Talks on world trade collapse

Talks on a global deal to liberalise world trade and ease poverty in the developing world have collapsed after five years of difficult negotiation.

Pascal Lamy, chief of the World Trade Organisation (WTO) suspended the talks yesterday after a last minute attempt by the world's major trading blocs to find a compromise ended in failure. The EU, US, India, Brazil, Australia and Japan could not overcome divisions on how to reform agricultural trade in 14 hours of talks, prompting a major crisis for the WTO, the body representing 149 states that facilitates world trade.

"Faced with this persistent impasse, I believe that the only course of action I can recommend is to suspend the negotiations across the board," said Mr Lamy, who warned that suspension could turn into the effective death of the free trade negotiations and prompt a resurgence of protectionism. He said it was up to WTO members to decide when to resume negotiations on a trade deal and that this could take "not a little bit of time".

The collapse in the talks prompted a blame game among the world's leading powers. The EU, Japan, Brazil and India suggested the blame lay with the United States. The EU and India said Washington had been demanding too high a price for cutting into the $20 billion (€15.8 billion) it spends annually on farm subsidies. But the US was adamant neither the EU nor India had been prepared to offer the sort of access to their markets that Washington needed to make a deal on subsidies worthwhile.

"Unfortunately as we went through the layers of loopholes. . . we discovered that a couple of our trading partners were more interested in loopholes than they were in market access," said US trade representative Susan Schwab.

EU trade commissioner Peter Mandelson said the US was not flexible enough and warned there were political and economic costs in failing to find a deal.

"We risk weakening the WTO and the multilateral trading system at a time when we urgently need to top up international confidence not further damage it, and do what we can to stabilise the world not create additional tension and uncertainty," he said.

The Doha round, which was launched in the Qatari capital in 2001, has continually been under threat due to the EU's and US's failure to agree cuts in agricultural support. In Europe, states such as France and Ireland have stringently opposed any offer by Mr Mandelson to improve the EU's offer on cutting farm subsidies and export tariffs.

Minister for Enterprise, Trade and Employment Micheál Martin, shrugged off US criticism of Ireland's entrenched position on defending the CAP. He said Ireland had already made deep cuts in farm support, which had not been matched by others.

The prospect of restarting the WTO talks in time to find a deal on the Doha round looks bleak given that in July 2007 US President George Bush loses his special "fast-track" trading authority. This allows the president to make deals that can be either approved or rejected by congress, but not amended.

What they said...

"It's most unfortunate. There could be a spate of bilaterals after this. The world is moving towards three blocks -- the US, the EU and Asia. It's a setback to the momentum for liberalisation." - Rajiv Kumar, Indian Council for Research in International Economic Relations, New Delhi

"All the previous trade rounds managed to prevent a failure. They [ papered] over the cracks. If it's an outright breakdown [ this time] it makes me very uncomfortable because the goodwill pushing forward in trade liberalisation is gone." - John Ip, Morley Fund Management, London

"Countries like India will be at the receiving end if it goes for bilaterals with major trading powers like the US and the EU. All the major trading blocs sing a different rhyme when they are [ at the WTO] and a different one when they are at home. It would be a failure on the most important issue - poverty alleviation." - Rajesh Chadha, National Council for Applied Economic Research, New Delhi

"It might be that negotiations will not continue until there is a new president in the US and a new EU Commission." - Tapio Kytola, Finnish Central Union of Agricultural Producers and Forest Owners