Developing countries take US, EU by surprise

Widely blamed as the leading architect of the collapse of the ministerial World Trade Organisation (WTO) conference in Cancun (Mexico) last Sunday, the EU will embark on an extensive review of its trade policies.

The US Deputy Trade Representative, Ambassador Josette Shiner, said in an interview that "Cancun collapsed on issues of interest to the EU, not the US".

On his return to Brussels, Pascal Lamy, the European Trade Commissioner and sole trade negotiator for the EU, said that "the EU has traditionally been a strong multilateralist, but this policy should be reconsidered".

Despite a strong plea for rapid completion issued this week by global business networks led by the International Chamber of Commerce, prospects have now faded for arriving by January 1, 2005 at a 'single undertaking' comprising agreements on trade issues under the so-called WTO Doha Development Round launched in November 2001. Member states' representatives in Geneva will resume work working out rules for negotiations, but without any agreed political framework from Cancun.

EU enlargement, the difficulties of reforming the Common Agricultural Policy, the US Presidential elections, and the highly politicised election of a new WTO director in mid-2005 will contribute to slowing progress.

Lining up in a new powerful bloc, major developing countries at Cancun refused to negotiate on a limited EU-US proposal submitted last month to reduce their protection of agriculture. However, US Ambassador Shiner revealed that the US had previously offered much broader concessions than the EU, not reflected in the EU-US joint proposal.

But the US enraged developing countries by refusing even symbolic concessions to hard-pressed cotton-producing African states, unable to compete with heavily subsidised US exports.

Until Sunday morning, the EU insisted on the launch in Cancun of negotiations to establish global rules on four 'new' issues not previously dealt with by WTO - investment, competition, government procurement and trade facilitation - despite the opposition of developing countries. Its stand was supported by Norway, Japan and South Korea, but not by the United States, a number of EU member states, nor, reportedly, by European business.

EU trade ministers in Cancun came under heavy NGO and European Parliament pressure to drop the issues. Mr Lamy's mandate was changed at midday and he returned to a nine-country negotiating group representing WTO's 148 members, having dropped investment and competition from his demands. Procurement and trade facilitation were retained. The offer was rejected by South Korea, and sparked off a walkout by Kenya, representing the 90-nation African Union-ACP-least developed country bloc formed in Cancun.

The conference chair, Mexico's trade minister Luis Ernesto Derbez, then decided that there was no hope of consensus, and declared the conference closed.

The rock-solid resistance of nearly 100 developing countries - most of them linked to EU, or US, or Japan by bilateral and regional trade agreements - as well as the key role of China as one of their leaders, took rich countries by surprise. The latter have hinted at a sweeping 'reassessment' of their trade relations with poor countries.

Meanwhile, US Trade Representative Bob Zoellink made clear that whatever direction the WTO took, the United States would "move on multiple fronts" to open up developing country markets."