Cancun was meant to kick-start the world economy. Now pessimism reigns

The weather may be good but the outlook is gloomy. In just 20 days' time 146 trade ministers gather in the Mexican resort of Cancun.

Hope is fading fast that this latest World Trade Organisation jamboree will lead to a deal to unlock billions of pounds for both the rich and poor nations.

It is a staggering 21 months since the talks were launched in Doha, Qatar, amid scenes of jubilation. That optimism has all but evaporated and there is scant sign of progress.

Not only are many of the negotiations stuck in the mud but some countries, notably the US, have adopted policies that appear to flout the spirit of the Doha agreement. Steel tariffs, farm subsidies, genetically modified foods and the war in Iraq have all driven deep rifts within the global community.

If breakthroughs are not achieved it is almost certain a final deadline of 1 January 2005 will be missed, which could push any deal as far out as 2007.

Professor Alan Winters at Sussex University, said: "If you can't settle trade then the multinational situation looks very sick. Utter failure would further weaken groups within countries that have been advocating open trade. People will be less willing to invest in trading systems."

The World Bank estimates an additional 300 million people will be lifted out of poverty by 2015 if the WTO secures a comprehensive trade deal. A 40 per cent cut in industrial good tariffs worldwide would generate an increase in global trade volume of $380bn (£239bn), with three-quarters of the gains accruing to developing countries.

According to Oxfam, a 1 percentage point increase in Africa's share of world exports would generate $70bn, or five times what the continent receives in aid.

But most NGOs believe there is a real danger the talks will simply rubber stamp a deal under which rich countries exploit the wealth of the developing world but give little in return. Adriano Campolina Soares, head of the rights campaign at ActionAid, said globalisation has "completely failed" poor people and the WTO's trade rules have made things yet worse.

He said: "If Cancun fails to deliver genuine changes on key issues such as agriculture and access to essential drugs, developing countries may well start questioning the existence of an organisation that seems constantly to work against us."

At the heart of the talks are four key issues - agricultural subsidies, cheap drugs for the poorest countries, cutting tariffs and opening up services. On top of this is are the "Singapore issues" which contain radical proposals to bind developing countries to new rules on investment, competition and government procurement.

Last week the US and the EU managed to patch up their differences and cobble together a deal to liberalise their immense agricultural industries. The deal was attacked by developing countries and charities and pressure groups as too little, too late.

There is a ray of hope over a deal to enable poor countries to override corporate patents to get access to cheap drugs and food in cases of a public emergency. At Doha the WTO agreed countries could in principle produce cheap versions of generic medicines, such as anti-retroviral drugs to treat HIV/Aids.

The issue now is how countries without their own pharmaceuticals industry can get access to cheap medicines while still allowing Western companies to protect their patents.

Observers believe a deal will be done ahead of the WTO general council later this week to allow ministers to give an example of substantial progress before Cancun.

Hafiz Pasha, assistant secretary general at the United Nations, described such a deal as "critical". "We see this as a very vital agreement in terms of the overall trading regime," he said. "If we want to pursue this momentum and further trade liberalisation there will have to be a quid pro quo from developed countries.

"There has to be some movement on [public health] and possibly agricultural subsidies matched by some opening up of services by developing countries."

The problem is how to judge Cancun. In 1999 Seattle was plainly a disaster - the talks collapsed inside the convention centre while the streets outside were gripped by violent riots.

Michael Bailey, a senior policy adviser at Oxfam, said: "To my mind failure won't be a breakdown with people streaming out of the talks. Failure will be business as usual for the [West] with no concessions on development."