The Poor Get Poorer

The collapse of the Cancun trade summit is best viewed from within so-called green rooms. Not until 2001 were the poor even allowed into the conference halls where the rich once gathered to write the rules of the trading world. That same year, at the summit in Doha, poor countries pushed their demands to the top of the agenda for the first time. The focus of future talks would be development--boosting exports of rice and cotton from Asia and Africa, rather than cars and computers from Europe, America and Japan. There was much hope. Yet 22 months later, resentment over decades of exile from the green room would return to explode in Cancun.

The leaders of the West seemed flabbergasted. On the face of it, the largest developing nations had torpedoed a summit from which they had the most to gain. Spearheaded by Brazil with vocal support from India and quiet backing from China, the core group founded in Doha was reincarnated as the group of 22 developing nations, or G22. They will bear the brunt of the cost of failure in Cancun, which according to the World Bank includes the lost opportunity to raise 144 million people out of poverty. In the final two days, the G22 and allied groups refused to budge even an inch from the "development agenda." After the collapse, U.S. Trade Representative Robert Zoellick denounced countries looking for "freebies," saying those "that could ask for but not give... are going to face the harsh, cold reality" that they came away with nothing. His European friend and counterpart Pascal Lamy warned that the trade talks were becoming a "medieval process."

It's even more complicated than that. For many years, says University of California, Davis, economist Colin Carter, the United States and Europe made the rules governing global trade in farm goods by themselves, and the poor were tired of it. After Doha, they looked on in dismay as America actually raised farm subsidies and the European Union dragged its feet on offering proposed cuts. The EU offer finally came in June, and attempted only to dampen the distorting influence of subsidies, not to cut them. Then, only a month before Cancun, the United States took back a more generous offer to unite with Europe on its less generous one. Even a conservative American trade expert like Brink Lindsey at the Cato Institute wondered if the United States was playing games, offering deep cuts to look like the "good guys," with no intention of delivering.

Suspicions went even deeper in developing nations, which saw America and Europe conspiring against them on the critical issue in Cancun. It was only then, just weeks before the summit, that Brazil began reassembling the front that would become the G22. University of Hawaii political scientist Christopher McNally says the turning point came when the CAIRNS group of exporting nations, led by Australia and including Brazil, Argentina, South Africa, Indonesia, Thailand and the Philippines, formed alliances with India and China. Together, these nations represented two thirds of the world's farmers and 60 percent of world agricultural output on five continents, and had the confidence to take on the West.

To many observers, the G22 looked like a throwback to the G77, the 1950s alliance of poor nations that rose up to challenge European colonialism. Hajime Ito, a senior official at the Ministry of Economy, Trade and Industry in Tokyo, says India's lead role in the G22 suggests a nation suffering "the East India Company syndrome," or fearful memory of the British trading house that once controlled its economy.

As the Cancun summit opened, most Western delegates seemed certain that the G22 would crumble under pressure into the G2: Brazil and India, its loudest members. Instead, led by raspy-voiced Brazilian Foreign Minister Celso Amorim, the coalition held up. Early on, so did the negotiations. "After three days of really tough talks, we were beginning to see some room for compromise on agriculture," says Marcos Jank, an adviser to Brazil's team in Cancun.

Then, rich nations introduced a new twist: the so-called Singapore agenda on "competition" issues, which would, for example, pry open the procurement practices of governments in the developing world. To the G22 leaders (and on this most U.S. trade experts agree) the new agenda was a late-in-the-game trick to gain leverage in the debate over farm subsidies. "The EU took a hard line on Singapore and the climate became very bad," says Jank. "By Sunday morning we were actually pulling for the talks to break down." At 6 p.m., the Mexican hosts declared the summit over.

At a parting-shot press conference, Zoellick made it clear the United States would push ahead negotiating trade deals country by country, or region by region. Fearful that this represents a divide-and-conquer strategy, poor nations have begun shoring up their own trade alliances all over the world. Even before Cancun ended, Mexico was negotiating side deals with Japan. Within days, business people in the Philippines lobbied for deals with the United States, Japan and India, which next month will cut deals with Thailand and South Africa, and so on. It's not clear whether the proliferation of bilateral deals will unite or complicate world trade, but the great powers do have a clear advantage in the negotiating phase. "This is an unhappy outcome" for small nations, warns Singapore's Minister for Trade and Industry George Yeo. "Small countries have less negotiating power in bilateral agreements. That's a given."

Yet many developed nations are celebrating what they see as a political victory. After Doha, leaders of the developing world said they were not against globalization, they just wanted deals that would distribute its benefits more fairly. By last week, Indian Commerce Minister Arun Jaitley was boasting that "we dominated the agenda" in Cancun and saying that no global deal was better than a bad one. "We're going back to the 1930s," when dueling trade blocs fed the tension that led to World War II, says former Reagan administration trade official Clyde Prestowitz. "Asia's miracle has been based on the global system. This is dangerous, particularly for the poorest in Asia."

The quietest leader of the G22 may prove most important now. China occupies a gray area between the developed and developing worlds. As a manufacturing juggernaut it is feared by every exporting nation, rich or poor. As a net importer of food its growing middle class benefits from subsidized Western prices for wheat and rice; yet its own farmers could sell more vegetables to Japan if subsidies were cut. The diversity of its economy makes it less vulnerable than agrarian neighbors like Vietnam. And no leader in Cancun handled the collapse more diplomatically than Chinese Commerce Minister Lu Fuyuan, who said Beijing had supported the G22 push for a more "balanced" world trading system, but would immediately "promote a new round of talks." If any nation can bridge the post-Cancun rifts between rich and poor, it's probably China.