Exclusive: U.S. rejects Mexico plan for Doha trade deal

GENEVA Fri Feb 4, 2011 1:44pm EST

GENEVA (Reuters) - The United States on Friday rejected a Mexican government proposal to break the deadlock in long-stalled world trade talks, saying it failed to achieve the amount of new market opening needed for a deal.

Trade ministers agreed last week to push for an outline deal in the decade-old talks by July, and instruct their negotiators at World Trade Organization headquarters in Geneva to make the necessary compromises to reach an agreement.

Mexico's proposal attempts to tackle the fundamental divide in the talks -- the call by rich countries for a more far-reaching deal than is now on the table versus the demand by poorer countries that a deal primarily promotes development.

"We appreciate the active engagement, but our analysis of Mexico's approach is that it will not address the central issue of ambition," a U.S. trade official told Reuters.

That "cannot be resolved through blanket prescriptions, or over-arching formulaic solutions," the aide added.

"There is simply no substitute for WTO Members sitting across the table and negotiating with one another. Shortcuts all lead to dead ends," the aide said.

The United States and European Union want emerging economies to open up their markets more than so far proposed, while developing countries want advanced economies to make a bigger contribution to the deal than they do.

Since it is already agreed in principle that the world's poorest countries would not have to make concessions, the difference is between rich and fast-emerging economies like Brazil, China, India, South Africa and Thailand.

Some economists say a Doha deal could inject hundreds of billions of dollars into the world economy. It would also boost business sentiment and bolster defenses against protectionism.

While the nine-year-long negotiations have prompted yawns and skepticism in the past, businesses are paying increasing attention. The law firm King & Spalding issued a note to clients on Thursday urging them to review how a deal could affect them.

TRADE-OFFS

Mexico's proposal, a copy of which was obtained by Reuters, would require rich countries to do more to open their markets than developing countries.

It looks to open up a whole range of markets, from farming and industrial goods to services, allowing negotiators to make trade-offs across the board.

For instance one country may be willing to make deeper cuts in industrial tariffs if it sees its partner going the extra mile on farm import duties.

"In the market access areas progress has been quite limited," Mexican Economy Minister Bruno Ferrari told trade ministers in the Swiss resort of Davos on January 29, according to a participant in the meeting.

"So the question is if we are going to be able to create a shortcut toward a simultaneous solution for all market access issues," he was quoted as saying.

A Doha agreement may be quite different to Mexico's proposal in the end, but it is certain to involve this kind of trade-off across different sectors, known in the jargon as horizontal negotiations.

And once questions of market access are dealt with, other problems such as cutting subsidies or improving rules for unfairly priced imports will fall into place, Ferrari said.

(Additional reporting by Doug Palmer in Washington; Editing by Laura MacInnis)

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