Global Policy Forum

By Kevin Watkins*

Where now for the World Trade Organisation? Having engineered the collapse of the ministerial meeting in Cancun, political leaders in Europe and the United States face a stark question: what comes next? The failure at Cancun does not inevitably mean the end of the "development round", or the collapse of the rules-based multilateral system. In fact, Cancun's failure has created an opportunity to strengthen the WTO's legitimacy and change the trade rules at the centre of global poverty. The danger is that northern governments will waste that opportunity, turning a serious problem into a crisis in the process.

But WTO negotiations will never be the same. Developing country governments representing most of the organisations' 146 members have found their voice. Led by India, Brazil and China, the group of 21 has emerged as a formidable negotiating force - as have African governments. By refusing to concede rich country demands on investment, rejecting bilateral European Union-US deals on agriculture and demanding better access to northern markets, developing countries have driven a stake through the heart of a profoundly undemocratic WTO system.

Cancun was the moment that glasnost came to the WTO, and with it the potential for democratic renewal. Transitions to democracy can be painful. The EU trade commissioner, Pascal Lamy, left Cancun warning that Europe might turn its back on the WTO. Democracy is difficult; sometimes it produces outcomes we don't like. But it also provides institutions with strength and legitimacy - and global markets need to be underpinned by strong governance structures that reflect shared values rather than project economic power. Pascal Lamy knows this. He has been roundly and rightly condemned for his reckless pursuit of the Singapore agenda - notably a WTO investment treaty, along with rules on government procurement, competition and trade facilitation - yet he is a committed multilateralist. He knows European prosperity depends on a rules-based multilateral system.

The Bush administration has different instincts. It supports rules-based approaches where they project US interests and rejects them when they don't. This is a multilateralism of convenience - and the WTO, like the United Nations before the invasion of Iraq, is now seen as a constraint to be marginalised and ignored. Robert Zoellick, the US trade representative, has promised the US will now concentrate on negotiating regional and bilateral trade deals, rather than on reviving the Doha round. China has been targeted for a review of "unfair trade policies", raising the spectre of a protectionist backlash. And senior congressional figures are calling for a review to identify which developing countries adopted "anti-American" positions at Cancun, and for aid and trade relations to be adjusted accordingly.

Sadly, Bush is likely to listen to them. He may trumpet free markets, but having engineered a massive American trade deficit he is more than capable of dragging the US into a new era of protectionism at home and aggressive export expansion overseas. Recourse to unilateralism and the threat of trade sanctions are potent weapons for such a strategy, especially when deployed in bilateral and regional deals with poor countries desperate for access to the US market.

For all its failings, the WTO system provides a framework for a rule of law that could circumscribe US power. That, of course, is why the trade hawks despise it. Unfortunately for the US, not to mention the rest of the world, the Bush administration is a slow learner on multilateralism. Having undermined the UN in Iraq, it is now discovering the costs of going it alone.

Repeating the performance with the WTO would have devastating consequences for the US economy. The fragmentation of the global economy into hostile trading blocs, slower global growth and protectionism at home will ultimately cost American jobs. It is too much to hope enlightened self-interest will guide the administration. Leadership will have to come from the EU. Instead of rattling its sabre at the group of 21, Europe should be joining with it and other developing countries to defend multilateralism in trade.

That means tackling head-on the issues that scuppered Cancun. The first step should be to jettison the Singapore agenda. On agriculture, the choices are simple. The EU can either defend the common agricultural policy or it can defend multilateralism. It can't do both. CAP reform has to be reopened, with heads of government making a clear commitment to stop agricultural dumping. Last, Europe should agree to lower the trade barriers that deny poor countries market access and a fair share in world trade. Action in these areas will be a small price to pay for the survival of a rules-based trading system. But it will require what EU governments have failed so lamentably to provide - political leadership.

About the Author: Kevin Watkins is head of research at Oxfam.

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