In Cancun, a Blow to World Trade ; the Collapse of the World Trade Organization Talks May Shift Nations' Focus to Bilateral or Regional Pacts

Article excerpt

Some cheered in the hallways. Others pointed fingers. But when word came down that a World Trade Organization conference had collapsed Sunday, attendees and observers agreed on one thing: The push for international freetrade had been dealt a significant blow.

Formed in 1995 as a organization to negotiate and adjudicate trade agreements, the WTO's relevance has been challenged by the inability of rich and poor nations to compromise and find consensus on issues ranging from farm subsidies to foreign investment.

The Cancun debacle may spur nations initially to shun the WTO's 146- nation forum and pour greater efforts into developing bilateral or regional trade agreements. Longer term, analysts say, that shift may undermine the WTO, or may hold the key to streamlining future global trade talks.

"Failure at Cancun could do to the WTO what the Iraq war did to the UN: Undermine its influence and marginalize it," says Justin Forsyth, Oxfam's director of policy. A new hardball tenor at the talks, accentuated by the emergence of a 21-member bloc of developing nations determining to fight farm subsidies, echoed the tough talk over Iraq that has hobbled the United Nations Security Council.

And just as the US ultimately abandoned the UN over Iraq to form a "coalition of the willing," individual nations may simply strike up new trade deals bilaterally and regionally, bypassing the contentious global talks.

"I predict more bilateral trade deals, more NAFTAs," says Daniel J. Ikenson, a trade-policy analyst at the Washington-based Cato Institute, referring to the North American Free Trade Agreement. "They are easier to negotiate since there are [fewer] arms to twist."

However, the WTO's director general, Supachai Panitchpakdi, denies that such a shift would spell disaster for his organization.

"I could understand that other countries will want to get on with things and use bilateral agreements. Overall, I don't think this will undercut the relevance of the WTO," he says.

In the long term, he argues, a reemphasis on regional trade blocs like South America's MERCUSOR and Southeast Asia's ASEAN is a "normal and healthy thing" that could reduce the current unwieldiness of global trade negotiations. This development was already on display at Cancun, with the formation of the G-21 and the representation of Europeans nations by EU trade commissioner Pascal Lamy.

The Cancun talks were considered the make-or-break moment for trade negotiations launched two years ago in Doha, Qatar. There, WTO delegates launched the Doha Round, agreeing to phase out most agricultural export subsidies, and eliminate most tariffs, but failed to set a deadline, or specify which goods would be affected.

Japan, for example, levies 600 percent tariffs on rice imports, effectively barring other countries from entering their market. The US, meanwhile, spends $5.6 billion a year to subsidize its cotton farmers, a figure higher than the entire US foreign aid package to West Africa, where the cotton industry has been decimated by cheaper American imports.

And European nations protect their farmers perhaps more than anywhere else, with many countries arguing that domestic food production is a national security issue, in case a massive war blocks food imports.

The industrialized world pays out $1 billion a day in subsidies to farmers who represent less than 1 percent of its population. The G-21, meanwhile, includes 63 percent of the world's farmers.

'Singapore issues'

Japan and the European Union put discussion of farm subsidies on hold, however, pushing instead four topics referred to as the "Singapore issues." The goal was to give more market access to multinational companies, regulate competition, improve transparency in government contracts, and simplify procedures for cross-border transportation.

The Group of 21 (G-21), including economic powerhouses like Brazil, China, and India, balked at the sidelining of the farm- subsidy issue, and flexed its newfound muscle to end the talks. …