March 31 and June 26 are the dates that sealed the fate of the Cancun World Trade Organization Ministerial conference. While the conference wonít begin until September 10, the writing is already on the wall: doom, gloom, and failure.
Echoing a growing consensus, one insider told me that ìthings are going to get worse before they get betteróa lot worse.î
But maybe thatís not a bad thing.
March 31 was when WTO Committee on Agriculture chairman Stuart Harbinson announced a breakdown of the pre-Cancun talks on farm subsidies, scuttling any likelihood of an agreement later in the year. Though delegates spoke dispassionately of disagreements over ìmodalitiesî and timetables, the real sticking point was the uncertainty of the European Unionís Common Agricultural Policyódue to be reviewed just months lateróand Europeís subsequent stalling in the talks. At the time, delegates from the U.S., Australia, and other participating countries accused EU members of trying to shoehorn in their own internally negotiated agreement at the upcoming Ministerial, a charge that European officials still hollowly deny.
The potential for CAP reform in June was strong, supported by Britain and Scandinaviaónet donors in the CAP apportioning processóbut France, CAPís biggest beneficiary, went to the mat for the status quo and found in Germanyócowed economicallyóan unlikely ally. Under the reform agreement announced on June 26, subsidies will be gradually ìdecoupledî from farmersí production through 2005 (through 2007 in France), when the process will be complete. At that time, payments will be tied to past production and compliance with a wide range of European directives, from environmental safety to animal care. While decoupling should reduce farmersí incentive to overproduce, the amount of money being put into the system will remain the same, and thatís the problem.
Europeís reformed CAP, now part of the pantheon of European law, will be no less distortionary than its predecessor to international trade. Europeís farm subsidies have always been a tremendous trade barrier for the developing world, and this nominal reform wonít change that.
And now that Europe is locked into a long-term policy, what little chance there was for compromise at the Cancun Ministerial has evaporated. Long overdue forward motion from the rest of the developed world to multilaterally break down subsidy regimes will be met with stony silence from the Europeans; after all, their hands are tied. It is likely that this skirmish over an industry representing about 2 percent of the GDPs of most developed countries will throw off-track trade liberalization talks in every other domain and bring Cancun to an impasse.
But given the recent history of the WTO, this may be an acceptable outcome. More and more, the developed worldóand especially Europeóhas been working to tie-in workersí rights, sustainability, appellation-labeling, and all sorts of creeping ìstandards harmonizationî into the WTO process, essentially erecting a new set of barriers to block developing economies. Indeed, Franceís participation in the Cancun Ministerial is contingent on environmental policy. Any agreement that could pass muster in Cancun would sacrifice significant liberalization for political expedience.
In his ìWither the WTO,î(1) Catoís Razeen Sally notes the increasingly proliferation of regional trade agreements and warns of their potentially ìambiguousî terms, with respect to openness. Still, when designed thoughtfully, RTAs have been a great boon to participants, as treaties like NAFTA demonstrate so well. A rash of RTAsónecessarily marginalizing the European positionóafter Cancunís inevitable failure could be the thing to shock the WTO process back on track. And even if the WTO is finally doomed, the end of global free trade isnít quite nigh. It may just be that a patchwork or smaller agreements is the real route to the eventual perfection of a global framework, to be negotiated when Europeís hands are tied from without.
End Note
- 1. Razeen Sally, ìWither the WTO: A Progress Report on the Doha Round,î The Cato Institute for Trade Policy Studies, 3 March 2003.