Europeans need clearer vision to revive WTO talks

Shada Islam, Journalist, Yale Center for the Study of Globalization, Geneva

The members of the World Trade Organization (WTO) face an uphill battle in trying to jump-start the collapsed talks in Cancun. U.S. presidential elections and the expansion of the European Union in 2004 make it imperative that negotiations get back on track as swiftly as possible.

With America still in unilateral mode, however, success in Geneva requires a special effort from an EU which has long spearheaded the drive for a stronger global trading system and, post-Iraq, also promised to counter U.S. hegemony by helping craft an alternative multipolar world order.

As they reflect over their post-Cancun strategy -- including the future of a controversial transatlantic farm alliance -- EU policymakers must decide whether global governance simply means a cozier, "more equal" relationship with the U.S. or the construction of a truly inclusive multilateral system. Achieving progress in Geneva is no longer just about tariff concessions, farm subsides and investment rules. Clinching a new world trade liberalization deal will require all WTO members to recognize new geo-strategic realities and overcome key contradictions and ironies in trade policies.

A WTO meeting set for Dec. 15 should show that the 148-member organization is still alive and kicking. However, with senior trade officials in Geneva unsure of whether, when, and how to resume the talks, rescuing the Doha round demands political leadership at the highest level. Cancun has clearly provoked rifts and revealed weaknesses in the WTO that only intervention by enlightened policymakers can mend.

Without guidance from their political masters in national capitals, diplomats and trade technicians in Geneva will remain mired in old quarrels, unable to overcome suspicions, mend fences or rebuild confidence.

Despite brave statements by WTO officials that Cancun was a setback, not a disaster, the U.S. and the EU remain firmly committed to defending their costly farm policies. At the same time, the Group of 20 -- led by Brazil, India, China and South Africa -- still insists that improved access to rich countries' farm markets and other development issues must remain at the center of the Doha round.

African countries, in particular, want an end to Washington's $3.3 billion in annual subsidies to American cotton farmers, which they say hurt their domestic cotton producers. African states also continue to oppose any attempt by the EU to put so- called Singapore issues -- investment, competition policy, government procurement and trade facilitation -- on the agenda.

The WTO crisis is a special challenge to the 15 EU nations which have long waxed lyrical about their commitment to a multipolar world. French President Jacques Chirac and Germany's Gerhard Schroeder are especially fervent believers in a new world order where the U.S. "hyperpower" shares global responsibilities with Europe, Russia, China and Latin America. Turning the vision and rhetoric into reality is proving to be no easy task for EU policymakers, however.

The WTO is a multipolar organization par excellence and is shaping up as a real testing ground for European ideals. Its members, big and small, are equally instrumental in determining the world trade agenda. Crucially, unlike in the United Nations, no country in the WTO has veto power. But instead of embracing the WTO as a reflection of the multipolar world it espouses, the EU went into the Cancun meeting with a deal on farm trade liberalization concluded exclusively with the U.S.

Not surprisingly, developing countries reacted with hostility both to the transatlantic alliance per se and the duo's failure to promise a total elimination of export subsidies, significantly slash domestic farm support, or improve market access for farm products.

The unified front presented by developing countries in Cancun provided clear proof that there has been a seismic shift in the WTO. The so-called "quad" nations -- America, Europe, Canada and Japan -- are no longer able to run the world trade show as they did during the last WTO negotiations.

The EU's collusion with the U.S. is especially disappointing given the bloc's repeated pro-development proclamations. But it reveals a deep-seated European unease about developing countries' emerging clout. For many EU policymakers, development policy means helping only the poorest nations -- which are also the least competitive -- gain access to EU markets. It is not about assisting middle-income countries to grow more prosperous.

EU Trade Commissioner Pascal Lamy has been scathing in his criticism of the new-found assertiveness of developing nations. Engaging in a bout of wishful thinking, Lamy argues that the G-20 alliance of larger developing nations will be pulled apart by their different agendas. Small African countries, he says, will continue to use disruptive tactics in the WTO because they have no real stake in world trade. Lamy also contends that China's membership of the world trade club has "scared the living daylights" out of its competitors who would rather see the current negotiations fail than give additional trading advantages to Beijing.

U.S. Trade Representative Robert Zoellick is equally angry at the "inflammatory rhetoric" of developing countries in Cancun, arguing that such tactics reflect the kind of empty posturing that traditionally takes place in the UN General Assembly. But by focusing on the tactics rather than the substance of developing countries' demands, both men remain out of touch with the WTO's new realities.

WTO members must also decide just what they want: A dynamic multilateral system or bilateral and regional pacts. While negotiators in Geneva painfully ply the multilateral route, their counterparts in national capitals are busy doing discriminatory deals which risk fracturing the global trading system.

The U.S. has made clear that it will pursue free trade pacts with individual countries and regions with increased gusto and enthusiasm. Japan, long reluctant to embark on the regional course, is now rallying to the cause, prompting China, India and Thailand to follow suit. The EU has now said it is also reconsidering the question. European industry leaders, for their part, make no bones of their determination to secure a transatlantic free trade area if there is no swift resumption of the Doha talks.

Despite the contentious nature of recent relations, there are signs that some members are willing to take up more flexible negotiating positions. Lamy's last-minute decision in Cancun to drop controversial EU demands for WTO negotiations on investment rules and competition policy is a step in the right direction.

The EU has now suggested that both questions should be negotiated only by a small group of like-minded countries, not the entire WTO. The recent decision by the 21-member Asia Pacific Economic Cooperation (APEC) forum to back a quick revival of the round is also good news for the WTO, as is active lobbying by European business leaders for a revival of the talks.

But time is of the essence. With the EU expected to be preoccupied by its expansion in May 2004 and U.S. policymakers entangled in a presidential election campaign, there is little time to lose in restarting the round. U.S. disenchantment with the WTO following the body's recent ruling against U.S. steel tariffs could be another complicating factor.

But anger and frustration in many parts of the world over the Iraq crisis and aggressive American unilateralism make it imperative that confidence in north-south, rich-poor cooperation is restored in at least one multilateral forum.

This article appeared in YaleGlobal Online, (www.yaleglobal.yale.edu) a publication of the Yale Center for the Study of Globalization, and is reprinted by permission.