Why it ended without finishing

Even the best accounts of the final hours of the Cancún Ministerial Meeting of WTO seem to avoid answering a couple of obvious questions:

# Why did this disagreement mean the end of talks for now? There is no lack of disagreements at Cancún: after all, that’s why we have negotiations—to bridge the differences Why did this one kill the deal?
# Why did the bloc of African, Carribbean and ‘least developed’ countries oppose negotiations on issues such as ‘trade facilitiation’? What did they think they had to lose? I’ll give you my view … and I’d really welcome your views, if you’d like to comment.
My own report[⇒ related story], yesterday, offered only a quick summary of the events that led the Conference Chairman, Mexican Foreign Minister Luis Ernesto Derbez, to “pull the plug”. As I wrote, the final statements were still being made. There has now been time to pull together a more complete account from the key delegations in the ‘back rooms’. For a good summary, I recommend that you take a look at the ICTSD “Bridges(link to the ICTSD website)”:http://www.ictsd.org/ministerial/cancun/wto_daily/ben030915.htm newsletter. I have the same understanding of the sequence of events and the way in which Derbez seems to have reasoned that the deadlock on the “Singapore” issues—whether on all four or even on one—killed hopes of a broad agreement at Cancún. To answer my own questions: First, why did this disagreement mean the end, not the beginning, of further negotiations? The answer, in brief, is that this was not a disagreement over the substance of something being negotiated but a disagreement that amounted to a refusal to negotiate at all. The decision of the developing countries not to negotiate on the Singapore issues broke the ‘single undertaking’ principle of the WTO and that, in turn, doomed the Cancún talks. In what follows I’ll be taking the topic of ‘Trade Facilitiation’ as an example of the problem encountered on Sunday night. But the same remarks apply to the other three ‘Singapore’ issues, which had nearly identical status in the Doha negotiations (until the EU, in a last minute effort, agreed for its part to pull two of the most contentious issues off the table). Ready ? Take a deep breath … The Doha Declaration states that “negotiations on trade facilitation will take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that Session on modalities of negotiations.” Here’s the translation of that sentence: bq. We (the Trade Ministers gathered at Doha) decide that we will, after 2003, start negotiations on the topic of “Trade Facilitation”. But first we will reach an agreement at our next Ministerial meeting (in Cancún) on how (the ‘modalities&#8217)to do what we want to do in Trade Facilitation. So the job at Cancún was to agree on the ‘modalities’ for the negotiations that had already been launched in a sense—but postponed—in Doha. In the interim, the Doha declaration said, the WTO Goods Council was to work on improving and clarifying some aspects of ‘trade facilitation’ that have been in the GATT(“The General Agreement on Tariffs and Trade”) from the beginning (1948). The draft Cancún declaration[⇒ related story] put together by Ambassador Carlos Perez del Castillio in Geneva at the end of August included some possible ‘modalities’ for negotiation on Trade Facilitation (and for the other ‘Singapore’ issues) in Annex G. (My report[⇒ related story] of includes a copy of the draft: scroll right to the end for the text of Annex G). They are, to say the least, innocuous. They are tightly wrapped around with undertakings to take account of the capacity of developing countries to implement any future agreement and to help them with technical assistance to improve their capacity to manage trade facilitation and to absolve least-developed countries of inappropriate obligations. In the body of the draft Declaration itself, there are two alternative decisions on these modalities: one endorsing them and one postponing a decision on the modalities pending further examination. So it has to be said that there was a good opportunity to achieve the substantial objective of the Doha declaration on this topic: that is, to negotiate reasonable modalities and even to further postpone a decision on further modalities. What happened, instead, was that the developing country groups declared that they would not negotiate (not even negotiate postponement of the decision on modalities) on the topics at all. The developing country declaration breaks the single undertaking “principle(link to the WTO site, text of Doha Declaration)”:http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm#organization in the Doha negotiations. What’s that? Briefly, its the agreement that almost every topic for which there is a negotiating mandate must figure in the final package of agreements that concludes the negotiating round and that every government participating in the round has to be part of the consensus decision on every topic. At first blush, this may seem to be rule that is tough on poor countries or countries that have limited capacity to follow the negotiations in every detail. But, at least in principle, the opposite is true. What the rule really means is that “nothing is agreed until everything is agreed”. So until you have all countries, including developing countries ‘on-board’ in the decision on the final package, you don’t have a decision. This is precisely the principle that allowed, for example, India to hold out on the Doha declaration in 2001, on its own, until the last moment. Its also one of the reasons that the Seattle Ministerial meeting collapsed when the African group refused to continue negotiations. There is another way in which the ‘single undertaking’ works to protect the interests of the smaller and less powerful members of WTO. It ensures that the biggest and most powerful economies cannot ‘pick and choose’ which agreements they are prepared to implement. The answer is: they have to implement everything, even the agreements they don’t like. But it would be disingenuous to pretend that the single undertaking is without problems. It enforces universal compliance with the rules but at a price. It puts a lot of pressure on developing countries that may not fully understand the implications of the decisions that they have been asked to approve at the end of a long negotiation or who may not have had a chance to evaluate the impact of the agreements they are being asked to join. Although the principle gives each developing country the right to hold out until it’s happy, it takes a lot of guts to resist the arm-twisting of the other members to join the consensus so that everyone else can move on (or go home). The reaction of the developing countries, since the 1999 Seattle Ministerial, has been to say, quite rationally: “Well, we’ll respect the principle. But this means that we won’t even start negotiations unless we figure that they are about topics of real priority for us, and we have a reasonable chance of following the negotiations in detail. Otherwise, we risk finding ourselves being pressured into agreeing to something that doesn’t matter that much to us but which, for all we know could turn out to hurt us, or at best narrow our options in the future.”

Which brings me to the answer to my second question (remember?): What did developing countries think they had to lose in an agreement on e.g. Trade Facilitation? I am not sure about this: I need to talk to more people. The truth is that trade facilitation offers significant gains for developing countries. For example, World Bank sponsored studies in the the APEC region suggest that the gains from even partial trade liberalization are huge. There is every reason why this agreement would have been a priority for developing countries. It seemed pretty unlikley from the text in Annex G of the draft Chairman’s text that this agreement would be rules bound. It was much more likely to be about facilitation than about new and onerous obligations for developing countries and it promised a lot of technical assistance to achieve the goals of any new agreement (although the WTO members have a mixed record of delivery on these promises). My guess is that someone sold the developing coutries the idea that a potential future agreement on trade facilitation would be somehow like the agreement on Customs Valuation: a massive implementation project that could have significant costs for developing countries that chose to implement a ‘Rolls Royce’ model of customs processing.

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