Multinational Monitor

OCT 2003
VOL 24 No. 10


Subsidizing Sprawl: How Economic Development Programs Are Going Awry
by Greg LeRoy

Welcome to Wal-World: Wal-Mart’s Inexhaustible March to Conquer the Globe
by Andy Rowell

The Collapse at Cancun: A Frontline Report on the Failed WTO Negotiations
by Martin Khor


The Political Economy of Sprawl in the Developing World
an interview with Anna Tibaijuka

Out of Bounds: The Sprawling Metropolis and Its Discontents
an interview with Elizabeth Plater-Zyberk


Behind the Lines

The Business of Sprawl

The Front
The Politics of Chemistry - Nike’s Come-From-Behind Win

The Lawrence Summers Memorial Award

Names In the News


The Collapse at Cancun: A Frontline Report on the Failed WTO Negotiations

by Martin Khor

Cancun, Mexico -- The World Trade Organization's Fifth Ministerial Conference in Cancun collapsed in September without an agreement on a ministerial text.

The Conference Chair Mexican Foreign Secretary Luis Ernesto Derbez suddenly announced the decision to close the meeting during informal consultations involving about 30 countries (such informal gatherings are dubbed "Green Room" meetings) when agreement could not be reached on new agenda items for the World Trade Organization (WTO). Known as the "Singapore issues," after a meeting where they had first been proposed, the controversial issues included proposed new WTO agreements on investment, government procurement, competition and trade facilitation.

The decision to end the meeting, without any substantive declaration, took participants by surprise. Many delegates had expected the meeting to continue into the night or the small hours of the morning, or even be extended by a day.

A short closing ceremony was held, from which nongovernmental organizations (NGOs) and the media were barred, and to which each delegation could only send a few representatives. It was expected to have been at the grand hall where the opening ceremony was attended by 3,000 people. But the venue was shifted to a much smaller room and many delegates were kept out of this closing ceremony (as well as the last heads-of-delegation meeting preceding it) by security guards.

"The collapse of the talks must have been embarrassing for the WTO officials and leaders and they must have decided to keep as many people as possible from the closing session to hide the embarrassment," said a developing country diplomat.

The closing session adopted a brief and simple Ministerial Statement in lieu of the substantive ministerial text that had been under discussion since its first version appeared in Geneva in July.

The Statement said all participants had worked hard to make considerable progress under the Doha mandates, but "more work needs to be done in some key areas to enable us to proceed towards the conclusion of the negotiations."

The ministers instructed their officials to continue working on outstanding issues, taking into account all views expressed in the conference.

From the statement it is unclear how future negotiations will proceed, and whether the Cancun draft texts will be used as the basis of negotiation when discussions resume in Geneva.

Consensus and Consequences

There is indeed a sense of confusion about what actually happened in the last hours of the Cancun conference, whether the talks broke down due to any specific issue or simply the running out of time to resolve the serious divisions on the many key issues, and also how Derbez came to make his decision to close the meeting when he did.

The immediate reason is that an agreement could not be reached on the Singapore issues in the exclusive small group Green Room meeting.

In the early hours of Sunday, after a long heads-of-delegation meeting to discuss the revised ministerial text, Derbez convened a meeting of nine ministers (from the United States, the European Community, Mexico, Brazil, China, India, Malaysia, Kenya, South Africa) lasting from 1:00 a.m. to 3:00 a.m. to discuss the Singapore issues, at which the countries reportedly kept to their known positions.

Later that morning, a larger Green Room meeting of about 30 ministers was convened. It was meant to discuss all the outstanding issues of the conference with the view to resolving the differences. Derbez decided to start with the Singapore issues. He later explained at a press briefing that he chose this as the first item because it had become the main issue of contention, judging by the reactions to the revised ministerial text at the previous night's heads-of-delegation meeting.

At the meeting, the developing countries opposed to starting negotiations reiterated their demand for further clarification of all the issues rather than negotiations over substantive agreements. Derbez reportedly proposed that for two issues (trade facilitation and procurement) negotiations could begin, but that the other two issues (investment and competition) would be dropped from the agenda.

EC Trade Commissioner Pascal Lamy later reported that he agreed that the two issues of investment and competition could be dropped, giving the impression that these would be removed from the WTO altogether (and not just from Doha mandate of starting negotiations on the basis of consensus). The other two issues would then proceed to negotiations.

Many countries said they had difficulty accepting negotiations on the issues of trade facilitation and procurement. Derbez then adjourned the meeting for more than an hour to enable ministers to consult with their constituencies on whether they could accept this formula of dropping two issues and negotiating the other two.

During the break, a combined meeting of the African-Caribbean-Pacific (ACP) countries, least-developed countries and African Union members decided that they would not move from their position that there should be no negotiations on any of the four Singapore issues.

When the Green Room reconvened, some developing country ministers (including those representing the ACP-LDC-AU groupings) reported they were unable to accept negotiations on any of the issues. Korea reportedly said it could not accept the dropping of any issue. Derbez then said a consensus could not be reached on the Singapore issues, and thus there was no consensus possible for the whole package of issues. He then made the decision to close the conference, without having an agreement on any issue, and ended the Green Room meeting.

When news of the breakdown reached the canteen, the lobby and the media room, there were scenes of excitement as everyone tried to find out the actual situation. Many NGO representatives broke into cheering and singing, as they celebrated the non-adoption of what they considered a harmful text. green rooms and red lights

The lack of consensus on Singapore issues may have been the immediate cause, but the meeting's collapse had broader and deeper roots. For the first three days, the conference focused mainly on the controversial agriculture issue, with the main protagonists being the European Union and United States on one side, and a group of developing countries led by Brazil and India on the other side, and a grouping of 32 other developing countries championing stronger special and differential (S&D) elements. (In WTO parlance, S&D refers to the idea that developing countries should receive special treatment, and not be required to adhere to the same exacting rules as industrialized countries.)

The revised text, issued at lunchtime on Saturday, had the effect of intensifying rather than reducing the polarization in the conference. The developing countries were unhappy that the agriculture text did not answer their concerns. They were outraged with the sections on Singapore issues, as the views and formal proposals of 70 of them to continue a process of discussing the issues and not launch negotiations had been swept aside. They were also angry at the text's poor treatment of a cotton initiative to address the problem of U.S. cotton subsidies driving down the global price for cotton, the major export product of the desperately poor countries Benin, Burkina Faso, Chad and Mali. One minister proclaimed the revised text's cotton proposal to be an insult to Africans and unworthy of the WTO.

The atmosphere was already on the boil when one by one the developing countries took the floor at the heads-of-delegation meeting to criticize the text. At their own regional and national meetings, expression of their dissatisfaction was even more pronounced.

The issue of the manipulative decision-making process, particularly in the drafting of texts, was then coming to the fore.

"Here we are with 70 or more developing countries speaking up clearly in the consultations, having a consensus document with language on the Singapore issues, clearly expressed, and the revised text just ignores their position and takes the opposite position," said a Caribbean country's minister on Saturday night, while having a coffee break. "What kind of organization is this? Who does it belong to? Who does the drafting? Who appointed them? Why waste our time engaging seriously in consultations only to find our views not there at all in the draft?"

In the end, it was the WTO's untransparent and non-participatory decision-making process that caused the "unmanageable situation" that led to the collapse of the Cancun Ministerial.

At the WTO ministerial meeting in Singapore in 1996, most ministers were shut out of the negotiations, as only 30 countries were invited to the Green Room that operated throughout the meeting. The uninvited ministers were angry when they were told at a last informal plenary that they should agree to a declaration they had no hand in drafting. They reluctantly agreed only after the Director General promised that exclusionary meetings would not happen again.

At the 1999 Seattle meeting, the Green Rooms operated again from the start to the end of the meeting. Ministers of the ACP and Africa groups were so outraged at being shut out that they issued a statement they would not join the consensus on any declaration. The talks collapsed.

At the Doha meeting in 2001, many informal consultations were held, and the ministers and officials were kept busy. But the drafting of the various versions of the declaration were undertaken in an untransparent and exclusionary manner, starting with the General Council Chair Stuart Harbinson submitting an unpopular draft "under his own responsibility" and ending with a last draft on the last extended day which everyone was urged to adopt on the grounds that there was no alternative at the late hour.

The practice of chairs writing and submitting texts "under their own responsibility" became widespread after Doha, even though many developing countries voiced their unhappiness with it, as the major countries found it convenient to get their positions adopted through this undemocratic practice.

The drafts for agriculture and what are called "non-agricultural market access modalities," and later for the Cancun text itself, were all drawn up by chairs and not by the members. All that was needed to suit the interests of the rich countries was: a chair coming from the circles of the rich countries or compliant to their views; a secretariat willing to condone or promote the process; and a membership that was willing (or unable to object successfully ) to be part of the process.

The drafting by chairs shifted the WTO from a member-driven to a chair-driven organization. Instead of negotiating with one another, members were negotiating with the chair.

But the drafts, because they usually reflected the views of the powerful minority, lacked the support of most of the developing country members (who were often outraged that the texts were one-sided in favor of the rich countries and did not reflect development country positions) nor public legitimacy.

In Cancun, this chair-driven process continued and became the norm. The chairs became all powerful as they not only conducted consultations but were responsible for drafting of reports and texts. The conference chair became responsible for the revised ministerial text.

No one among the participants is sure how the drafting is done, or who does it. It is known that the secretariat plays a major role. And when the revised text came out on Saturday at 1:00 p.m., it again revealed biases (some of them blatant) towards the industrialized countries.

Victory for the "Won't Do's"

By this time, there were only 28 hours to the scheduled end of the conference. It was evident from the heads-of-delegation meeting and later at the Green Rooms that the developing countries were this time much better organized (through their own regional and national processes) and better prepared to face the processes and substantive debates.

An attempt to reproduce a Doha ending (i.e. ram through an unpopular text on the grounds that there is no alternative, and that a "collapse" of a Ministerial would lead to the breakdown of the trading system and the global economy) would have led to an open revolt by developing countries.

Thus, the Mexican minister made a rational decision that the best option was to close the conference with a simple statement instead of risking a real catastrophe.

With the Cancun Ministerial collapse, the issue of the WTO's decision-making and text-drafting process has again emerged to the fore. That the ministerials are run without rules and proper procedures can no longer be ignored if the system is to survive.

The EU's Pascal Lamy, at a closing press conference, himself termed the WTO as having a "medieval organization" and a "not so rules-based organization." But it is one which critics say he himself used to great effect in Doha, to ram through the unpopular decision on Singapore issues.

U.S. Trade Representative Robert Zoellick was even more petulant. "Whether developed or developing, there were ëcan do' and ëwon't do' countries here," Zoellick said in a closing statement. "The rhetoric of the ëwon't do' overwhelmed the concerted efforts of the ëcan do.' ëWon't do' led to impasse."

"Today we stalled because of the Singapore issues, but the larger lesson of Cancun is that useful compromise among 148 countries requires a serious willingness to focus on work -- not rhetoric -- to attain the fine balance between ambition and flexibility."

Lamy responded to the collapse by calling for reforms to the decision-making system of the WTO. He forgot to mention that after the Doha experience, many developing countries had put forward a set of proposals (in February 2002) on establishing procedures for ministerials and their preparatory process, and that the EU with other industrialized countries had blocked a decision based on these proposals.

Just a few weeks before Cancun, developing countries again tried to raise the issue of the need to have proper procedures for ministerials, including for drafting texts. Several international nongovernmental organizations also launched a campaign for internal transparency and participation in the WTO.

But these attempts for more democracy in the WTO house were swept aside by the major developed countries. Their argument had been that ministers must be given the "flexibility" to run ministerials the way they want without being hampered by procedures. In reality, they would like to retain their grip over the drafting of texts and the operation of Green Room meetings, and repeat the Doha experience of pushing developing countries into adopting last-minute texts.

If this system continues, then each ministerial would be a poker game, whose fate depends on last-minute brinkmanship, with powerful countries trying their luck and using various methods to push their way through, and developing countries organizing themselves to resist the pressures.

In Doha, it worked for the majors. In Cancun, it didn't. If things don't change, it will be another gamble in Hong Kong or wherever the next ministerial is held (since the proposal to hold the next ministerial in Hong Kong was never adopted in Cancun).

Holding the trade system hostage to the poker-like game of brinkmanship is, however, fraught with risks, as the record of two failures out of three meetings shows.

The ultimate lesson of Cancun is that the organization must change or perish.

Martin Khor is director of the Third World Network, based in Penang, Malaysia.

The Key Issues at Cancun

The key issues in the WTO negotiations at Cancun were agriculture and the so-called Singapore issues of investment, competition, government procurement and trade facilitation. Negotiations over agriculture and the Singapore issues broke down largely along North-South lines, though alliances shifted.


The biggest issue at Cancun concerned agriculture, and developing country access to rich country markets.

The United States and European Union proposed: (a) a deal in which they would not have to reduce their domestic subsidies or export credits; (b) a "blended" formula for cutting tariffs that preserved their high tariffs while imposing deeper cuts on more products in developing countries; (c) nothing substantial on special and differential treatment (S&D) for developing countries.

This so outraged the developing countries that 20 of them (including Brazil, India and China) combined to come up with their own proposal that would: (a) commit the rich countries to significantly reduce their domestic subsidies of all types, and eliminate their export subsidies; and (b) provide S&D for developing countries, with less tariff reduction commitments, and the introduction of "special products" and a special safeguard mechanism against import surges.


The proponents of an investment agreement ultimately want international binding rules that give foreign investors the rights to enter countries without conditions and regulations, and to be treated on an equal footing with domestic firms (known as "national treatment").

Developing countries argue that "national treatment" would limit or eliminate their control over the entry of foreign investors and types of investments, while denying them the right to give preferential treatment to local firms, or to channel foreign investment in certain desired directions.

Extension of the rules to financial investments -- such as portfolio investment, loans and investment funds -- would open developing countries further to financial instability and sudden economic shocks spurred by rapid capital withdrawal.

An investment agreement modeled on NAFTA would prohibit "performance requirements" (including such obligations on foreign firms as the requirement to transfer technology to host countries), and prohibit "expropriation" -- which might be defined to include not only physical takings of foreign investors' property, but regulations that diminish their profits in any way.


Proponents of a WTO agreement on competition want to have multilateral rules that discipline members to establish national competition law and policy, based on the "core principles of WTO," transparency and non-discrimination against foreign firms. The European Union in particular sought a competition agreement to provide ëeffective opportunity for competition' in the local market for foreign firms.

Developing countries worried that instead of addressing competition issues of concern to them -- such as activities of the international grain cartels -- a WTO agreement on competition policy would undermine their ability to give preference to local firms.


There is already a WTO agreement on government procurement, which stipulates that, in buying goods and services, governments may not give preference to local producers over firms from other members of the agreement. Unlike other WTO agreements, however, WTO members are free to join the procurement agreement or not as they choose (for others, such as the intellectual property agreement, adhering to the agreement is a condition being a WTO member). Hardly any developing country is a member of the current procurement agreement.

Developing countries believe the industrialized countries are seeking through negotiations over "transparency" in government procurement to draw them into a negotiating process that will ultimately require them to join the WTO procurement agreement, and deny them the right to give preference to local firms in supplying goods and services to government agencies. This would be particularly severe for developing countries, they believe, because government contracts are an important means to build up the capacity of local firms.


Trade facilitation involves administrative and other mechanisms to make trade between countries simpler. At issue may be such matters as inspection rules for imported products. The industrialized countries are seeking simplified rules that will remove regulatory drags on trade. While supporting the aim of trade facilitation, developing countries worry that a binding agreement might impose harmful burdens on them. For example, a requirement to inspect only a small number of imported goods on a random basis may increase the risk of customs avoidance. The inspection mechanisms in developing countries may not be sophisticated and dependable enough to work on a randomized basis.

The Right to Food Sovereignty

Via Campesina, the leading global network of peasant and family farmer organizations, brought thousands of farmers to Cancun to protest the WTO negotiations on agriculture. Via Campesina condemned the industrialized country proposals at Cancun for agricultural liberalization, while also criticizing developing country governments that focused on agricultural exports rather than protecting the right of local farmers to produce for the local market. Excerpts from Via Campesina's statement on the negotiations follow.

Every community should have the right to produce their own food, the right to food sovereignty. This means that communities have the right to define their own agricultural and food policies, to protect and to regulate their national agricultural and livestock production, and to shield their domestic market from the dumping of agricultural surpluses from other countries.

This also implies that they do not dump agricultural and food products under the cost of production on international markets.

Priority has to be given to local and regional production over export production, authorizing protection from low price imports, allowing public aid for peasants, supporting food production for domestic consumption and guaranteeing the stability of agricultural prices at an international level through agreements on supply management..

The WTO main objective, the so-called "liberalization" of agriculture, has made the crisis worse.

The "liberalization" of agriculture has entrenched the on-going crisis in rural societies and impoverished large tracts of the rural population. The Agreement on Agricultural favors large transnational corporations that are, in turn, supported by their governments. The European Union and the United States imposed rules allowing them to continue with the "dumping" of their production surpluses at very low prices -- this practice destroys the internal local markets on which peasants and small farmers depend. At the same time, many importing countries have been forced to lower their import taxes and eliminate any protection they may have had for their own agriculture.

We demand that governments approve the following measures immediately:

  • Halt the advance of WTO current negotiations, and further talks on "new issues,"
  • Cancel negotiations that seek greater liberalization of agricultural trade in the context of the Agreement on Agriculture,
  • Defend peasants' rights and food sovereignty,
  • Eliminate the obligation of minimal market access: the obligation to accept imports up to 5 percent of internal consumption and all other clauses regarding obligatory access to markets,
  • Ban patenting of any kind of living material or any of its components,
  • Apply genuine agrarian reform policies and guarantee agricultural producers' rights on crucial common resources such as land, seeds, water and others.


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