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Wealth of Nations 
The Prelude To Cancun Was Two Wasted Years
One has to ask whether the WTO process is any longer worth the effort. by Clive Crook .... The official purpose of the trade talks that got under way in Cancun, Mexico, this week is not what the buildup might have led you to think. The idea is not to launch some bold and far-reaching new initiative. Formally, the meeting is to review progress in the first half of the Doha Round of negotiations, a sequence of meetings that actually started in Qatar nearly two years ago. This task need not detain the delegates very long. There has been no progress. Deadlines have come and gone. Nothing has happened. The best the world's governments have been able to achieve in the past two years is a pretense of progress, and a feeble pretense at that. For this, the trade negotiators ask to be congratulated. An optimist would say, it could have been worse. Recently, it looked as though the Cancun meeting might not happen at all. Then came two last-minute breakthroughs, as the trade negotiators like to call them. The first was a deal between the United States and the European Union on agricultural trade. The second was an agreement to change global trade rules so that developing countries can legally import more cheap generic drugs. Deadlock on either of these issues could have blocked the talks altogether. The new agreements did allow the Cancun meeting to start, at least, but there is much less to them than governments would have you believe. The deal on farming is the more shameless of the two. It is so empty, it is almost a hoax. Agriculture is the make-or-break issue for many developing countries. Many of the world's poor nations are predominantly agricultural. Tariffs in rich countries make it impossible for them to develop export industries in which they have a natural advantage. In addition, to clear their surplus production, wealthy countries subsidize their own exports of farm goods. (Japan and the European Union are the worst culprits.) The result is to make many poor-country farmers uncompetitive in their own markets. Rich-country taxpayers suffer (because they must finance the subsidies); rich-country consumers suffer (because they are denied imports of cheap food); and poor-country farmers and their families suffer (because they remain in poverty). The paramount goal of the Doha Round was to curb these ruinous farm-support policies, or so it was claimed. To underline their commitment, officials called the new series of talks the "development round." Then, for the next two years, nothing. Europe embarked on a purported reform of its Common Agricultural Policy—in fact, it was an agreement to delay reform—as though the Doha undertakings had never been made. In effect, Germany and France agreed between themselves that they would postpone meaningful change in the system until further notice. So it is unsurprising that the farm-trade deal between America and Europe turns out to have no content. The quarrel between the two trade giants over precisely how to liberalize farm trade has been going on for years. Each side has its own priorities, reflecting its own political pressures. For instance, America says it wants to see agricultural export subsidies eliminated, whereas Europe, whose farm policies rely on them, insists on retaining some. The new deal has resolved none of these disputes. The framework agreement says that some subsidies will be cut—but it does not say for which products or by how much. Much the same goes for tariffs, and for every other draft provision in the document. No doubt, within the terms of this infinitely elastic framework, a genuinely radical reform of farm-trade policy could indeed be undertaken. Equally, its terms could be satisfied by doing virtually nothing. And the best part is, this refusal of either side to commit itself to anything at all is the fruit of two years' work. Compared to the farm-trade pantomime, the agreement on drugs is genuine enough. The main scandal here is that the deal, which is fine as far as it goes, took such an age to conclude. Under the World Trade Organization's existing rules, poor countries are allowed to produce cheap copies of patented drugs without the patent-holder's approval, so long as certain conditions are met, and provided that the drugs are intended for domestic use. This lets countries such as India and Brazil, which have domestic pharmaceutical producers, make cheap generics to meet their own pressing needs. But it does not let poor countries without such producers import cheap drugs. The new agreement extends the arrangements for compulsory licensing—permission to make copies without the patent-holder's consent—so that poor countries lacking the capacity to manufacture drugs can buy them from producers abroad. The rules require the WTO to be kept informed about such purchases, and safeguards are planned to prevent generics made in developing countries from finding their way back into rich-country markets. The concerns of rich-country manufacturers are understandable. They have invested in the creation of intellectual property, and they are entitled to see the value of that investment protected on the terms that were originally presented to them. Patients in Europe and America want these firms to keep spending on research into new treatments: Threatening to expropriate the companies' intellectual property is no way to encourage that. Yet the position is by no means clear-cut. Many drugs used in the treatment of AIDS, for instance, are so expensive in the West that exports to developing countries would be zero without some form of government intervention. And the cost of producing those drugs, now that the expenses incurred in development have been sunk, is far lower than the price. Therefore, even if the drugs are sold in the developing world for much less than the price they command in the rich countries, they yield a profit that the manufacturers would otherwise be unable to realize. Cheap drugs for the poorest countries can make sense for all concerned. Compulsory licensing is one approach, but may not in fact be the best. Outright donations, bought at a discount and financed by rich-country taxpayers, could be a fairer and more effective method. There are several other possibilities. But the main thing was to act promptly. In this, America and Europe failed. It is apparent that hundreds of thousands of people in the developing countries have been suffering and dying, for want of drugs that can be cheaply manufactured. It is shameful that rich-country governments have taken so long to choose among the many possible ways that have long been available to address the problem. Poor-country governments are right to be angry about it. The prospects for real progress at Cancun and beyond, given this sham deal on farm trade and a modest, long-overdue understanding on drugs, look poor. Europe and the United States might be satisfied merely to avoid an outright collapse of the process—not because they fear that a breakdown would set back the cause of liberal trade, but because it would be politically embarrassing. Many developing countries are tempted to force such an embarrassment on them. It would be good to be contradicted on this during the next few days, but again one has to ask whether the WTO process is any longer worth the effort. Might it even be harmful in present circumstances to the cause of liberal trade? To ask this is not to question the benefits of trade reform. Perish the thought. I regard those benefits as beyond question, especially for the world's poorest countries: Closer economic connections to the rest of the world are their only hope of lasting economic progress. Sadly, the question is whether the WTO any longer serves this goal. Multilateral trade negotiations are undoubtedly the best way to liberalize trade when governments sincerely want to open their own markets as part of the process. When that is true, the WTO mechanism has a multiplying effect on good intentions. It is how the process worked for much of the period after 1945, led by a United States full of zeal for liberalization. That enthusiasm has gone. Countries everywhere are now most interested in extracting trade "concessions" from everybody else, falling into the old mercantilist trap of regarding an unrequited act of trade reform as self-defeating. Aside from farming and textiles, rich-country markets are already pretty open to trade. The developing countries have retained more of their old trade restrictions than the rich countries, and therefore have most to gain from a further lowering of barriers. The WTO process, supported by rich-country rhetoric, casts such a policy as an act of submission. Politically, in other words, the WTO may be making it harder for poor countries to do what is in their best interests. Not because it is forcing them to liberalize, as the anti-WTO protesters complain, but for exactly the opposite reason: It is encouraging them not to. A depressing thought. Here's hoping that the talks in Cancun prove it wrong.
What do you think? Discuss this article in the Politics & Society conference of Post & Riposte. More from National Journal. More on politics and society in Atlantic Unbound and The Atlantic Monthly. Clive Crook is a columnist for National Journal and the deputy editor of The Economist. This column appears every week in National Journal, a weekly magazine covering politics and government published in Washington, D.C. For information on National Journal Group publications, see NationalJournal.com. Copyright © 2003 by The Atlantic Monthly Group. All rights reserved. | [an error occurred while processing this directive] | ||
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