WTO negotiations end in stalemate

High-level talks aimed at striking a new deal on trade rules have hit " crisis point", the head of the World Trade Organisation said yesterday after the latest set of meetings over the weekend ended in failure. Pascal Lamy, the body's director general, said that after five years of bitterly slow negotiations, the 149 member countries were now in the "red part of the red zone".

His comments came after three days of talks at the WTO's Geneva headquarters ended with little sign of progress between the main trading blocs ­ the United States, European Union and G-20 group of developing countries such as Brazil and India.

Speaking after the talks ended, Mr Lamy said: "I will not beat about the bush. We are now in a crisis. The only good news I have is that no one, and I repeat no one, appears to want to throw in the towel."

Mr Lamy has been asked by leading nations to embark on a whistle-stop tour of the world to find a breakthrough on the key issues ­ agricultural subsidies and tariffs, and access to world markets for industrial goods.

Put simply, poorer countries in Asia, Africa and Latin America want the US, EU and Japan to stop using taxpayers' money to keep their food cheap while erecting tariffs against imported produce. However, rich countries want emerging countries such as Brazil and India to allow better access to their markets for industrial goods.

Trade ministers admitted that positions were as far apart after the weekend as before it. Shoichi Nakagawa, Japan's agriculture minister, said: " The gap is as wide as the Grand Canyon."

The failure of trade ministers from 60 countries to make progress in Geneva will put pressure on the heads of the state of the G8 countries to intervene at their summit this month.

The G8 includes the US, Japan and four EU member states ­ France, Germany, Italy and the UK. China, India and Brazil will be represented at the summit in St Petersburg on 15 July.

British officials believe an outline deal has to be struck before the summer holiday season, to give time for a deal to be finalised by the 31 December deadline.

Many think July is the true final deadline because it will take 12 months to finalise any deal before July 2007, when President Bush loses his "fast track authority" that prevents Congress from amending any trade deal.

Peter Mandelson, the EU's trade commissioner who negotiates on behalf of the 25 member states, appeared to endorse that timetable. "If we don't turn things around in the next two weeks, we will not make a breakthrough this summer and then we will be facing defeat," he said.

Susan Schwab, on her first engagement since taking over as US Trade Representative, said her country was "disappointed but not deterred". She said: "We must shift the debate from how to grow loopholes in both agriculture and manufactured goods that undermine liberalisation, and focus instead on what each of us can bring to the table to ensure the round succeeds."

Poverty campaign groups condemned the failure of rich countries as a " final betrayal" of promises made when the talks were launched in the Gulf city of Doha in November 2001 to deliver real gains to poor nations.

"This meeting was counter-productive," said Celine Charveriat, head of Oxfam's Make Trade Fair campaign. "The atmosphere is more poisonous now than before and ministers are leaving without a road map for July. It's impossible to see how a decent agreement can be resurrected from this chaos." John Hilary, director of campaigns and policy at War on Want, said: "The round should be closed and a new series of talks launched on a genuine development agenda to favour the world's poor."

The trade triangle: What's at stake

* Trade talks between 149 countries that have gone on for almost five years have broken down over three inter-linked sticking points.

* The EU is under pressure over its tariffs. It has offered to cut tariffs by 39 per cent but major developing countries want 54 per cent, while the US is demanding 66 per cent.

* The US is facing pressure from the EU, India and Brazil to make deeper cuts in its domestic farm subsidies, ensure that its food aid programme is not used to dump cheap exports and specifically to stop subsiding American cotton farmers.

* The EU and US want developing countries such as India and Brazil to reduce the tariffs protecting their industrial goods markets, so that the average tariff is no more than 5 percentage points higher than rich countries'.

* The OECD says a deal that halved tariffs and subsidies across all sectors would generate $44bn (£24bn) of welfare gains globally.