June 21 (Bloomberg) -- Negotiations among four major World Trade Organization governments collapsed today, increasing the likelihood of failure in efforts to produce an agreement that would add billions of dollars to the global economy.

Negotiators from the U.S. and the European Union said their Indian and Brazilian counterparts offered nothing new to unblock trade talks that have dragged on for almost six years. India and Brazil blamed U.S. and European unwillingness to cut farm aid and import duties on commodities.

Today's breakdown in Potsdam, Germany, may spell the end of the Doha Round of talks, which began in late 2001, even though trade chiefs and politicians say a deal is still possible. Elections in the U.S. and India and possible policy changes as a result present a threat to future progress if an accord can't be wrapped up before next year.

Since discussions began on June 19, Brazilian Foreign Minister Celso Amorim and Indian Commerce Minister Kamal Nath ``didn't move an iota from the point we started at two years ago,'' U.S. Agriculture Secretary Mike Johanns told journalists in the German city outside Berlin. ``We stretched and they grabbed. I could have done cartwheels off the roof of this building and I'm still not sure I would have got a response.''

Farm-Aid Proposals

Trade and agriculture ministers from the four governments began what was intended to be almost a week of talks aiming to reach a breakthrough on slashing farm subsidies and lowering hurdles for goods crossing borders. The early end of discussions mirrors last July's collapse, when negotiations among the four governments plus Japan and Australia disintegrated, prompting WTO Director-General Pascal Lamy to suspend talks.

``Over time these rounds have taken longer and longer,'' said Douglas Irwin, a historian of trade at Dartmouth College in Hanover, New Hampshire. ``The issues are more complex than the old days when they were just talking about tariffs. The new issues are much more politically difficult.''

Amorim and Nath said talks derailed because the U.S. and the EU refused to improve their farm-aid offers. The numbers presented by the U.S. on domestic subsidies exceeded those demanded by the so-called G20 alliance of farm commodity- exporting nations while the EU's tariff-cut offers were insufficient, Amorim said.

`Final Move'

``Whatever the version others may try to offer, the major divergences appeared in agriculture,'' he said. ``It was very clear at lunchtime and was said at lunch that it was useless to continue the discussion based on the numbers on the table. The decision not to continue with the negotiation was not ours.''

European Trade Commissioner Peter Mandelson said the EU still has ``a final move left in us to reach a final, balanced equitable conclusion in agriculture,'' though he insisted that the 27-nation bloc has made offers without reciprocal efforts on the part of the other governments.

``I firmly believe we constructed a landing range in agriculture which is fair and forthcoming for developing countries and takes to the limit what the EU can do,'' he told journalists in Potsdam.

Nath said the U.S. offered to cap its overall spending on trade-distorting domestic support at $17 billion. As leaders of the G20, which also includes China and Argentina, India and Brazil are pushing for an annual U.S. spending limit of no more than $15 billion.

Correct the Flaws

``If this is to be called a development round, we need to correct the flaws in terms of subsidies,'' Nath said. ``There is no logic or equity'' in the U.S. offer.

The Bush administration now spends $10.8 billion a year on support payments that distort market prices to American farmers, Nath said. A ceiling of $17 billion would represent ``a 50 percent increase,'' he told journalists.

U.S. Trade Representative Susan Schwab has said the U.S. can trim more, but only if advanced developing nations and the EU open their markets to more U.S. farm goods. Today, she questioned whether Nath and Amorim were even prepared to negotiate as the ``rigidity'' of Brazil's and India's position ``seemed quite different from the positions of the G20.''

The EU, on the other hand, ``showed this week it was ready to stretch,'' Schwab told a news conference. ``The only way you get to a trade agreement is willingness to compromise.''

`Very Disappointed'

Nath said he was ``very disappointed'' about U.S. and EU calls for developing nations to reduce applied industrial tariffs. According to Mandelson, developing countries were asked to cut ``only one in two tariffs by one or two percentage points,'' a demand the EU trade chief described as ``not unreasonable.''

A group of developing countries known as the G90 issued a veiled criticism of India and Brazil, saying ``critical issues have been marginalized or left behind as the negotiations proceeded.'' Developing countries make up more than three- quarters of the WTO's membership, where decisions are only reached by consensus.

``The majority'' of G90 countries ``have little or no knowledge of the progress and content'' of meetings between the EU, the U.S., India and Brazil, the group said in a statement. Brazil and India ``cannot be expected to carry the responsibility of representing the views of all developing countries.''

Not the End

Earlier this week, Mandelson said the Potsdam meeting ``cannot finish the Doha Round, but it will determine if Doha can be finished.'' Today, he said the untimely end of the talks, which were supposed to run at least until June 23, doesn't spell the trade round's demise.

``It is not the end of the Doha Round,'' he said. ``It places a very major question mark on the ability of the wider WTO membership to complete this round, but it does not in itself mean that the negotiations cannot be put back on track.''

European Commission President Jose Barroso called the Potsdam failure ``very worrying news'' and said it was lamentable that ``not all our partners are ready for real negotiations now.'' U.K. Foreign Secretary Margaret Beckett said the collapse is ``a source of regret.''

Amorim called today's collapse ``a setback,'' though he, like Mandelson, said WTO discussions ``are not dead.'' German Economy Minister Michael Glos also said the derailing of the Potsdam talks is ``not the end'' of the trade round.

`Not Giving Up'

Schwab agreed, saying the U.S. ``is not giving up on the Doha Round.'' Even if the four governments meeting in Potsdam are ``never able to reach closure, that doesn't mean the end of the round,'' she told journalists.

While an agreement among the four governments ``would have been helpful to pave the way toward multilateral convergence, helpful does not mean indispensable,'' Lamy said in a statement today. The EU, the U.S., India and Brazil should now try to reach an agreement along with the remaining WTO governments rather than as a smaller group, he said.

White House spokeswoman Dana Perino said President George W. Bush is ``disappointed that there were countries that were trying to block a successful discussion,'' especially since the U.S. ``demonstrated considerable flexibility in these discussions.'' Still, the U.S. will continue to ``push and find another way to get it done,'' Perino said.

Former U.S. Trade Representative Clayton Yeutter said negotiators are now battling the clock and may simply run out of time to get a deal.

``They may have another 30 days to piece things together, but that's all,'' he said by telephone from Washington. ``It's very disappointing, because it looked like they had some momentum.''

To contact the reporter on this story: Warren Giles in Potsdam, Germany, at wgiles@bloomberg.net

Last Updated: June 21, 2007 18:33 EDT