The Hindu Business Line : Lessons from the failure at Cancun

SO, THE much-awaited Cancun Ministerial of the WTO is over. And it seems that there was more excitement on the sidelines than at the talks themselves.

There were hundreds of demonstrators on the streets some distance away from the conference venue, most of them wearing ethnic headgear, masks and robes and adding considerably more colour to the proceedings than the epicentre of activity in the conference hall, where the tone was belligerent and aggressive from the word go.

Judging by the reports from Cancun it would appear that there is a general disappointment, both among the participants and the public, at the breakdown of the multilateral trade talks. As this means a further setback to the long-cherished dream of making the world a single free market with each country giving the other the treatment as given to the most favoured nations (MFN) and treating all goods and services as being on par with domestic products once they enter the national frontiers.

At the talks, there was widespread recognition that the Agreement on Agriculture (AoA) formed the main item on the agenda. In a way, the dozen or so new items that appeared on the radar screen sort of got pushed back to bring agriculture back into centrestage.

The main focus in the discussions on agriculture was the pattern of richer countries paying massive subsidies to their farmers.

This is, no doubt, fully understandable and even justifiable in the context of their economic situation — given the miniscule proportion of farmers in the population, and high level of infrastructural and technological development.

But it is clear that if the rich countries' demands of free access to developing countries' markets are to be acceded, the subsidies will have to undergo a massive reappraisal in a relatively short span of time.

The heavy subsidies of the richer countries are the single major obstacle to the realisation of a global trade system governed by internationally accepted rules that do not permit abrasive, trade-distorting intervention from any member-state.

The Indian team for Cancun had certainly fine-tuned its vocal chords. The Commerce Minister, Mr Arun Jaitley, made his point forcefully: The rich countries must bring down their subsidies or else the prospects of successful negotiations would be bleak. Mr Jaitley was, for the most part, suave and soft-spoken though, at times, he sounded a trifle loud for his complex and rather delicate mission.

Mr Jaitley, of course, could ill-afford to play a Dattopant Thengadi who, only last week, attempted to hold a kisan rally at Ramleela Maidan in the Capital and let out, in his speech, an outpouring of jingoistic abuse aimed at the gore (white) nations.

He said these "white nations" were pampering their farmers and depressing the prices in the domestic and international markets, directly affecting the economics of peasants in the poor nations.

His advice to the Government was: Get out of the WTO even before Cancun Ministerial opens. He said: We will not be treated as equals by these white men in the WTO, so let's get out.

Mr Jaitley's subtle pressure on the rich countries to scale down their subsidies in the manner acceptable to the developing countries is understandable.

As leader of a national delegation, and particularly as he assumed the unofficial leadership of a group of score or so nations, he was required to make some belligerent noises in the hope of producing a favourable psychological impact on the negotiators of the opposite side.

The rich countries were sure to be disappointed if the current round of WTO negotiations were stalled. But they could certainly have been expected to make substantive concessions to avoid such a contingency. The recent decision to allow patented medicines manufactured by non-patent-holders into countries direly in need thereof is a good example.

International negotiations, however, do not proceed under exchange of ultimatums, `walk-outs' or threats, as is routine in national legislatures.

Mr Thengadi is demanding that the level of domestic support in rich countries be brought down, not to the minimum prescribed in AoA but to the level of domestic support in poor countries. Mr Thengadi could not be unaware of the fact that the Commerce Ministry is on record as admitting that Indian farmers have a negative subsidy — domestic support or Aggregate Measurement of Support (AMS), at least in the basic period of reference.

Whether the Indian negative subsidy is merely 18 per cent, as held by the Commerce Ministry, or 87 per cent as demonstrated by the farmers' organisations is an issue that can be easily resolved in a Cancun-like conference.

An American, European or Japanese interlocutor may ask politely: `Mr Thengadi, do I understand you correctly? Do you expect us to scale down the domestic support actually to minus 87 per cent? That is very interesting. By the way, does India actually impose such a massive negative subsidy on its peasantry? Would you not agree with me, Mr Thengadi, that the poverty of Indian peasants is more directly related to India's negative subsidy rather than our positive subsidies?'

The moment of truth has come. The positive farm subsidies in OECD countries have worked in tandem with the negative subsidies of countries like India.

Developing countries might have scored a victory as, by sheer strength of their numbers, they succeeded in making Cancun a futile exercise. But whatever the perception of self-interest of various countries, ultimately, history will push them towards systems that are open and transparent.

Even if some of the extremist opponents of free trade managed to make Cancun futile, it is all not going to end in zero. The WTO will begin fresh rounds and improve its procedures. The trade negotiations will certainly recover balance and move on.

One only hopes the protectionists will not need a third world war to learn the lessons that World War II and the Iron Curtain apparently failed to bring home to them. At the end of World War I, the victors were foolish at Versailles and lost the peace in arrogance.

At the end of World War II, both the victors and the vanquished were sober, to say the least. After the fall of the Soviet Union and in the shadow of a world war against terrorism, indications are that, this time, the poor and the weak might let the prospect of peace recede through sheer pique at their poverty.

(The author is Founder, Shetkari Sanghatana. Feeedback may be sent to sharad@mah.nic.in)

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