G7 struggles to revive free trade talks

LONDON - Finance ministers from the world's leading economies have sought to breathe life into world trade talks, appealing for a new spirit of compromise before a crunch meeting in 10 days' time.

They also renewed their call for China to relax its currency controls further as many countries are worried the yuan's exchange rate is artificially low and makes life difficult for rival exporters.

Actual movement on trade, however, was limited and there is a possibility leaders from both the rich and developing world will try to break the deadlock at a special summit before 148 countries meet in Hong Kong on December 13-18.

"This is a US$300 billion ($426 billion) issue. We have a duty," UK Fiance Minister Gordon Brown said after chairing talks among the Group of Seven industrialised nations, also attended by Russia, Brazil, China and India.

He trumpeted a commitment by India and Brazil that they would be willing to offer greater access to their markets if the rich world were prepared to give up their subsidies to farmers that some estimate to be worth about US$280 billion a year.

But France, already deeply unhappy with concessions offered on the European Union's behalf, gave little ground. Its finance minister Thierry Breton was on a tight leash given President Jacques Chirac is set on protecting his farmers.

US Treasury Secretary John Snow emphasised the key role France had to play in solving the current impasse.

"He (Breton) is unique among us in wearing two hats -- he's the finance minister and he's the trade minister," Snow said. "When he talks as the finance minister on trade issues he's terrific and when he talks as the trade minister he's under some constraints.

"So what we need to get is Thierry Breton the finance minister talking to Thierry Breton the trade minister and being very persuasive."

Aid groups said more needed to be done if the Hong Kong meeting was not be a complete failure. There had to be greater impetus to keep negotiations moving in 2006 with a view to wrapping up the so-called Doha round of trade talks during next year.

They say securing a meaningful agreement could lift millions out of poverty and provide a huge boost to global growth.

We are disappointed not to see an end date for export subsidies," said Liz Stuart, trade policy adviser at Oxfam said. "Now it's all eyes on whether anything happens in Geneva this week and then all eyes on Hong Kong."

Trade ministers from some of the main economic regions are meeting in Geneva where US Trade facilitator Rob Portman welcomed the G7 words of intent.

Besides keeping up the pressure on Beijing to allow its currency to rise, the G7 also asked the International Monetary Fund to pay more attention to exchange rates in its capacity as guardian of the world economy.

"We expect that further flexible implementation of China's currency system would improve the functioning and stability of the global economy and the international monetary system," the ministers' final statement said.

Snow refused to comment on a report published on Friday that China would revalue the yuan by 7.2 per cent in the New Year.

But the G7 made no mention of currency markets' other main source of anxiety right now -- the yen which has fallen to a 20-year low on a trade-weighted basis.

"The absence of any reference to the yen opens the way for dollar-yen to go up towards 125," said Kit Juckes, chief markets strategist at RBS Financial Markets.

The rich nations club remained optimistic about global growth prospects though it noted that the imbalances plaguing policymakers for so many years are growing.

More vigorous action was needed to tackle them, the G7 said.

- REUTERS