India calls on EU and US to give ground on trade deal

Developing countries can compromise to reach a global trade deal but the US and European Union have to concede much more ground to get talks going again, India's commerce minister said yesterday.

The US needed to scale back its farm subsidies radically to prevent distortions in world trade, said Kamal Nath, one of the "Group of Four" core negotiating partners in the so-called Doha round of trade talks.

"If the US seeks market access for its subsidised products it will result in more market access for subsidy flows, not trade flows," he said.

The US wanted access to export markets such as India's for its most heavily subsidised commodities including cotton, corn, sugar and rice. India has traditionally been one of the most reluctant countries to liberalise trade.

Mr Nath was speaking ahead of a meeting of about 30 trade ministers at the World Economic Forum in Davos on Saturday, which will discuss restarting the talks that were suspended indefinitely in July last year.

Mr Nath said he was optimistic about the prospects for Doha but said the countries of the developed world must sort out their differences first.

"I have told the US and EU that they must both converge," he said.

"This ministerial [ meeting] is not to negotiate. The starting point cannot be a ministerial."

The EU and US have been working hard at a technical level in recent weeks to reach agreement, but differences remain between them on cuts in subsidies and import tariffs.

Mr Nath said that talks should resume between officials on the details of which farm products the poorer countries would be allowed to exempt from the big tariff cuts, another significant point of disagreement in the talks last year.

India is a member of the Group of 20 (G20) developing countries, which wants the US to cut its maximum permitted subsidy limits to $12 billion (€9 billion).

The current proposal from the US would create a $22.5 billion ceiling, though that could probably be reduced by about $5 billion without much impact. The EU is asking for another two or three billion at least in cuts on top of that.

Privately, officials from developing countries in the G20 are sceptical that the US and the EU can convince their domestic constituencies to compromise.

France, which has a presidential election in April and parliamentary polls in June, has given a resounding No to the proposals floated privately by Peter Mandelson, the EU trade commissioner, to increase the average cut in farm tariffs from 39 to above 50 per cent.

Some other partners in the talks think that a window of opportunity may open after the French elections.