The indefinite suspension of WTO talks announced on Monday is a major setback for international efforts to break down protectionist trade barriers and boost world economic growth, especially in poorer nations.
But more is at stake. The unexpected collapse of the WTO's Doha trade round, following disagreements on farm trade among the world's top six trading powers -- the US, the EU, Japan, Australia, India and Brazil -- looks set to worsen current global woes, marked by escalating Middle East violence and increasingly strained relations between Iran and Western nations.
WTO director general Pascal Lamy did not mince his words as he declared failure on Monday.
"We are in dire straits," he said, adding that with key WTO members still unable to bridge their differences over agriculture, he did not see how a deal could be reached by the end of the year.
The WTO chief did not set a new timetable for completing the talks.
Lamy's announcement trig-gered another round of an acrimonious blame game that the WTO's top trading powers have been playing since the Doha round was launched in the capital of Qatar five years ago.
EU negotiators immediately pointed an accusing finger at the US, saying the talks had come to a halt after Washington refused to slash billions of dollars of trade-distorting subsidies paid out to farmers.
"Surely the richest and strongest nation in the world, with the highest standard of living in the world, can afford to give as well as take," said EU trade chief Peter Mandelson.
The US in turn blamed Brazil and India for being inflexible on cutting barriers to industrial imports and the EU for refusing to make deeper cuts in its farm import tariffs.
US Trade Representative Susan Schwab said Washington did not want a "Doha lite" and accused the EU of trying to protect itself by blaming the US.
Developing nations were pessimistic about chances of putting the talks back on track.
"This is a serious setback, a major setback," said Brazilian Foreign Minister Celso Amorim.
The talks were "somewhere between intensive care and the crematorium," added India's Trade and Industry Minister Kamal Nath.
The WTO breakdown could not have come at a worse time, warned Jean-Pierre Lehmann, director of the influential Evian group trade think-tank based in Lausanne, Switzerland.
Given current "global turbulence and uncertainty" -- including the Israel-Lebanon conflict, bloodshed in Iraq, the risks of further conflagrations in the Middle East and the rising price of oil -- Lehmann said the US, the EU and Japan should have taken the lead in easing international trade tensions.
Instead, they decided to put their vested interests -- especially in the narrow farm sector -- ahead of global concerns.
"This is a tragic outcome. It points to a dramatic failure of leadership among the leading trading powers," said Lehmann.
There is special concern that the outburst of transatlantic acrimony following the collapse of the talks could impact on US-EU efforts to ease current tensions in the Middle East.
The US and the EU have shown in the past that they can work together on the global political stage while engaging in barbed exchanges on trade issues.
But their current rift in the WTO comes on top of divergent transatlantic views on the Middle East conflict, with EU nations backing Lebanese calls for an immediate ceasefire and the US saying it wants to focus on eliminating the root causes of the conflict before there is a cessation of hostilities.
The dramatic collapse of the discussions which have long been seen as a test of the credibility of the WTO and especially for its dispute settlement system, is a blow to the reputation of the WTO.
Analysts predict that with the Doha round in deep freeze, there will be a proliferation of bilateral and regional free trade deals. These, they fear, could damage the WTO multilateral trading system, based on the principle of non-discrimination among nations.
With the WTO's reputation in tatters, "discrimination will come back with a vengeance," warns Lehmann, adding that while richer developing countries will be actively courted by the EU and the US for bilateral deals, poorer nations will be left out.
The US has cautioned that unless a WTO deal can be secured by the end of the year, the negotiating process may have to be put on ice until after US presidential elections in 2008.
This is essentially because President Bush's "fast-track" authority to strike trade deals expires next year. Without such backing, any trade agreement struck by Washington could be amended endlessly by an ever-critical US Congress.
Historical experience provides some hope that the current crisis could mean future opportunity. Previous global trade talks were also effectively suspended in 1990 but were then revived, allowing for a final "Uruguay Round" agreement to be clinched in 1994.
But for that to be repeated, WTO negotiators will have to stop being "myopic and mediocre" in their outlook, said Lehmann. So far, the prospects for such a change in approach look grim.
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