Mumbai: Representatives from the US, the EU, Australia, Brazil, India, China and Japan managed to hammer out a compromise after a marathon meeting but the revised negotiating draft has left the developing countries a divided house.

The compromise draft calls for cutting limits of European farm subsidies by 80 per cent and those of the US by 70 per cent to around $14.5 billion – keeping proposed US farm subsidies more or less untouched. Last year the US spent only $9 billion on farmers.
 
The compromise proposals also involve cuts in tariffs on agricultural and industrial products by the developing countries. Developing countries, including India, however, will be able to protect their strategic industries and sensitive products.

The proposals also left the developing countries a divided house with poor countries criticising the proposal on agriculture – one on the ''special products" and second on the ''special safeguard mechanism".

There were divided over what would constitute special products and which of these could be labeled as ''special products'' so they can be fully exempt from tariff cuts as proposed in the talks. This, the poor countries argue, is not necessarily in the interests of food or livelihood security or rural development.

''The safeguards are at the core of the development outcome of the round of talks as they involve the concerns of food security, livelihood security and rural development in developing countries," they said in a joint statement.

The differences were mainly based on rumours that China with its huge and growing market would put rice, cotton and sugar under special products. If China goes ahead, it would bring a backlash from rice exporting countries like Thailand and cotton exporters from Africa with United States making it clear to China that it should open up its cotton market as a condition for making any cuts in its highly contentious cotton subsidies.

China, however, said it reserved the right, like any developing country, to designate some sensitive products as special, some of which would have no tariff cut.

India's commerce minister Nath said said some 100 countries have concerns on proposed farm tariff mechanisms that could derail any deal on the global trade pact. 

He further added that these 100 countries have made a paper expressing their concerns on the so-called special safeguard mechanism (SSM), which would allow developing countries to raise farm tariffs in the event of an import surge.

As the mechanism allows increase in tariffs if imports surges over 40 per cent to which the Indian side was totally against this high benchmark saying "By the time it reaches 40 per cent, our people would have ''died''.

''These safeguards are at the core of the development outcome of the round as they involve the concerns of food security, livelihood security and rural development in developing countries," developing countries accounting for half the WTO's 153 members said in a joint statement.

Developing countries such as India, China and Indonesia have argued for measures at the WTO to protect their millions of subsistence farmers from the impact of trade liberalisation.

But developing-country food exporters like Thailand and Uruguay believe increased sales of farm produce to other developing countries are a key source of growth and development.

The developing countries who issued the joint statement said they could accept the compromise that 5 per cent of products would be exempt from cuts in duty if declared special, but wanted to raise the total number of products eligible for this designation to 15 from 12 per cent. Developing country exporters had been pushing for no products to be completely exempt.

The outcome of the meeting, intended to be a make-or-break effort, depends as much on politics as on economic considerations and over the next few days we will know if there will be a fair deal.

(Also see: Bush, Singh broker truce at Geneva trade talks: report)