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Last Updated: Monday, 15 September, 2003, 07:56 GMT 08:56 UK
Q&A: Why did trade talks collapse?

The World Trade Organisation (WTO) meeting in Cancun, Mexico - aimed at liberalising trade between rich and poor countries - has ended without agreement. BBC News Online explains why no deal was reached, and how it will affect people North and South.

Why did the talks fail?

The talks failed because rich and poor countries could not reach agreement on two key issues.

The first and most contentious of these was agriculture.

Rich countries were accused of hypocrisy for urging poor countries to open their markets but not being prepared to open their own - or reduce the huge subsidies to their farmers.

In the end, the rich countries would not agree to the abolition of all export subsidies which make their agricultural products cheaper on world markets.

There was also a great deal of opposition to European Union proposals for rules to govern investment by multinational companies in the developing world.

Many countries felt that they could not agree to this without losing control of their industries, and argued that the WTO was not the appropriate forum for such discussions.

Who is to blame?

Both sides have blamed each other for the failure of the talks.

The US trade representative in Cancun said poor countries would have to be prepared to compromise more if future trade talks were to make progress.

But developing countries blamed the EU, for trying to introduce a far too ambitious agenda on issues such as investment and competition.

In reality, it was the developing countries' ability to maintain a common bargaining position despite pressure from the rich, and despite differing interests on some issues, that proved decisive.

It showed that the developing nations now have real power in the WTO.

What happens next?

This was only an interim meeting in the Doha round of trade talks.

Now the negotiations return to the back rooms of Geneva, hopefully out of the headlines, where trade officials will make suggestions on the way forward.

But there are real doubts whether the ambitious deadline of concluding the Doha round by the end of next year can be met.

The Cancun setback makes it unlikely that a deal can be completed by 2005.

However, earlier trade rounds also suffered from delay - including the previous Uruguay round which lasted eight years.

It all depends on whether the shock of failure at Cancun will make both sides more willing to compromise at the next ministerial meeting, which will take place in Hong Kong in 2004.

Who will be affected by the failure?

Trade has been the engine of world economic growth over the past 50 years.

But in the past few years there has been a sharp slowdown.

A new trade deal would have boosted economic growth and confidence.

Developing countries will be the biggest loser if trade liberalisation fails, however.

The World Bank estimates that 144 million people would be lifted out of poverty if a deal had gone through in Cancun.

Citizens in rich countries would have gained from a deal involving agriculture through cheaper food prices.

However, developing countries are still on track to make gains in two areas.

Under an earlier agreement, rich countries have agreed to full opening up of textile and clothing markets by the end of 2004.

And in August, there was a deal that should make cheap medicines available to poor countries in the near future.

The WTO has agreed to finalise the deal on importing generic drugs to meet medical emergencies like HIV/Aids within the next six months.

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