* WTO chief says trade body "back in business"
* Agreement will lower trade barriers
* U.S. says deal benefits developing and developed economies
* Pact could create 21 million jobs - study (Updates throughout)
By Randy Fabi
NUSA DUA, Indonesia, Dec 7 (Reuters) - The World Trade Organization reached its first ever trade reform deal on Saturday to the roar of approval from nearly 160 ministers who had gathered on the Indonesian island of Bali to decide on the make-or-break agreement that could add $1 trillion to the global economy
The approval came after Cuba dropped a last-gasp threat to veto the package of measures.
"For the first time in our history, the WTO has truly delivered," WTO chief Roberto Azevedo told exhausted ministers after the talks which had dragged into an extra day on the tropical resort island.
"This time the entire membership came together. We have put the 'world' back in World Trade Organization," he said. "We're back in business...Bali is just the beginning."
The talks, which had opened on Tuesday, nearly came unstuck at the last minute when Cuba suddenly refused to accept a deal that would not help pry open the U.S. embargo of the Caribbean island, forcing negotiations to drag into Saturday morning.
Cuba later agreed on a compromise with the United States.
But there was scepticism how much had really been achieved.
"Beyond papering over a serious dispute on food security, precious little was progress was made at Bali," said Simon Evenett, professor of international trade at the University of St Gallen in Switzerland. "Dealing with the fracas on food security sucked the oxygen out of the rest of the talks."
The talks had begun under a cloud because of an insistence by India at the outset that it would only back an agreement if there was a compromise on food subsidies because of its massive programme for stockpiling food to feed its poor.
India, which will holds elections next year, won plaudits at home for taking a stand on behalf of the world's poor.
An eventual compromise was greeted with jubilation by Trade Minister Anand Sharma. While India had insisted on a permanent exemption from the WTO rules, the final text aimed to recommend a permanent solution within four years.
But the agreement is a milestone for the 159 WTO members, marking the organisation's first global trade agreement since it was created in 1995.
It also rescues the WTO from the brink of failure and will rekindle confidence in its ability to lower barriers to trade worldwide, after 12 years of fruitless negotiations.
The deal would lower trade barriers and speed up the passage of goods through customs. Analysts estimate that over time it could boost the world economy by hundreds of billions of dollars and create more than 20 million jobs, mostly in developing countries.
It still needs to be approved by each member government.
"It is good for both developed and developing members alike," U.S. Trade Representative Michael Froman said.
A study by the Washington, D.C.-based Peterson Institute of International Economics estimated the agreement would inject $960 billion into the global economy and create 21 million jobs, 18 million of them in developing nations.
The deal slashes red tape at customs around the world, gives improved terms of trade to the poorest countries, and allows developing countries to skirt the normal rules on farm subsidies if they are trying to feed the poor.
The ministers had gathered with a clear warning that failure to reach agreement in Bali would turn the WTO into an irrelevance and trigger a rush towards regional and bilateral trade pacts.
It came almost 20 years to the day since a similar nail-biting conclusion to another marathon negotiation - the talks to agree the creation of the WTO itself, which wrapped up in mid-December 1993. That was the last global trade deal.
The Bali meeting was also noticeable for its lack of anti-WTO protests compared to the street battles when ministers met in Seattle 14 years ago.
The Bali accord will help revive confidence in the WTO's ability to negotiate global trade deals, after it consistently failed to clinch agreement in the Doha round of talks that started in 2001 and proved hugely over-ambitious.
As the Doha round stuttered to a halt, momentum shifted away from global trade pacts in favour of regional deals such as the Trans-Pacific Partnership that the United States is negotiating with 11 other countries, and a similar agreement it is pursuing bilaterally with the European Union.