America wants the World Trade Organisation to help prevent low wages and child labour from undermining jobs in the US, and it wants to do this through sanctions on countries that break the rules. Developing countries say this is just penalising them for their poverty.
But labour standards were the key demand of trade unionists who marched on Tuesday, and without them, the US government will be in deep political trouble with one of its core political supporters.
As he arrived in Seattle for the WTO meeting, President Bill Clinton ratcheted up the pressure for new rules with language that will have alarmed the developing world. He told the Seattle Post-Intelligencer: "What we ought to do first of all is to adopt the United States' position on having a working group on labour within the WTO. Then that working group should develop these core labour standards, and then they ought to be a part of every trade agreement, and ultimately I would favour a system in which sanctions would come for violating any provision of a trade agreement."
Most of the developing countries have reservations about labour standards, fearing that it is just Western protectionism in another form. India, more than any country, rejects the idea completely. Indian delegation members say it will be impossible for the country to return home with any agreement that links labour and the WTO.
But the US, with pressure increasing from the unions and an election campaign just months away, cannot end the meeting without such a deal.
Britain and Egypt have agreed a compromise plan that would allow the WTO to discuss labour standards with other organisations, without sanctions and with the possibility of new aid from the World Bank to help remedy the problem rather than sanctions. Egypt and India are competing diplomatically for leadership of the developing countries at the conference, and some countries will see any British initiative as imperialist "divide and rule" by other means. But at the same time, if there is no compromise before the meeting's scheduled end on Friday then the conference may fail.
The other critical issue at the summit is agriculture, where Europe is at odds with the farm-exporting nations like Canada and Australia, and to a lesser extent the US. One key issue is that the EU insists the WTO must recognise that agriculture is different from other goods, something which the exporters reject. An EU working paper released yesterday relaxes its stance slightly, and may set a path for a compromise.
The other sensitive issues are the environment and the implementation of the last trade round, where developing nations say that too little has been achieved. An EU plan to reduce trade barriers to the world's poorest countries is close to agreement. But e-commerce, one of the newest areas, is also threatening to become a problem. The aim is to kick off a three-year negotiating round, to end in a new treaty with rules to break down global barriers.
Many of the developing nations suspect the US deliberately let Tuesday's protests get out of hand. Delegates were aghast at the failure of police to create a cordon around the negotiators, allowing many to be left isolated in small enclaves. Though some delegates say the protests have increased the pressure for a deal, and warmed relations between officials who spent Tuesday being teargassed together, many are furious at how the US allowed the conference to degenerate into chaos.