Next few months seen as last chance for WTO deal

WASHINGTON Wed Aug 29, 2007 8:15pm EDT

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WASHINGTON (Reuters) - The last chance for a world trade deal could slip away in the next few months unless India, Brazil and other advanced developing countries offer meaningful commitments to open their market to more foreign goods, U.S. private sector experts said on Tuesday.

"What is badly needed is political leadership in key capitals to get the job done this fall. Absent such leadership, my fear is the round will go into a deep freeze for a few years," said Mary Irace, vice president for trade and export finance at the National Foreign Trade Council.

Negotiators will return to Geneva next week to dig into agricultural issues that have been the main stumbling block since the talks were launched in November 2001 in Doha, Qatar.

A week later, countries will resume negotiations on "nonagricultural market access" issues, known in World Trade Organization parlance as the NAMA talks and which basically cover all manufactured goods.

In July, the Geneva-based chairmen of both the agriculture and NAMA negotiating groups tabled a pair of draft texts they hoped would set the stage for a final deal.

"While there are some major issues in the texts which require greater clarity ... the outlines of a solid Doha agreement are there," Irace said.

One big issue for U.S. business is how much advanced developing countries would be required to open their markets in exchange for cuts in rich country farm subsidies and in tariffs on both farm and manufactured goods.

That will largely be determined by a pair of key numbers, or "coefficients," that are to be inserted in a mathematical tariff-cutting formula for manufactured goods.

The July draft proposed coefficients of 8 or 9 for developed countries, and between 19 and 23 for developing countries.

AN 'IMPERFECT' DEAL

A lower coefficient generates more new market openings by cutting tariffs, especially high ones, more aggressively. Whatever the coefficient used, it effectively becomes the new tariff ceiling for that country.

The United States and the European Union pushed for coefficients of 10 and 15 for developed and developing countries, but ran into stiff opposition from the NAMA-11 developing country group, which wanted 10 and 35.

U.S. business leaders say that would generate few, if any, new export opportunities to advanced developing countries, while requiring the United States to open up sensitive manufacturing sectors, like textiles and clothing, which are protected by high tariffs.

"It's very important for U.S. business that the (developing country) coefficient be under 20 percent," Irace said.

At this point in the negotiations the United States has two options: "Accept an imperfect compromise, or accept a more costly failure that could damage U.S. economic interests and the international economic system," said Jeffrey Schott of the Peterson Institute for International Economics.

"When those are the options you have, then you go for the imperfect compromise," but the deal still has to generate enough new U.S. export opportunities to make it politically viable in Congress, Schott said.

With U.S. lawmakers already losing interest in the talks and the 2008 presidential campaign heating up, negotiators must draw on the draft texts to stitch together the key elements of a deal over the next two months, Schott said.

"If countries continue to play the blame game and maintain their past positions, nothing will happen and the window of opportunity for crafting an imperfect compromise will close. That will be it. The round will go into deep hibernation," Schott said.

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