Summary: October 28, 2003: Pascal Lamy, EU Trade Commissioner, on "The EU, Cancun and the Future of the Doha Development Agenda". Journal for Common Market Studies (London)
Ladies and gentlemen, delighted to be back here in London.
The Journal of Common Market Studies, it seems to me, has always rather revelled, in a very British way, in having an out of date title. As they used to say, a well dressed man is always at least ten years behind the latest fashion. Of course, the JCMS does not need to worry about that - everyone knows who you are. But you are lucky you are not called the "Journal of Iron and Steel Community Studies", frankly speaking, or the "Journal of European Defence Community Studies", although that wheel may yet come full circle. And at least you have resisted the blandishments of image makers who might have reduced you to the poverty of "European Union Institutional Reflections Monthly". Either way, although I do not read your journal as much as I would like, your reputation precedes you, the turn-out today for this annual lecture is tremendous, and thank you very much for inviting me.
The intention today had been to give you some serious reflections on governance issues, including economic governance, across a rather broad front. This is a topic which continues to interest me enormously, and I had indeed prepared some rather detailed remarks on this, and I have also written some rather provocative comments about economic governance issues which stirred a bit of public comment, including over here. But I have decided to put aside my planned remarks, because we agreed all this as a game plan long, long ago, long before a WTO Ministerial meeting happened in Cancun, way back in September of this year, and at a time when we all frankly thought that Cancun would work. But it did not. And now that we are officially in the "post Cancun" period, I rather thought it would be more interesting for this audience to set out my own reflections on where matters stand, and where they should move to next. As I hope you will see, the connection with issues of governance is by no means negligible.
Who killed Cancun ?
Although the statute of limitations for analysis of what happened in Cancun has nearly expired, it remains the starting point. It is impossible to start to tackle the basic choices about what to do next unless we understand that the explanations about what happened in Cancun fall into two broad groups.
The first group of explanations suggests that Cancun was an accident. Two cars, or three cars, or indeed 148 cars, collided on the way to a wedding. Casualty levels still not clear. Road currently blocked, but the police are on the way with heavy lifting equipment. And when the road is clear, providing everyone can still remember the way to the wedding, and providing that everyone is still in the mood, well, then maybe we can still go, there'll still be plenty to eat and drink.
Of course, rather than my own rather clumsy, indeed tawdry, metaphor, there are plenty of good historical antecedents for this theory that accidents can have major impacts on history. The accident of Cleopatra's nose was just too elegant, driving Julius Caesar to madness and war. At least that is what I recall from my careful study of Asterix battling the Romans. Or the accident of the beauty of Helen of Troy was such that it alone could launch a ten year war. Had it not been for her beauty, Odysseus could have stayed at home with his dog, and indeed his wife, thus ruining the basic plot of not one but two rather good books.
In Cancun terms, this sort of "explanation of the fates" suggests that we were sort of on track, we might have made it, and we were just a long night's negotiation away from success. My teasing references to car crashes and Greek myths aside, this group of explanations is not wholly irrelevant.
The Geneva preparation of the Cancun meeting had not been bad, under the careful helmsmanship of Perez del Castillo in particular (although Geneva, seemingly like everyone else, collectively missed cotton); the EU and the US had done what everyone had asked them to do, and had come up with a framework deal on agriculture; and so on. But the difficulty is that most theories of this kind tend to put too much weight on the role of individuals in the system. So they usually go on either to blame the Chairman, unfairly in my view; and / or to suggest that one or other player made a tactical judgement at a key point.
The second set of explanations play down the sense of Cancun as an accident, except in the sense of an "accident waiting to happen". They downplay the role of individuals, and the sense that everything was going fine in Cancun until nearly the very end. They tend to suggest that there are serious underlying problems that we have to resolve before we can move on. For example, just consider the systemic issues thrown up by the relatively recent emergence of new groups inside the WTO, new groups in which developing countries are setting the agenda.
The G20, for example. As I have said already, it is a mistake to see the G20 group of nations, led as it was by Brazil, India and China, as simply an agricultural phenomonen which emerged in response to the perceived iniquities of the EU-US text on which some of us spent so many days and nights in August. If the mother of the G20 is agriculture, the father is clearly geopolitics. And in many respects, we have to respect, even welcome, the emergence of the G20 which is self-consciously positioning itself as a counterweight to the G8 in terms of global economic governance. But the paradox is that if united only by politics and agriculture, or parts of the agriculture dossier, it will struggle to thrive as a unifying force on trade when their agendas differ so markedly.
Everyone talks about the G20 these days, but in my view there is not nearly enough attention paid to the G90 - the group of African, Caribbean and Pacific countries together with other least developed nations. Their concerns, their demands were certainly less visible for a long time, certainly less audible until the plenary session on the Saturday night in Cancun when delegate after delegate stood up to denounce the text produced by Derbez whether on cotton, Singapore issues or the general lack of fairness of the text to the developing world. To put it very bluntly, this large, rather inchoate group of WTO members simply did not have a large enough stake in these negotiations to want them to succeed. They were particularly worried about the impact of the certain erosion of their trade preferences, notably on the EU market, of continued liberalisation at a multilateral level. Moreover, they were satisfied, before the conference, to have under their belts, so to speak, the agreement on TRIPS and medicines, which had "repaired" the problem for them.
And so we must perhaps confront a systemic question: was Cancun really about a north-south confrontation, long coming, barely visible beforehand, a tidal wave of trade resentment blown on the winds of political schism following the Iraq crisis of the last year ? In some respects, yes, if we focus on the detail of the trade issues. Clearly, the G20 was opposed to "the north" on agriculture. Clearly the Africans were viscerally opposed on cotton. And undoubtedly there was a common, if not universal, theme of opposition in the G90 to the Singapore issues which were obviously close to our heart.
But in other important respects, no. A simple north-south explanation miss the point that 40% of world trade is south-south, a percentage which frankly should be higher. North-south explanations miss the reality of the detail.
On Geographical Indications, the EU, India, Morocco and Thailand fought together against New World countries. On the Convention on BioDiversity, the line-up was China, and India, backed by the EU. And even on an "old" trade issue like anti-dumping, where traditionally developed countries held the line against cheap imports from developing countries, more than half the total AD cases are now initiated by developing countries, and our own position in these negotiations, frankly, is rather closer to the position of south-east Asia than the US.
Even on agriculture, where the UK press loves to gorge on stories which "prove" how the CAP is irrevocably opposed to the interests of developing countries, you need to consider, step by step, the moves we have made just this year towards developing countries following the CAP reform which was decided in June. To name just two examples, we have accepted, for the first time, the elimination of export subsides on products of interest for developing countries, and we have accepted that so-called blue box subsidies, even though less trade distorting than some, should be capped.
My friend Alec Erwin spoke in London only last week on this question of a north-south split, and according to the august columns of the Financial Times, which I always read with great attention, the only reason north-south divisions appeared was because the EU and US had been (and I quote) "silly" because "we had ill-advisedly politicised that risk". Well I am - as often - not quite sure what Alec means because he is a very clever guy, but on this point, I agree: there was no systematic north-south split.
So if there was not a systemic north-south confrontation in Cancun, at least not on all the issues in Cancun, then what was going on ? In my view, a melange of different things. The key traditional supporters were not always at their best. For example, the United States remained generally positive, but public opinion, and the US Congress, remain uncertain supporters of a Round and of the multilateral system in particular. Cotton proved to be a difficult issue for the US to handle in Cancun. More generally, and not just in the US, a generalised fatigue with the constant pressures and challenges of globalisation in general, and trade liberalisation specifically, affected all of us.
Then there was China. Through no fault of her own, China's capacity to produce and seemingly bottomless comparative advantage, scares the living daylights out of not just the United States Congress, but also a number of developing countries. One such developing country, having for years argued fiercely against EU interest in some WTO role for core labour standards, actually came to us and said that we might now need to start thinking about action against China because, the country alleged, a number of textiles were being produced in sweat-shops. In other words, if you are already worried about China's ability to scoop the pool, the last thing you want is trade liberalisation.
Finally, - and perhaps we in the EU must recognise this as well - there was a general difficulty in addressing rules to address what are rather wide differences in collective preferences.
If we then add to these other, myriad, systemic problems, the institutional problems which exist for the WTO itself. To put it mildly, the WTO is not a paradigmatic mix of efficiency and legitimacy, is not the perfect modal of global governance that we would all like to see. On which subject, more in a minute.
So where next ?
But where next ? To remind you: I have offered you this lengthy detour of analysis through two competing models of explanation of the failure of Cancun by way of demonstrating that adherence to either one takes you in very different directions.
The "car crash" theory suggests Cancun was little more than a "small local difficulty" to quote from an episode - alas, I have forgotten which - from the UK's imperial past. It suggests that we simply have to get up, brush ourselves down, remount the horse and press ahead regardless with the negotiations, perhaps with a decent down-payment of early concessions up-front to stress our bonne volonté, our determination to bring the Round, come what may, to an early conclusion.
The second theory suggests that hard thinking is needed before you jump back on the horse, lest you fall off again, or ride off in the wrong direction. In all honesty, I suggest to you that some serious thinking is needed post-Cancun, and that all sides would benefit from some reflection.
Let me give you just one example. In Cancun, on the Saturday afternoon before the denouement, the chairman of the Ministerial meeting, Luis Ernesto Derbez, produced a long awaited compromise text, the so-called draft of 13 September. It was a good effort, in many ways. It caused us a lot of difficulties, notably in agriculture. But it would be true to say it caused a lot of countries difficulties in different ways. Where it fell down badly was in failing to capture the middle ground on issues like cotton, where it took a strongly pro-US line. At the lengthy meeting in the evening and early morning which followed, delegation after delegation took the floor to denounce the text as a travesty of justice, as an affront to every developing country, as a heresy of enormous magnitude. At the end of Cancun, the 13 September text looked dead and buried.
But now, if I correctly understand the statement which came out of the APEC summit this week, the US and 20 other Pacific Rim countries are ready to re-launch… on the basis of the Derbez text. That also seems to be the position of some other members of the G20. I am left to wonder, rather, what magic dust has been shaken over a text so roundly rejected in September, to find it so roundly endorsed in October. India, as so often, brought us back to earth. Perhaps the magic dust does not work down there. Minister Jaitley is reported to have said, again, last week, that the text "completely failed to gauge the mood in Cancun", and "only favoured the development of developed nations".
Another example from the "quick re-launchers". Some of them say it is even simpler. They say: we are ready to re-launch if everyone else is ready to show the flexibility that we have shown. Indeed, Celso Amorim, who is really the cleverest of all of us Trade Ministers, even manages to link the two ideas together: we, Brazil, are ready to re-launch the Round on the basis of the Derbez text…and that just shows how flexible we are: if only others would show such flexibility as Brazil, then the Round would be already concluded, etc, etc.
Celso is very good at playing the flexibility game, but he is rather less good at recognizing what we have contributed to the search for consensus. For our part, the European Union has moved, and moved again, across the board, starting with core labour standards, which we had to accept would not form part of the Doha agenda in 2001, continuing with agriculture, which I have already talked about, and finishing with services, where - for example - we have done our very best to accommodate developing country interests by making offers on the temporary movement of workers.
As I have said to Celso, I would love to discuss what more I could do in this area, for example, but it would help if Brazil would even now table an offer on services, which it should have done by the end of March on WTO timetables.
The EU consultation
But it would be quite wrong to believe that I see the issue in entirely black and white terms. I understand why many people want to get back to the negotiating table. It is understandable, it is in line with their interests, and I just wish that more had reflected on this fundamental point before Cancun.
But I also believe that a period of reflection, starting internally, has been the right approach for the European Union. I think it has been important for a number of reasons. First, because we need to recognise that this is a major, major setback in policy terms, and second, because the Commission does not make up policy on the hoof: we can only reflect the support we get from our authorizing environment. We needed to check back to see if the support was still there. So we have been posing four questions, internally, and let me briefly summarize for you where we have got to in the process. The goal is to be ready by the time of the General Council meeting in Geneva on 15 December, a date which was agreed in Cancun: before then, we will have a further informal meeting with our Member States on 2 December, and discussions with the Parliament, NGOs, the business community…so our consultation is being properly nourished.
First question: should we continue to favour the multilateral system as at present ? Well here, on the authoritative basis of European Council conclusions, I can tell you that the answer is…yes. I know that those European Council conclusions get pretty long, and it can be pretty tedious trawling through what feels like a telephone directory looking the name of that elusive pizza parlour, but it's in there, in black and white, and I am sorry Guy de Jonquieres missed the European Council Conclusions when he was writing his long piece this week, for they were rather positive.
It is perfectly understandable why this should be: multilateral negotiations are a good fit for the European Union. More to the point, they are by definition non discriminatory and thus do not distort trade or sideline the weak; they are efficient and also fair. They are also effective simply in negotiating terms: different interests and preferences allow more issues to be moved forward, particularly under the concept of the Single Undertaking.
But I cannot but note in passing that in the time since we have been consulting on this question, there has been a lot of concern amongst third countries as to whether the EU had somehow left the negotiating table forever. That itself seems to have produced something of a change in attitude, and one which I for one did not anticipate: a more positive approach on the part of others.
One can but hope that a valuable lesson is thereby being learned that multilateral negotiations need to be pushed along by everyone in the system, and cannot be "sponsored" by just one of the players.
So, as the European Council put it, rather well, if I may say so: "the EU's commitment to the multilateral approach to trade policy remains, and the EU should remain open to an early resumption of the DDA negotiations". But "a commitment by all will be indispensable to any successful resumption of negotiations".
Second question: should we continue to seek a balance between market access and rules ?
This question is of course over-simplistic. There is a continuum between "rules" and "market access" both in theory and in the WTO. You might not know it if you listened to Alec and Celso talk about the subject for half an hour, but "agriculture" for instance, is not just about setting tariffs and tariff rate quotas, but contains rather complex, very detailed, very technical rules, including rules which facilitate market access, such as those governing subsidies, for instance. And remember the role of collective preferences in rule-making, in the WTO as elsewhere. Most of the time, I hear scepticism over here as to rules-making. But animal welfare ? Environment ? And of course, then there are the Singapore issues: should the EU retain its commitment to push, within the Single Undertaking, for binding multilateral negotiations on the four Singapore issues: investment, competition, trade facilitation and transparency in government procurement. I cannot yet answer this question. Should we continue to insist on negotiations on all four? On the face of it, this would be quite reasonable as a matter of principle. Despite the commitment to negotiate all WTO members made at Doha, we in the EU offered to drop two of the Singapore issues in Cancun. Some other Member States, [including Malaysia], showed some interest in such an approach, but others did not. Ultimately, given that the whole Cancun package fell flat, we would be perfectly justified in holding on to our existing position. Alternatively, we might recognise that full political support for Singapore issues remains elusive. It might make sense to accept, for example, that one or more of the four issues should be the subject of some form of negotiation with voluntary participation within the WTO. So this remains an important issue for decision within the EU. There is a difficult balance to be struck between our objective interest in all four issues, and objective reality - what happened before and at Cancun on these issues. But we will shortly bring our ideas forward on this.
Third question: what do we do about developing country preferences ?
This question is probably the most difficult to answer in the short term. But it needs to be considered because one major reason for developing country, and particularly African, opposition to making progress in Cancun lies in their perception that they had relatively little to gain and relatively much to lose in terms of their preferences, in a successful, multilateral market opening outcome. Not so much worried about their own markets, but their ability to keep market share elsewhere, both in agricultural and industrial goods. I have already mentioned China, of course, and underlying much of this concern, of course, is the rise and rise of China as an industrial and exporting powerhouse and the fear that continued Most Favoured Nation (MFN) liberalisation can only advantage China even more. So no answers yet here, either, but we are continuing to work very hard on this one. For example, an idea: rather than leaving the hard work on preferences just to the OECD countries, would the G20 countries be ready to offer preferences to the G90? Just a thought.
And finally, the fourth question: what do we do about WTO reform?
No-one, including inside the WTO, argues that the WTO is perfect, or that its organisation, staffing levels and funding don't need addressing. But opinions thereafter differ fairly sharply in two areas. For example, what areas should we address - e.g., should we focus simply on the organisation of Ministerial conferences, given the disastrous outcomes in Seattle and Cancun, for example? Or do we need to go further, e.g., into the decision making principle of consensus, recognising the difficulty of this in a WTO of 148 diverse countries. And secondly, depending on the answer we have given to the first part of this question, how do we manage the impact of WTO reform processes on the future of the DDA negotiations ? We have to balance, here, the need to use the negative momentum of Cancun to start a long overdue process of institutional improvement for the WTO with the importance of avoiding getting the organisation bogged down again in debates on voting versus consensus.
But before I conclude, there is another important perspective we need to give this whole question, relating to WTO reform, and that returns us back to the subject I had originally intended to address: that of global governance. It is true, as I have said in the past, that the WTO is one of the relatively few islands of governance in a sea of globalisation: the binding dispute resolution system, for instance, is clear evidence of this. But this has blinded the public into believing that a supremely efficient and a supremely illegitimate body. When it is neither. With a tiny staff of roughly one quarter the size of the OECD in Paris, and a consensus-based, member-driven ethos, one might genuinely pose the question of whether the WTO sets out to legitimise what it cannot deliver. An ironic outcome if true. But if so, we can and must try to reform the WTO so it can deliver what its one hundred and forty eight members have signed up to see it deliver.
In conclusion, I have tried to explain, I fear at some length, that Cancun was not just an accidental collision, but was rather a deep-seated problem, which we have had to address in rather a methodical way, consulting other players inside the EU, checking with third countries what they are ready to do. And six weeks on, it is clear that the barometer is rising. A number of countries are signalling their readiness to get back to work in Geneva, and signalling their bonne volonté in terms of offering flexibility. All I can say at this stage is that my guess is that if their volonté really is bonne, they will not have to wait too long for the EU to make its position clear.
Thank you very much.