Hope of deal in world trade talks

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.

Fresh push in global trade talks

Negotiators from more than 30 countries will meet in Geneva on Monday to inject fresh impetus into long-running efforts to agree a global trade deal.

Discussions have so far foundered over the extent of acceptable cuts to farm subsidies and how far trade in services such as banking should be liberalised.

US officials are desperate to finalise a deal before President George W Bush leaves office in January.

Supporters say a deal could boost the world economy by up to $100bn a year.

Sticking points

But sceptics say any agreement is unlikely to fully address distortions and inequalities in trading relationships between the world's richest and poorest countries.

Officials from the US, EU and emerging economic powers such as China, India and Brazil are under fierce pressure to try and reach agreement before the end of the year.

With a new US president coming into office early in 2009, observers believe countries need to capitalise on existing momentum to obtain a deal before then.

Chief US trade negotiator Susan Schwab has said she believes a historic deal in the coming days is "doable".

European Commission president Jose Manuel Barroso said the talks were "perhaps the last great opportunity" to achieve a deal.

But he added: "There is a lot of work to do on all sides."

But huge obstacles remain in the way of agreement, with little progress made on the key sticking points in recent months.

Several European nations, including France and Ireland, have warned that the EU is giving away too much ground in negotiations over proposed cuts to agricultural subsidies sought by developing countries.

French President Nicolas Sarkozy said last month that "conditions" were not right for a deal.

At the same time, the EU and US have become frustrated by the slow rate of progress in efforts to open up overseas markets to trade in business services and non-manufactured goods such as retail and insurance.

A question of politics?

Under the auspices of the World Trade Organization, officials will discuss draft texts on agriculture and non-farm goods - seen as the blueprint for a comprehensive deal - which were first released last summer.

Ahead of the meeting, Brazilian President Luiz Inacio Lula da Silva said he was keen to negotiate and was hopeful of an agreement that could give "poor nations better opportunities in international trade".

Experts said the hurdles to be overcome were now essentially political rather than technical.

"The details of the agreement are known," said David Hartridge, a former deputy director of the WTO.

"The question is whether governments are now ready to move on the political field."

UK fund will accept Japan rebuff

A British hedge fund, whose request to up its stake in a Japanese utility was rejected by the Japanese government, has said it will accept the decision.

The Children's Investment Master Fund wanted to increase its stake in Japan's Electric Power Development company - or J-Power - from 9.9% to about 20%.

But the Japanese government rejected it citing national security reasons.

The fund has said it will instead concentrate on improving corporate governance at J-Power.

"Disconcerting" decision

Japanese law states government approval is needed if foreign companies want a stake of over 10% in some sensitive sectors such as utilities or weapons manufacturing.

The government was worried that an increased stake would give the fund greater sway over decision-making at J-Power, which could have an adverse effect on the overall functioning of the country's utilities sector.

Despite the Children's Investment Master Fund disagreeing with the government's reasons, it has now said it will not be opposing it as the government is unlikely to change its mind.

"It is disconcerting that legitimate investors who want to improve corporate governance of privatised and listed companies can be so hastily characterised as threats to public order," said fund director John Ho.

Fears have now been raised about Japan's ability to attract foreign investment as several foreign takeover attempts have recently been rebuffed.

One recent example of Japan stalling foreign investment was the case of condiment company Bull-Dog Sauce.

American firm Steel Partners had wanted to take over the sauce company, but Bull-Dog employed the "poison-pill" tactic of threatening to dilute any Steel Partners' holding by issuing fresh shares of its own.

The US company appealed but its complaint was later rejected by Japan's Supreme Court.

Chinese exports slow during June

China's exports grew at their slowest pace in four months in June, causing its trade surplus figure to fall by more than 20% from a year earlier.

The government may now try to slow the growth of China's currency, which is making Chinese exports more expensive.

Exports grew to $121.5bn (£62bn), an 18.2% year on year rise but lower than the 28% rise seen in May.

Beijing has let the yuan rise against the dollar to slow incoming export revenue, which is driving up prices.

The surplus of $21.4bn was still China's biggest so far this year since a surplus of $22.7bn in December.

Meanwhile, the growing demand for overseas resources to fuel the country's expanding economy pushed imports up 23.7%, to $100.1bn in June.

Balancing act

The slowdown in the export figures reflects the downturn in global growth and may indicate the world's largest economy, the US, is on the edge of a recession.

The US is China's second biggest export market after the European Union.

The Chinese government has recently allowed the yuan to grow against the dollar as it seeks to tackle inflation in China which is near 12-year highs.

A stronger yuan would help squeeze the export revenue coming into China and which is pushing up prices and fuelling inflation.

But the rise of the yuan has made exports more expensive in dollar terms and is affecting export growth, and the Chinese government may now decide to ease back the yuan's growth against the dollar.

Despite the yuan growth, the US has accused the Chinese government of keeping its currency artificially low in order to give Chinese exporters an unfair advantage in global markets.

Dollar edges up in Asian trade

The dollar edged up in Asian trade on Thursday amid caution after a Wall Street slump and ahead of the Bank of England's interest rate decision, dealers said.

The dollar rose to 106.76 yen in Tokyo from 106.72 in New York late Wednesday.

The euro slipped to 1.5726 dollars from 1.5754 and to 167.89 yen from 168.04. The British pound slipped to 1.9814 dollars from 1.9826.

"Currencies are directionless while markets are paying close attention to stock markets," said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.

The yen was higher in earlier trade following an overnight plunge on Wall Street, but the Japanese currency stabilised by noon trade as Japanese shares edged back up, he added.

The blue-chip Dow Jones Industrial Average slumped a hefty 236.77 points (2.08 percent) to close at 11,147.44, entering into "bear market" territory as investors fretted over the health of corporate America.

An unnamed trader in a major Tokyo bank told Dow Jones Newswires that "market conditions are a little unstable and players are reluctant to push the dollar much higher."

But "looking at yesterday's moves, the dollar could have fallen further given all the negative news and the stock market's fall, but it didn't. So it seems players are not that nervous at the moment," he added.

An interest rate decision is due later Thursday by the Bank of England (BoE). British borrowing costs are expected to stay unchanged at 5.0 percent amid economic turmoil, dealers said.

"The BoE faces a tough task in balancing the evident sharp slowing in activity against a background of high and rising headline consumer price inflation," wrote NAB Capital strategist John Kyriakopoulos in a note.

"We expect them to leave interest rates on hold in July, as they seek to ensure that higher short-term inflation does not get embedded into longer-term underlying inflationary pressures," he added.

India, Sri Lanka to expand free trade pact: diplomats

India and Sri Lanka will expand their free trade agreement with a new pact to be signed on the sidelines of a South Asian summit in Colombo, diplomats said on Thursday.

The two countries entered a free trade deal in 1998 limiting tariff concessions to goods, but the new Comprehensive Economic Partnership Agreement (CEPA) covers services such as banking and also allows greater cooperation between customs administrations.

They will conclude the pact during the two-day South Asian Association for Regional Cooperation (SAARC) summit starting on August 1, a diplomat said.

Sri Lanka's exports to India increased from 49 million dollars in 1999 to 516 million last year while Indian exports rose to 2.7 billion dollars last year, up from 549 million dollars in 1999.

Tesco to end trade with Zimbabwe

Supermarket chain Tesco has announced it will stop sourcing products from Zimbabwe while "the political crisis persists" there.

The retail giant buys about £1m ($1.9m) worth of goods a year, including vegetables, from Zimbabwe.

Tesco said it was looking for other ways to support workers there.

The move comes a day after a Foreign Office minister urged firms trading with Zimbabwe to "look carefully" at their investments.

The international community has expressed concern at the presidential election re-run, which saw Robert Mugabe claim victory as the sole candidate after opposition leader Morgan Tsvangirai withdrew citing pre-poll violence.

The UN has urged African leaders to try to negotiate a solution to the Zimbabwe's crisis.

Foreign Office Minister Lord Malloch Brown told UK firms that they would find it harder to operate there as sanctions tightened.

'Continued support'

Tesco said it had been "a difficult decision" to end its trade with Zimbabwe.

"We cannot ignore the escalating political crisis in Zimbabwe, and the growing consensus in the international community - including from UK politicians on all sides - that further action must be taken to maximise the pressure for change," the company said in a statement.

It added that it was urgently seeking to ensure workers who supplied the retailer and their families were affected as little as possible.

"We cannot continue to support them through trade, but are urgently finding ways to support them by other means," Tesco said.

The retailer had used its concern for Zimbabwean workers as a reason for maintaining its commercial ties with the troubled African nation.

Last week, it said it would be "irresponsible" to withdraw from the country.

Former Africa minister, Peter Hain MP, welcomed Tesco's decision.

"I hope it will give a lead to other British and global companies to freeze or suspend ties with Zimbabwe under Mugabe's tyranny," Mr Hain said.

"This is a decisive time when everybody and every institution in a position to take a stand should do so."

Rival retailers Waitrose and Sainsbury's both buy fish from Zimbabwe.

Waitrose said it supported international efforts to restore democracy and to help the Zimbabwean population.

"We believe our limited relationships with two Zimbabwean suppliers actually enhances these efforts rather than undermining them," Waitrose said.

"In addition, withdrawing our small amount of trade would greatly affect the workers and their extended families."

US slowdown reduces Japan surplus

Japan's trade surplus fell for a third consecutive month in May, down by 7.6% on a year ago, figures have shown.

Surging crude oil prices and the rising cost of other commodities meant its imports bill rose, cutting the surplus to 365.61bn yen ($3.4bn; £1.7bn).

The US slowdown meant demand for Japanese cars and machinery continued to fall, and the trade surplus with the US was down by 11%.

But its surplus with the rest of Asia rose for the second straight month.

Overall imports grew by 4.4% to 6.44 trillion yen in May, while exports rose 3.7% to 6.8 trillion yen, the finance ministry said.

Economy fears

Analysts say Japan, a key exporter, is likely to leave rates unchanged for some time, because of inflationary pressures and the US slowdown.

Japan has the lowest interest rates among the Group of Eight industrialised nations. Its last rate increase was in February 2007, from 0.25% to 0.5%.

Earlier this month, Japan revised its economic growth rate upwards for the first quarter of the year after higher-than-expected capital investment, but economists expect slower growth ahead.

Fears remain about what will happen to the world economy, as food and fuel prices continue to rise.

Chinese steel imports 'injure' US

The $1.4bn US steel pipe-making industry has been "injured" by subsidised imports from China, a US commission has concluded.

The US International Trade Commission said the Chinese products had been sold at "less than fair value".

As a result, the Department of Commerce will impose duty of up to 700% on the imported goods.

This is the first time a US industry has successfully won protection from subsidised Chinese products.

Until last year, the US government refused to consider complaints from industry about the dumping of Chinese products as it did not classify China as a market economy.

The policy was changed in the face of growing anger from industrial producers who claimed they could not compete with much cheaper imports from China.

The tariffs on the imports of steel pipe will range from 99% to 701%.

The circular steel pipe affected by this judgement is used for home plumbing and sprinkler systems.

It is made by 21 producers in the US employing almost 2,500 people.

Japan to announce joint gas exploration with China: reports

Japan is to announce on Wednesday an accord with China to jointly develop gas fields in the East China Sea, resolving a spat that was a thorn in relations of the two major energy importers, reports said.

Japan will announce the deal on the long-running spat at an evening press conference by Foreign Minister Masahiko Komura and Economy, Trade and Industry Minister Akira Amari, Jiji Press news agency and other media said.

No immediate confirmation was available from the government.

Japanese media said Japan would make an investment in China's already existing production at the Chunxiao gas field and win the right to resources in proportion with its financial contribution.

The exact level of Japanese investment is to be worked out later, they said.

Chunxiao, called Shirakaba by Japan, is located just west of the Japanese-proposed median line and Japan has earlier voiced worries that China's drilling may siphon gas from its own side.

China has said the gas field falls easily within its sovereign zone.

The Sankei daily also reported the two countries would make a 50-50 joint development of the Longjing field, called Asunaro by Japanese, which is the northernmost of four gas fields near the the median line.

Prime Minister Yasuo Fukuda said Tuesday the long-running row on gas fields would be resolved soon.

"There is a strong likelihood that this dispute will be resolved," Fukuda told news agencies from the Group of Eight rich nations ahead of their summit in Japan in July.

"The idea is to jointly excavate and drill and produce," he added.

Japan and China have been working to repair relations which have long been tense due in part to the legacy of Japanese imperialism.

China started drilling in the area in 2003, stirring tensions with Japan.

China and Japan 'near gas deal'

Japan and China are close to a deal that would ease a long-running dispute over gas fields in the East China Sea, reports from Japan say.

The two sides were "working out final details", top government spokesman Nobutaka Machimura said.

His comments came after Japanese media said an agreement on joint exploration of disputed areas had been reached.

China will allow Japan to invest in drilling projects in return for a share of the profits, Kyodo News agency said.

The dispute has been an ongoing irritant in China and Japan's often tense relationship.

But ties have improved in recent months and in May Chinese President Hu Jintao visited Tokyo for talks with his Japanese counterpart, Yasuo Fukuda.

Under the deal, China and Japan would conduct joint exploration of several gas fields in offshore areas each side claims, Kyodo said, citing government sources.

The deal would allow undersea oil and gas resources to be accessed while putting to one side the wider issue of overlapping territorial claims, the agency said.

An official announcement could come as early as this week, the agency quoted the sources as saying.

India govt looking to import cement from Pakistan

Commonwealth Games 2010 to be held in Indian capital could have a Pakistani connection as Delhi government is looking to import cheap cement from neighbouring country.

"We have written to the Centre to permit us to import cement from Pakistan to complete construction of projects associated with games.

Prices of material available here have risen," Chief Minister Sheila Dikshit said. She said her government is waiting for approval.

Pakistani cement is of similar quality as being presently used in projects here.

Due to rising inflation, prices of building materials including cement and steel increased, resulting in cost escalation of various infrastructural projects, including those related to games.

The government feels it will not be able to complete projects within the target period unless alternate arrangements are made.

Delhi government is facing flak over delay in completion of games projects from the centre, which at a recent meeting, asked authorities to expedite work.

Japan vows to ratify free trade accord with Asean

Japan's government, saying its honour was on the line, vowed on Tuesday to ratify a free-trade accord with extending a parliament session hampered by feuding with the opposition.

"Japan would be laughed at by the international community" if the world's second-largest economy fails to ratify the accord, chief government spokesman Nobutaka Machimura told a news conference.

He said the government planned to extend the current parliament session, which is due to end on Sunday, so that the ruling coalition can win approval for key legislation including the free trade accord.

Japan's lower house approved the accord on May 22, but parliament debate on the accord and other key bills has been deadlocked in the upper house, where the opposition camp enjoys a majority.

The opposition has ramped up pressure on unpopular Prime Minister Yasuo Fukuda and is expected on Wednesday to introduce a censure motion against him over a controversial medical plan.

Under the constitution, international treaties signed by the government can be automatically ratified 30 days after the more powerful lower house gives its approval.

The deal was signed in April by Malaysia, the last of the 10 members of the Association of Southeast Asian Nations to sign off on it.

Under the pact, about 90 percent of trade between Asia's largest economy and the Asean bloc will be tariff-free within 10 years.

It will be the first multinational free trade agreement for Japan, which also has been seeking to conclude a flurry of bilateral pacts amid a breakdown in global trade negotiations.

Tokyo has reached bilateral deals with eight nations, six of which are in the Asean group -- Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. The others are Chile and Mexico.

Oil prices ease in Asian trade

Oil prices eased in Asian trade on Tuesday on continuing concerns over global energy demand, dealers said.

New York's main oil futures contract, light sweet crude for July delivery, slipped 46 cents to 127.30 dollars per barrel.

The benchmark contract had closed at 127.76 dollars on Monday at the New York Mercantile Exchange.

Brent North Sea crude for July dropped 71 cents to 127.31 dollars per barrel, after settling at 128.02 dollars on Monday in London.

Tetsu Emori, fund manager at Astmax asset management in Tokyo, said concerns over falling demand for oil worldwide would continue to weigh on the market despite positive economic data from the US.

"In the near term, prices will find support at 115 dollars," he said.

Prices made a temporary rebound in later trade Monday after the publication of the Institute for Supply Management (ISM) index of manufacturing activity in the US.

The index rose to 49.6 in May, topping market expectations of a fall from 48.6 in April.

Although the reading still indicated reduced activity for the fourth straight month, it rose close to 50, above which readings indicate growth.

Crude oil has shed about eight dollars since striking record peaks of 135.14 dollars in London and 135.09 dollars in New York on May 22.

"The signs that demand is falling is forcing funds to seek better profits elsewhere," Alaron trader Phil Flynn said.

"Keep an eye on the 125 dollars a barrel area. A close below (that level) could open up the selling floodgates."

New York crude plunged five dollars last week, while London Brent shed about four dollars, in line with a recovering US currency that makes oil less affordable for foreign buyers and therefore dampens demand.

Despite the recent easing in prices, the high cost of crude has sparked widespread international alarm and US-led calls for the Organisation of the Petroleum Exporting Countries to produce more oil.

Benchmark crude prices burst through the 100-dollar level for the first time at the start of the year.

Opec president Chakib Khelil on Saturday reiterated the cartel's long-standing view that speculators and the weak dollar were partly to blame for runaway prices.

On Monday US Treasury Secretary Henry Paulson, touring the Gulf, called on oil-producing countries to open their oil markets to foreign investment.

"On the supply side, we are urging all oil producing countries to open oil markets to foreign investment, which would support faster and more efficient growth," he said in a speech in the oil-rich United Arab Emirates.

Dollar takes breather in Asian trade

The dollar was steady in Asian trade on Monday as investors sat on their hands ahead of a fresh batch of US economic data, dealers said.

The dollar was quoted at 105.42 yen in Tokyo morning trade, down slightly from 105.51 in New York late Friday.

The euro slipped to 1.5534 dollars from 1.5553 and to 163.81 yen from 164.14.

The Tokyo market looks set for a quiet day's trade, said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.

"Since last week, the dollar has been gaining ground while the yen slowly headed lower," he said.

Whether the greenback could continue to advance would depend on the results of a survey of US manufacturing activity by the Institute of Supply Management due later Monday, as well as Friday's key monthly US jobs report, he said.

Dealers were keeping a close watch on world oil prices following the official start of the Atlantic hurricane season, traders said.

"The persistent and strong correlation between the euro-dollar (exchange rate) and oil prices makes the Atlantic Basin's 2008 hurricane season more important for forex than usual," Barclays Capital analysts wrote in a note to clients.

"Traders will be watching hurricane reports and in particular any risk of a major hurricane sweeping up into the Mexican Gulf and disrupting oil supplies," they added.

The US Federal Reserve has expressed concern about inflationary pressures in recent months as world oil prices have rocketed to record highs.

The Fed has slashed interest rates this year in a bid to boost US economic momentum, but its rate cuts have weighed on the dollar as investors typically prefer to hold currencies in countries with higher returns.

The euro has gained momentum against the dollar in recent months as the European Central Bank has opted not to cut eurozone rates, despite rising inflation worries in Europe.

African leaders criticise donor nations on trade

African leaders on Wednesday lashed out at rich nations for erecting trade barriers that prevent the continent's economic development even as they make lofty pledges to boost aid.

The leaders, in Japan for a major development conference, urged industrialised nations to make it easier for them to export food, coffee and other products at fair prices.

"Pursuit of unfair trade practices by the big powers as well as difficult access for African products to markets of developed countries continue to penalise our states and significantly destroy their performance in the creation of riches," said Burkina Faso President Blaise Compaore.

Forty heads of states from Africa are participating in the three-day conference to discuss economic growth, stability and climate change.

Japan pledged on Wednesday to double aid to Africa by 2012 and to help the continent boost rice production two-fold to ease food shortages.

But some African leaders said their countries were more concerned about unfair trade deals than a lack of things to eat.

"There is a big problem of food in the world now and a problem of energy. In Uganda, there is a problem of a different kind. We have too much food and no market to export it to," said Ugandan President Yoweri Musaveni.

"Why? Because of bad policies in Europe, America and even in Japan," he added.

He said his country was facing "a real struggle" to get a fair deal for its natural resources, including agricultural and mineral products.

For example, a kilo of unprocessed Ugandan coffee would be sold for one dollar at home but for 14 dollars in Britain after it has been refined, he said.

"I see some people here who are called donors," Museveni told the conference audience.

"Now, I really have a problem with that definition. Because I don't know who's helping who," he added.

Gabon's President Omar Bongo Ondimba urged Japan to boost direct investment in Africa and open up Japanese markets to African products.

"Japan can weave with Africa a strategic partnership which is mutually beneficial," he said.