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Pyrrhic victory for poor: WTO talks fail
( 2003-09-15 14:00) (Agencies)

Poor countries emerge as the political winners from the wreckage of world trade talks in Cancun, but they also risk being the economic losers.

Members of non-governmental organizations celebrate as they hand out press releases announcing the collapse of WTO ministerial talks in Cancun, Sept. 14, 2003. Trade talks critical to the health of the world economy collapsed after rich and poor states failed to bridge deep divisions over agriculture and investment rules, delegates said. [Reuters]
By dealing a grievous blow to the multilateral trading system, the collapse of World Trade Organization talks on Sunday will probably lead to a new rash of country-to-country and regional market-opening deals.

In such a world, many countries could find themselves the wallflower at the dance, their economies too small or poor to interest the United States, the European Union  and Japan.

"That is the tragedy of the situation and it gives me the greatest pain. These are the countries which are the most disadvantaged by the failure of Cancun," said George Yeo, Singapore's trade minister.

"They are the biggest losers," he said.

Even if rich countries do show interest in regional or bilateral free trade agreements, they will be able to use their muscle to exact a stiff price for granting preferential access to their markets, Yeo said.

The United States did just that in insisting on environmental conditions when Mexico joined the North American Free Trade Agreement and on curbs on capital controls to recent pacts with Chile and Singapore.

Yet Yeo said delegates from some poor countries applauded and hooted with delight after the talks collapsed over a failure to agree on whether to write new rules to eliminate the red tape and corruption that slows cross-border shipments -- trade facilitation in WTO jargon.

Poor countries were joyous because they had cemented their growing power in the 146-member WTO by refusing to accede to demands made by the EU, South Korea, Japan and others.

But Jean-Marie Metzger, who heads the Paris-based Organization for Economic Cooperation and Development's trade directorate, agreed it was poor countries that would suffer most from a failure to cut tariffs and open markets.

Under conservative assumptions, developing countries would earn from trade liberalization more than twice as much as they receive every year in official development aid, with trade facilitation accounting for a third of the gains, he said.

"This is a Pyrrhic victory for those who claim victory," Metzger said. "Development is the loser."


For the world economy, Cancun is an opportunity lost.

The aim was to impart momentum to the Doha round of market-opening talks that started in November 2001 and should have been wrapped up by the end of next year. If and when the round will be concluded is now anyone's guess.

Ministers are confident the world will not relapse into the sort of tit-for-tat protectionism that wrought havoc in the 1930s. But with the cause of free trade damaged, more bilateral trade spats could spring up.

"This is a huge setback. It's a setback to the WTO. It's a blow to the Doha Development round, and it's a setback for the world economy, which very badly needed a boost to confidence," said British Trade and Industry Secretary Patricia Hewitt.

"Inevitably, people will put much more effort into bilateral and regional trading agreements, and although there are benefits to be had from those they will emerge much more slowly than if we'd seized the opportunity to reform the world's trading system as a whole," Hewitt told Reuters.

Wasting no time, Japan and Mexico are expected to resume talks on a bilateral pact as early as Monday, diplomats said.

Mexico has trade deals with 32 countries and can look after itself. So can Japan.

But Hewitt wondered how weaker nations would fare if talks to redress the injustice they see in multilateral trading rules go nowhere.

Take the four west and central African cotton producers that say rich-country subsidies condemn millions of their farmers to poverty. They made a powerful pitch in Cancun for the handouts to be scrapped. But because the talks failed they came away with nothing but sympathy.

Poverty anywhere is a recruiting sergeant for radicalism, and Singapore's Yeo said rich countries would ignore the rising resentment against them within the WTO at their peril.

"It is not in the interest of those of us who are better off to have them remaining impoverished because eventually their problems become our problems -- whether through terrorism or disease or migration," he said.

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