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Last Updated: Sunday, 11 December 2005, 00:50 GMT
Trade talks showdown in Hong Kong
By Steve Schifferes
BBC News economics reporter

Hong Kong conference centre
Hong Kong is proud of its role as the centre of China's export trade
Trade ministers are gathering in Hong Kong for a crucial round of talks aimed at liberalising free trade. But pessimism is growing that the talks will succeed, or benefit the poor.

For four years, the 149 members of the World Trade Organization (WTO) have struggled to reach a trade deal that would open up world markets, especially in agriculture.

Rich countries have the opportunity in Hong Kong to deliver on their promises to make trade work for the poor
When talks began in Doha, Qatar, in the shadow of 9/11, there were high hopes that the "Doha Development Round" would for the first time put developing countries at the heart of the trade agenda.

These hopes were reinforced at the Gleneagles G8 Summit in Scotland in July, when world leaders pledged to make trade reform, as well as debt relief and increased aid, the key to reaching out to Africa.

UK Prime Minister Tony Blair has warned failure at the WTO summit would hurt both Western and developing economies alike, particularly in Africa.

container ships
Trade has been the engine of world growth
But now time appears to be running out for reaching a trade deal, despite the high-level commitment by political leaders.

The head of the WTO, Pascal Lamy, says that the talks will have to be "recalibrated".

He says that says an impasse will damage the WTO's credibility and make it hard to start fresh negotiations.

At the heart of the problem is a dispute over how far the rich world is prepared to go to liberalise its agricultural markets to allow in products from poor countries.

In return, both the US and EU want more access to developing country markets, to sell manufactured goods and services like banking and telecommunications.

Security fears

Anti-globalisation campaigners are urging developing countries to reject a bad deal if that is all that is on offer, and are expected to mobilise thousands of protesters in Hong Kong.

Anti-WTO protestors in Cancun, 2003
Trade talks have proved controversial among the public

The Hong Kong government has mobilised its police force and spent weeks cementing up bricks in the pavement to prevent their use in riots.

"Rich countries have the opportunity in Hong Kong to deliver on their promises to make trade work for the poor. Millions of farmers, campaigners and workers will be watching them," said Amy Barry, a spokeswoman for the charity Oxfam.

Meanwhile, a poll of public attitudes showed growing support for protectionism in rich countries.

A poll for the German Marshall Fund found 58% of Europeans and Americans would support raising tariff barriers in order to protect jobs.

And 82% believed that it was multinational companies and China which benefited most from free trade.

Difficult deal

Time is running out to reach a trade deal, with the US government's negotiating authority expiring in Congress in 2007.

Brazil says US subsidies are hurting smaller cotton producers
Concessions on cotton are a key test for rich countries

The best that might be expected now may be concessions on issues like cotton or drugs, where the WTO has finally agreed the waiver to allow the import of off-patent drugs to cope with the medical emergency of Aids.

Under the rules of global trade negotiations, where "everything has to be agreed before anything is agreed" by every country, it is increasingly hard to find the compromises necessary.

Instead, disagreements seems to be growing both among rich countries and poor countries about the viability of a trade deal.

The EU and the US are at loggerheads over how far they are willing to open their agricultural markets - with the EU constrained by the insistence of France and some other beneficiaries of the Common Agricultural Policy that they should make no further changes to the reform programme agreed in 2000.

And poorer developing countries are growing increasingly sceptical that they will gain more than they will lose from a trade deal - a view partially backed up by a new study by the World Bank.

The trade minister of the small Caribbean island of Dominica, Charles Savarin, for example, says that "the failure of the round to take on issues germane to us is a palpable betrayal of a promise we believed was made in earnest."

Free trade creates wealth for the participants
Tim Hammond, London, UK

The French foreign minister, Philippe Douste-Blazy, has backed the claim of the former EU colonies for further protection, writing that "a sudden lowering of EU trade barriers would put paid to the possibility of self-sufficiency for the poorest countries."

Meanwhile the middle-income developing countries like Brazil, who would gain from agricultural liberalisation, are also unsure whether they want to risk opening their markets.

Risks of failure

Trade has the potential to make a bigger difference to the lives of the world's poor than foreign aid.

And trade rounds in the past have been the engine of world growth.

But reaching trade deals has become harder since the first round began in 1947 with just 23 countries, mostly devastated by war, taking part.

Now the issues are more complex, and the risk of failure greater.

The world trading system would not grind to a halt if the process failed.

But there is a worry that without a multi-lateral trading system, with the same rules for all, the big countries like the US and the EU would increasingly call the tune.

They have already begun signing bilateral trade deals with some of their smaller trading partners - where they have far more leverage to extract concessions.

"A complete breakdown of the WTO Hong Kong Ministerial - no agreement whatsoever will spur members to cut their own bilateral or small group deals," said David O'Rear, chief economist for the Hong Kong General Chamber of Commerce.

And with other areas of international cooperation already looking shaky, the collapse of the trade talks could have wider geopolitical implications.

So much is at stake in Hong Kong.

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