Ten months after a global trade meeting in Cancun, Mexico, collapsed in acrimony between rich and poor countries, senior world trade officials have gathered here to warnings that the fate of the international trading system is on the line if they can't compromise this time.
The four-day meeting at the World Trade Organization's headquarters is intended to advance negotiations for a far-reaching agreement to lower trade barriers and reduce other forms of government interference in global markets. Inaugurated in the Persian Gulf city of Doha, Qatar, in two months after the Sept. 11, 2001, attacks on the United States, the discussions began in a mood of international cooperation and were scheduled to produce a final agreement by the end of this year.
But hanging over the proceedings is the specter of last year's fiasco at Cancun. That meeting broke down when the United States and other wealthy nations clashed with Brazil, India, and a group of developing countries over several issues, including the reluctance of rich nations to dismantle their farm-subsidy programs. Another impasse, many trade experts contend, would threaten the viability of the WTO, which polices much of the commerce among nations, resolves most international trade disputes and serves as the main forum for market-opening initiatives.
"A second such failure could severely undermine confidence in the Doha Round and even in the WTO and the system it oversees," WTO Director-General Supachai Panitchpakdi wrote in a commentary published in Tuesday's International Herald Tribune.
Such admonitions by WTO officials are standard before important meetings, but observers echoed the sentiment. "This is more than just about the round," said Naotaka Matsukata, a trade specialist at the law firm of Hunton & Williams and a former adviser to U.S. Trade Representative Robert B. Zoellick. "The real issue at the Geneva meeting is about the relevance and future of the WTO."
To a considerable degree, negotiators are trying to paper over differences with vague language that leaves the toughest issues to be resolved later. But even some carefully drafted provisions are jeopardizing the talks. One particularly nettlesome proposal concerns how far rich countries will have to go in lowering barriers that protect "sensitive" farm products -- for example, rice in Japan, South Korea and Taiwan, and dairy products in Norway and Switzerland.
"That's an issue that could bring the whole thing down," said a WTO official who spoke only on the condition of anonymity because of the sensitive nature of the discussions. "The G-10 are going ballistic," he added, referring to a group of wealthy food importers, including Japan, Korea, Taiwan, Israel, Norway and Switzerland, that strictly limit foreign competition to shelter their farmers. Although those countries are pleased with a part of the draft agreement that would allow them to designate a large number of products as "sensitive," they are upset over another paragraph that would require them to make "substantial improvement" in the openness of their markets in each product area.
This week's meeting is not intended to complete a deal to lower tariffs or change trade rules. It is supposed to forge a "framework" that would set the parameters for future negotiations. For example, before jointly agreeing to cut tariffs in a certain sector, negotiators must decide on what formula they will use -- whether, for example, all countries will cut more or less equally, or whether countries with the highest tariffs will cut substantially more.
But as Cancun vividly showed, even the seemingly modest goal of agreeing on a framework is laden with obstacles. The WTO has 147 member countries and operates by consensus. To strike an agreement, each government must perceive that it stands to gain more in the form of enhanced global opportunities for its industries, companies and farmers than it stands to lose by exposing its producers to international competition.
Broadly speaking, the main goal of many developing countries is a significant cut in the subsidies that the United States, the European Union, and other rich-country governments give their farmers. Those subsidies can cause crop surpluses that depress prices worldwide and hurt farmers in developing countries. Such a change would fall hard on American cotton growers, European sugar farmers and others that receive direct government support.
In return, the United States and the European Union demand that the developing countries cut tariffs and scrap quotas on agricultural and industrial goods, which would help U.S. and European exporters because products could be shipped more freely and at lower costs across national borders. About 32 of the poorest nations would be exempt from such requirements under the current draft accord.
Zoellick drove home the point in a written statement issued Monday before leaving for Geneva: "We will not accept a deal to put the round back on track simply for the sake of a deal. . . . There must be substantial new openings for trade in agriculture, goods and services."
At a news conference here, Kamal Nath, India's minister of commerce and industry, took a hard line against the idea that countries like his should cut tariffs simply because rich countries reduce their domestic subsidies. "To say, 'I'll do the right thing provided you give me market access' I think is very ill-conceived," he said.
In some areas, general accord has been reached, raising hope that posturing will give way to compromise by the end of the week. The current draft would mandate the elimination of all subsidies that go directly for exported farm products "by a credible end date," leaving open the precise time. Similarly, in response to pressure from developing countries, the E.U. and Japan have abandoned their demand that this round of talks produce new WTO rules concerning issues such as international investment.
Yet other major disagreements remain. France is adamant that European concessions on agriculture have gone too far, and haven't been repaid with adequate compromises from other countries. Since the European Union represents its 25 member nations on trade, Paris can't veto a deal single-handedly, but it has substantial influence.
Another significant issue involves farm subsidies that don't go directly for exported products. "Developing countries feel there is an escape clause [in the current draft], allowing the U.S. in particular to continue with certain types of subsidies" that support crop exports indirectly, said Martin Khor, director of the Third World Network, a group critical of rich-country trade policies.
Accordingly, no one here discounts the possibility that this week's meeting will end in discord. If it does, the WTO's existing rules will stay in effect, "and the talks will just drift," said Jeffrey J. Schott, a trade expert at the Institute for International Economics in Washington. "But what won't just drift is the perception of whether it's better to do business in the WTO or in bilateral or regional negotiations," such as the recently approved free-trade agreements that the United States reached with Australia and Morocco. "I think you would then call into question the viability of the WTO as a negotiating forum. That's a real risk."
That, in turn, could adversely affect the WTO's "crown jewel" -- its system for arbitrating trade disputes among nations, according to Peter D. Sutherland, a former director-general of the organization. In a Financial Times column this month, Sutherland asked whether the global trade system can continue to function well "if the institution within which it is embedded -- and on whose rules its judgments are based -- ceases to command the respect of governments and businesses."