Cancun: Not A Requiem For Multilateralism

Updated: Sep 19 2003, 05:30am hrs
If you think Arun Jaitley is a clever trade negotiator, which he has proved he is, wait till you meet Mukhisa Kituyi, trade minister of Kenya. He was, so to speak, the Maran of Cancun. His inspiring leadership of the worlds poorer and smaller economies encouraged the trade ministers of Benin, Burkina Faso, Chad and Mali to stand their ground on cotton. Cancun tore at the seams.

Symbolic gestures have a way of calling attention when everyone gets caught up in the detail. The betrayal on cotton became a symbol. The four cotton exporting west African nations have long complained that their economies have been savaged by the fall in cotton prices due to subsidised exports from the United States. According to one study, the $3bn-$4bn subsidy paid out every year to about 25,000 cotton farmers in the US is more than the national income of Burkina Faso and has hurt the livelihood of ten million cotton farmers who live at subsistence level.

If the US, the worlds largest and richest economy will continue with cotton subsidies for the benefit of a few thousand farmers that end up hurting entire nations, what hope is left for the poor cotton exporting African nations United States Trade Representative Robert Zoellick reportedly gave a Marie Antoinette like answer. If you cant get bread, try cake. That was the last straw and the Africans staged a coup by walking away. The Cancun draft was in shreds.

Having pushed the World Trade Organisations Cancun ministerial to the brink, the US and European Union trade representatives were churlish in their response to a collapse they virtually engineered. Mexicos trade minister and chairman of the conference Luis Ernesto Derbez would not have pulled the plug if Washington DC had not nodded its consent. Neither the US nor EU were keen on the kind of compromise that the developing world was about to secure. The time had come to cut losses, quit and quickly find a scapegoat.

Interestingly, the scapegoating game has been damaged by the outspokenness of the western media that has been quick to paint EUs Pascal Lamy and USs Robert Zoellick as the main villains at Cancun. Mr Kituyi and his African friends called their bluff. The core issue at Cancun was agricultural subsidies. Everything else was secondary. If Old Europe will not give up its butter mountains how can New Africa earn bread This question will have to be dealt with for the impasse in WTO to break.

The second thing that is clear after Cancun, is that the Singapore issues are virtually out of the Doha Round. Few countries want the WTO to become World Government, intruding increasingly into domestic policy issues ranging from intellectual property protection to environment, investment policy, social policies and such like. Maybe trade facilitation will survive and find place at the next ministerial. Investment issues are dead and de-multilateralised.

If the US and EU come to their senses and will accommodate the concerns of the poorest among the developing countries, there is still hope for the Doha Round. Discount the voices of despair. In all negotiations, nothing is won till it is won, nothing is lost till it is lost. Cancun was a way station for the Doha Round, not the final destination. So what if the journey has been slowed down, perhaps even derailed for a while, mainly on account of the timetable of US Presidential elections, it will resume, like the Uruguay Round did and there will be more jaw-jaw.

What does the Cancun outcome mean for India To begin with, it is important to recognise that India did not opt for a defensive stance at Cancun as was feared by some free trade critics. Rather, India showed a willingness to give and take, to negotiate a wider agenda, drawing a line on agricultural subsidies and investment. India expressed satisfaction with the compromise the US and African nations had worked out on TRIPs and public health, even though this did not fully satisfy many in the domestic pharmaceutical industry at home.

India went prepared for an unbundling of the Singapore issues and in the green room it showed willingness to go along with the final US and EU formula. This does not mean that India would have broken ranks with the developing countries but it only showed that India would not stand in the way. However, when other developing countries objected to the kind of compromise that was on offer and refused to sign on, India quite naturally remained loyal to its developing country allies. The Indian role at Cancun was mature and nuanced, not blindly oppositional nor purely defensive.

Several commentators in the West have expressed the apprehension that the Cancun impasse will divert US and perhaps even EU attention to bilateralism and regionalism in trade negotiations. This is an exaggerated fear and need not be taken too seriously. Free, preferential and regional trade agreements have run parallel to the GATT/WTO process and were never encouraged or discouraged by the multilateral process. They have a logic of their own, often geo-political and geo-economic.

India need not despair on this count. However, we must be actively engaged in pursuing FTAs, PTAs and RTAs even as we remain pro-active in reinvigorating the multilateral process. Indias immediate challenge is to catch up with our wider Asian neighbourhood. China, Japan, Korea and the ASEAN member nations are busy forging a closer economic relationship through the ASEAN+3 process. India must enter this process and can do so through the trade and economic cooperation agreements it is forging with Singapore and Thailand. Bilateral free trade agreements even with the US and EU are possible in theory even if they will take time in practice.

Closer home there are gestures to be made to Sri Lanka, Nepal, Myanmar. One of the issues that came into focus in the run up to Cancun was South-South trade. The less developed countries blame the large developing countries of not being very helpful on trade. The complaints India has against the US and EU are often voiced against India in Sri Lanka and Bangladesh. These issues must be addressed bilaterally. India must remain active defending multilateralism, pursuing bilateral and regional trade pacts, and unilaterally doing what we must do to become a more open and competitive economy.