The EU after Cancun:

A way forward

“The EU remains committed to a strong rules-based multilateral trading system and will continue to work in this direction within the WTO.”

Pascal Lamy, speaking at the Press Conference closing the World Trade Organisation 5th Ministerial Conference in Cancun, Mexico, 14 September 2003

The collapse of the World Trade Organisation (WTO) talks in Cancun was a huge disappointment for all those committed to reform of unfair trade rules that systematically disadvantage the world’s poorest countries and its poorest people. The EU was by no means solely responsible for the failure in Cancun: the intransigence of other rich countries and the chaotic negotiating process were also critical factors. But the EU has to accept that its failure to commit to ending agricultural export dumping, and its under-estimation of developing country resistance to the launch of negotiations on the Singapore issues were major factors contributing to the stalemate.

Looking forward, the priority for all those committed to making trade fair is to get the WTO talks back on track, with a renewed commitment to a true development agenda and early measures to rebuild confidence in the multilateral trading system. The EU, with its longstanding commitment to multilateralism, has a critical leadership role to play. There is a real fear that powerful players will temporarily give up on the WTO and retreat to bilateralism and entrenched protectionism. The development challenges are too pressing and the need for multilateral economic cooperation too great for the EU to allow this to happen.

Oxfam calls on the EU to work with developing countries to reinvigorate the WTO negotiations around a genuine development agenda. In the aftermath of Cancun, it is essential that the EU takes a lead in defending multilateral economic cooperation and focusing the WTO negotiations on those issues of critical importance to global poverty reduction, particularly the achievement of a pro-poor deal on agriculture, rather than forcing new issues onto the agenda.

Defending multilateral economic cooperation

The collapse of the Cancun Ministerial Conference has undermined and possibly imperilled the multilateral trading system. And yet, there is a growing recognition of the need for greater global cooperation to respond to the world’s challenges. This is true not only in the economic sphere, but also in relation to security, stability, development and environmental protection.

The pressing development challenges facing the international community demand leadership and vision from Europe, with its longstanding commitment to multilateralism and poverty reduction. Global inequality remains at obscene levels, and this is especially true when it comes to the distribution of the benefits of world trade:

• With 14 per cent of the world’s population, high-income countries account for 75 per cent of world exports.
• Low-income countries with 40 per cent of the world’s population account for three per cent of world trade.

This starkly unequal picture is in large part the result of unfair trade rules, which can only be reformed in favour of the needs of the world’s poor through a process of multilateral trade negotiations directed towards genuine development goals.

The alternative route of bilateral and regional trade agreements would marginalise the WTO. Developing countries’ bargaining power will be further weakened, leaving them vulnerable to highly unequal trading deals, where they are obliged to introduce sweeping liberalisation measures in exchange for limited market access.

The idea of pursuing a plurilateral approach within the WTO could possibly work if this were limited to market access, and meant that smaller member countries would benefit from agreements to reduce northern subsidies or other trade barriers without having to make reciprocal commitments. However, such an approach would not be development-friendly if it results in plurilateral agreements on new rules, which have been negotiated by the larger players, into which smaller developing countries are then pushed.

Within this context, defending multilateral economic cooperation is paramount. And if the EU will not champion multilateralism, it is far from clear who will.

A genuine development agenda

Oxfam believes that there is an obligation on all WTO members to get the negotiations back on track in pursuit of a genuine pro-development outcome. However, as a major player on the key stumbling blocks in Cancun, the EU has the potential to play a key role in rebuilding confidence in the negotiating process. Confidence-building measures by the EU would help to clear the atmosphere and allow all countries to show greater flexibility.

Oxfam believes that a number of positive elements from the negotiations in Cancun must be built on and taken forward. The EU’s initiative on cotton, for example, was a welcome first step to address the crisis in the cotton sector. In other areas, particularly agriculture – the single most important issue for development on the WTO agenda – it is imperative that the EU, with other rich countries – notably the US - commit to deeper reform.

Agriculture

The EU faces difficult political choices on agricultural trade reform. Powerful vested interests – including large farmers and capital-intensive agribusiness – have a strong stake in maintaining the status quo. But without a breakthrough on agriculture, the WTO will be unable to deliver a genuine ‘development round’. It is imperative that the EU makes concessions on direct and indirect export subsidies to bring an end to the unfair practice of agricultural export dumping, which destroys the livelihoods of vulnerable farmers in developing countries. This will mean far deeper reform of an agricultural system that benefits a minority of agribusiness interests, and supports intensive, export orientated large-scale production, in favour of an agricultural policy that provides value-for-money for Europe’s citizens in supporting environmentally sound, small-scale farming within thriving rural communities, without harming the interests of developing countries.

In addition, more attention must be given in the WTO negotiations to the demands of developing countries for effective special and differential treatment that will allow them to promote and protect their domestic agricultural sectors in the interests of food security and poverty reduction. This will complement the financing from the European Development Fund to address supply-side constraints.

According to feedback from several developed and developing country members, the agricultural discussions at Cancun seemed to be heading in the right direction. These advances must be capitalised upon. Agriculture is the key to unlocking the Doha development agenda, and without constructive steps on this issue, the broader negotiations cannot really restart. The answer is not to wait for others to move, but to have the will and vision to take a lead.

Singapore issues

The EU seriously underestimated the strength of developing country resistance to the Singapore issues, and their insistence on launching negotiations on these issues played a significant role in the failure of the Cancun Ministerial Conference. Irrespective of their individual merits, it is clear that, for the time being, the Singapore issues cannot be negotiated at the WTO.

The EU should take a positive step forward by clearly indicating their readiness to drop the Singapore issues from the WTO agenda. This will help create a better environment for making progress, and allow the WTO members to focus on the issues of central importance to achieving agreement on a genuine development round. It will also demonstrate concretely that the message sent by developing countries has been heard, and that the EU is prepared to make concessions to salvage multilateralism and the Doha development agenda at this decisive moment.

The way ahead

The failure at Cancun has prompted several WTO members to raise the issue of WTO institutional reform. It is clear that procedural issues contributed to the failure at Cancun. Key concerns include: the drafting of text under the responsibility of chairmen, which failed to reflect the positions of the vast majority of the membership; the role of facilitators; and decisions regarding the sequencing and prioritising of issues on the conference agenda. While business as usual is not an option, radical proposals – such as the EU’s suggestion to consider the creation of a two-tier WTO - are unlikely to be accepted by all parties in the near future and require careful assessment, particularly regarding their potential impact on developing countries.

On a positive note, the EU and other WTO members should welcome the improved coordination and coherence among developing countries through the group of 20+, and the consolidated ACP/LDC/Africa Union. The new WTO political landscape that this creates offers an opportunity to move the negotiations forward in a more focused and effective manner, and has the potential to overcome some of the difficulties associated with negotiations among 146 member countries. This development can only strengthen the credibility of the multilateral trading system.

At this crossroads in the history of the multilateral trading system, the EU faces a clear choice: to position itself as the champion of the multilateral economic cooperation that is essential to rebalance international trade rules in favour of developing countries and poor people; or to retreat to narrow, introspective positions in defence of vocal mercantilist lobbies protecting the interests of a small minority. Oxfam believes that the EU, with the support of civil society, can and must play a lead role in ensuring that the spirit of the Doha Ministerial Declaration prevails by adjusting to the new political realities and getting back to the table in Geneva.

Date of original publication: October 2003