U.S. manufacturers fear Doha trade round failure

WASHINGTON (Reuters) - World trade talks could be headed for failure if advanced developing countries like Brazil and India balk at opening their markets to more foreign manufactured goods, U.S. industry officials said on Wednesday.

"When you have a group of countries that say we don't want to liberalize, how can you move ahead?" said Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers. "If they persist in this direction, it could be the end of the Doha round."

Vargo's comment echoed those U.S. trade officials made on Tuesday, after major developing countries outlined a proposal that would give the United States and other rich countries few, if any, new export opportunities in exchange for cutting their farm subsidies and tariffs.

The United States recognizes agriculture is the central issue for developing countries in the nearly 6-year-old world trade talks, Peter Allgeier, the U.S. ambassador to the World Trade Organization, said in Geneva.

But refusing to negotiate seriously on manufacturing and services trade liberalization until "the dust has settled on agriculture ... is a formula for failure," Allgeier said.

What U.S. business groups find most frustrating is the refusal of the so-called NAMA-11 group -- which includes India, Brazil and other advanced developing countries -- to say they are willing to negotiate a final manufacturing agreement on the basis of a draft text released in July.

Unless they're willing to do that, "it's hard to see how these negotiations are going to conclude," said Mary Irace, vice president for trade at the National Foreign Trade Council, whose members include many major U.S. exporters.

The draft manufacturing text already provides less new market access than U.S. companies hoped they could get when the Doha talks begin, Irace said. In addition, less than 30 developing countries would actually have to make any tariff cuts because of an agreement to exempt the very poorest WTO members from opening their markets, she said.

By indicating they can't work from the July text, the NAMA-11 have raised questions about whether they really want a deal, said Christopher Wenk, senior director for international policy at the U.S. Chamber of Commerce.

TRYING TO SHIFT FOCUS?

U.S. business groups still don't have any clear indication of what market openings advanced developing countries would in fact be willing to make, Wenk said.

For its part, the United States has agreed to negotiate a final deal based on a draft agricultural text that would require it cap spending on total trade-distorting farm subsidies at $13 billion to $16 billion per year.

The United States spent $19 billion on those supports in 2005, but high crop prices have reduce spending since then.

"Advanced developing countries need to step up and show leadership, in addition to the United States," Irace said.

Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics, said he suspected the developing country statement was a clumsy attempt to shift the focus of the talks back to agriculture and away from manufacturing.

"If it isn't a tactical move, it is a very foolish attempt at brinksmanship. Holding backing (in the manufacturing negotiations) is a clear recipe for stalemate and ultimate failure in the talks in the near term," Schott said.