Mexico, 'middle ground' countries offer WTO solution for industrial trade

A group of Latin American and Asian countries is proposing to break the divide between rich and poor nations with a compromise deal to tear down barriers in industrial commerce while allowing emerging economies to shield strategic sectors.

The proposal, obtained by The Associated Press, entails concessions for both sides and could serve as the basis of a World Trade Organization breakthrough. On the other hand, it could be universally rejected.

Drafted by the so-called "middle ground" countries _ which include Chile, Costa Rica, Mexico, Singapore and Thailand _ the offer will be presented to WTO delegations Friday.

It comes as a crucial week of talks on a new global commerce pact faces perhaps its decisive moment, with rich and countries at sharp odds over opening up trade in agriculture and manufacturing.

The pressure has been on developing countries since Tuesday, when the United States made a key concession by proposing to cut its farm subsidy limits deeper than it previously had offered. For their agricultural concessions in the WTO talks, the U.S. and the European Union have demanded reciprocal moves by emerging powers such as Brazil, China and India to open up their industrial markets.

After four days of negotiations in Geneva, the two sides were still far from agreement. India, in particular, was described as the main hindrance to a compromise, with a number of trade officials citing it for offering no flexibility on industrial trade.

The "middle ground" proposal contains provisions that would be seen as concessions for developing countries. They would have to choose from a set of industrial tariff caps ranging from 20 percent to 25 percent _ a steeper cut than what they have accepted in the WTO talks.

But Brazil, India, China and others would also be granted generous exceptions under the plan. They would be able to protect up to 14 percent of their manufactured goods by maintaining higher tariffs for foreign competitors.

In a blow to the United States and European exporters such as Germany, the proposal would also allow emerging countries to shield up to 90 percent of goods in any single industrial sector _ such as automobiles _ from opening to greater international competition under an agreement.

Such a result would break the poorly named "anti-concentration clause" that has become a symbolic last stand for some European countries, which feel they have sacrificed too much in agriculture in exchange for too few opportunities for their industrial exporters.

Washington also strongly opposes allowing emerging economies to carve out nearly entire industries from greater liberalization.

The middle ground of countries first formed as an informal WTO group in June 2007, shortly after talks among the U.S., 27-nation EU, Brazil and India fell apart in Germany.

The collapse was the latest in a series of high-level failures that has plagued the WTO's seven-year Doha round of trade talks, and the middle ground's creation was seen as sign that some developing countries were breaking ranks with Brazil and India.

But those countries, along with China, have continued this week in their leadership roles on behalf of developing countries, negotiating in a select group with the U.S., EU, Japan and Australia.

The WTO is hoping for agreement this week or next on a deal that would liberalize world agriculture and manufacturing, setting the stage for an overall trade accord by the end of the year. But there is widespread skepticism.