No one should underestimate the role played by Mexican and other international activists demonstrating at Cancun, for creating the unexpected, historic collapse of the recent WTO Ministerial. There have been many moving accounts in the international media of the bravery, creativity, and ultimate commitment to peaceful protest showed by these persons, young and old, as they confronted the might of the security forces of the Mexican state deployed “to preserve the peace and protect property,” and the civilian thugs and miscreants sent to operate as enforcers and provocateurs. Neither, I believe, should anyone underestimate the level of consciousness and, for recent times, the unprecedented depth of solidarity, unity and single-minded purpose displayed by most of the delegates from the developing world. That these two sets of forces converged to produce a “victory” at Cancun is beyond doubt. The issue, which we have to assess, however, is whether in hindsight, and the benefit of 20-20 vision this affords, it turns out to be a real and lasting victory and not simply a pyrrhic one.

Doha Development Round
At the WTO Ministerial Conference at Doha two years ago (November 2001), the world community made a commitment that that Conference would start a round of negotiations that would focus on development issues in the WTO. Indeed, the rhetoric was so powerful that the Doha Ministerial has come to be known as the initiator of the Doha Development Round. The agenda of action the WTO members agreed to pursue and report on two years later at the just collapsed Cancun Ministerial, included a large number of trade and development issues, including many of the thorny ones that led to the collapse at Cancun. These included, agriculture, services, special and differential treatment, the dispute settlement procedures and technical assistance. Over the next few weeks we will examine some of the major areas of the ‘development agenda,’ and the difficulties they have encountered along the way. For this introductory piece I want to focus on one important background consideration, by taking readers back to the 9/11 terrorist attacks on the USA and its aftermath. It is my view that this is a major contributory factor to the failure at Cancun and with it the effective disappearance for some time now to come of the promise of a development-oriented WTO.

The spectre of 9/11
As I had argued two years ago, one of the lasting consequences of 9/11 and its aftermath, is that security considerations will, for a long period into the future, take precedence over development considerations on the global agenda. This is a reversal of the situation, which obtained before 9/11. It is largely the consequence of the vulnerability the USA has felt after these attacks, and its resulting determination to pre-empt all such future attacks. As the single global hegemonic power what the USA wants, determines, in substantial measure, what the rest of the world gets.

These security concerns have already led to the USA and its allies to invade two states, Afghanistan and Iraq. There are also many veiled (and some not so veiled) indications that when considered timely and appropriate other such invasions will occur, either pre-emptive or in response to immediate threats. The targeted states include North Korea, Iran, and Syria. The former two have the added complication of being seen as potential terrorist bases, possessing (or soon to acquire) nuclear arms. Drastic changes to the US domestic security institutions, laws, and forces have occurred and have been accompanied with far-reaching changes in its domestic legislation and practices. These reverse a number of the substantial gains the USA had made in human rights and civil liberties legislation and practice, for which it had an enviable reputation worldwide. These changes have also affected US immigration policy.

In this atmosphere the development agenda has had to give way to the security agenda, and indeed to serve it as the primary objective of the USA. As a result, the scope for unselfish global philanthropy, (already very narrow in relation to global needs,) has been considerably narrowed. To the extent therefore, that the WTO had embarked at Doha on a ‘development round’ to be financed and fuelled by US contributions to these proposed economic arrangements, is clearly out of sync with the new US security reality. This to my mind has made any substantial pro-development arrangements at the WTO almost unthinkable. It also explains much of the slow progress over the past two years.

The movement of persons
There is the further complication that some of the development issues that have been taken up at Cancun could have added to the US security concerns in other ways. This time not by re-directing government’s focus to development concerns or competing for resources directed to security, but because some of the measures on the table could themselves add to the burden of security concerns. One good example of this is the free movement of labour or persons attached to the provision of services as part of the General Agreement on Trade in Services (GATS).

As we saw earlier in this series trade in services has been categorised into four (4) modes: Mode 1 is called ‘cross-border supply,’ and a good example is international telephone calls. Mode 2 is residents of one country making use of a service in another, for example tourism. Mode 3 is when a company establishes a branch overseas to give it a ‘commercial presence’ in another country. The contentious one is Mode 4, which permits individuals to travel from their own country to supply services in another country. We are familiar with consultants and experts visiting Guyana, and this represents a good example of a Mode 4 trade in services. In a period of heightened security fears the USA would be most unwilling to travel down this road, no matter what was its original intention at the formation of the WTO when it strongly favoured this position in the GATS.

As we shall see over the next few weeks, this argument does not suggest that the US has no global priorities for trading arrangements. Rather it indicates to my mind the pursuit of a different path to global arrangements, one more consistent with its security pre-occupation. In this regard I believe that the USA will lean more towards a complex set of bilateral and regional arrangements to secure its trade objectives in support of its national security.

Over the next few weeks we shall pursue these issues further.

The weave of poverty: cotton at Cancun
Last week I introduced the discussion of the rocky road from the Doha WTO Ministerial in 2001, to the recent collapse of the WTO Ministerial at Cancun, Mexico. The former was heralded as the beginning of the pursuit of a “development round” of negotiations, and the Cancun Ministerial was planned to be held half-way through the round in order to assess both what would had been achieved and what was left to be completed at that point. The collapse at Cancun is therefore, by any reckoning an event of the most far-reaching significance. In that article I had argued that 9/11 and its aftermath is the most important causal factor behind the collapse at Cancun. My reasoning is that, since 9/11, the security pre-occupations of the world’s single hegemonic power, the USA, has dominated the global agenda. Moreover, this will more than likely continue to be the case for some time to come. The consequence of this is that all major global events have to be referenced back to this fundamental reality.

Taking this position does not imply a denial of the deep intertwining between US security concerns and global development. What it does claim however, is that the US has placed its security concerns (and it would perhaps claim that of the whole world) at the front burner of its national agenda. To be realistic the evolution of its stance on re-constructing the global architecture for trade has to be seen in this light.

While 9/11 and its aftermath remains a primary cause of the collapse at Cancun, a number of other factors have arisen as serious contenders for what did in fact precipitate the collapse. I therefore think it would be useful for readers to distinguish between underlying causal factors and proximate occurrences or “reasons,” which triggered the collapse. My present count indicates that at least nine (9) proximate causes or “reasons” have surfaced in the serious international media, as explanations for the collapse at Cancun, and we shall pursue some of these in the coming weeks.

Commodity-dependent countries
My article in last Sunday’s SN was completed last Friday morning, just before setting off later that day to attend a one-and-a-half day meeting at the headquarters of the United Nations Conference on Trade and Development (UNCTAD), in Geneva. The purpose of the meeting was that the United Nations General Assembly had last year passed a Resolution (57/236) calling upon the Secretary-General of UNCTAD “to designate independent eminent persons to examine and report on commodity issues, including the volatility in commodity prices and declining terms of trade and the impact these have on the development efforts of commodity-dependent developing countries.” From the time the Secretary-General addressed our small group last Monday morning at the opening session and throughout the discussion that day and the next, all those members of the Group and invitees who had attended the Cancun Ministerial, expressed the view that the cotton plight of five West and Central African countries (WCA): Benin, Burkina Faso, Chad, Mali and Togo, best symbolised the fundamental struggles between the rich and the poor countries, which took place at Cancun. A week later, as I prepare this week’s article, I thought it would be useful to brief readers on some of the issues that surrounded cotton at Cancun.

The cotton proposal
In May this year, the first four of the five WCA countries listed above submitted a remarkable joint proposal to the WTO Negotiations on Agriculture. In that proposal these four countries made essentially six points. First, the proposal established how important cotton production is to their survival. It accounts for 30 per cent of their total exports and over 60 per cent of their agricultural export earnings. As a share of total output it represented 5 to 10 per cent of GDP. Second, under encouragement from the IFIs and donor countries these four countries at a huge cost had made their cotton-producing sector easily the lowest cost worldwide while focusing on high-quality cotton. In fact their cotton output had risen from 200,000 tonnes in the early 1980s to about one million tonnes today, making the four countries the seventh largest producer in the world and the second largest exporter after the USA. By any measure these countries had done everything the much maligned WTO had asked them to do in responding to the new global trade rules.

Third, the other countries with which these four countries compete for world market share were all industrialized countries and cotton represents a minimal share of their export earnings and GDP. Fourth, in all these other countries as well the cost of producing cotton is far higher than in the four WCA countries. Thus in the case of the USA the cost of production is 50 per cent higher. Fifth in these other countries, their industries survive only because of subsidies and other forms of domestic support given by their governments to cotton farmers. The total value of this support was US$ 6 billion in 2001/2002. The USA alone gave US$ 2.3 billion in 2001/2002 and remarkably this is expected to rise to US$ 3.7 billion this year. Unfortunately, these subsidies cannot even be rationalised as favouring poor farmers in these other countries. In the case of the USA US$1billion goes to a few thousand farmers who each cultivate about 1000 acres of cotton. These are hardly poor farmers. In contrast, over 1 million farmers in the WCA countries have only 5 acres to cultivate and each farmer lives on less than US$1 per person per day.

Sixth, the effect of these subsidies is to have artificially expanded production, thereby undermining cotton prices in the world market. This effect has been demonstrated in a number of studies. Thus between May 1995 and October 2001 cotton prices fell by two-thirds from US$2.53 per kilo to US$0.82. Prices have since reached US$1.25 per kilo. Indeed between 1999/2000 and 2001/2002 production in the four WCA countries increased by 14 percent but their export earnings fell by 31 per cent! This is a good example of the ‘poverty trap,’ which poor commodity- dependent countries face. Orthodox economics teaches us that when prices rise producers seek to expand output (the upward sloping supply curve) but when they fall producers seek to cut back on production. However, poor countries exporting commodities are forced because of the pressure to maintain income and earnings to expand their output when the prices of the commodities they sell fall.

The only specific interest
Having articulated their case cogently the four WCA countries simply concluded their proposal by stating starkly that “the elimination of subsidies for cotton production and export is the only specific interest of WCA cotton-producing countries in the Doha Development Round.” By all accounts the impact of this was dramatic and decisive in focusing anger and outrage at the gross inequalities in the global trade situation and the WTO rules, which govern it.