Deadlock in Doha as EU pressed on farming subsidies

The future of the world's trade system was hanging in the balance last night as a deep split between rich and poor nations at the World Trade Organisation meeting threatened to block a new round of negotiations.

The European Union was under intense pressure to give way over some of its most cherished principles while several developing countries repeatedly threatened to walk out – a move that would consign the WTO to failure for the second time in two years.

Ministers from the 142 countries at the meeting in Doha raced to hammer out a declaration before the end of the conference at midnight last night. However, one observer said: "It is complete gridlock. It'll go through the night."

The key debate is over the subsidies for farming exports, operated by the EU, US, and Japan, which developing countries say exclude them from important export markets.

The EU was fighting to save its Common Agricultural Policy from abolition and looked close to losing its battle to enshrine a whole new agenda governing environmental protection, competition and investment.

The EU is resisting calls from developing countries for the WTO declaration to include a pledge to reduce "with a view to phasing out" all forms of agricultural export subsidies. But Laurent Fabius, the French Economy Minister, said "no European" could accept that wording, as it implied subsidies would eventually be eliminated.

The EU was also demandingthe right "to take measures to protect human, animal or plant life", including the power to ban foods that have been genetically modified or injected with hormones.

Senior EU figures, including the trade commissioner, Pascal Lamy, and agriculture commissioner Franz Fischler, warned repeatedly during the meetings that failure to include environmental protection in any deal would receive an "unpleasant response" within Europe from voters.

World leaders are desperate to launch a new round of trade talks, which could help prevent the world from slipping into a recession and would also be a defiant statement of co-operation in the wake of the terrorist attacks on the US.

But last night a number of developing countries were rumoured to be holding out for a better deal on textiles and tried to cut huge sections out of the draft declaration. The latest draft, published at lunchtime yesterday, showed that agreement had been achieved on a wide range of issues but differences remained on issues that are dear to the developing world, including the question of agricultural subsidies, tariffs on textiles, and eco-labelling.

The EU was also fighting plans to postpone a decision on launching negotiations into new rules covering investment and competition standards in developing countries.

Barry Coates, director of the World Development Movement, said it looked as if the EU had failed to launch a new round of trade negotiations. "It will be a defeat for them but, tragically, not a victory for the world's poor."

Aid agencies said developing countries were furious that the declaration had failed to address their concerns.

India, for example, demanded that sections covering the EU's agenda for links between trade and investment, competition, the environment and transparency in government procurement, be removed. Murasoli Maran, India's Commerce Minister, said he had "very serious concerns and difficulties". His country was angry that opening Western markets to textile imports – a key market for the subcontinent – was not the highest priority, he said.