International talks aimed at ushering in a new era of free trade collapsed in Geneva on Tuesday during a bitter split between developed and developing countries over the future shape of global commerce.
The failure of the talks after nine days of intense negotiations underscored what is likely to be the biggest challenge in coming years to expanding world trade: the reluctance of emerging juggernauts such as India and China to risk their newfound success by offering rich nations greater access to the hundreds of millions of consumers rising out of poverty in the developing world.
High-level delegations from the United States and the European Union showed fresh willingness at the World Trade Organization talks to make concessions that would have gradually curbed the subsidies and tariffs they have long employed to protect first-world farmers. But India and China dug in their heels, insisting on the right to keep protecting their farmers while accusing the United States and other rich countries of exaggerating the generosity of their concessions.
"The breakdown of these talks is bad news for the world's businesses, workers, farmers and most importantly the poor," said Thomas Donohue, president of the Washington-based US Chamber of Commerce. "It's ironic that this blow ... came from two of the chief beneficiaries of worldwide trade. India and China are emerging powers, but with great power comes great responsibility. They missed an opportunity to show leadership as key players in the global trading system."
The result is what most experts concede is at least a temporary mothballing of the Doha Round of trade talks, so named because a group of nations agreed to work towards dramatic new cuts in subsidies and trade tariffs in Qatar's capital of Doha back in 2001. The talks have floundered for the past seven years, with negotiations falling apart each time trade ministers have gathered to try to hash out an accord.
The WTO meeting of more than 35 nations in Geneva that ended Tuesday had been described by officials as a "do or die" moment for the round, with the lack of agreement postponing the $50 billion to $100 billion injection such a deal was expected give the global economy. The sense that the failed talks may not get another chance anytime soon is linked to the pending exit of the pro-trade Bush administration, rising opposition to farm concessions in Europe and an upcoming changing of the guard of several key trade officials who have worked on this agreement for years.
Some analysts said the spread of free trade for now is likely to shift toward more modest bilateral agreements, or the expansion of regional trading blocs such as South America's Mercosur and the Association of Southeast Asian Nations. Yet even bilateral deals have recently faced stronger resistance during a growing global wave of protectionism, including in the United States, where free trade agreements with Colombia, South Korea and Panama are being held up by opposition in Congress.
"We are heading toward the fragmentation of the global trading system into individual trading blocs — regional and bilateral — which offer no guarantee for the economic benefits we have seen in the post-War era," said Randall Soderquist, senior trade program associate for the Center for Global Development.
The talks in Geneva at times took on a highly charged, personal tone that immediately cast the negotiations as a power struggle between the developed and developing worlds. Within 24 hours of landing in Geneva nine days ago, Brazil's Foreign Minister Celso Amorim infuriated first-world negotiators, comparing their efforts to hype their proposed trade concessions to Nazi propaganda. His comments drew sharp reprimands, particularly from Washington's top negotiator, US Trade Ambassador Susan C. Schwab, the daughter of Jewish Holocaust survivors.
Yet Brazil would later show far more flexibility than India or China, casting the Asian nations as the principle holdouts.
Schwab said negotiators were "so close" last week in reaching an agreement. But the talks fell apart over the insistence by developing nations to reserve the right to protect their farming sectors against sudden surges in cheap food imports. India's chief negotiator and commerce minister, Kamal Nath, may have played the biggest role in undoing the talks, repeatedly blocking attempts by developed nations to win greater access to India's burgeoning market.
Nath's inflexibility was cheered as heroic in India, where his refusal to offer major concessions to rich nations was being portrayed as a classic David-vs.-Goliath case.
"I kept saying 'No I don't agree' at every point," Nath said in a telephone interview from Geneva Tuesday. "I come from a country where 300 million people live on 1 dollar a day and 700 million people live on 2 dollars a day. So it is natural for me, and in fact incumbent upon me, to see that our agricultural interests are not compromised. You don't require rocket science to decide between livelihood security and commercial interests."
Opposition to the talks had been building in India since June, when 35 farmers groups from across that nation gathered at a conference in New Delhi to discuss the implications of the trade negotiations with trade and food policy activists. They called upon wealthy nations to remove their farm subsidies, saying such assistance to first-world farmers denies a level-playing field to subsistence-farmers nations such as India.
The United States and Europe did offer up what several experts described as the most significant concessions to reduce agricultural protections they have ever made. They were offered in the hopes that developing nations would respond by reducing barriers for such manufactured goods as US cars and German chemicals. Instead, their offers were dismissed by developing nations as not nearly enough.
"This is a very painful failure and a real setback for the global economy when we really needed some good news," Peter Mandelson, the European Union's trade commissioner, told reporters in Geneva on Tuesday.