey at WTO in Cancun

When the minnows confront the colossus and win it is a truly historic moment.

This week, cocooned in the luxury resort of Cancun, Mexico for the fifth ministerial meeting of the World Trade Organisation (WTO), the Caribbean, African and other ‘least developed’ countries told the European Union, United States and Japan that ‘no means no’. Their resolve not to give in, yet again, to bullying and marginalisation in setting the rules that govern their economies precipitated the closure of the WTO meeting without agreement.

In public and private they credited key non-government organizations (NGOs) with strengthening their ability to keep on top of rapidly changing and complex issues in the negotiations. They also acknowledged the moral and psychological support provided by the protests of NGOs inside, and social movements outside, the meeting venue.

As the adrenalin rush of their victory dies down some crucial questions have to be addressed. These extend beyond the specifics that were in dispute to the future of the WTO itself.

The Crisis at Cancun

The meeting broke down over the insistence of the EU, Japan and South Korea that negotiation of agreements on investment, competition, government procurement and trade facilitation should begin. Those who remember the failed attempt to negotiate a Multilateral Investment Agreement (MAI) in the OECD will appreciate how contentious that was.

Battles over bringing these ‘new issues’ within the WTO date back to the first ministerial meeting in Singapore in 1996. India managed to limit the process to investigations through working groups. This shifted, controversially, in the Doha ministerial in 2001 to discussions over the modalities of negotiations, with a decision to be taken at Cancun. The EU insists this meant that negotiations would proceed; the only question was how. India was equally adamant that a requirement for ‘explicit consensus’, which it secured in a last-ditch intervention at Doha, meant that all 146 WTO members had to agree at Cancun before negotiations could begin.

At the very start of the Cancun meeting 70 governments from the ‘South’ jointly issued a statement that no consensus existed; others concurred. It became clear equally quickly that this was likely to be ignored.

At this stage New Zealand made an interesting intervention, presumably in its role as one of the self-styled ‘friends of high ambition’. The government claims to be neutral on the Singapore issues, especially investment. But instead of accepting the explicit position of a majority of WTO members that there was no consensus, it proposed a compromise framework agreement setting out best practice rules for the post-establishment treatment of foreign investments. That would create a review committee, using the WTO’s peer review processes, but breaches of the framework might not be enforceable.

It is not clear whether this reflected New Zealand’s concern about the paralysis of the agriculture negotiations or the risk of a national campaign against ‘the child of the MAI’. Whatever the motive, the intervention reportedly infuriated both the EU and governments that insisted process of ‘clarifying’ of the Singapore issues should continue.

The revised draft text produced on day three of the meeting included two annexes that set dates for negotiations on transparency in government procurement and trade facilitation. A three-stage process was set down for investment, with deadlines to agree on modalities and start negotiations linked to agriculture and industrials. The ‘framework’ for investment contained echoes of New Zealand’s approach.

Malaysia’s response was a blunt letter to the meeting’s Chair in bold type, much of which was underlined and in capitals. The message was “MALAYSIA CANNOT SUPPORT ANY TEXT TO IMPLY THE COMMENCEMENT OF NEGOTIATIONS ON MODALITIES. MALAYSIA’S POSITION is NON-NEGOTIABLE REGARDLESS OF ANY MOVE or developments IN THE OTHER ISSUES.”

At a late night invitation-only meeting of the US, EU, Japan, China, Brazil, Malaysia, Kenya, India and Mexico the gap seemed unbridgeable. It was the same at a larger Green Room meeting of 30 invited countries. The EU offered to unbundle the four issues and settle for transparency in government procurement and trade facilitation for now. But South Korea and Japan insisted it was all or nothing. So nothing it became. Whether the proponents of the Singapore issues will accept they are dead and buried remains unclear.

If the Singapore issues had been resolved, agriculture posed a second potential breaking point. Again, the world’s poorer countries had mobilised to challenge the imposition of a deal to protect the agribusiness and political interests of the US and EU.

In an attempt to repeat the Blair House accord that brought the Uruguay Round to a close, the US and EU tabled a document before the meeting that would continue protection for their agricultural and political interests while opening the markets of poorer countries to their agribusinesses. There was no attempt to address concerns about dumping of food below the cost of production in poor countries.

The response was the Group of 20 (later G21 and G22), including India, China, South Africa and Argentina, as well as smaller countries who collectively represent 60 percent of the world’s farmers. They demanded major cuts in domestic support and elimination of export subsidies and export credits. The group was led for the Cancun meeting by Brazil.

Another group of 23 Southern countries, including Cairns group countries Indonesia and Philippines, were concerned at the G20 failure to push for the elimination of export dumping and demanded strong Special Products (SP) and Special Safeguard Measures (SSM) to protect against import surges and ensure food security and rural development.

The richer members of the Cairns Group, including New Zealand, had to play second fiddle to these blocs, as most of its Southern members belonged to one or other of them. They voiced support for, but did not join, the G20 proposal. Although they denied that this was an opportunist position, this was the only way to get their major issues of export subsidies on the table. It was also clear that their view of special and differential treatment for poorer countries was limited to longer time frames to implement the same rules, and not substantively different treatment in the long term. There was no comparable endorsement of the demands from the other Southern governments for strong SP and SSM measures. The position of richer Cairns Group countries post-Cancun, and the future of the Group itself, will depend largely on how durable the G-20+ proves as a force in trade negotiations.

The revised draft released on 12 September offered largely cosmetic concessions, given the extent of movement that was being demanded. There was no commitment to SSM and tariffs would still have to be reduced on Special Products. Northern governments were simply asked to ‘address’ tariff escalation and make best endeavours on market access. India’s Minister sarcastically observed: “The heightened ambition on market access pillar, which ironically provides Special and Differential treatment in favour of developed countries, is utterly incomprehensible and extremely insensitive to the large number of people living in poverty in these countries.”

Proposals on export subsidies (in EU) and export credits (in US) included a requirement of parallelism. Rather than forcing these down, it was likely to justify minimal or no reductions. As events transpired, there was no discussion on the agriculture text.

Barely discussed, but potentially just as devastating, were the proposals on industrial tariffs which Southern governments objected would effectively de-industrialise their economies.

Where to Post Cancun?

What happens next remains unclear. Practically, there is no work programme to continue with in Geneva, aside from negotiations such as the General Agreement on Trade in Services (GATS) that have their own track. Whatever, the deadline of January 2005 is dead. But the implications for the WTO go far beyond these practical considerations. The context for decisions making has changed dramatically. When the meeting ended, so did the pretence of a Doha ‘Development’ round.

The major powers can be expected to devise a strategy to reassert control and not be fussed about the niceties of doing so. EU Trade Commissioner Pascal Lamy has labelling the organization ‘medieval’. US Trade Representative Robert Zoellick says reform is essential. Their problem is similar to the United Nations: in theory all governments have an equal right to influence the rules that will govern them. It would not be surprising to see proposals for a WTO version of the Security Council to emerge, in the name of efficiency. But that will further delegitimise an already discredited institution.

A backlash against the minnows seems only too predictable. During the meeting the US made threats to withdraw market access preferences, terminate negotiations on free trade agreements and cut aid funding. Immediately after the meeting collapsed US Senator Chuck Grassley said: “Let me be clear. I’ll use my position as chairman of the Senate Finance Committee, which has jurisdiction over international trade policy in the US Senate, to carefully scrutinise the positions taken by many WTO members during this ministerial.... I’ll take note of those nations that played a constructive role in Cancun, and those nations that didn’t”. This seems ironic, given speculation that the US is not all that unhappy about the collapse of the meeting. It apparently estimated that cuts to its subsidies would create major domestic political problems and felt secure that the fall back position of regional and bilateral negotiations could secure ‘high quality’ deals (discussed below).

Threats of retaliation, followed if necessary by action, are designed to divide and rule. They could have the opposite effect. The powerless have shown that collectively they are strong. The role played by Brazil and Venezuela reflects the changing politics in the Americas. Argentina recently refused to meet the IMF’s debt financing conditionalities, which were then significantly softened. To the surprise of some, South Africa remained solid in the G-20.

As for the future, the Brazilian Minister for Agrarian Reform Miguel Rosse speaking at a briefing to NGOs, put it more or less like this: "we have a coalition of those that defend the present unfair international trade system, mainly the US and the EU, and we have a variety of scattered forces opposing this system. The G20+ was created around the issue of agriculture in Cancun and in the post-Cancun will have to build bridges to the African and least developed countries and to civil society in the developed countries around the common goal of free and fair trade, food sovereignty and food security, social justice and the fight against poverty."

The WTO’s days may be numbered, at least as the world’s pre-eminent economic rulemaking body. Doubtless there will be attempts to achieve similar objectives through bilateral and regional agreements. These may well become enveloped in similar crises, although the dynamics will be different.

The first test will come with the meeting on the Free Trade Agreement for the Americas in Miami in a few weeks time. The US will be determined to reassert its dominance politically over the region. The resolve shown by the Latin American countries, and the strong rejection of the neoliberal agenda by Venezuela at Cancun, creates the potential for a major showdown - although Brazil may be in a more difficult position, as it has been arguing tactically that investment should be dealt with in the WTO, rather than the FTAA, in the hope this would produce a much weaker set of rules. Social movements are NGOs are likely to shift to Miami from Cancun to maintain support for countries that stand up to the WTO and to demand alternatives to neoliberal globalisation.

APEC is also due to meet in October in Bangkok. The current rush of bilateral negotiations may intensify, even with countries that remain wedded to the multilateral system. New Zealand will be in a dilemma as its bilateral options are limited. It would be nice to think that this might prompt a reconsideration of the desirability of the free trade model and exploration of alternative models of international economic cooperation. But the exact opposite seems more likely. There will be pressure to enter negotiations and make deals for the sake of them, simply not to be left out, and a real risk that the New Zealand government might be prepared to make reckless concessions in the agreements itself or by sacrificing other policies, such as the anti-nuclear legislation.

The Search for Alternatives

The events at Cancun were not just a hiccup of the kind that dragged out the Uruguay Round for seven years, as New Zealand’s WTO Ambassador Tim Groser has claimed. It is a crisis that goes to the core of the WTO’s free trade paradigm.

There is now a window of opportunity to consider genuine alternatives. That demand was voiced outside the conference by thousands of farmers, indigenous peoples, students, unions, NGOs and ordinary Mexicans. The focal point was a three day indigenous and farmers forum that combined education, solidarity building and protests. Key concerns involved land, biodiversity, water, the impact of commercial forestry, fisheries and tourism and the denial of self-determination.

The forum culminated in a mass mobilisation at the barriers that were erected to quarantine the WTO meeting in the Hotel Zone venue from the masses. It was at this demonstration that Korean farmer Lee Kyong Hae climbed the broken barricade and sacrificed his life. The placard he was holding - “WTO Kills Farmers” - gave voice to the thousands of desperate farmers who commit suicide each year. Lee had his own farm seized to pay debts incurred after IMF-inspired cuts to subsidies and the impact of foreign dumping and had since been working with others facing a similar fate.

The forum was convened by Via Campesina, which represents 60 million members in 46 countries. They cannot simply be ignored. Their short-term goal was the collapse of the current discussions. Their longer-term challenge was to shift the starting point for agriculture from trade liberalisation to a food system based on human and workers rights.

Similar demands were articulated in a paper prepared for the Cancun Summit by the International Union of Food, Agricultural and Allied Workers (IUF). In examining “What is at Stake for Food and Agricultural Workers” they objected that “the right to safe, adequate and nutritious food, and the collective rights and interests of 450 million agricultural workers are affected by the Cancun agenda, but are not on the agenda.”

The IUF challenged the critical failure of a world food system that generates US$545 billion in agricultural exports each year, but where eight million people die each year of hunger and hunger-related diseases. Farmers and agriculture workers are among the 840 million people without sufficient food and living in hunger. The conversion of land use to non-traditional agro-exports promoted by the IMF/World Bank/WTO fuels the dominance of Northern agribusinesses conglomerates like Cargill, ConAgra and Tsyon over the world’s food supply and agro-chemical giants like Monsanto, Bayer and Dupont driving new forms of high yield production based on GMOs. This increases dependency on food imports in poorer countries.

Meanwhile, heavy subsidisation of northern agribusinesses allows them to export food at below the real cost of production, squeezing out local food producers from their own markets. The Institute for Agriculture and Trade Policy estimates that US wheat is dumped on world markets at 40% below cost, soybeans at 30%, rice at 20% and maize (corn) at 25 to 30% below cost. Small farmers in both rich and poor countries suffer the same syndrome.

As the IUF points out, the problem is not subsidies per se. “Opposition to subsidized production for dumping on world markets must not be confused with support for agriculture as such. Agricultural subsidies are essential in all countries to support socially and environmentally sustainable agriculture, provide public services to rural communities, and promote job creation and the elimination of rural poverty’

This is not a readjustment that can be achieved within the paradigm of the WTO. “The fundamental problem lies in the assumption that the object of ‘global agriculture’ is to increase the value of agricultural goods exported overseas. The promotion of local food production capacity to meet local needs and the pursuit of sustainable social objectives in agriculture, including decent work, has no place in this corporate vision. Instead, increased dependency on agricultural exports is promoted at the expense of local needs.”

This debate is as relevant to New Zealand as it is to the Third World. We’ve had our own suicides. Hopefully that is in the past; but it may not be. If shares in Fonterra become tradeable and it ends up like ENZA or in a joint venture effectively controlled by, say, Nestle, farmers will become captives of global corporate strategies and price taking supply contracts. Such transnational agribusinesses increasingly control the entire food production process from seeds and semen to processing, marketing and distribution. Large-scale corporate farming with tenant farmers would transform the country’s agriculture and horticulture and our rural communities. Maori especially would struggle to maintain control of land and production practices.

Parallel debates are needed on the other major questions that remained unresolved at Cancun - the role of industrial tariffs, control of services, and the nature of intellectual property rights, as well as the future of the existing WTO agreements which may Southern governments claim cannot be implemented.

The juggernaut of globalisation hit another major obstacle this week. Surely it’s time to set aside the free trade rhetoric and engage in a genuinely open debate about the economic, social and political future of New Zealand and where we should line up in this dramatically changing world?

Professor Jane Kelsey, from Auckland University and advisory board member of ARENA.