EU farm struggle casts doubt on WTO Hong Kong meet

WASHINGTON (Reuters) - A meeting of world trade ministers to hammer out a new global pact is in jeopardy unless Europe offers big cuts to its farm tariffs, the United States warned on Monday, and the EU itself admitted talks were on a "knife-edge."

The developments stepped up pressure on France, which has tried to curb concessions offered by EU Trade Commissioner Peter Mandelson on agricultural reform. France said on Monday it had not yet considered whether to use its veto on any EU proposal.

World Trade Organisation members are due to meet in Hong Kong in December to put together a deal that would lower global trade barriers in an attempt to lift millions out of poverty. But efforts to agree first on cutting rich nations' farm subsidies and duties have run into trouble.

A U.S. trade official told Reuters that people involved in the negotiations were now looking at alternatives to the Hong Kong meeting, in case Brussels failed to come up with a new offer in time.

"It's certainly a possibility," said the official, who spoke on condition of anonymity. "If the EU is not at the table, the round is not going to be successful. So people are trying to look at other alternatives and other contingencies."

Agriculture has taken centre stage at the talks because many poor nations, dependent on farm exports, say they need a deal here first before opening their markets for other goods. The talks began in 2001 in Doha, Qatar.

"I do not exaggerate when I say that the Hong Kong ministerial meeting is on a knife-edge," Mandelson said.

"We signed up to a 'substantial improvement' in market access," he added. "We have to make an offer on this basis that can be both prudent and real."

Market access, or lowering duties on imported farm goods, is a major sticking point. The U.S. wants cuts from 55 percent going up to 90 percent on the highest tariffs. The EU has said it could go over 50 percent only on its top tariffs and wants a wide number of exceptions from the cuts. It also says talks must include other areas outside of agriculture.

The core WTO countries are due to resume talks on Friday by telephone. EU officials have said they are "number-crunching" to see what kind of new offer they can produce on tariffs.

Christin Baker, spokeswoman for U.S. Trade Representative Rob Portman said: "U.S. trade officials are working to make Hong Kong a success. The U.S. government is totally committed to Hong Kong."

Australia, another major farm goods exporter, urged France and the EU to make more concessions to salvage the WTO talks. Australia Trade Minister Mark Vaile said a cow in the EU received an average subsidy of $2.20 per day, which is more than that earned by the world's 1.2 billion poorest people.

PRESSURE

Trade sources in Washington said they thought it unlikely that the Hong Kong ministerial could be called off at this stage, although memories of bitter failure in Cancun in 2003 remain fresh in people's minds.

"It's too soon to cancel it. They can't call it off before they get all the ministers in a room together. They may be trying to put pressure on the EU," said one industry source.

A former U.S. negotiator added: "I don't think any of the WTO key members want to see another Cancun. I can see Hong Kong becoming downgraded from a big ministerial meeting to one where they agree to finalise a farm deal maybe a month later."

France, which recently accused Mandelson of exceeding his mandate, sounded a conciliatory note.

French Foreign Minister Philippe Douste-Blazy told reporters in Paris he was pleased that the European Commission had agreed to meet regularly with experts to discuss the talks. "Confidence has returned and we will watch and monitor the discussions in the coming days," he said.

President Jacques Chirac told Luxembourg Prime Minister Jean-Claude Juncker, chairman of the Eurogroup of euro zone finance ministers, he was carefully watching the mandate of the European Commission in the talks.

A diplomatic source in Luxembourg told Reuters: "The idea is to take the heat out of things. We've laid out some red lines and the Commission, which is being watched now, should be aware of that."

(With reporting by Anna Willard in Paris, William Schomberg in Brussels, Yves Clarisse in Luxembourg, James Grubel in Canberra)