World trade talks stall, atmosphere tense

GENEVA (Reuters) - Progress towards a global trade deal ground to a halt on Monday as the United States clashed with China and India over access to their rapidly growing markets and key European Union states demanded better terms.

"The situation is very tense. Things are finely balanced and the outcome is by no means certain," World Trade Organisation spokesman Keith Rockwell told reporters, as key WTO ministers resumed talks shortly after midnight.

Negotiators battled over a "special safeguard mechanism" intended to help poor countries protect their farmers against import surges, with agricultural exporters like Costa Rica, Paraguay and Uruguay pitted against other developing countries.

The row about the safeguard blocked all other discussions on Monday, preventing the WTO from issuing new negotiating texts to serve as the blueprint for a deal.

"We are very much concerned about the direction that a couple of countries are taking," U.S. Trade Representative Susan Schwab said during a break on the eighth day of World Trade Organisation talks.

"I am very concerned it will jeopardize the outcome of this round," she told reporters.

Her comments reflected strong differences over U.S. demands for major developing countries to agree to deep tariff cuts in at least some manufacturing sectors and China and India's insistence that developing countries be given a strong new tool to guard against agricultural import surges.

China's WTO ambassador Sun Zhenyu said the United States was refusing to budge on the safeguard, which he said developing countries needed to protect their subsistence farmers. But major WTO players were continuing to try to resolve the disagreement.

"Maybe not tonight, but they're not giving up efforts," Sun told reporters.

German Chancellor Angela Merkel and French President Nicolas Sarkozy shared concerns about the talks in a phone call on Monday, a spokesman for Sarkozy said, while France, Italy and seven other EU members formed an alliance to push EU Trade Commissioner Peter Mandelson to hold out for better terms.

"There is a real risk that this deal will not be accepted by the European countries if the concerns of all European countries are not addressed," Sarkozy's spokesman said.

MARATHON TALKS

Top trade officials from around 30 key WTO members have been in Geneva since last Monday to try to agree on terms for cutting farm subsidies and tariffs on agricultural and manufactured goods. After a rough start, the talks appeared to be making progress just as problems resurfaced again.

India's Commerce Minister Kamal Nath told reporters India had never agreed to a compromise crafted last week by WTO Director-General Pascal Lamy, but had continued talks in the hope of winning further concessions from developed countries.

"I'm still hoping we will see some movement. I'm still optimistic," Nath told reporters after meeting ministers from seven key WTO players.

Priorities include deeper reductions in allowed spending on developed country farm subsidies than the proposed 70 percent cut for the United States and 80 percent cut for the EU in the current package, he said.

Poor countries also need a better special safeguard mechanism to help ward off import surges or price collapses in farm products, Nath said.

But developing country food exporters say the mechanism as now proposed would shut them out of other developing country markets, depriving them of their best prospects for growth.

In some cases, by allowing countries to hike tariffs over current levels, regardless of any cuts agreed in the Doha round, it could leave them worse off than today's level agreed in the 1994 world trade deal.

"My country will not accept that remedies will go back to a pre-Uruguay round state," Uruguay's ambassador to the WTO, Guillermo Valles Galmes said.

The United States, under pressure to cut its farm subsidies and tariffs in core markets such as autos and clothing, insists developing countries make significant openings in return.

In manufacturing, it wants China, India and others to agree to voluntary "sectoral" negotiations, in which a critical mass of countries would agree to cut tariffs to as close to zero as possible for industries ranging from jewelry to chemicals.

China and India object to a compromise provision which encourages countries to take part in at least two sectoral talks by allowing them lower cuts in other industrial tariffs.

(Additional reporting by Doug Palmer, Laura MacInnis and Robin Pomeroy; editing by Alison Williams and Richard Meares)