2007 will be make or break year for world trade body

Global trade:Although it ought not be a matter of concern these days, approaching your 60th birthday might still be worrying. It all depends on the state of your health. The World Trade Organisation (WTO) dates from 1995 when Peter Sutherland became its first director general. But the torch it has carried was first lit when its predecessor the General Agreement on Trade and Tariffs (GATT) was set up in 1947.

By coincidence, the current WTO director general Pascal Lamy was also born in 1947. Regularly seen jogging around Lake Geneva, he is twice as fit as most men half his age. The same, unfortunately, cannot be said for his organisation.

The collapse of the Cancun round of WTO talks in 1999 might be likened to a heart attack. Last June, and after seeming to recover, the organisation suffered a relapse when WTO members failed to agree a way forward on trade liberalization, leaving the 150-member organisation facing an aimless future from 2007.

Death will not happen. The WTO does more than conclude trade agreements. As well as monitoring existing ones, it acts as the world's trade policeman, adjudicating in hundreds of disputes between member states. Last week, for instance, the US announced it was taking litigation to the WTO over the EU's support for Airbus.

But confinement to those activities would leave the organisation in a bedridden state. Worse it would have dire consequences for the world's poorest countries, whose only hope of fair trade is a multilateral trade agreement.

The alternative - bilateral trade agreements between pairs of states - will leave them at the mercy of strong-arm negotiating tactics as more economically powerful nations impose unfair terms of trade, or link free trade to other political favours.

For the world's poorest countries, trade in agricultural produce with the world's developed economies offers the only hope of prosperity.

The bitter irony is that agriculture is the most protected sector of the world's economy. Tariff rates on agricultural products range from 11 per cent in the US to 17.3 per cent in the EU and 18 per cent in Japan.

By contrast - and thanks to the GATT - the average tariff rate on manufactured goods is just over 4 per cent.

A high level "ministerial round" of negotiations in Hong Kong a year ago, which were supposed to close the gap, resulted in preliminary agreement to tariff and subsidy reductions. But it was not to be.

When WTO officials gathered in Geneva last June to put meat on the bones of what was agreed - tariff reductions in some agricultural products and measures to facilitate trade for poorer countries - they failed to agree on the matter of farm subsidies.

Talks on the Doha round, the name given to the latest series of negotiations, were formally suspended.

Lamy has likened the current situation to timeout in a basketball or other game that gives coaches time to talk to their players. No one is in a hurry to get back into the game.

The US position is that, until the EU offers more reform of its Common Agriculture Policy, it won't budge on subsidies.

Pointing the finger in the other direction, the EU blames Congressional elections in the US for what it says is an intransigent stance.

And both the EU and US blame Brazil, India and China for not agreeing to free up access to their services markets for American and European firms.

Whether it is to blame or not, political events in the US will have a significant bearing on what happens next. George Bush's presidency has the power to negotiate and finalise a deal without constant recourse to congress - but that dispensation runs out next month.

Thereafter, agreement becomes much more difficult to achieve as it must run the gauntlet of an increasingly protectionist Congress.

After the debacle of the Great Depression, not to mention the horrific second World War to which it gave rise, GATT's long hard slog to liberalise world trade left its mark in the prosperity of post-war Europe and America.

The third world looks once again like being denied the chance of that same prosperity.

Worse still is the possibility that the serious global economic imbalance between the north and south - an imbalance that free trade might redress - begins to interact with political conflict between the developed and non-developed world, particularly in Islamic countries.

As they contemplate the future of the WTO, world leaders might pause to reflect on the ashes out of which it was born.