The EU has insisted that "essentially all" rather than "all" goods are to be allowed in - allowing them to restrict any "surges", while the US insists on exempting textiles and clothing from the agreement.
The plan by the World Trade Organisation to allow tariff-free access for all products from the 48 poorest countries has been torpedoed just days before it was due to be presented.
The EU has insisted that "essentially all" rather than "all" goods are to be allowed in - allowing them to restrict any "surges", while the US insists on exempting textiles and clothing from the agreement.
The EU has also revealed that it is maintaining its tough line on the admission of China to the WTO.
Anthony Gooch, the spokesman for EU commissioner Pascal Lamy, said that with the current remit of the EU and China "we cannot reach a deal."
The EU has been pushing for China to allow a majority stake in its sensitive financial services sector to be owned by foreigners, a demand they have already rejected in negotiations with the United States.
Warning for the West
Meanwhile, a former trade official has delivered a stark warning that the World Trade talks will never restart unless major industrial countries make a genuine effort to take into account the needs of the developing world.
Alan Winters, an academic who used to advise the World Bank on trade issues, said there was a "huge degree of mistrust" in the trading system as a result of the collapse of the Seattle talks in December.
He urged industrial countries to give up their ill-thought-out plans for a comprehensive trade round and grasp the nettle of developing country concerns.
He said there was little chance of progress if the big industrial nations stuck to their plans to include environmental issues, labour standards and investment rules in trade talks.
Developing countries, which make up a majority of the World Trade Organisation, would never agree to this as they see it as an excuse for protectionism.
He said the West should focus on the traditional goals of lower tariffs and barriers to trade in agriculture, manufactured goods, and services.
Quid pro quo
Mr Winters said that while trade liberalisation was largely complete between industrial countries, with very low tariffs on most manufactured goods, the same was not true in regard to developing countries.
They still faced higher tariffs, particularly in regard to their most valuable exports - agriculture and textiles.
He urged developing countries to refuse to sign any trade deal until it was clear that the West was going to honour its commitment to open its markets in textile and clothing.
This trade has been limited for 40 years under the so-called MFA agreement, but in the last set of trade talks it was agreed that all barriers would end by 2005.
But he said they should also make more concessions to open their service sectors to foreign trade and investment, and repeal outdated laws which restricted competition in this area.
In return, he urged Western governments to allow the developing world to export more of its main resource in the service sector - people - by agreeing to many more temporary work permits for third world professionals.
Poor prognosis
Mr Winters admitted that the trade reform process was stalled, with the WTO having lost its credibility.
He said that rebuilding a consensus would be a slow process which could take many years.
Unlike the World Bank or the International Monetary Fund, the WTO was made up of governments and it had no choice but to build a new consensus.
He said that there were limits to how far it was possible to streamline the WTO, as it was unrealistic to expect governments to accept trade deals that they had not negotiated - especially if they involved pain for some domestic producers.
It was only when the main trading blocs, especially the EU and the United States, were able to patch up their differences, especially on agriculture, that the process could continue.
He accepted that many of the non-governmental organisations that had protested in Seattle had genuine concerns, especially about the environment.
He said it was the job of governments to reassure them, because if they did not, then 50 years of trade liberalisation could be in danger.