The collapse of the World Trade Organisation talks in Cancun in Mexico was not unexpected. The rhetoric from both sides of the trade divide in pre-Cancun meetings had set the tone for the meeting.

At the meeting, while the developing countries made a passionate plea that the 'development issues' raised in the explosive 2001 Doha meeting be resolved first. Principal among these issues was ending or scaling down of the huge subsidies on farm products that the rich countries paid their farmers. The rich countries wanted to link any such reform to concessions on the 'Singapore issues' of investment policy, competition guidelines, government buying and trade facilitation.

Life and death issues
The poor countries argued that eliminating trade barriers completely would ruin their populations, which are heavily dependent on agriculture, and do not benefit from the kind of subsidies their rich-country cousins get. Critical to the debacle was the failure of the US and the EU to give ground on the issue of agricultural subsidies. While these countries made some minor concessions like tariff cuts on processed agricultural products, they were too insignificant to form the basis of a way forward.

In the face of rich-country intransigence they were left with no alternative but to stage a walkout from the last meeting.

They had to rest content with the belief that no deal was better than another bad deal. What they had accomplished, other than this negative achievement, was a relatively rare unification of the views of all developing countries, and had successfully articulated their stand at Cancun.

There were two overlapping coalitions of developing countries in evidence. The group of 21 countries, called G-21, was firm on the phase-out of farm subsidies by developed countries, and the group of 15 countries, or G-15, was firmly opposed to the inclusion of the Singapore issues in the trade talks. China's first ever presence at the WTO gave developing countries an extra boost. The combination of China, India, Brazil and South Africa enabled the group of 21 developing countries to successfully challenge the EU- and US-dominated agenda.

Electoral considerations
If politicians in countries like India are celebrating the collapse of the Cancun talks as a victory, this may well turn out to be a pyrrhic victory. There is a high possibility that the world will see no trade liberalisation at all. In any case, with the US presidential elections (coming up in 2004) casting a long shadow on the talks, it was unrealistic to have expected any American reform on the farm subsidies issue.

The farm states had formed the backbone of support for George W. Bush in the 2000 US elections. The US may now actually retreat from multilateral liberalisation, as it has threatened, and ignore the WTO in favour of one-on-one pacts with favoured countries (like Australia).

Before the talks broke off, American farm groups at the conference said they were pleased that US trade negotiator, Robert Zoellick had protected most of the farm bill passed in 2002, which raised subsidies by $40 billion.

US cotton subsidies
America has about 25,000 cotton farmers. They produce $3 billion worth of cotton annually, and receive $4 billion each year in subsidies. While American taxpayers pay for these subsidies, those who suffer the most are the 10 million cotton farmers of Benin, Burkina Faso, Chad and other Central and West African countries, most of whom live on less than $2 a day. They could earn a lot more, and their countries can export more, but subsidised American cotton has caused world cotton prices to tumble, costing African farmers at least $1 billion a year. The prices of cotton, West Africa's main cash crop, are at a 30-year low.

To test whether the rich countries were actually serious about trade liberalisation, ministers from four African countries, Benin, Burkina Faso, Chad, and Mali - among the poorest countries in the world - met with Zoellick at Cancun to discuss the effect of American cotton subsidies on world agricultural trade. Zoellick told his visitors that what was already on offer - no cuts in subsidies but a vague plan to help build up African textile industries.

The Africans then joined the Group of 21, headed by Brazil, China, India and Indonesia in walking out of the talks.

The cost of the breakdown
The collapse of the Cancun talks means the WTO is unlikely to be able to meet its January 2005 deadline for dismantling global trade barriers. The World Bank estimates that a good pact would add $520 billion to world incomes by 2015, or nearly $600 for every living person on earth. So, goodbye to that.

Experts believe that the reform of the American agricultural system will now not take place as fast as it might have done had the talks succeeded - which is bad news for farmers of developing countries.

Robert Zoellick, the US Trade Representative, felt the poorer countries had lost good opportunities in the face of their insistence that the US and European Union end all farm subsidies and drop barriers to agricultural imports. He made it obvious that Washington would now focus on getting regional and bilateral pacts outside the WTO framework arrangements which are said to make it easier for big countries to impose their will on smaller ones.

A high level meeting of the WTO will be held to review the situation, but with no new pact in sight, poorer countries will have to wait much longer for even slightly better access to lucrative markets for their farm goods. The cost of waiting will probably be greater for the weaker than the stronger in the system.

Conclusion
At Doha the message that was hammered home was that without safety nets, as long as different countries were at different levels of the development scale, no benefits would accrue from trade, especially for the developing world. The EU and US negotiators were not willing to blink on these issues, including the contentious farm subsidies, which make agriculture-dependent Third World economies uncompetitive even within their borders.

The Americans and Europeans have been waxing eloquent about how the war against terrorism can best be fought by declaring a war on poverty. But, at Cancun, the US, Canada, Europe and Japan turned their backs on the poor, who now feel as terrorised by rich country trade policies as by masked terrorists armed with AK47 rifles.