Trade Talks: Can Rich Nations Keep the Poor on Board?

Can the benefits of free trade and globalization, as well as the pain, be distributed among rich and poor nations in a more equitable way? The 146 members of the World Trade Organization will convene in Cancún, Mexico, on Sept. 4 to ponder that question -- and attempt to revive stalled but crucial trade talks known as the Doha Round.

How the U.S., Europe, Japan, and developing countries such as Brazil horse-trade in Cancún will determine whether the Doha negotiations have a chance to be completed on schedule by January, 2005. The talks are the first to acknowledge that 50 years of trade liberalization have left much of the nonindustrialized world behind. But the talks are bogged down because developing nations, which make up three-fourths of the WTO membership, want "special and differential" treatment, while richer countries find it hard to meet demands that mean sacrificing powerful constituencies such as farmers and drugmakers. "There's been hardly any progress and little goodwill from the rich countries," complains Martin Kohr, a Malaysian specialist on developing economies.

Now, the rich nations -- led by the U.S. -- are scrambling to inject momentum into the talks. With the global economy still slumping, a contraction in global trade is the last thing Washington wants. And no one wishes to be blamed for a replay of the 1999 WTO talks in Seattle, which collapsed in a miasma of tear gas and recriminations. Moreover, President Bush's trade agenda will be deemed a failure if the U.S. allows the Doha talks to unravel. "We want to retain a high level of ambition in Cancún," says Deputy U.S. Trade Representative Josette Shiner, whose negotiators have logged over a million miles, much of it in travel to Third World capitals, leading up to Cancún.

The biggest challenge will be finding the right formula for the thorny issue of agricultural trade. The developing world pins its hopes on persuading Europe, Japan, and the U.S. to lower tariffs and quotas on imported food and especially, to cut subsidies to their coddled farmers. The farm sectors of developing countries, which account for 60% of employment and up to 35% of gross domestic product, have been devastated by rich-nation overproduction of commodities such as cotton, wheat, and corn. Because of such trade distortions, poor farmers lose $24 billion each year, says Washington's International Food Policy Research Institute.

Brazil, whose commodity exports such as sugar face an average 15% tariff in the U.S., is leading the effort to pressure richer nations to make sweeping subsidy cuts. The U.S. and Europe, with their own history of farming disputes, recently agreed to slash subsidies and tariffs. Details must be worked out, but U.S. and European negotiators hope to paper over their differences in Cancún to keep talks going with poorer countries.

Poorer nations are also wary of making concessions. India is leading the resistance to a U.S. proposal to cut tariffs on manufactured goods to zero by 2015. Business wants poorer nations to crack down on piracy of software, entertainment, and medicines. But poorer nations want less, not more, patent protection. A case in point: African and Asian nations without their own drugmakers want to import knockoffs from India and Brazil for a fraction of what they might pay U.S. drugmakers.

Such a concession may be one of the few deals to emerge ahead of schedule from Cancún. The U.S. has acquiesced to looser enforcement of patent rules in Africa to allow the import of cheap medicines. A few more compromises like that will be enough to avoid a Seattle-style calamity.

By Paul Magnusson in Washington

Edited by Rose Brady

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