Diplomats study final proposal for trade round framework

Friday, July 30th 2004, 6:14 am

By: News On 6

GENEVA (AP) _ After months of division, negotiators at the World Trade Organization studied a last-ditch proposal Friday for an agreement that would cut tariffs and subsidies in a bid to boost the global economy.

The proposal, produced early Friday after an all-night session by mediators, seeks to satisfy the concerns of rich and poor nations in the difficult areas of agriculture and trade in manufactured goods.

Trade ministers and diplomats at the 147-nation World Trade Organization now have only hours to decide on the proposal if they are to avoid being left years behind in their work on a new round of trade liberalization.

``We are optimistic that the text will provide us with the basis for a deal in the next 24 hours,'' said Australian Ambassador David Spencer.

However, other delegations warned that problems remain. Brazil's WTO ambassador, Luis Felipe de Seixas Correa, told reporters the text ``still needs major revision.''

Choi Kyong-lin, ambassador for South Korea, said his country was ``not at all'' happy with the text, but declined to comment further. South Korea is a member of the so-called Group of 10 agricultural importing countries _ which include Japan and Switzerland _ that have raised objections to the agriculture text. They are demanding special rules that would allow them to keep higher tariffs on a number of ``sensitive products'' to avoid devastating their domestic farming industries.

If approved, the WTO agreement will be an important step forward in the current round of negotiations to boost the global economy by cutting tariffs, subsidies and other barriers to international trade. The changes would affect farm goods as well as manufactured goods and service industries like telecommunications and banking.

The deal was originally supposed to be approved at the WTO's ministerial meeting in Cancun, Mexico, last September, but countries could not reach an agreement.

Failure to reach agreement this week will delay the trade round by months if not years, as the U.S. presidential elections and political changes in other countries will prevent the WTO taking any major political decisions until at least next spring.

WTO members agree in principle that cutting barriers to international trade, such as import taxes and government subsidies, is good for the world economy. But uncontrolled trade liberalization could have devastating consequences for individual countries, and diplomats are fighting hard to protect national interests.

The document, obtained by The Associated Press, makes a number of major changes from a two-week-old proposal that met with widespread disapproval.

On the key issue of agriculture, it incorporates an offer by a group of five powerful producers _ the United States, the European Union, Australia, Brazil and India _ to make immediate cuts to trade-distorting domestic farm subsidies. Although most of the treaty would be implemented over several years, the proposal calls for an immediate 20 percent reduction in the maximum amount of subsidy that each country is allowed to give in the first year after it is agreed.

For the first time, the document proposes a cap on subsidies aimed at limiting production, amid concerns by some nations that these have been abused in major industrialized countries.

The European Union has already agreed to eliminate all its agricultural export subsidies if other rich countries do the same. To ensure this, the document calls for the elimination of all state-run export credit and insurance programs with repayment terms of more than 180 days, and work to ensure that shorter programs are run on commercial terms.

To meet concerns of African nations who claim their cotton producers are being forced out of business because of heavy subsidies in rich nations, the text promises that the issue will be considered ``ambitiously, expeditiously and specifically.''

Negotiators were worried that insufficient time remained to finish talks by early Saturday, the deadline set by WTO as the latest time for agreeing on a framework document.