G20 leaders call for Doha breakthrough by year end

WASHINGTON (Reuters) - World leaders agreed on Saturday to "strive" for a major breakthrough in long-running world trade talks by the end of the year and pledged not to raise any new trade barriers for the next 12 months.

"There is a determined effort to see if we can't complete the modalities for Doha by the end of December," U.S. President George W. Bush said, referring to the politically sensitive core details of how countries would cut farm subsidies and tariffs on both agricultural and manufactured goods.

Both developed and developing country leaders attending the Group of 20 summit stressed the role the seven-year-old trade round could have in restoring economic growth battered by the worst financial crisis since the 1930s.

"A successful conclusion to the ongoing multilateral trade talks would be an important confidence builder at this stage," Indian Prime Minister Manmohan Singh said, a point Brazilian President Luiz Inacio Lula da Silva also made.

The G20 meeting brought together key players in the Doha round, including the United States, the European Union, Brazil, China, India, Japan, Australia, Canada, Britain and France.

The world trade talks have lurched from one crisis to the next since countries agreed in the capital city of Qatar on November 14, 2001 to launch the negotiations.

With Bush set to leave office on January 20, many countries would like to wrap up the basics of a Doha agreement before his successor, President-elect Barack Obama, takes over.

"If there is the political will, it would be good if we could reach an agreement in the Doha round with the present U.S. administration," German Chancellor Angela Merkel said.

World Trade Organization Director General Pascal Lamy, in a statement from Geneva, said the G20 leaders provided the Doha round with a "much-needed political impetus."

'SUPPORT ... INTO ACTION'

"What we need now is for this strong show of support to be translated into action at negotiating table," Lamy said.

Lamy has indicated he would call trade ministers back to Geneva only if there is a good chance of reaching a deal.

A breakthrough would require the chairmen of various negotiating groups based in Geneva to quickly produce new texts that capture the progress made in July and come up with possible solutions for the tough remaining issues.

The G20 leaders had a "passionate" conversation over lunch on Saturday about the importance of finishing the Doha round, a Bush administration official said.

"That's going to be tough to do but certainly that's something that we believe is important," Canadian Prime Minister Stephen Harper said.

In their statement, the leaders agreed to strive for a modalities deal in the next eight weeks that produces an "ambitious and balanced result" and said they stood ready to help their trade ministers to achieve that goal.

In a nod to retaliatory tariff moves that many blame for prolonging the Great Depression, the leaders also pledged to refrain over the next year "from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization- inconsistent measures to stimulate exports."

All countries would suffer from such moves, but "we should

remember that emerging economies will be the biggest victims of protectionism," South Korean President Lee Myung-bak said.

Trade ministers meeting in Geneva in July came very near to reaching a Doha breakthrough, but that effort collapsed when the United States clashed with fellow G20 members, India and China, over the terms of a "special safeguard mechanism" to protect poor country farmers from a surge in imports.

New Delhi and Beijing also have resisted U.S. demands for "sectoral" negotiations in which a critical mass of countries would agree to reduce tariffs in certain industries to zero.

The G20 statement did not provide any instructions for bridging the gap on sectorals or on the SSM issue.

"I don't think they'll come up with an agreement on modalities this year," said Jeffrey Schott, senior fellow at the Peterson Institute for International Economics, a Washington, D.C.-based think tank.

Domestic politics make it difficult for India to strike a deal right now, Schott said, despite Singh's pledge that India would "work constructively with other major players to reach a balanced and mutually beneficial outcome."

But the statement at least shows countries recognize the importance of continuing to work hard for a Doha agreement and "the standstill on new protectionism is about as concrete as one can get in these declarations," Schott said.

(Additional reporting by David Lawder, Pedro Nicolaci da Costa, Paul Eckert, Gernot Heller and Randall Palmer; Editing by Eric Walsh)