The Custom-House

Agreement at the WTO talks

Agreement at the WTO talks in Geneva

The WTO website statement about the agreement is here: "Round-the-clock meetings produce �historic� breakthrough". Here is the text of the agreement: "Text of the �July package� � the General Council�s post-Canc�n decision".

Forbes carries an Associated Press report on some of the elements of the agreement: "Update 5: WTO Negotiators Reach Tentative Accord".

"In agriculture, the document agrees to eliminate export subsidies and other forms of government support for exports, while making big cuts to other subsidies. It includes a "down payment" that would see an immediate 20 percent cut in the maximum permitted payments by rich nations.

The highest agricultural import tariffs will face the biggest cuts, although no figures have yet been agreed. Nations will have the right to keep higher tariffs on some of the products they consider most important.

Tariffs on industrial products will also be cut according to a formula, but the exact details have yet to be established. Developing countries will have longer to make the changes.

The deal also approves the launch of new negotiations on trade facilitation - "further expediting the movement, release and clearance of goods" by streamlining customs procedures.

Developing countries in particular have been congratulating themselves for forcing issues onto the agenda that they say were ignored by rich nations in the past - such as the devastating effect of U.S. cotton subsidies on producers in Africa."

Saturday at the WTO Exhausting,

Saturday at the WTO

Exhausting, marathon negotiations in Geneva, reports news.com.au: "No result in marathon WTO debate". And it can't go on forever. Logistical issues may put a stop to it by Sunday:

"...Other diplomats noted, however, that logistical rather than political reasons would prevent the talks from continuing indefinitely.

Switzerland is due to celebrate national day tomorrow [Sunday - Ben], raising security concerns as thousands of people flock to Geneva, while many delegates, who have already postponed flights home, are due to leave in the next 24 hours.

"It's going to end this afternoon, whatever happens," said one trade diplomat on condition of anonymity..."

Friday night and Saturday the negoitators plowed through the agricultural elements of the document and then moved on to industrial tariffs. The Group of 90 (poorest countries) and the EU have signed off on the agricultural sections, reports the Jakarta Post: "Consensus on farming at WTO within reach: Spokesman".

Richard Waddington and Patrick Lannin also report that things are coming together in this Reuters dispatch (from just after noon in Geneva - many hours ago now): http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=5835204&src=rss/businessNews">"Breakthrough on WTO Trade Pact Seen Close".

"...I think that the momentum is such that it is difficult not to conclude (successfully)," Brazilian Foreign Minister Celso Amorim told reporters at the WTO's headquarters.

"This is the beginning of the end for (farm) subsidies. Export subsidies will be eliminated first," Amorim added.

Brazil leads the so-called G20 group of nations which played a key role in the failure of last year's talks in Cancun, where they mounted fierce attacks on rich countries' farm subsidies..."

Max Zawicky evaluates Kerry

Max Zawicky evaluates Kerry

A view from my left: "KERRYNOMICS" Zawicky likes the fair trade talk, but doesn't believe it. Clinton fooled him once, and its not going to happen again.

"Kerry is making fiscal commitments -- balanced budgets, tax cuts and program expansions -- that defy the laws of arithmetic." But, "A friend tells me to cheer up -- that we can expect better in regulation of the environment, labor, reproductive rights, and other areas. Plus better judges. He's right."

Zawicky's not happy with Democratic party economic orthodoxy: "FED ACHE". Read Galbraith's review of the Lawrence Meyer book for more moderate left critique of the Democratic mainstream view.

Was Kerry's acceptance speech protectionist?

Geitner Simmons identifies a protectionist slant in Kerry's acceptance speech, arguing that, since the speech is designed to have a "centrist tone" it signals that the Democratic party "now regards protectionism as well within the policy mainstream." See "That which must not be named".

I didn't see the speech, but I'm curious to see what Kerry said. The text of the speech is here: "Text of John Kerry's acceptance speech" Here are some selections:

"...And here at home, wages are falling, health-care costs are rising, and our great middle class is shrinking. People are working weekends - two jobs, three jobs - and they're still not getting ahead.

We're told that outsourcing jobs is good for America. We're told that jobs that pay $9000 less than the jobs that have been lost is the best that we can do. They say this is the best economy that we've ever had. And they say anyone who thinks otherwise is a pessimist...

What does it mean in America today when Dave McCune, a steel worker I met in Canton, Ohio, saw his job sent overseas and the equipment in his factory literally unbolted, crated up, and shipped thousands of miles away along with that job? What does it mean when workers I've met had to train their foreign replacements?

America can do better. So tonight we say: help is on the way...

...So here is our economic plan to build a stronger America:

First, new incentives to revitalize manufacturing.

Second, investment in technology and innovation that will create the good-paying jobs of the future.

Third, close the tax loopholes that reward companies for shipping our jobs overseas. Instead, we will reward companies that create and keep good paying jobs where they belong � in the good old U.S.A.

We value an America that exports products, not jobs � and we believe American workers should never have to subsidize the loss of their own job.

Next, we will trade and compete in the world. But our plan calls for a fair playing field � because if you give the American worker a fair playing field, there's nobody in the world the American worker can't compete against..."

Someone is going to be disappointed. Either the unsophisticated voter who thinks, on the basis of the code words, that Kerry is going to make foreigners play "fair," or the sophisticated Laura Tyson who thinks we should look at what Kerry has done in the past, not what he says.

Friday at the WTO Delegates

Friday at the WTO

Delegates received a 20 page draft framework for continuing negotiations this morning ("WTO Mediators Make Final Bid for Accord") . This text is available at the WTO site: "Second draft of post-Canc�n decision for the General Council".

Negotiations begun on Thursday continued until 4 AM this morning. An informal 2 1/2 hour "Heads of Delegation" meeting started at 7 AM - shortly after the new document was circulated. The meeting is described here: "Members comment on new draft as chair warns of overload".

Channel NewsAsia reports on the new document here: "WTO lays out last-ditch compromise to unlock global trade talks". Peter Gallagher has some early thoughts on the draft here: "Second Grosser text ". Here is some early analysis from the High Plains Journal as well: "Details Of WTO Proposal ".

African countries are reported to be pleased with the result: "African Nations Happy With U.S. Agreement".

"...The agreement would establish a special subcommittee to look at issues related to cotton as part of the WTO's agriculture negotiations.

It also instructs WTO Director-General Supachai Panitchpakdi to work with other
international agencies, like the World Bank and the International Monetary Fund, to "direct effectively existing programs and any additional resources toward development of the economies where cotton has vital importance."

Most importantly, the agriculture agreement as a whole - if approved - would see an end to export subsidies globally and major cuts in domestic subsidies paid by rich nations...

He [Ousmane Ngom, Senegalese minister of trade - Ben] acknowledged that the African nations also had to make some compromises. They had originally demanded that cotton be treated separately from other agricultural issues, and that African nations be compensated until subsidies were eliminated..."

This story, "India rejects revised WTO draft" indicates that India, one of the "Five Interested Parties" that negotiated the agricultural section of the draft, has rejected the draft released today. However, the Indian trade minister, who was in Bangkok is returning to Geneva to see if acceptable revisions can be made. This story from India's Business Standard elaborates a little more on Indian concerns: "India scuttles US WTO move". This story by Ritu Sarin in The Indian Express ("India, Thailand ink FTA pact") indicates the nature of India's concerns today:

"...He [Kamal Nath, India's trade minister - Ben] also admitted that it was the prickly problems of Aggregate Market Support (AMS) and the amber box formulae being postulated by the US, that India was objecting to. The position being taken by India is as a developed country, the US should have a more drastic reduction of subsidies to agriculture. Secondly, EU had agreed to reduce subsidies to a nil level, the US had asked for a slow pace of reduction, necessitation from India�s viewpoint a redrafting of the proposed WTO agreements."

One final story on India's role, from the Times of India: "New WTO draft 'unacceptable' to India".

"Explaining the rejection of the draft, Indian officials said the document pushed through by the US would have allowed it to get away with a lower reduction of subsidies and at a slower pace.

At the same time, the US had insisted that India should commit itself to reducing its aggregate support for agriculture from 5 per cent allowed now to nil.

The current round of negotiations has seen India using deft footwork, switching allegiances to further its interests.

It was only on Thursday that it was seen leaving its familiar perch among the "developing countries" to join the so-called NG-5 (Non-group-5) with the US, the European Union, Brazil and Australia. The NG-5 is described as such because of their conflicting interests."

Peter Wilson writes, in The Australian ("Australia blamed for hiccup in Geneva"), that the deadline for completing the negotiations has offically been pushed back until midnight on Friday to Saturday.

"...The first three days of this week's four-day meeting in Geneva were basically put on hold to wait for an agreement behind closed doors between Australia and four other major players in agriculture -- the two biggest distorters of farm trade, the US and the European Union, and two representatives of developing nations, Brazil and India.

They finally agreed on a draft for future negotiations under which Europe's promises to eventually end export subsidies would be matched by a US vow to reduce its huge domestic supports for American farmers and an Australian promise to study whether state trading enterprises for commodities such as wheat were hidden forms of government subsidies..."

Elizabeth Becker, reports in the New York Times ("U.S. Will Cut Farm Subsidies in Trade Deal") that U.S. concessions were an important element today:

"GENEVA, July 30 - The United States yielded to pressure from developing countries on Friday and agreed to make a 20 percent cut in some of the $19 billion in subsidies it pays to American farmers each year, as members of the World Trade Organization met round the clock here to win approval for a new deal governing world trade.

Working until 4:00 a.m. on Friday, Robert B. Zoellick, the United States trade representative, reached an agreement to cut subsidies for such crops as corn, rice, wheat and soybeans. He also reached an accord with four cotton-producing countries in West Africa for eventual cutbacks in subsidies paid to American cotton growers...

In exchange for reducing agricultural supports, the wealthy nations are asking the developing nations to reduce their tariffs on manufactured goods. That issue was left in general terms for more precise negotiations in later talks. Mr. Zoellick so far has failed to get significant concessions to open up new markets for American agricultural and industrial goods."

The EU foreign ministers met this morning, and there was general agreement that the new draft framework is an improvement. Only France found objected to approving the agreement: "France stands alone among EU states opposing WTO accord".

Revised 9:30 PM Juneau time

Thursday at the WTO Agricultural

Thursday at the WTO

Agricultural negotiations, dominated by the US, EU, Brazil, India, and Australia, (the so-called "Five Interested Parties," or "FIP") continued until midnight Wednesday or early Thursday morning. The five have now turned their ideas over to New Zealand Ambassador Tim Groser, the WTO's chief agricultural negotiator.   Elizabeth Becker of the New York Times reports that the U.S. made significant concessions during the evening "U.S. and Europe Reach Informal Agreement on Agriculture".

"..With less than two days remaining, delegates and officials said that the United States in particular had made significant new compromises on Wednesday night, inspiring cautious optimism that the talks will lead to an agreement and advance the Doha round of trade for the developing nations...

While officials were reluctant to describe specifics of the discussions or even describe them as an agreement, they did say that the United States seemed willing to put off some of its more contentious demands on agricultural subsidies and, instead, offer to make specific cuts in other areas..."

Groser is to finish turning these ideas into a document describing an agricultural framework, and he and WTO Director-General Supachai Panitchpakdi are to present a complete version of the revised framework covering all the issues late Thursday night, or possibly Friday morning. (see this Associated Press story: "WTO Proposal Delayed As Govt's Struggle", and this Richard Waddington story for Reuters: "Hopes for WTO trade deal rise".)

This Reuters dispatch indicates that a number of countries feel "left out" of this process ("Fate of World Trade Talks Hangs in Balance"):

"At a stormy meeting late on Wednesday, a number of countries also expressed anger at the special role being given to the FIP countries, saying that they would not be steamrollered into accepting a text just because it had been approved by them."

This South African Mail & Guardian story amplifies on the frustrations felt by some countries not included among the five core countries in the negotiations: "Trade talks by big five spark outrage".

The WTO held a "Heads of Delegation" briefing meeting late last night about 10 PM (the "stormy meeting" of the Reuters dispatch?). The meeting is described in a WTO release this morning: "Supachai welcomes input from the Five as a key first step".

"...At chairperson Oshima�s invitation, Ambassador Groser reported on the latest state of play in the agriculture negotiations. He said he was �in a much better frame of mind� than he had been that morning because he had received clearer guidance on how to narrow the gaps on major differences. He said he would not spell out the details yet, preferring to go through all the many proposals he had received first.

But Ambassador Groser did hint that progress had been made on how to deal with subsidized export credit, food aid and state trading enterprises, in a way that would match the proposal to get rid of export subsidies by a negotiated date. He also said complaints about the unequal treatment for developed countries� sensitive products (which are described in some detail in the current draft), and developing countries� provisions for their �special products�, would be amended in response to the complaints.

There is now a real chance of �saving the Doha Round�, he said. Meanwhile parallel talks are underway on the cotton initiative, Ambassador Groser reported..."

The goal of this week's meetings is to produce a draft Doha Round framework agreement. This agreement will provide negotiators with a framework for future, more detailed, negotiations in coming months. The framework identifies the subjects to address and the approaches to take to them.

A final agreement is due sometime before the General Council meeting ends on Friday. Various news stories talk about a mid-night deadline, but one recent story is talking about a meeting running into early Saturday. The framework document was originally expected on Tuesday or Wednesday. Yesterday it was hoped to have something early Thursday. Now delivery is late Thursday night or Friday morning.  This late delivery doesn't give much time for delegations to review it, debate it, or consult with their home governments. If there is much controversy about the delivered document, there may not be any time for further revision. Representatives of the FIP countries have been briefing other groups privately on the Wednesday night outcomes on Thursday, pending release of the final document.

This EUPolitix story notes that the EU negotiator, Pascal Lamy, must defend the proposals before a meeting of EU foreign ministers. Ministerial approval is needed for the EU to sign off on any agreement. Some EU states, including but not limited to France are concerned that too many concessions may have been made: "EU to quiz Lamy on new WTO deal"  This meeting was originally scheduled for Thursday, but this story from Channel NewsAsia reports that the meeting has been postponed until Friday morning, because of the delays in preparation of the framework document: "Tempers fray as WTO talks rumble on without result".

I'll close out today's post with some notes on Paul Blustein's story in tomorrow's Washington Post ("5 Powers Agree at WTO on Farm Talks").

• There was still a lot of uncertainty among the delegations about the nature of the agreements that had been worked out among the "Five interested parties."


• The draft was still being rewritten late on Thursday night, and was still "hours and hours" away.


• Although the deadline was midnight Friday, the draft is so late that to give delegations more time for review and consultation with their governments, the deadline may be extended 24 hours.


• I mentioned above, based on another, earlier, story, that FIP spokesment had been briefing delegations on the agreements worked out last night.  Blustein reports that FIP spokesmen have remained "silent on the substance of the agreement for fear of fuleing resentment among the other WTO members left out of the elite group."


• "Just as optimism surged about the agriculture text, officials said a number of developing countries are balking at a proposed formula for cutting tariffs on industrial goods. The formula would require countries with high tariffs to reduce them much more sharply than countries with low tariffs.

  That is a major goal of the United States and the European Union, which hope to swap concessions in agriculture for concessions that would help their big industrial exporters sell their products more easily around the world. But the prospect of freer trade in manufactured products unnerves many developing countries that fear being overwhelmed by competition from China."

Revised Thursday, July 29, (7:30 PM Alaska time)

Likely Kerry Administration Trade Posture

Likely Kerry Administration Trade Posture

Matt Yglesias reports that Laura Tyson, former Clinton, current Kerry, economic advisor says that Kerry would pursue pro-free trade policies. Despite some of the things he has said on the on the campaign trail:

"...The thing to look at "is Sen Kerry's very courageous, very consistent, very long-term record on trade and global economic integration." A man who has consistently voted for a pro-trade, pro-integration agenda. His career has been oriented in this direction. He has shown "courage in this direction because a significant part of my party's base is a voice of concern about trade . . . and is consistently asking for policies that would take the US backwards." Kerry has consistently heard those voices, "and consistently voted a pro-trade record."

("Notes on Tyson on Kerry on Trade")  I learned about this from "AB" at Angry Bear ("Free Trade Update")

Wednesday at the WTO (Our

Wednesday at the WTO

(Our story so far...)  Remember that the General Council of the World Trade Organization (WTO) is meeting this week to develop guidance for negotiators on how to proceed on the current round of negotiations on liberalization of the world trade.  Last September in Cancun, the trade ministers of the member nations met to try to do this, but they failed to produce agreement. Upcoming elections in the US and transitional events in the EU, will make it hard to hold a similar meeting for many months. A failure to reach agreement now may hurt, or effectively end, the current round of negotiations. The Council meeting ends Friday.

A draft set of guidelines, floated on July 16, has been the subject of intense negotiation since then. A revised set of guidelines had been expected today. Currently (Wednesday - 12:30 PM Alaska local time and night in Geneva) the revised version is expected very late tonight or early tomorrow (Thursday, July 29) morning. Here is the WTO web page on the status of the negotiations: "Chairs report progress as hours tick by":

"Consultations on the key issues in the �July package� are progressing gradually and a realistic estimate of when a revised draft text will be circulated is �very, very late� this evening, or early the following day, WTO members heard today, 28 July 2004

�All delegations are engaged and we�re making worthwhile progress in all areas,� General Council chairperson Shotaro Oshima told heads of delegations at the latest meeting called to keep negotiators informed about the various consultations taking place.

But above all, a revised text for the July package awaits the section on agriculture, with the subject�s �facilitator�, Ambassador Tim Groser of New Zealand, hoping to produce a new draft later in the day, members were told.

Many delegations said they were encouraged by the progress and were willing to wait another half day for a revised text if that could lead to agreement. But several warned that enough time should be left for those who are not directly participating to be able to have a say, and for them to seek reactions from their capitals."

The WTO page provides briefings on the progress of negotiations in several key areas over the last few days.

The Forbes website carries an Associated Press ("Update 2: WTO Countries Work on Farm Trade Logjam") story, which indicates that agriculture is the hold-up, and that much of today's activity revolved around meetings between Brazil, India, Australia, the EU and the US, on this issue:

"Senior trade mediators and government negotiators worked into the night Wednesday, attempting to bridge the divide between rich and poor nations over liberalizing farm trade at talks in Geneva.

The World Trade Organization's 147 members are frantically working to reach an agreement by the end of the week to clear the way for sweeping changes in world trade. But mediators said disagreements on farm trade liberalization are holding up the talks.

"It depends on the (agriculture) session, which is ongoing," WTO Director-General Supachai Panitchpakdi told reporters. "I think there's a limit to their time."...

Five major agricultural producers continued to meet for a second day Wednesday, hoping to find a solution to open up the international farm trade.

Trade ministers from the United States, the European Union, Brazil, India and Australia met at the U.S. mission in Geneva..."

The African countries remain unhappy about the status of cotton.  Channel NewsAsia reports: "Tied up with cotton, African countries threaten to unravel WTO talks".

"...The initial draft proposal to steer the talks back on track, which is under review at this week's crunch WTO meeting, pays more attention to the cotton issue [than cotton had received at Cancun - Ben] but African nations contest that the wording is still not strong enough.

As a result Benin on Friday proposed a revised, more assertive draft.

A copy of the text, obtained by AFP, states: "WTO members are committed to take a specific, urgent and ambitious actions to address trade distortions in the cotton market."
It also declares that any agreement on cotton must be implemented on an early harvest basis starting in 2005.

"The text presented by Benin on cotton is the minimum for us African countries. If it's not accepted, we won't sign" the overall agreement, the African delegate said.

Several WTO experts, however, felt the Benin document had no chance of being accepted by the United States..."

The revised framework document is due tomorrow.  As noted on the WTO website above, that doesn't leave much time for input by other parties, or for touching base with the government at home.  Note also that the EU trade ministers have agreed that they will approve any document before their negotiator can sign off on it.

Will the chances for an agreement improve if the negotiators drop specifics and draft a more general document? Richard Waddington of Reuters ("Mediators' WTO Pact Plan Could Slip"):

"...Some developing countries have argued that rather than risk a fresh failure, negotiators should opt to lower their sights and seek a more general accord on principles.

But others said that it would be difficult for Brussels Trade Commissioner Pascal Lamy, who is already under attack by France for having conceded too much, to keep on the table a firm commitment to end export subsidies when all other issues were reduced to generalities..."

What happens if the negotiations fail? Martin Wolf has evidently argued (in the Financial Times - subscription required) that it would have extremely serious consequences, not just for the current round of negotiations, but for the WTO as an organization. Similar concerns are expressed in these paragraphs from a story by Paul Blustein in yesterday's Washington Post ("Failure in Cancun Haunts WTO"):

"Accordingly, no one here discounts the possibility that this week's meeting will end in discord. If it does, the WTO's existing rules will stay in effect, "and the talks will just drift," said Jeffrey J. Schott, a trade expert at the Institute for International Economics in Washington. "But what won't just drift is the perception of whether it's better to do business in the WTO or in bilateral or regional negotiations," such as the recently approved free-trade agreements that the United States reached with Australia and Morocco. "I think you would then call into question the viability of the WTO as a negotiating forum. That's a real risk."

That, in turn, could adversely affect the WTO's "crown jewel" -- its system for arbitrating trade disputes among nations, according to Peter D. Sutherland, a former director-general of the organization. In a Financial Times column this month, Sutherland asked whether the global trade system can continue to function well "if the institution within which it is embedded -- and on whose rules its judgments are based -- ceases to command the respect of governments and businesses."

Peter Gallagher argues that these concerns are overblown. The institution of the WTO itself will survive, and the negotiations themselves may not be over: "The price of 'failure'". Gallagher's point is that the General Council shouldn't agree on a poor set of guidelines, just to avoid the perception of failure.

Revised 12:30 PM July 28

Perverse incentives Josh Barr reports

Perverse incentives

Josh Barr reports in the Washington Post ("Athletes Make the Grade Sooner by Failing First") that:

"An apparent loophole in National Collegiate Athletic Association eligibility regulations is leading an increasing number of top recruits to intentionally fail to graduate from high school so they can improve their chances of playing sooner in college..."

I learned about this from Skip Sauer at the Sports Economist

What happened at the WTO

What happened at the WTO on Tuesday?

Tuesday, July 27, was the first day of the WTO's General Council negotiations on the Doha trade liberalization agenda or framework (all this, Cancun and Geneva, and many negotiations between...just to flesh out the groundwork for the detailed negotiations to come).  Elizabeth Becker of the New York Times reports: "Farm Subsidies Again Take Front Seat at the W.T.O.".

"GENEVA, July 27 - Global trade talks began here Tuesday with officials hoping to break logjams and to satisfy the increasingly vocal complaints of developing nations that rich countries have yet to pledge a substantial enough cut in their $300 billion annual agricultural subsidies and supports.

But neither the haves nor the have-nots were acting as single blocs, with members of both factions seeking out splinter groups focused on particular issues. At the headquarters of the World Trade Organization, the countries gathered in a general session and later broke into discrete special-interest groups that tried to devise strategies that offer enough concessions to reach a compromise, while also appeasing groups at home..."

Becker describes a fractious meeting, but the short article is ultimately optimistic:

"After raising serious objections to farm subsidies of developed countries at a news conference, India's minister of commerce, Kamal Nath, nonetheless said: "I'm looking at the next three days with optimism. It is possible to make improvements."...

Mr. Nshuti [Rwanda's Commerce Minister - Ben] said failure of the talks was not an option. "For Africa, we are losers already,'' he said. "If there is a failure here, it is a failure for the whole world, not just Africa.''

Analysts said that some of the tough new demands from many countries were predictable devices to win greater concessions..."

This report from Michael Madigan in Australia is even more optimistic than Becker's: "Farm trade victory looms".

"...Trade Minister Mark Vaile and National Farmers Federation president Peter Corish both cancelled engagements in Townsville on Monday to fly to World Trade Organisation talks in Geneva after a dramatic shift towards consensus.

Yesterday [This is dated the 28th, so yesterday is Tuesday - Ben] both the Cattle Council of Australia and the NFF confirmed what had been unthinkable only a few months ago � that the removal of subsidies in the US and Europe was a genuine possibility.

"What they are looking at is the possible abolition of all subsidies for agriculture," Cattle Council president Keith Adams said.

"It's really been the last 24 hours that have seen the ground shift."

This seems unlikely. Would the Bush Administration, facing a tough election fight, agree to a framework that opens the possibility of an elimination of all subsidies, or that the EU would go beyond the concessions they've already made on export subsidies, given the position taken by the French.  Maybe this is referring to information about an agreement on export subsidies only.

Here is Peter Gallagher's latest report.

Paul Blustein at the Washington Post weighs in here with a general overview of the background to, and purpose of, the Geneva meetings: "Failure in Cancun Haunts WTO". Blustein surveys some of the outstanding issues. What's at stake:

"...no one here discounts the possibility that this week's meeting will end in discord. If it does, the WTO's existing rules will stay in effect, "and the talks will just drift," said Jeffrey J. Schott, a trade expert at the Institute for International Economics in Washington. "But what won't just drift is the perception of whether it's better to do business in the WTO or in bilateral or regional negotiations," such as the recently approved free-trade agreements that the United States reached with Australia and Morocco. "I think you would then call into question the viability of the WTO as a negotiating forum. That's a real risk."

That, in turn, could adversely affect the WTO's "crown jewel" -- its system for arbitrating trade disputes among nations, according to Peter D. Sutherland, a former director-general of the organization. In a Financial Times column this month, Sutherland asked whether the global trade system can continue to function well "if the institution within which it is embedded -- and on whose rules its judgments are based -- ceases to command the respect of governments and businesses."

Revised 8:45 PM Alaska local time, 7-27-04.