Back to the Future in Cancun

I’ve been trying to understand exactly what happened at the WTO ministerial conference in Cancun. That they’ve come apart is pretty clear, but there is a certain amount of ambiguity about why and who is to blame. The crux of the matter appears to be the “Singapore issues”, for which you can find a more detailed discussion at Crooked Timber.

What are the “Singapore issues”? In most of the world, national governments get to write the laws regulating investment and taxing economic activity, and usually government contracts are, at least to some degree, offered preferentially to locally controlled or operated businesses. It seems that some combination of countries – the US, the EU and Japan – want to extend the WTO’s mandate to globalising investment and procurement rules. Apparently, the whole business first came up at the WTO ministers’ meeting in Singapore after the death of the Multilateral Agreement on Investment in 1998 – a treaty intended to address exactly these questions of government procurement and investment security.

To what degree each of the big three industrial powers pushed this agenda is what I have not yet managed to determine from press accounts. One newspaper claims that the EU and Japan are responsible, while the US role was minor; another account suggests that the US was about to walk out of the talks over exactly those issues when the third world beat them to it. The Indian business press was reporting “flexibility” in the EU position just before the talks failed. Pascal Lamy, the EU negotiator, was apparently willing to “unbundle” these issues from agricultural subsidies and other matters on the agenda. “Unbundling” usually means that one side is willing to table some issues, but not drop them, in order to get an agreement on something else.

Regardless, the talks are dead and the WTO may be going down with it. The “Group of 21” – Brazil, India, China, Malaysia and a lot of smaller countries – have certainly shown that they can bring multilateral trade negotiations to a halt. Several papers are reporting that the US and the EU intend to start negotiating trade pacts with individual states instead of going to the WTO. My fear is that this will mean a return to a sort of tacit colonialism, where the US ties Latin America to it through trade treaties, and the EU does the same with Russia and Africa.

The EU does not need a colonial empire, nor does America, but the prospect seems almost inevitable to me if bilateral trade accords replace multilateral ones.

13 thoughts on “Back to the Future in Cancun

  1. I think the WTO could do a lot better, and we could avoid the colonialist dystopia of which you speak, if it unbundled its agenda and made agreements on the things people can agree upon.

    It’s a crying shame that everyone agrees that agricultural subsidies have to go, and yet, they’re still there.

  2. We in Sweden actually had cheaper food and clothes before we joined the European free market. Because we could import it from the third world now we aren`t allowed.

    On the other hand everybody ofcourse wants to enjoy open landscapes in Europe so some sort of subvention to the farmers may be needed.

  3. Maybe the WTO was not designed appropriately, fair enough. Too many veto players are certainly driving up the transaction costs of reaching an agreement. Maybe smaller negotiating groups will be better at solving the problems. But looking at the subjects at hand, I don’t really see how smaller groups alone would help solve them?

    There would need to be more genuine consensus about the way to go from here. But this consensus is less probable now than it ever was given the economic situation in the industrial core. There is no real understanding about the right way to deal with the economic and social challenges of globalisation – as we can witness looking at the masses of globalisation enemies from all social strata putting forth all kinds of arguments.

    The root cause of the problem the WTO (through its member governments) had to deal with is declining confidence in the ability of free trade to deliver social progress – especially with respect to interindustrial trade and development.

  4. Tobias: it is not the fault of free trade if social progress was not delivered, but that of individual governments who did not respond to free trade. Too many bureaucrats in too many third world governments simply did not “get it” when it was time to figure out what had to be done.

    Perhaps they had all been educated in Europe?

  5. Small point: the Singapore talks on investment, competition, procurement and the other one were in 1996, before MAI fell apart. But right on the big picture as nobody really cared about them in the WTO context until after 1998. Since the source of this error is quite likely to be my own confused and illiterate picture on CT, I am inclined to be lenient 🙂

  6. There is no contradiction between big buisness and communism they both wants to have a monopoly.
    Thats why we need free trade no trade barriers and many small enterprises.

    Just the opposite of what is the case in Sweden today, where small companies are taxed to death with the highes taxes in the world while the very rich billionaires and companies escapes tax legally.

    Down with the monopolies and the trade barriers !

    Then we perhaps could lift the third world out of poverty !

  7. D^2 – actually, I was planning to write this post before I saw yours, and then cut most of the background material and pointed to Crooked Timber. So, it’s my own fault. I did know that the “Singapore issues” had been raised at Singapore but didn’t check the date of the actual meeting, and I knew that the MAI got torched in ’98. So I simply assumed a logical order of events instead of an illogical one.

    Aidan – *sigh*, I spell International English – somewhat inconsistently – but I still speak ‘Mercan. I have developped a fondness for the word “bollocks” though, probably from watching the Beeb. I suspect that you’re right about the G21, but what I fear is that the US and EU no longer have any reason to go back to the WTO, especially since there is some much acrimony over WTO decisions on trade between just the two of them.

    Ryan, one of the theories I’m entertaining is that raising these issues was done intentionally to kill talks on agriculture. The only problem is that Lamy’s willingness to unbundle agriculture from investment discussions doesn’t make sense under that theory.

    Tobias, if the “small groups” means one, big industrialised country – e.g. Japan, the US or the EU – and a bunch of smaller or poorer countries, it’s more or less the same as a bilateral accord. One of the reasons for the WTO was to try to bring more balance and less neocolonialism to trade talks by putting all the big rich countries and all the small and poor countries together.

    Markku, what exactly should those third world governments have done to respond to free trade? If you mean liberalise their markets, I can show you plenty of examples of states that did just that failed anyway. Same for infrastructure investment, legal reform and anti-corruption measures.

    Magnus, according to my less-than-totally-trusty CIA factbook, Sweden does about 60% of its trade with the EU, and the engineering sector – which is dominated by very large firms with deep links to various governments – represents some 50% of GDP. It seems to me that not joining the EU would cost Sweden more than it lost in cheap trade, and that free global markets without preferences or government ties would harm Sweden’s engineering firms pretty badly.

  8. Actually Mr Martens Sweden by being a member of Efta already had free trade with the European Union. Though very few trade barriers to the rest of the world.

  9. Small update. The West African cotton issue. The economist has this to say about the inflexibility of the proposed ‘cotton draft’:

    “This hardline stance had American fingerprints all over it. Political realities in Congress (the chairman of the Senate agriculture committee is a close ally of the cotton farmers) made American negotiators fiercely defensive of their outrageous subsidies”.
    http://www.economist.com/finance/displayStory.cfm?story_id=2071855

    The Indians are also running this version of things. Now while it is to soon to be clear, it does seem that the Europeans may have been ‘set up’ on Singapore, and that the bigger problem may be elsewhere.

    Whether this is because the US is moving generally away from multilateralism, whether it is simply a temporary blip caused by the imminence of the US electoral process, or whether there is some serious re-thinking of globalisation going on, we will only know when we get a bit further upstream.

  10. @Magnus: maybe you should comment on my proposal (http://www.fransgroenendijk.nl/comments.php?id=28_0_1_0_C16) to limit the size of corporations.
    @Tobias/Markku: “it is not the fault of free trade if social progress was not delivered”. Of course it is not! Social progress is and never was the objective of free trade. To me it seems that both of you have raised our expectations to high.
    A problem with the major global institutions in my view is that they are allowed to grow away from their original objectives.
    IMF -> stability. Why should they describe to Dominica that “To enhance revenue programmes immediately, the IMF calls for a consumption tax on petroleum.”? (http://da-academy.org/drjbyimf.html)
    WTO -> get rid of trade barriers and dumping practices. Why should they work on protection of investments, rules on labeling products (gentech controversy between US and EU), property rights etc?

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