U.S. warns WTO talks "hurtling towards irrelevance"

By Tom Miles

GENEVA (Reuters) - The United States launched a blistering attack on fellow World Trade Organization member states on Thursday for failing to do more to cut global barriers to trade, criticising India in particular for trying to introduce a "massive new loophole".

"The time has come to speak bluntly," U.S. ambassador Michael Punke told his counterparts at the Geneva-based body. "We must not sit idly by as the WTO's negotiating function hurtles towards irrelevance."

Ambassadors to the 159-member WTO were meeting to review progress towards a possible deal to be signed in Bali in December, which would cut red tape from customs procedures, adding as much as $1 trillion to global trade.

At the insistence of developing countries who objected to having to shoulder most of the burden of the red-tape reforms, a Bali agreement would also include limited reforms to rules on food and agriculture and special treatment for poor countries.

While such a deal would be a boost for the world economy, the scale of the negotiation has been massively cut back from the far more ambitious "Doha Round" of trade talks, which dragged on for a decade before finally collapsing in 2011.

"The glint of hope today is that we still have time - though only just barely - to adjust our course. The institution we care about is in crisis, and we need to act accordingly," Punke said.

"While it is not my intention to throw bricks, I will be frank in our substantive assessment of where various issues stand," he said, adding that the mood had changed from hopeful to grim over the past three months.

He called on all WTO ambassadors to seek urgent instructions from governments to try to re-energise the negotiations before the end of April.

"If Bali fails, the signal that we will send, in a world full of fruitful trade negotiations, is that the WTO is the one place where trade negotiations don't succeed."

LAMY PESSIMISTIC

As the talks have slowed, many trade ministries have been distracted by more pressing problems, such as the global financial crisis, or with less daunting issues, such who should lead the WTO once Director General Pascal Lamy steps down at the end of August.

Lamy told the meeting there had been a lot of activity - but limited progress on substance - towards the three main areas of a potential Bali agreement.

He said there were still "very significant divergences" about how to change the rules on stockpiling food, as demanded by a coalition of developing countries led by India.

He urged WTO members not to resort to finger pointing, but gave a pessimistic summary.

"The stark reality is that the current pace of work is largely insufficient to deliver successfully in Bali," he said.

"This means that without rapid acceleration and real negotiations, it is highly probable that you will not see the deliverables you desire in Bali."

STOCKPILES

The disputed stockpiling proposal would let poor countries buy and store farm produce without worrying about the usual WTO rules on agricultural subsidies. Supporters say it would help poor farmers and food security, but critics say it would do just the opposite.

Punke said the proposal became more worrying the more he learned about it and would be a step back, "creating a massive new loophole for potentially unlimited trade-distorting subsidies".

"This new loophole, moreover, will be available only to a few emerging economies with the cash to use it. Other developing countries will accrue no benefit - and in fact will pay for the consequences."

He said the proposal would mean governments pumping up food prices by buying commodities for their stockpiles, a policy that would lead to national surpluses later being dumped on world markets and hurting the interests of non-subsidised farmers elsewhere.

Punke said the United States was concerned about rumours of yet more proposals on agricultural reforms, which he said would only deepen the impasse.

"Do we really want to watch this movie again?" he asked. "Against this frustrating backdrop, how can we be anything but gravely concerned about the prospects for Bali?"

(Reporting by Tom Miles, edited by Richard Meares)