WTO chief says Doha rescue in U.S., China's hands

World Trade Organization Director General Pascal Lamy on Monday acknowledged the Geneva-based grouping has been a "disappointing" forum for trade liberalization but placed the blame for moribund world trade talks on both China and the United States.

Lamy, in a speech to the Brookings Institution, said it was clear a comprehensive agreement in the Doha round of world trade talks launched in 2001 "is out of reach in the short term."

But it may still be possible for WTO members to make advances in some areas, such as expanding the 1996 Information Technology Agreement to eliminate duties on more high-tech trade and negotiating a new international services agreement among an interested set of WTO members, he said.

Lamy also said he has assembled a panel of 12 experts, including U.S. Chamber of Commerce President Tom Donohue, to recommend by early next year a future course for the WTO.

Last month, U.S. Ambassador to the WTO Michael Punke told Washington lawmakers the WTO was "at a crossroads" because of its failure to reach a Doha agreement as well as the resistance of China, Brazil and India to the proposed services talks.

"Our view is the WTO can't fix its problems without first acknowledging them," Punke said.

The United States puts much of the blame for the impasse in the Doha round on major developing countries, which it says failed to offer sufficient new market openings in exchange for proposed cuts in U.S. farm subsidies and tariffs.

Developing countries say Washington demanded too rich a price for its reforms and the Doha negotiations were launched primarily to help poor countries increase trade.

Lamy said the main obstacle to a Doha round agreement was a dispute between the United States and China over how much to cut industrial tariffs for rich and developing countries.

"If the U.S. and China would agree on a compromise on industrial tariff problems, I would tell you the whole picture would change," he said.

Lamy conceded the WTO has fallen short of expectations in opening new markets, but defended its other operations.

"If the WTO's negotiating function has been disappointing, our organization has become more effective in other areas," such as the monitoring and reporting of trade restrictive measures imposed since the crisis began, he said.

He also lauded the WTO's role in defusing trade tensions.

"In an atmosphere of escalating trade tensions, the Dispute Settlement Mechanism has taken the heat out of disputes through a process, which is rules-based, predictable and respected. It is no accident that we have already had three times as many cases filed this year as in all of 2011," he said.

Lamy, who steps down as WTO head next year, said a new global consensus was needed to tackle a proliferation of regulatory trade barriers, while recent tariff increases by "certain WTO members" show why it would be valuable to reach a new global deal cutting tariff ceilings.

He did not mention countries by name, but Brazil has increased tariffs on a number of goods this year.

The geopolitical landscape is increasingly complex, but tough challenges did not deter the United States 50 years ago when President John F. Kennedy signed legislation creating what became the U.S. Trade Representative's office, Lamy said.

"The world was gripped by the Cuban missile crisis. The U.S. was looking with some perplexity at the consolidation of the European Common Market. Yet, President Kennedy noted it was no time to stagnate behind tariff walls, but to promote increased economic activity through increased trade," Lamy noted.

The WTO will hold its next ministerial meeting in Indonesia in late 2013. Lamy resisted setting that as a deadline for scaled-down Doha package, but added it was possible to achieve for negotiators to achieve several agreements by then, including China's accession to the WTO government procurement pact.

(Reporting by Doug Palmer; editing by Todd Eastham, Gary Crosse)