World Trade Organisation negotiations in Cancún broke down unexpectedly September 14, 2003. The main causes were differences over whether to negotiate four new trade-related issues -- investment, competition, trade facilitation and transparency in government procurement – and how to free up trade in agriculture. The breakdown in Cancún means the Jan. 2005 deadline for completing this round of talks will almost surely be missed.
Everyone loses from this setback, including developing countries, which had the most to gain from a new global agreement to strengthen trade rules, lower tariffs and eliminate other barriers to the free exchange of goods and services. With lost momentum in the WTO talks, the push for free trade deals between individual countries, or small groups of countries, will likely accelerate. In that case the world's poorest nations may become more marginalized than they are today.
How long the WTO talks will be delayed remains unclear. Negotiations now shift back to the WTO's Geneva headquarters where delegates are scheduled to meet by mid-December. At first, talks will likely be characterised by deep distrust and uncertainty, after the disagreements of Cancún. The key to renewed progress will be movement toward free trade in agricultural products, an area where markets are currently distorted by more than $200 billion in annual subsidies.
Cancún ushered in a major change in WTO negotiating dynamics that will influence future talks. Groups of developing countries emerged, like the Brazilian-led coalition dubbed G20+ and the African Union/ACP, and presented their positions in a more unified and powerful way than ever before. At the same time, the United States and the European Commission showed a new willingness to promote their objectives together. It remains to be seen how these dynamics will play out -- especially whether the new coalitions of developing countries are durable, and how they will project their stronger voice. A polarized North-South standoff would undermine the economic interests of both sides and could be highly damaging to the multilateral trading system.
Read the OECD Statement on Reinvigorating the Doha Development Agenda after Cancún.
