September 17, 2003

September 17, 2003 | Commentary on Foreign Aid and Development

Trading Insults, The Cancun Free For All

Don't give a starving man a fish, give him a fishing rod. That used to be the mantra in foreign aid circles. The message that came out of the collapsed World Trade Organization negotiations in Cancun, Mexico, last week took the metaphor one step further; Don't let him export that fish once you have taught him how to catch it.

"We are told that free trade brings opportunity for all people, not just a fortunate few," U.N. Secretary General Kofi Annan said at the opening Wednesday of a five-day meeting of the 146 member nations of the World Trade Organization. "Sadly, the reality of the international trading system today doesn't match the rhetoric. Instead of open markets there are too many barriers that stunt, stifle and starve. Instead of fair competition, there are subsidies by rich countries that tilt the playing field against the poor."

The criticism is fair. It was, in fact, the purpose of the meeting to give new impetus to the Doha WTO round, which was launched in 2001, and to level that playing field. The Doha round is intended to deal with agricultural subsidies, among the thorniest of issues. At the request of the EU, investment and government procurement were added. The mixture turned out to be explosive.

By the time the weekend rolled around, the developing countries - now organized under the name of the G-21 -- had decided that the United States, Europe and Japan were not prepared to make sufficient cuts in their agricultural subsidies. Meanwhile G-21 countries had balked at setting investment rules they thought would favor the rich countries.

While the rich nations agreed to end export subsidies on farm products of special interest to developing countries, the G-21 called for an to all agricultural subsides. On Sunday, the developing countries walked out and the talks collapsed amidst plentiful demonstrations and even a suicide by a Korean protester.

Now, Americans and Europeans are clearly both guilty of protecting their farmers at the expense of developing countries, whose exports are overwhelmingly in the agricultural sector. According to the Economist "World in Figures," the countries most economically dependent on agriculture are in Africa, Southeast Asia, Central Asia, and Latin America.

In African countries like Congo, Burundi or Tanzania between 45-60 percent of the GDP derives from agriculture. These countries cannot compete in high tech or services. Meanwhile, in the United States, agriculture accounts for 1.4 percent of GDP. In most European countries, it is less than 3 percent.

And yet, for political, emotional and other reasons, our farmers are protected against competition by huge and expensive subsidies and tariffs. While American farmers also benefit from subsidies and export guarantees, the European Union is the worst offender. The European Common Agricultural policy accounts for 85 percent of the world's agricultural subsidies.

So, if the G-21 are mad, it's understandable. The question is how they can get even, and walking out on trade talks is not productive. As Dennis Kabaara of the Institute of Economic Affairs in Nairobi told the BBC, "In the long run, we lose out. It means that the developed world, the EU, America and Japan will take even longer to reduce subsidies."

Already, here in Washington, Sen. Charles Grassley has promised congressional hearings on the collapse of the Cancun talks and even raised the possibility that the negotiating authority for a WTO agreement conferred on the administration by Congress in the Trade Act of 2002, might not be extended beyond 2005. This would be a great mistake.

The fact is, however, that more flexibility is needed on all sides if the still-young WTO is to work. Since the failed negotiations in Seattle four years ago, the developing countries have been getting their act together, and are getting tougher about pressing their demands. Americans and Europeans have not arrived at a strategy of their own, in part because of mutual differences.

Critics of the WTO will be inclined to take the evidence of Seattle and Cancun and declare the organization useless, a dead letter. Let us not forget that the liberalization of global trade has been a huge engine for wealth creation since World War II. Nor that the last world trade round, the Uruguay round, took seven years to complete. The squabbling parties have agreed to gather in Geneva in December to assess the damage. They all could do with some soul searching before then.

Helle Dale is the Deputy Director for the Davis Institute for International Policy Studies at The Heritage Foundation.

About the Author

Helle C. Dale Senior Fellow for Public Diplomacy
The Margaret Thatcher Center for Freedom