Efforts by four leading trading powers to salvage a world trade deal foundered in Potsdam yesterday when the European Union, the United States, Brazil and India failed to reach a broad agreement on reducing tariffs and subsidies.

The last-ditch effort to bridge the gap between richer and poorer nations failed amid recriminations on both sides of the wealth divide. The collapse of the Potsdam talks is a severe setback to Pascal Lamy, director-general of the World Trade Organisation, who nevertheless insisted that a global deal was still possible.

The Doha round of trade talks, launched in 2001 in the Gulf city and intended to lift the developing world out of poverty through expansion of trade, has been stymied by the unwillingness of rich countries to abandon tariffs and subsidies that protect their farmers.

At the same time the emerging industrial powers of the developing world, such as Brazil and India, are resisting demands that they lower tariffs on imported industrial goods. The row continued in Potsdam as Brazil and India cut short the talks two days ahead of schedule. “It was useless to continue the discussion on the basis of the numbers put on the table,” Celso Amorim, Brazil’s Foreign Minister, said.

Kamal Nath, India’s Commerce and Industry Minister, blamed the collapse of the talks on America’s unwillingness to reduce trade-distorting subsidies to US farmers sufficiently. “If the round is to move forward, there will have to be a substantial attitude change,” he said.

The Doha talks will now return to the wider forum of 150 nations in Geneva but Peter Mandelson, Britain’s EU Trade Commissoner, said: “It places a very major question mark on the ability of the wider membership of the WTO to complete this round.”

Brussels and Washington are seeking a quid pro quo for any sacrifice of support for American and European farmers. However, American and EU officials put the blame squarely in the lap of Brazil and India for failing to offer tariff reductions that would expand nonagricultural trade.

“In Europe, we are prepared to pay a lot – and more than others – we cannot do so for next to nothing in return,” Mr Mandelson said.

The EU offered an average reduction in farm tariffs of 50 per cent but had expected a meaningful reduction in tariffs from Brazil and India that was not forthcoming.

The White House reacted yesterday to accusations that US farm subsidies were blocking a deal by blaming Brazil and India for blocking a deal for poorer countries.

“Large economies like Brazil and India should not stand in the way of progress for smaller, poor developing nations – but that appears to be what happened in Germany this week,” a White House spokesman said. The Potsdam talks were an attempt to settle key differences in the Doha round by bringing together Europe and America with Brazil, which represents the G20 group of emerging economies, and India. It is a member of the former group but also speaks for the G33 group of poorer nations.

What’s up for discussion

The Doha round was launched in 2001 in Qatar and relaunched in 2005 in Hong Kong. The main topics in the Doha Development agenda are:
–– removal of tariffs and subsidies in agriculture
–– promoting trade in services
–– improving market access for industrial goods
–– implementation of the agreement on intellectual property
–– foreign direct investment
–– transparency in government procurement

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