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EU: World Trade Liberalization Talks Deadlocked Before Cancun Summit

European Union representatives have returned from a round of trade liberalization talks in Montreal held on 28-30 July saying a lot of work is needed before reforms can be agreed at a World Trade Organization summit in Cancun, Mexico, next month. Key actors -- from the richest to the poorest nations -- still disagree over issues such as farm trade or access to cheap medicines. However, the EU says global agreement is still possible despite the complexity of interests involved.

Brussels, 1 August 2003 (RFE/RL) -- Six weeks before the start of the World Trade Organization's (WTO) summit in Cancun, the likelihood of sweeping reforms -- demanded mostly by the world's poorer nations -- remains an open question.

One European Union official says a limited, informal round of talks in Montreal this week involving only key players in global trade had produced "no scope for pessimism, but no scope for optimism either."

Liberalizing agricultural trade has become the crunch issue in this round of talks, first launched two years ago in Doha, Qatar. It pits some of the world's richest and poorest nations against one another.

Those better off -- predominately the European Union, the United States, and Japan -- are intent on protecting their farming sectors from outside competition. To do that, they restrict access to their markets by means of import tariffs, and subsidize domestic production to give it a greater competitive edge both in external and domestic markets.

The interests of most poorer nations are diametrically opposed. Their export-driven economies depend on easy access to markets in the developed world for their largely agricultural produce. The poorer nations have found an ally in a number of industrialized countries -- among them Australia, New Zealand, and Canada -- who support global free trade.

If a deal is to be reached in Cancun, the EU and the United States -- in the words of one EU official, the two "elephants" of global farm trade -- must reach an understanding first. This has raised fears that they could "pre-cook" a deal, agreeing to keep their respective advantages to the detriment of most of the remaining 144 WTO members.

Gregor Kreuzhuber, a farm spokesman for the European Commission, yesterday confirmed that talks with the United States are under way, but promised "transparency."

"Yes, it is important that Europe and the United States seek and find common ground, but this should not be misinterpreted in the way that we are trying to 'cook up' a deal between Europe and the United States, leaving out all the other 144 WTO members in the cold," Kreuzhuber says. "What we want to do in the next days is that we will talk and engage with the Americans [on] how we can try to find a common position, but we are going to do that in full transparency and explain whatever we might be able to to the other WTO members."

Kreuzhuber said it is obvious that without the EU and the United States agreeing to a deal, the Doha development agenda agreed in 2001 to help the developing world will be "very difficult" to achieve.

However, members of the Cairns Group, which brings together the world's foremost exporters of agricultural goods -- both poor and industrialized -- have said an earlier EU-U.S. deal agreed nearly 10 years ago had simply served to put off reforms.

A number of Cairns Group countries say that unless the EU and the United States agree to substantial cuts in farm support, they will walk out of the Cancun meeting.

An EU-U.S. deal by itself is no easy matter to achieve, given that differing support schemes allow both sides to accuse the other of misconduct.

The EU is frequently attacked over the level of subsidies it pays its farmers, but it claims that the reform of the Common Agricultural Policy (CAP) announced last month will drastically reduce the "trade-distorting" effects of subsidies.

Direct subsidy levels in the United States are lower than in the EU, but various types of "export credits" are used, allowing farmers to "dump" their goods in poorer markets. Financial inducement schemes also exist to encourage foreign governments to buy U.S. goods.

The United States claims, for its part, that its export subsidies by far undercut measures in place in the EU.

Both the EU and the United States also use measures to restrict imports from the rest of the world.

Under WTO rules, all countries have to agree to a final package in Cancun. If a country walks out, the talks would be frozen.

The other pivotal issue in the run-up to Cancun is that of access to cheap medicines by citizens of the world's poorer countries. Here, the United States stands alone, refusing to allow cheap, copied "generic medicines" to be sold without royalties being paid to the owners of the patents on the originals.

This allows the EU to say that "very little" is needed for a final deal, as the other 144 WTO countries agree with the EU.

Arancha Sanchez is an EU Commission spokeswoman for trade: "What progress have we made since the last meeting where we met informally two months ago? Very little. But there is very little that is necessary to get to a final deal. We just have to make the U.S. move its position to access on medicines."

Sanchez said U.S. negotiators had said in Montreal they will hold further consultations with domestic producers of medicines.

Finally, Kreuzhuber noted in Brussels yesterday, an eventual deal in Cancun will be a complex one, with "so many different interests involved." A deal is only possible, he said, "if everyone is ready to move, and no one will get 100 percent."