Modest WTO free trade deal seen better than nothing

GENEVA (Reuters) - Even a modest global trade pact may be better than nothing, according to economists and analysts who say the implosion of faltering World Trade Organisation talks would carry big costs.

Countries have missed deadline after deadline in their near six-year pursuit of a new WTO accord meant to give poorer nations a leg-up in world trade and reduce worldwide barriers to commerce in agriculture, manufacturing and services.

Negotiations stalled last year when wealthy nations resisted calls to slash their politically sensitive farm protections and developing countries balked at demands to expose their fledgling industrial sectors to more competition.

Prospects dimmed further last week when an attempt to bridge stubborn differences between the United States, European Union, Brazil and India collapsed acrimoniously in Germany, casting doubt over whether the WTO's 150 member states could reach the consensus needed to conclude the Doha round.

Razeen Sally, director of the European Centre for International Political Economy, said the negotiators' defensive positions meant any potential Doha agreement would have a limited scope and "change practically nothing on the ground".

Still, he said it was important for countries to salvage something from the WTO talks in order to restore confidence in the global trading system and its existing agreements.

"The real anxiety is not about potential gains forgone or short-term losses on the liberalization front. It is much more about the rules. The danger of not getting a deal is that the existing rules will be flouted or broken," he said.

CHINA TENSIONS

David Woods, a trade analyst and former WTO spokesman, said failure to secure a Doha deal would likely trigger a rash of two-way and regional trade deals, making life difficult for businesses navigating imports and exports through each system.

He warned that a breakdown in the Doha round could cause an escalation of trade conflicts between major powers, who have already lodged complaints at the global trade body over goods such as corn, cotton, aircrafts and car parts.

The WTO plays a vital role in easing tensions in economic circles, Woods said, noting a rise in protectionism in the wake of a Doha collapse may well aggravate simmering tensions between China and its trading partners such as the United States.

"A diminution of the credibility of the institution through a failure in the Doha round is not going to help that. It makes everybody's job of dealing with China more difficult," he said.

Small and vulnerable economies would also lose out if the Doha round dies, as few powers would seek them out in bilateral trade alliances. Development goals attached to the Doha agenda would also fall by the wayside in such a piecemeal system.

The aid agency Oxfam said important concessions had already been offered in the WTO talks, including duty-free quota-free access to least-developed nations and pledges for "aid for trade" to help poorer countries improve trading infrastructure such as roads, ports and communications networks.

But without a deal that overhauls market-distorting U.S. and European subsidies and tariffs, Oxfam spokeswoman Amy Barry said West African cotton producers and other poor-country farmers would "continue to really suffer".

"These reforms are completely necessary," she said. "We are not talking about huge, vast overhauls of rich countries' economies. We are just talking about reform that gives much, much poorer countries a decent opportunity."