Rich Man, Poor Man
(September 16, 2003)
Abstract:
Just prior to the Cancun WTO Ministerial, a compromise on access to medicines for poor countries had raised hopes that the Developed and the Developing could resolve their differences after all -- and that the Doha Round might actually move forward. But the talks at Cancun have collapsed and the opportunity is lost. The collapse was in no small measure due to the unwillingness of developing countries to make credible market-opening concessions of their own, to match those they demanded from the rich countries. This is tragic since such liberalization would have only benefited them -- and helped open the markets of their partners.
Of course, Cancun is no Seattle. At Seattle, the WTO members tried and failed to launch a new round whereas at Cancun they have failed to move an ongoing round forward. The more apt analogy is with the failure in Montreal in 1988 when developed and developing countries had failed to advance the Uruguay Round. The round was, however, successfully completed in 1993. Ironically, differences between rich and poor countries on agriculture, which led to the collapse of the Cancun talks, were also at the heart of the failure at Montreal 15 years ago.
While the Doha Round is, thus, not in danger of being buried, the costs of the failure in Cancun are large for both developed and developing countries. The biggest cost may turn out to be a further acceleration of bilateral free trade areas. The EU already has so many preferential deals in place that all but six of its trading partners have a preferential rate that is better than the WTO rate. The U.S. has also accelerated the move toward bilateral arrangements: this can only get worse following the failure at Cancun.
The cost of this for some large developing countries -- China, India, and Brazil to a degree -- could be substantial. Already, they face discrimination in the European and U.S. markets. This will get worse. Progress at Cancun had offered one sure-fire recipe to these countries to put an end to the discrimination by bringing trade barriers down on a world-wide basis, thus killing the preferences within free trade areas at the source. If more bilateral deals get cut now, these countries will face increased discrimination against their products. Brazil may escape this if the Free Trade Area of the Americas is negotiated, but that remains to be seen.