The threat of a US-Iraq war and sharp differences over farming subsidies are hampering the World Trade Organisation (WTO) talks targeted for completion by the end of 2004, Malaysia warned today.

Trade Minister Rafidah Aziz also lashed out at rich economies for using non-tariff barriers to "circumvent" existing WTO free trade rules.

Rafidah said "old-timers" such as the European Union (EU) and the United States had brought their own political agendas into the WTO and often resorted to unilateral trade actions to protect their markets.

She said next September's WTO ministerial conference in Cancun, Mexico designed to act as a mid-term review would just be a "nice holiday by the sea" amid sharp differences and economic uncertainties.

"With a looming war over our head... people are now much more cautious about market opening. I don't believe that in Cancun, we are going to see any more (development) beyond what we see today," she told the World Economic Forum's East Asia Economic Summit here.

"To get explicit consensus in WTO is just like looking for a needle in the haystack... we're talking about modalities, how to go about it and this is contentious, so Cancun is going to be a nice holiday by the sea."

Competitive prices

Rafidah urged developed nations to "be realistic of the realities of the world and not just be champions of free trade" if they want to see the Doha round of trade talks succeed.

"Their markets are open but it's impossible to bring in your products at competitive prices because there are so many things you need to do that involve a lot of costs for manufacturers from developing countries.

"This is ongoing. They know this would not directly violate the rules but they find some loopholes that validate this action," she said.

"That is why we are demanding the tightening up of anti-dumping rules, the tightening of application of export subsidies and many other subsidies that actually distort trade, not to help farmers but to prevent others from coming in."

Farming is widely recognised as key to the WTO's Doha talks launched in the Qatari capital last November, aimed at further removing trade barriers by end-December 2004.

Rafidah said "sharp differences" still persist in WTO talks to cut farming subsidies of up to a billion dollars daily in rich countries which are crippling small farmers in Latin America, Africa and Asia.

Environmental protection

The US has unveiled proposals to cut subsidies but Japan, the 15-member European Union and Switzerland want non-trade concerns of agriculture, such as environmental protection, to be also taken into account.

Rafidah said such a move by Japan and EU "only validates their policy of high subsidy for agriculture that negates market opening measures."

Japan's Economic Vice-Minister for International Affairs Tadakatsu Sano defended Tokyo's position and said the country was "working hard" towards domestic agricultural reforms.

Japan is "fully committed to finding modalities on agriculture by March 2003," he told the summit.

Indonesian Economic Coordinating Minister Dorodjatun Kuntjoro-Jakti said there must be preferential treatment given to developing countries in the Doha talks to help bridge the gap with rich countries.

Rafidah urged Asian countries to unite in their call for flexibility, preferential treatment and "gradual liberalisation" in the WTO and not bow to pressure from developed countries for hasty market opening. — AFP