U.S. accuses China and India of threatening WTO round

GENEVA (Reuters) - A clash between the United States and two big emerging markets, China and India, over cutting farm and industrial tariffs threatened to derail more than a week of work to salvage a world trade deal Monday.
"We are very much concerned about the direction that a couple of countries are taking," U.S. Trade Representative Susan Schwab said during a break on the eighth day of World Trade Organisation talks.
"I am very concerned it will jeopardise the outcome of this round," she told reporters.
Her comments reflected strong differences over U.S. demands for countries to agree to deep tariff cuts in at least some manufacturing sectors and China and India's insistence that developing countries be given a strong new tool to guard against agricultural import surges.
David Shark, deputy U.S. ambassador to the WTO, said resistance by India and China to opening up to more imports had thrown the global trade talks into their "gravest jeopardy" since their launch in 2001.
China responded quickly. "We have tried very hard to contribute to the success of the round," its WTO ambassador Sun Zhenyu told delegates. "It is a little bit surprising that at this time the U.S. started this finger-pointing.
TRIAL RUN FOR CLIMATE TALKS?
Top trade officials from around 30 key WTO members have been in Geneva since last Monday to try to agree on terms for cutting farm subsidies and tariffs on agricultural and manufactured goods. After a rough start, the talks appeared to be making progress just as problems resurfaced again.
The meeting has been described by some European officials as a test of a changing balance of power in the world as developing economies grow in confidence, and also a possible trial run for climate change talks.
India's Commerce Minister Kamal Nath told reporters India had never agreed to Lamy's package, but had continued talks in the hope of winning further concessions from developed countries.
"I'm still hoping we will see some movement. I'm still optimistic," Nath told reporters after meeting ministers from seven key WTO players.
Priorities include deeper reductions in allowed spending on developed country farm subsidies than the proposed 70 percent cut for the United States and 80 percent cut for the EU in the current package, he said.
Developing countries also need a better "special safeguard mechanism" to help ward off import surges or price collapses in farm products, and long-awaited action on U.S. cotton subsidies which hurt developing country farmers, he said.
The United States, under pressure to cut its farm subsidies and tariffs in core markets such as autos and clothing, insists developing countries make significant openings in return.
In manufacturing, it wants China, India and others to agree to "sectoral" negotiations, in which a critical mass of countries would agree to cut tariffs to as close to zero as possible for industries ranging from jewellery to chemicals.
The United States and many other farm exporters, such as Uruguay and Paraguay, also fear the proposed safeguard mechanism would let developing countries massively increase tariffs in response to normal growth in trade.
Separately, France kept up pressure on EU trade chief Peter Mandelson not to agree to a deal that meant farm concessions in return for little gains elsewhere.
VOLUNTARY OR NOT?
WTO members endorsed the idea of "voluntary" sectoral agreements at ministerial meetings in Hong Kong in 2005.
China and India object to a compromise provision which encourages countries to take part in at least two sectoral talks by allowing them lower cuts in other industrial tariffs.
Developed countries want sectorals in "machinery, chemicals and automobiles, in which they enjoy substantial export advantage" and are pressuring developing countries to join in, said Lu Xiankun, a Chinese press counsellor.
In agriculture negotiations, "China has indicated that it intends to shield cotton, sugar, rice and other commodities from any tariff cuts whatsoever", U.S. envoy Shark said.
That makes it much harder for the White House to sell farm subsidy cuts to Congress, particularly for cotton, which WTO members have agreed will face faster and deeper reductions.
Lu noted the United States would be able to spend up to $14.5 billion on trade-distorting subsidies under the proposed deal, or about twice what it currently does.