WTO in Seattle: Summit divided over attempt to halt child labour

A TOUGH battle of a different sort began in Seattle last night, as governments from the North and South, from America and Europe, clashed over trade.

This one was fought not with tear gas and molotov cocktails, like the rioting which has shaken the city this week, but with something much more dangerous: words. The issue of how to enforce labour standards, one of the most contentious at this summit of the World Trade Organisation, looked set to divide developed and developing nations even as the governments at the meeting proclaimed their intention of healing that rift.

And it seemed set to be the issue which, as dawn breaks over Seattle today, still stands in the way of a new round of world trade talks. The WTO's alleged lack of concern for the world's poorest nations has been one of the key concerns of the demonstrators who have filled the streets of Seattle for the last three days. But the other central issue is demands by US unions to put sanctions on countries which do not respect Western norms of employment.

Squaring that circle was expected to take the negotiators late into the night, and possibly on into Saturday, extending a summit which has already been far too long for most people's patience.

The US is leading the charge for labour standards, an issue raised again by President Bill Clinton in his speeches on Wednesday when he arrived for the summit. If anything, the President's intervention has hampered the chances of its success, in that it has reinforced the feeling of the developing nations, led by India, that they are being bullied.

According to delegation sources, Mr Clinton also warned the Indians privately that if labour standards could not be enforced through the WTO, then America would go ahead on its own.

US officials were not certain that his presence helped. He surprised many by raising the heat of the debate over labour standards in an effort to placate the demonstrators. Last night Mr Clinton was due to return home, as the US and others began the concessions that will make a deal happen. Without a deal, Washington will be gravely embarrassed, so the onus was on the US to deal.

The outlines of a possible package are relatively clear. The US and farm exporting countries led by Australia will have to ease their insistence that all farm subsidies are abolished. Europe will have to soften its insistence that agriculture is completely different from other traded goods. The EU will also get some concessions on the environment, while conceding that the WTO can talk about biotechnnology, potentially opening the door in the longer term to imports of GM foods. The chances of success depend on concessions being made early, and there was little sign last night that a deal could be reached today.

"Today is the day the posturing has to stop and the hard trading has to begin," said one EU source, predicting a sleepless night for the delegates. The US was expected to produce its own draft agreement last night, and the EU was reformulating its demands. But the key issue - labour standards - may prove to be the most difficult.

Indian officials said that the government would not back down on its insistence that trade and labour standards should not be linked. But John Sweeney, head of the AFL-CIO, the main trade union grouping in the US, insists that they must. Several different formulations were under consideration, but none were likely to leave everyone happy.

The EU and the US have proclaimed their intention of making the forthcoming round of trade talks a "development round", by giving the world's poorest countries duty-free access for all their exports. But "all" has gradually been redefined, and it is unclear how far the US in particular will go.

Its officials pulled out of a joint press conference on Wednesday at the last minute, and US trade negotiator Charlene Barshefsky underlined that progress depended on existing US legislation in Congress for Africa and the Caribbean. There may also have to be a new US bill specifically for Bangladesh.

The inclusion of textiles and agriculture is in doubt; in short, the initiative (which covered a miniscule proportion of world exports in the first place, and which developing countries were deeply sceptical of) risks becoming a fiasco.

Business Outlook, page 23