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With world trade talks near an impasse, experts fear step backward

WASHINGTON—Trade negotiators from across the world will meet in Hong Kong starting Tuesday in a desperate bid to jump-start global negotiations that appear all but certain to fail. Experts fear that a return to protectionism could follow, which could endanger the global economy.

Since the 1930s, eight consecutive sets of global negotiations progressively opened borders and increased trade among nations, and prosperity around the world. But there's a real chance of failure in the ninth, the so-called Doha development round, named after the capital of Qatar, where members of the World Trade Organization launched the negotiations in 2001.

The stumbling block is this: Rich nations including the United States, France and Japan cling to agricultural subsidies, offering to give them up only gradually while retaining special protection for "sensitive" products. France is the most resistant to opening farm trade, and the European Union is backing it.

Developing nations, whom this round of talks is supposed to help, are balking too. Larger poor nations such as Brazil, India and South Africa insist that developed nations take bolder steps in opening their markets and ending farm-sector protections. Developing nations, they say, should get more time to end subsidies and open their own markets.

The rift between trading nations is so deep that the influential journal Foreign Affairs published a special December edition titled "Freer Trade?" It was the first time that the publication had devoted an entire issue to a single subject.

Failure would be bad news for the United States, trade experts say, because the world's largest economy is already the most open. American companies want the same access to foreign markets and lower customs-duties abroad that foreign competitors enjoy entering the U.S. market.

The current talks include trade in services and industrial products, but the main focus is on trade in agriculture. Thus American farmers have much at stake.

"We've got 275 million people in the United States; it's a drop in the bucket compared to the potential customer base globally. We can still gain tremendously from trade," said Kendell Keith, the president of the National Grain and Feed Association, which represents companies that process and market U.S. grains and oilseeds. The Census Bureau reported a U.S. population of 297,840,361 as of midday Friday.

The association thinks the various national offers in negotiations on market openings have been timid so far.

"If it (any trade deal) ends up being window dressing, then I frankly don't think it will pass Congress," Keith said. "It will appear to Congress that there's too much being sacrificed in farm programs for little gain in trade."

The mood on Capitol Hill is hardly pro-trade.

President Bush's agreement with tiny Central American nations was barely approved earlier this year, and then only after much arm-twisting. Also, a protectionist measure to slap Chinese imports with a 27.5 percent tax is gaining support in the Senate.

The trade stalemate troubles Sen. Charles Grassley, R-Iowa. He's the chairman of the Senate Finance Committee, through which all trade deals must pass; he also grows corn and soybeans on his family farm.

"The American farm produces for only 4 percent of the world's population when we produce for the domestic market. If we're going to have prosperity in agriculture, we have to be able to export," Grassley said in an interview.

The differences of opinion over agricultural subsidies boiled over in 2003, when talks in the Mexican resort of Cancun fell apart. Negotiators were trying to create a framework for agreement. Instead, Brazil and India led a revolt that aborted the talks. Negotiations haven't recovered.

Larger developing nations have shaken up the old order of things, said Stephen Richter, the publisher of The Globalist, an Internet publication that's devoted to the politics of globalization.

December 2005, he said, "marks the end of a negotiating process dominated by `tired old white guys,' meaning the United States and European Union," Richter said. Brazil and India are the new dealmakers, he said. "Their role in shaping compromises and progress acceptable to all will only grow in importance."

The Doha round of talks must finish by the end of 2006 if it's to win U.S. congressional ratification, but few expect a deal by the end of next year.

"I'd be a damn fool if I sit up here telling you this thing is going to happen by the end of 2006," said Thomas Donohue, the influential chief executive officer of the U.S. Chamber of Commerce, which is pushing for freer global trade.

Donohue expects that if there is progress next year, President Bush could ask Congress for an extension of special authority to negotiate trade pacts. But that could be tough given the congressional mood on trade.

A consummate salesman, Donohue sees opportunity in Hong Kong where others expect failure.

"I'm not going over there to participate in a failure. Our view is this thing is ripe for movement," he told a small group of reporters Thursday.

Fred Bergsten is less optimistic. The director of the Institute of International Economics in Washington, a research center that advocates open trade, Bergsten thinks that U.S. trade imbalances, especially with China, and slow economic growth in Europe are stoking public opposition to new trade deals.

In past trade talks, U.S. trade imbalances like those that exist now with China and oil-exporting nations delayed progress.

"I think the pattern is reasserting itself," Bergsten said. "Either trade policy moves ahead or it slides backwards. It's dynamically unstable. I think history is clear on that."

If the talks do end in a stalemate, that could slow the robust world economic growth of recent years, warns Carla Hills, who was the U.S. trade representative from 1989 to 1993.

"The effect would be shaving growth, and that's not good for developing or rich countries," she said.

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(c) 2005, Knight Ridder/Tribune Information Services.

GRAPHIC (from KRT Graphics, 202-383-6064): 20051209 TRADE growth

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