Global Trade Talks Falter

By JOHN W. MILLER

Wall Street Journal

July 29, 2008 1:07 p.m.

GENEVA -- World trade talks collapsed Tuesday after the U.S., China and India failed to agree on the Asian countries' right to impose emergency tariffs to protect their farmers.

The nine-day meeting, the longest trade summit diplomats in Geneva could recall, aimed at concluding a simple bargain: The European Union and U.S. would lower farm subsidies and tariffs in exchange for China, India, Brazil and other emerging economies opening up their markets for industrial goods like chemicals and cars.

Trade experts said the failure of the talks after seven years of previous negotiations was a sign of huge changes in the global economy since the Doha Round was launched in 2001. Since then countries such as China, India and Brazil have emerged as trading powerhouses.

The talks between the 30-some countries almost collapsed last week, but a midnight handshake on Friday between Brazil and the U.S. kept them going over the weekend. The U.S. agreed to cap its trade-distorting farm subsidies at $14.5 billion and Brazil accepted cuts in its industrial tariffs.

Over the weekend, however, two developing country camps then redoubled their opposition. India's trade and commerce minister, Kamal Nath, and then Chinese diplomats, refused to compromise with the U.S.

In particular, they demanded a rule that would allow them to impose special tariffs if imports surged in certain products like sugar, cotton and rice.

"I'm not risking the livelihood of millions of farmers," Mr. Nath told reporters. The U.S. was asking a price "as high as heaven," a Chinese official complained.

The U.S. hadn't expected such strong opposition over this so-called safeguard clause, which would hurt farmers all over the world, U.S. officials said. U.S. Trade Representative Susan Schwab refused to budge.

"We were so close to reaching a deal on Friday night," an exhausted Ms. Schwab told reporters after emerging from the final meeting late Tuesday afternoon.

Although more countries were present, most of the negotiations took place within a small group of economic powers: the EU, U.S., Australia, Japan, China, India and Brazil.

The future of the Doha Round now is unclear. Technically, it still is alive, WTO officials stressed. The U.S. remains committed to its completion, Ms. Schwab said. The Doha Round was launched with the goal of lifting people out of poverty by cracking open Western food markets.

Others were more circumspect. EU Trade Commissioner Peter Mandelson said Monday that a failure this week would be amount to a "burial" for the trade round.

Trade experts cautioned that the round's constant failures -- this was its eighth summit -- might have spelled the end of big multinational trade deals.

"Previous trade rounds picked the low-hanging fruit," says William J. Bernstein, author of A Splendid Exchange: How Trade Shaped the World. "So we may have reached the end of the line for trade deals."

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