WTO could start to pick up the pieces soon

World Trade Organization (WTO) Director-General Pascal Lamy opens an informal session of the Trade Negociation Committee at the WTO headquarters in Geneva July 21, 2008.

GENEVA (Reuters) - The widespread dismay over this week's collapse of global trade talks could prompt the World Trade Organisation to seek a way out of the impasse soon after the summer break, a highly placed trade source said on Thursday.

That would involve WTO experts and negotiators taking a fundamental look at the issue over which the talks deadlocked -- a technical but important proposal to help farmers in poor countries withstand a flood of imports, the source said.

As the negotiations to seek a breakthrough in the WTO's Doha round fell apart on Tuesday, their ninth day, key players said it could now be several years before a deal would be possible.

WTO Director-General Pascal Lamy said many countries had called for the package negotiated so far to be preserved in order to finish the Doha round, already in its seventh year.

"This left me with no doubt: looking at what is on the table now, the members of this organization believe that the Doha round is still worth fighting for. No one is throwing in the towel," he told WTO delegates.

WTO spokesman Keith Rockwell ruled out a resumption of ministerial talks in September, noting that the WTO largely shuts down in August so little preparatory work could be done.

But the trade source said work at the official and expert level could start soon after that. Lamy is due to visit India during August, which would give him an opportunity to probe the possibilities for discussions.

DISBELIEF AND FRUSTRATION

Disbelief that the talks had foundered over the "special safeguard mechanism" was mixed on Tuesday with frustration that agreement in so many other trade areas would now be set aside.

Even the United States and India, the two countries who were unable to agree on the scope of the safeguard, expressed regret that progress in the negotiations was going to waste.

"The big boys who did this are not completely happy with the situation," the trade source said.

Indian Commerce Minister Kamal Nath repeated on Thursday that he was willing to resume the talks whenever India's partners were ready.

The ultimately fruitless negotiations this week on the safeguard, an issue which no one had foreseen could torpedo the talks, concentrated on the numbers in the mechanism rather than the principles behind it.

The safeguard is part of the Doha talks mandate, so if the round is ever to reach an agreement it must be included.

But there are different views of its function.

Some see it as a tool to cope with an emergency -- a flood of imports that could suddenly deprive subsistence farmers of their livelihood.

Others see it more as a tool to regulate markets as they are opened up to imports, to cushion domestic farmers from the impact of competition.

PROTECTION FOR SUBSISTENCE FARMERS

The issue is how to reconcile the need for an emergency safeguard with the broader aims of trade liberalization.

"There's not been a real debate over these two viewpoints," the trade source said.

India and Indonesia said the safeguard was needed to protect their millions of subsistence farmers.

But the United States, backed by developing country exporters like Costa Rica and Uruguay, said the measure could be abused to restrain normal trade growth, or even roll back existing imports.

Much of this week's negotiation turned on the question of under what circumstances the safeguard could allow tariffs to be raised above current levels negotiated in the 1986-1994 Uruguay round.

The United States and developing country exporters argued this could turn the clock back 30 years on trade talks.

But the principle that tariffs can rise in extraordinary circumstances above negotiated ceilings is already well established, both in other safeguards and for instance anti-dumping duties imposed on unfairly priced imports.

U.S. and other exporters' fears that the safeguard could trigger cuts in China's commodity imports given its current low tariffs may also be groundless given China's enormous appetite for food imports to feed its population, the source said.

(Additional reporting by Doug Palmer; editing by Robert Hart)