Can trade marathon reach the finish?

By David Loyn
BBC international development correspondent

Food subsidies and barriers remain a major sticking point

This does not feel like the best time to try to bring off a historic free-trade deal.

Uncertainty over food prices has led instead to increasing moves towards protectionism in some major food-exporting countries, with the world on the edge of the precipice of an economic downturn.

Political pressure over the food price issue is most acute in Argentina, but many other countries want to retain the flexibility to impose high tariffs on imports to protect their farmers.

And yet there is gathering political momentum, at least among the leaders of the developed world, to finish what was started at Doha seven years ago, cutting tariffs worldwide.

Europe's Trade Commissioner, Peter Mandelson, has put the chances of success of a deal at 50/50.

He said that whether the resulting increase in economic activity "is measured in tens or hundreds of billions of euros a year will depend on the nature of the final outcome of those negotiations".

The head of the World Trade Organisation Pascal Lamy has gone further, talking of a 60/40 chance of success.

Search for consensus

He has tirelessly travelled the world in recent months, trying to build the consensus needed in a game that has been described as like playing three-dimensional chess.

He will meet key ministers in groups during the weekend, and then gather them together for a formal meeting on Monday, beginning a marathon series of talks that is expected to go on for several days and nights.

If there is no deal done this week, the Doha round is dead, as it would hit the buffers of the US presidential election.

At the heart of the deal being hammered out are demands for developing countries to lower their tariff barriers to goods and services from outside - non-agricultural market access - NAMA in the jargon of the WTO.

In return they would gain freer access to sell their products, for now mainly agricultural goods, into world markets.

In theory the poorest countries already pay no tariffs on basic farm products they sell into the EU and USA, but tariffs do kick in on processed foods.

Peter Mandelson says the prize for a successful deal is huge

So to benefit from a freer trade regime they would need to be ready to establish factories to deliver added value in processing agricultural products.

They may have a new opportunity to do this, as the soaring cost of food has changed one aspect of the complex equation in a positive direction, making it more attractive to invest in agriculture - particularly in Africa.

In order to make the deal attractive to developing countries, farm subsidies have had to be cut in the developed world - in particular the EU, Japan, and the US.

The EU has cut some subsidies, and moved the way it supports farmers into areas defined as not distorting trade, and so allowed under the rules.

But the developed world is now demanding that the big emerging economies, especially China and India, cut their tariffs too.

Mandelson row

That is what was at the root of the row between Peter Mandelson and France's President Sarkozy last month.

Mr Mandelson wants the maximum flexibility to be able to force more concessions, particularly from the US and India, and did not want sentiment for French farmers to stand in his way as he looked negotiators in the eye.

European Trade Ministers have met ahead of the Geneva meeting to deliver a mandate for the negotiating stance, at a time when Gordon Brown says a deal is within "touching distance".

In a recent briefing for journalists he said it is now "one minute to midnight" in the talks. If midnight, the end of the month, is reached without a deal, the world trading system would not collapse, but it would mark the end of a long period of unprecedented moves in one direction - opening up markets, the engine of globalisation.

And it would weaken the multilateral principle of a rules-based world trading system. Countries, and trading blocs like the EU, would increasingly adopt bilateral relationships to alter terms of trade with each other, a state of affairs that would favour the strong over the weak.

But despite this, there is a growing consensus among NGOs who work in the developing world, that 'no deal is better than a bad deal'.

Emerging economic superpowers like China will have to make concessions

They point out that the original aim of the Doha round was to remedy imbalances in a global trading system seen as skewed against the poorest countries, not provide opportunities for the services sector of the developed world.

Globalisation has provided unprecedented prosperity, but only for a minority of the human race, and opponents believe that the 'aid for trade' elements being offered in the Doha package do not deliver the remedies needed to allow the poorest to trade their way out of poverty.

Developing agenda

The majority of developing countries, gain a large proportion of government revenue from tariffs, and a World Bank study has shown that most will see no immediate gains from the Doha deal as it is on the table.

The study suggested that losses in revenue to the developing world would outweigh expected benefits by about four to one - $63bn to $16bn.

And most of the benefits would go not to the poorest countries in Africa, but to a small number of emerging economies - Argentina, Brazil (which stands to receive 23% of the developing country benefit), China, India, Mexico, Thailand, Turkey, and Vietnam.

Opponents of the deal on the table point too to the history of the most successful developing economies that have imposed tariffs to protect the fragile shoots of their new industries.

The list of 'special products' that countries would be allowed to name and be able to protect under Doha rules is one of the most contentious issues that still needs to be ironed out.

But a new deal would not be just a trade-off pitching bankers and factories from the developed world against farmers from the developing world.

An ambitious trade round would have to lower trade barriers between countries in the developing world too.

During the seven years of the Doha round a new global architecture has emerged, where China is by far the most assertive trading partner for many African countries and rapidly the most important customer both for energy and food from Brazil.

But in gaining more from new international trade rules, the big emerging economies, in particular China, India and Brazil, will need to make concessions too.

And that is why the negotiations are expected to last through several long days and nights this week.