DEVELOPING country delegates, ranging from Brazil to India to the Philippines to South Africa, left the WTO Cancun Ministerial ebullient over the collapse of mid-term talks intended to advance the Doha Development Agenda. They reveled in the newfound power of the G-21 group, a coalition of mid-sized and small developing countries, to block consensus on a framework to conclude negotiations by 2005. Brazilian Foreign Minister Celso Amorim, speaking on behalf of the 21-nation bloc, said the Cancun conference was a "political victory" for developing countries that showed unity in pressing their demands. Sir Ronald Sanders, the Antigua and Barbuda trade minister, captured the sentiment of many developing nations when he asserted that, had the poorer countries accepted the proposals of the rich at the WTO, "We would deserve our people's condemnation.... We would have condemned them to a life of perpetual underdevelopment." In fact, the exact opposite may be true: developing countries have the most to lose if the Doha Development Agenda is derailed through a misguided strategy of blockage and stalemate.

A Short History of Economic Conflict

FIFTY-SIX years after the inception of the 1947 General Agreement on Tariffs and Trade (GATT), the Cancun meeting will be remembered as one of the most consequential instances of North-South economic conflict in GATT/WTO history. Such confrontation is not new: it has occurred before in international fora, and even on a much larger scale, but never with much ultimate significance for the course of international relations. This is not the case, however, with the Cancun meeting.

To understand the greater consequences of the present North-South economic antagonism, some historical perspective is needed. In the early-1970s, developing countries at the United Nations Conference on Trade and Development (UNCTAD) coalesced into what became known as the Group of 77 to press their demands for a New International Economic Order (NIEO). This aspiration grew out of the neo-Marxist political economy theory of the 1960s, which argued that the international trading system was condemning the "periphery"--Latin America and other developing countries--to poverty, exploitation and dependency. Among other measures, the NIEO specifically called for a system of price supports for a number of key developing country commodity exports, indexation of developing country export prices to developed countries' manufactured exports, technology transfer and the negotiated redeployment of some developed country industries to developing nations. By the 1980s, the NIEO agenda at the UN had foundered due to divergences in developing country interests, the inability to replicate OPEC's success with other commodities and, most importantly, the discrediting of its command-based economic theories. This was evidenced by the astonishing success of Taiwan, South Korea and others that pursued trade liberalization and export-led growth.

Thirty years later, at Cancun, many officials opined that the harsh rhetoric employed by major developing countries such as Brazil and India, as well as smaller African and Caribbean countries, was strongly reminiscent of the 1970s UNCTAD experience. The themes of Northern economic exploitation have become fashionably recurrent, even though the remedies demanded by the South at the WTO now differ from the NIEO. Rather than price supports for commodities and exports, developing countries at Cancun called for unilateral trade concessions and compensation by the rich countries.

While there were many reasons enumerated for the failure at Cancun, the common theme was that talks fell apart along a North-South divide. The G-21 opposed developed countries' agricultural subsidies. The Lesser Developed Countries (LDC) refused to lower their astronomical agriculture and manufacturing tariffs, which stoked the frustration of the United States and others. Developing countries also decried developed country policies that they claim harm West African cotton growers. Europe and Japan insisted until the last minute on the inclusion of new issues, such as competition and investment, that were opposed by the majority of LDCs. Collectively, the Cancun collapse was the first major consequential North-South fissure for the GATT/WTO system.

But why was this rift so deep and bitter? Until now, developed-developing country conflict had generally been muted or otherwise accommodated throughout the GATT's history, even though the GATT/WTO's rule of decision-making by consensus remained constant. Even though the GATT was founded by an unconventionally diverse set of 23 developed and developing country signatories,¹ it was largely seen as a rich man's club in terms of rule-making procedures to lower tariffs and non-tariff barriers. Due to decolonization and the creation of new sovereign independent countries, membership surged to more than one hundred countries during the 1960s and 1970s. But developing countries were content to free-ride on the system. Big countries negotiated market-opening concessions that were then extended to all members on a Most-Favored-Nation basis.

In 1979, partly in recognition of the pressures created by LDCs in other international fora, an Enabling Clause was added to the GATT. This permitted developed members to give differential and more favorable treatment to developing countries and provided the legal basis for the Generalized System of Preferences (GSP), whereby developed countries could offer non-reciprocal preferential treatment (such as cutting or lowering import duties) to products originating in developing countries. Even so, throughout the 1980s, the Quad countries (the United States, the European Community, Canada and Japan) were the central players in developing the rules and jurisprudence of the multilateral system.

BY THE END of the Uruguay Round in the early-1990s, however, developing countries grew more assertive and were essential to the contours of the final deal. The GATT's competencies were expanded to include services and intellectual property rights, primarily of interest to developed countries, in exchange for the ultimate phase-out of the Multi-Fiber Arrangement, which placed prohibitive quotas on mostly developing country textile exports. Interestingly, the 1999 Seattle Ministerial, as significant as it was for the anti-globalization movement and as a temporary setback for the WTO, was not a turning point in the North-South story.

The Seattle failure was due as much to Quad disagreements as to developing country grievances about a perceived imbalance in the results of the Uruguay Round. For example, the United States wanted deep cuts in farm subsidies but refused to discuss reforming its antidumping rules as sought by Japan and others. The EU and Japan resisted agriculture reforms while seeking new talks on investment and competition policy. Canada and the EU wanted exemptions for cultural industries, all of which were opposed by the United States. On top of a raft of underlying North-North and North-South disagreements, President Clinton's unexpected statement in support of WTO sanctions to enforce labor standards, vigorously opposed by the developing world as well as many developed countries, was the final death blow to the Seattle conference.

The 2001 Doha Ministerial seemed to herald a new and positive paradigm for North-South cooperation in the WTO and greater attention to developing country interests. Galvanized by U.S. leadership under Trade Representative Robert B. Zoellick, who worked closely with his counterpart Pascal Lamy of the European Union, WTO members meeting in the Arab nation of Qatar succeeded in launching a new round of multilateral negotiations just two months after the September 11 attacks. The Doha negotiations introduced an ad hoc but results-oriented "Friends of the Chair" process: an innovative institutional procedure to involve individual LDC countries and representative country blocs in the so-called "green room" of WTO decision-making where compromise texts are hammered out. The Friends of the Chair was a procedural advancement for developing countries because the Quads had historically dominated the green room process.

At Doha, WTO General Council Chair Stuart Harbinson of Hong Kong selected Friends of the Chair countries to help build consensus in six key areas, including developing countries: Chile, for example, chaired the environment group, Mexico chaired the Trade-Related Aspects of Intellectual Property Rights (TRIPs) group, and South Africa led a working group on rules. Developing countries were now at the center of the negotiations and the successful Doha launch. African countries, furthermore, in a striking difference from their relatively marginal role at Seattle, coordinated their efforts primarily through three countries: Kenya, representing the African, Caribbean and Pacific (ACP) group; Tanzania, representing the least developed countries; and Nigeria, on behalf of the African Union. These three played a central role in the doubling of funding for building WTO trade capacity and the establishment of the Doha Development Trust Fund. In sum, WTO members proved at Doha that the contemporary system could be made to work, even with 146 members of vastly different sizes operating under a consensus rule.

But, at Cancun, larger developing countries rewound the clock to the 1970s, posturing rather than negotiating and radicalizing the smaller countries who were then unable to move from their positions. This set the stage for a North-South meltdown.

Clearly, the developing countries had a number of serious concerns about trade barriers in rich countries that hurt their exports and development prospects. And developed countries, such as the United States and Australia, sought far-reaching agricultural trade reform on a global basis. But, as a result of confrontational posturing and the G-21's refusal even to negotiate at Cancun from compromise draft texts put forward by the Uruguayan chair for agriculture, the WTO's Thai director-general, and the Mexican chair of the Cancun Ministerial, developing countries missed their best opportunity to compel the big players to eliminate damaging tariff and non-tariff barriers.

It is useful to recall that, in 2002 and 2003, the United States proposed a series of major WTO proposals that would have completely eliminated its own agricultural export subsidies, cut domestic subsidies by $100 billion globally and slashed its agricultural tariff to an average of 5 percent in exchange for meaningful reciprocal liberalization from other WTO members. The United States had also put its non-agricultural tariffs on the chopping block, calling for a tariff-free world for all manufactured goods by 2015. Furthermore, just weeks before Cancun, in August 2003, the WTO demonstrated its ability to respond to developing country concerns by reaching an agreement ensuring that poor countries could gain access to life-saving, low-cost medicines while still protecting intellectual property rights. Considering the United States' ambitious proposals and demonstrated willingness to negotiate on a range of issues, the G-21's intransigence at Cancun was counterproductive and self-defeating.

Cancun's Collapse

IN THE WAKE of deadlock at Cancun, and without the leverage of the WTO negotiating forum, it will be all but impossible for any country or group of countries to extract a similar level of concessions from the United States or other major players outside the WTO's auspices. The ramifications of this development will be especially felt on the thorny issue of agriculture reform, which must be addressed globally to be effective. All-in-all, the tragedy of Cancun is twofold.

First, by celebrating failure, many developing countries are hurting their own economic interests. With the WTO negotiating process blocked, big countries and regional powers have already announced intentions to focus on negotiating bilateral free trade agreements (FTAs). Most small and poor countries, landlocked or geographically-isolated states and those states with relatively unattractive markets will get left behind in the scramble. This is a potential catastrophe for the world's poorest countries, which are at greatest risk of turning inward to the failed protectionist and import-substitution policies of the past. There is also the prospect that a major WTO setback will strengthen the hand of protectionist pressures in the developed world in the midst of an economic downturn.

Second, and of potentially great long-term significance for the course of international relations, developing country blocs are now eager to wield a veto over the half-century-proven multilateral trading system. This is a new and dangerous development. In the 1970s, developing countries sought to exercise their collective bargaining power in a forum that, in reality, was of little salience to global commerce and the prospects for international economic growth. Bluntly put, to stymie the UNCTAD decision-making process in this area was no great tragedy.

This, however, is not the case with the WTO today: According to the World Bank, further trade liberalization under WTO auspices would have added $520 billion to world incomes by 2015, mainly for the benefit of developing countries. If the Cancun debacle deals a body blow to the multilateral trading system, all countries lose. Losses accrue not only to production and standards of living worldwide, but also to more intangible factors like promoting the spread of common principles in countries with heterogeneous economic and political systems. For example, Zoellick and the Bush Administration have argued that trade agreements in general help promote the rule of law, transparency and greater economic freedom and choice for individuals worldwide. The political dimension of the WTO may be no less important--especially today--than its role in providing a foundation for predictable, stable and efficient commercial transactions.

IN THE FINAL analysis, North-South economic conflict is neither endemic, structural nor inevitable. Free trade is not something the North unilaterally imposes on the South; witness the number of developing countries from Central and South America, Africa, Asia and the Middle East lining up at the door of the U.S. Trade Representative to negotiate bilateral FTAs because their leaders believe these agreements will benefit their people.² However, because only a small fraction of countries will participate in such FTAs, all WTO members would do well to eschew the confrontational posturing tactics and rhetoric of refusal that led nowhere in the past (at UNCTAD) and have currently stalemated the WTO process. As of this writing a few weeks after Cancun, some developing countries are already beginning to realize the magnitude of their miscalculation: a number of Latin American countries have broken ranks with the G-21, and Asia-Pacific Economic Cooperation (APEC) leaders meeting in Bangkok in October reaffirmed their commitment to the Doha Development Agenda, and willingness to work from the Cancun text. A WTO stock-taking session is planned for mid-December in Geneva.

It remains to be seen whether pride will ultimately give way to pragmatism in the WTO, and whether the necessary momentum and political will can be summoned to reverse the sorry Cancun outcome. Although a trading system crisscrossed by a patchwork of bilateral deals is less preferable to a global system of rules for all parties, the reality is that the United States, the EU and a few other developed countries and regional powers are big enough to take care of their own market access interests in a post-Cancun trade bargaining free-for-all. Rather, it is developing countries with less bilateral bargaining power and few viable alternatives for development that have the greatest stake in re-energizing the WTO and helping the Doha Agenda eventually to succeed.

1 The original GATT signatories were Australia, Belgium, Brazil, Burma, Canada, Ceylon, Chile, China, Cuba, Czechoslovakia, France, India, Lebanon, Luxembourg, the Netherlands, New Zealand, Norway, Pakistan, Southern Rhodesia, Syria, South Africa, the United Kingdom and the United States of America.

2 The United States recently concluded FTAs with Singapore and Chile, and is negotiating FTAs with the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, as well as the Dominican Republic; five nations in the South African Customs Union, including Botswana, Lesotho, Namibia, South Africa and Swaziland; Australia; Morocco; and Bahrain. In October, President Bush announced in Bangkok Washington's intent to negotiate FTAs with Panama and with the Andean countries of Colombia, Peru, Ecuador and Bolivia.

Dr. Christina Sevilla is a professorial lecturer at the George Washington University Elliott School of International Affairs and a former MacArthur Fellow at the Weatherhead Center for International Affairs at Harvard University. She works at the Office of the U.S. Trade Representative as Director for Intergovernmental Affairs and Public Liaison. The views expressed in this essay are entirely her own and do not necessarily represent the views of the agency.

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