Global trade talks collapse in acrimony

Trade war looms as African nations storm out; Huge gulf between rich and poor on farm subsidies

Global trade talks dramatically collapsed last night after the world's rich and poor nations failed to agree on the controversial issues of agricultural subsidies and investment.

Ninety of the world's poorest nations stormed out of the negotiations in the Mexican beach resort of Cancun in protest at demands by the European Union and United States for massive trade liberalisation.

Three groups of mainly African states walked out of talks aimed at striking a deal over new negotiations into rules governing foreign investment by multinational corporations in developing countries. Luis Derbez, the Mexican arbiter of the negotiations, closed the meeting after the Least Developed Countries ­ the African and Caribbean group ­ and the African Union refused to negotiate unless the EU backed down.

It is the second time in four years that a costly meeting of all 146 members of the World Trade Organisation has crumbled without a result. In 1999 the meeting in Seattle ended with blood on the riot-torn streets and, metaphorically, within the negotiating chambers.

The failure of the talks is a huge embarrassment for the rich industrialised countries that had hoped a multilateral trade agreement would be seen as mending fences with the world's developing nations.

Sources said Kenya was furious that the major economic powers ­ the EU, US and Japan ­ had failed to offer a deal that would prevent developing countries being swamped with cheap imports of farm produce as well as goods and services.

It is understood Britain had made a last-minute appeal to Pascal Lamy, the EU's chief negotiator, to back down on Brussels' key demand for an investment agreement.

The convention centre where the talks were held was swiftly full of jubilant chanting anti-globalisation groups who hailed it as a victory for the southern half of the world and blamed Brussels for the failure. Barry Coates, director of the UK-based World Development Movement, said: "This was the only option for the developing countries. They have been bullied, ignored and marginalised."

Claire Melamed, head of trade policy at Christian Aid, said: "Rich countries wanted something for nothing [but] the developing countries have drawn a line in the sand. No deal is better than a bad deal."

Delegates from the WTO had worked through the night, poring over a new draft agreement that was produced on Saturday in an attempt to break the deadlock. Hopes were quickly shattered as developing countries condemned the rich countries for refusing to give ground on a whole range of issues. While poorer countries won an agreement for cuts in tariffs on processed agricultural products, pressure groups said the rich countries were holding firm in their demand for new talks on a global investment agreement and for massive cuts in tariffs in developing countries.

The talks will now go back to the WTO's headquarters in Geneva with little to show. Negotiators face an uphill struggle to get a round signed by the final deadline of 31 December 2004.

There was already speculation some countries were prepared to walk out even before Kenya's decision. Malaysia, which wants investment talks scrapped, and the Dominican Republic, which wants protection for its key products, had been ordered to walk out if they did not win concessions. Papua New Guinea is booked on flights out of Cancun this morning, which would jeopardise hopes of getting the unanimous agreement needed for a deal.

On Saturday night the EU angered powerful developing countries such as India and South Africa offering concessions on farming in exchange for dropping their opposition to the launch of investment talks.

In an astonishingly outspoken attack, Rafidah Aziz, a Malaysian minister, said: "Malaysia's position is non-negotiable regardless of any move in other issues". Arun Jaitley, India's seasoned negotiator, said the "pretence of the development dimensions of the round has finally been discarded". The EU was also unhappy. "This paper crosses several red lines the European Union has clearly set out," said Franz Fischler, the EU's Agriculture Commissioner.