BRUSSELS (Reuters) - To hear some presidential candidates and European leaders talk, you would think hard times lay ahead for advocates of free trade.

Hillary Clinton and Barack Obama are vying in the Democratic primaries to criticize the North American Free Trade Agreement with Canada and Mexico, and vowing to renegotiate it to protect American workers.

Clinton, with strong backing from U.S. organized labor, has advocated a "time out" in trade liberalization and questioned whether the theory of comparative advantage that underpins free trade still applies in the 21st century.

On the other side of the Atlantic, French President Nicolas Sarkozy has urged Europeans to stop being naive about trade and develop "a real system of community preferences" to protect EU agriculture and industry from unfair competition.

olitical opposition has forced the European Union's trade commissioner, Peter Mandelson, to delay a reform of anti-dumping duties meant to take account of the interests of European firms that produce goods in low-cost countries.

Mandelson has broad powers to negotiate trade agreements on behalf of the 27-nation bloc, but France is doing its best to handcuff him, organizing a caucus of 20 farm ministers last month to warn against further concessions on agriculture.

Brussels trade diplomats say the British commissioner has long been viewed with suspicion in many member states due to his liberal views of trade, and his influence may now be waning.

All this sets a grim backdrop for negotiators at the World Trade Organisation preparing yet another "final push" for a global deal to cut tariffs and remove trade barriers.

Their aim is to clinch a deal before President George W. Bush leaves office next January.

"FIX THE ROOF"

Turmoil on financial markets and a sharp economic slowdown, especially in the United States, have fuelled calls to protect jobs in wealthy countries from low-cost competition.

WTO Director-General Pascal Lamy says the downturn on both sides of the Atlantic should focus minds on the benefits a trade agreement could unlock, not least because a failure would deal a blow to confidence in the world economy.

"Do you fix the roof when the sun is shining or when it's raining? Either way, it's still a good idea to fix the roof," said WTO spokesman Keith Rockwell.

Politically, a failure of the rules-based multilateral system to deliver progress on trade could undermine European hopes of a more ambitious international agreement in 2009 to curb the greenhouse gas emissions blamed for global warming.

As with climate change, a trade deal requires concessions from big emerging nations such as India, Brazil, China and South Africa, which demand to be able to protect key sectors of their developing economies from powerful rich country competition.

That impasse poses a serious threat to the WTO talks, along with the reluctance of wealthy nations to radically scale back long-standing protection of their farmers.

"I share the skepticism that anything good will come out of the Doha Development Agenda," says Adam Posen of the Peterson Institute for International Economics in Washington, using the name given to the trade round launched in Qatar in 2001.

Posen forecasts that, whoever wins the White House in November, Congress will make trade conditional on labor and environmental standards to shut out cheap competition, mainly from Asia.

 Andre Sapir, a trade economist at the Free University of Brussels and former adviser to the European Commission, agrees the climate in the United States is not favorable for new trade deals, although the Europeans should still push for one.

"You need some bad economic news to make a trade agreement necessary as a booster of confidence," he said. "But even if there is a deal now, the chances are that something is going to be reopened after the U.S. election."

U.S. trade diplomats in Europe are using Clinton's rhetoric and fears of a more protectionist U.S. administration to try to focus minds on the needs to do a WTO deal now.

One senior diplomat, speaking on condition of anonymity, said his message to his European counterparts was: "Don't wait for Hillary."

 
(Editing by Ruth Pitchford)

Mon Mar 10, 2008 2:57am EDT

By Paul Taylor, European Affairs Editor

Source: www.reuters.com