Progress has been made at global trade talks and a deal looks possible, negotiators have said.
Earlier, Pascal Lamy, the head of the World Trade Organization warned that the long-running Doha round would fail unless a compromise could be reached.
Delegates from the EU, US, Brazil and Australia said signs were encouraging although others were more cautious.
Talks have been extended until Wednesday. There are still sticking points that could hold up a deal.
"I think the situation looks strong. I think we can be very hopeful now," said Mr Mandelson said.
"What is emerging is a deal that is not perfect, not beautiful, but is good for the global economy and good for development."
An 'emerging' deal
After four days of deadlock, the compromise emerged from a five-hour meeting of representatives from the US, European Union, Australia, Brazil, India, China and Japan. It was then reviewed by ministers from some 35 countries.
The proposed settlement, brokered by WTO chief Pascal Lamy, calls for cutting limits of European farm subsidies by 80% and US payments by 70% to about $14.5bn.
However, this would not mean the US would have to cut its actual spending on support to farmers, which totalled about $9bn last year.
The compromise proposal also involves cuts in tariffs on agricultural imports and on industrial goods.
However, it would still provide developing countries with some loopholes to protect strategic industries such as automobiles.
Caution
Developing countries like Brazil and India say the US and EU are failing to offer big enough cuts in subsidies and import tariffs, particularly in agriculture.
However, Washington and Brussels both say they have ceded ground and want emerging economies to further open their markets to imports of manufactured goods and services.
US Trade Representative Susan Schwab said ministers had reached tentative agreement on the way forward but struck a cautious note.
"I think the biggest concern that we have is that a handful of large emerging markets really threaten this round for the rest of us."
Argentina rejected the proposal drawn up by the countries, saying it "was not acceptable in its current form".
Indian Commerce Minister Kamal Nath, whose tough position has been blamed for the deadlock, said "there are certain areas of concern, certain areas of consensus".
"There's still a lot of work to be done because for instance we didn't deal with cotton, which is a central issue," said Brazilian Foreign Minister Celso Amorim.
Mr Mandelson is due to present the emerging deal to EU member states on Saturday. France has previously disagreed with the trade commissioner's negotiating stance, while Irish Prime Minister Brian Cowen faces pressure to reject the deal.
In Saturday's talks, negotiators will also look at the liberalisation of services such as banking and telecoms.
Bleak outcome?
John Hilary, executive director of the anti-poverty charity War on Want, said that proposed settlement could lead to "a bleak outcome for the world's poor".
He said the proposal allowed developed countries to get away with minimal cuts to their farm subsidies, while at the same time opening up developing country markets to both agricultural and industrial imports.
"Stitching together an agreement between seven states while shutting out all others exposes the lack of legitimacy at the heart of the world trade talks," he said.
"The deal threatens disaster for millions as developing country markets are forced open in the interests of corporate profits."
Trade ministers from around the world began talks on Monday aimed at saving the Doha round, which began in 2001 and aims to liberalise world trade rules by reducing tariffs on imports and industry subsidies.
If negotiators fail to find common ground after this week's meeting, many think the Doha round would be doomed.
It is also not clear that any pledges made by the Bush administration at these talks would be honoured by the new US president who will be elected in November - especially if the Democratic candidate, Barack Obama, wins.
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