Trade talks fail over US farm feud

Nine days – and seven years – of painful negotiations to boost the world economy by bulldozing obstacles to free trade have collapsed in Geneva.

Hopes of a confidence-building breakthrough on trade in food, industrial goods and financial services between rich, poor and developing nations foundered on a dispute between China, India and the US. Although there was some talk of fresh negotiations in September, the so-called "Doha" round of trade talks, launched in 2001, appeared to be dead in the water.

The talks broke down after the US failed to resolve a dispute with China and India over a proposed system to defend poor farmers in developing nations from a surge of food exports from richer countries. The issue – regarded as minor when the talks began – came to crystallise growing suspicions between rich and poor, the developed and the developing, about the balance of risks and benefits in the package.

The failure was greeted with relief by some – and with intense alarm by others. With the world economy wounded by high oil prices and the banking crisis, there were fears that the collapse of the talks could undermine business confidence and tip the world towards recession. "It was hanging on a thread," said the Brazilian Foreign Minister Celso Amorim. The thread didn't hold."

Peter Power, spokesman for the EU trade commissioner Peter Mandelson, said the failure was a "massive blow to confidence in the global economy". In a blog written before the final collapse, Mr Mandelson spoke of his "disbelief" that such important negotiations could be torpedoed by what he saw as a relatively technical dispute.

Similar views were expressed in the US and Europe. "I think it's a strong negative and it really follows on the heels of a retreat from globalisation and trade that were really the building blocks for the prosperity of the last several decades," said Michael Darda, chief economist at MKM Partners in the US.

Third World aid pressure groups said the collapse signalled a willingness by poorer countries to stand up to the West. "No deal is better than a bad deal," said Matthew Coghlan, of Christian Aid.

The much-anticipated showdown between Mr Mandelson and the French President Nicolas Sarkozy was not the principal cause of the collapse. Some officials suggested last night that the immediate main sticking point was a row between Washington, Delhi and Beijing.

India joined with China in demanding a toughly worded "special safeguard mechanism" to allow developing nations to protect poor, peasant farmers. The US negotiator Susan Schwab objected to wording which, she claimed, would allow poorer nations to protect their agricultural markets unfairly. Some officials pointed to breakthroughs on issues which had destroyed negotiations in in 2003 and 2005. They spoke of a fresh attempt to revive the Doha round in the autumn.

However, Phil Goff, the New Zealand Trade Minister, said that the US elections would, in effect, freeze negotiations for at least 12 months. He said that it would probably be for a "new generation" to resume the talks.

The EU and US had agreed, in principle, to open up their farm markets to produce from Latin America, Asia and Africa. Brazil, China, India and other developing nations had agreed to accept more manufactured goods and financial services from the wealthy world. Some European governments, and pressure groups, said the EU conceded too much. All of these concessions are now suspended.