As weary ministers fly out of this glitzy beach resort yesterday following the dramatic collapse of world free trade talks, one group at least feels it has something to smile about.

A new alliance of more than 20 developing countries, with Brazil, India and China at its heart, emerged as a major force during five days of ultimately fruitless discussions at this Mexican beach resort and looks set to stay a power in world trade politics. The World Trade Organization?s 146 member states must now try to rescue something from the wreckage of the Cancun summit, which had been intended to inject new momentum into the WTO?s stalled global free trade negotiations.

States remain deeply divided, notably over how far and how fast to reform world farm trade to cut the massive subsidies that rich states pay their farmers and which developing countries say stop them competing.

?Important things achieved?

The European Union?s main trade negotiator, Pascal Lamy, and other top officials were adamant that the search for a deal, which could give a multibillion boost to a sluggish world economy, would continue back at WTO headquarters in Geneva.

And the new alliance of developing nations was equally firm that its newfound voice would continue to be heard loud and clear.

?It was not possible to get a concrete result. (...) But we think that we have achieved some important things. Firstly, the respect for our group,? said Brazil?s Foreign Minister, Celso Amorim.

The so-called G21 grouping, which represents more than half the world?s population and some two-thirds of its farmers, is united by a common commitment to getting the West to unwind subsidies running at nearly $1 billion a day.

It countered the traditionally huge weight the United States and the European Union wield within the WTO by combining a hard line towards the rich states with calls for more understanding of the problems of the world?s poor farmers.

Australian Trade Minister, Mark Vaile, whose country shares many of the group?s criticisms of the EU and the United States, said the emergence of the G21 marked ?a significant shift in the dynamic? of the WTO.

Newfound influence

Some Western envoys had expressed scepticism that the G21 would survive long because countries such as Brazil and Argentina, efficient farm goods exporters, appeared to have little in common with India, a protectionist nation of 650 million poor farmers.

By the end of the Cancun meeting, Nigeria and Indonesia, the world?s most populous Muslim state, had joined the initial 21 countries in the group.

In the end, the G21?s newfound influence was not put to the test because the talks fell apart before final bargaining on agriculture could begin.

African countries rejected a rich state demand to launch negotiations on new rules to cut out red tape and corruption in trade, ruling out the possibility of deals elsewhere. But Amorim vowed the battle would continue in Geneva. ?The pieces will be picked up again and the negotiations will go on (...) from the point where they stopped,? he said.

Richard Waddington

Factbox

Key issues behind failures or talks

- Agriculture

Farm reform lies at the heart of the world trade talks and, without progress here, there can be no real movement on lowering barriers to trade in industrial goods or services. Negotiations have centered on three areas of farm policy; domestic support, market access and export subsidies. These are interlocking issues with countries expecting concessions in one to be matched by gains in another. Dozens of developing countries joined together in Cancun to demand that the United States and the European Union make deep cuts in their domestic farm payments, slash tariffs and scrap export subsidies altogether. Negotiators said they were making real progress on agriculture in Cancun and that the talks collapsed on other issues. Even so, the disputes over agricultural subsidies will still be there for negotiators when they try to pick up the pieces in the next few months.

- Singapore issues

Although agriculture was a major theme at Cancun, the talks finally fell apart on a dispute over proposals that the WTO set rules for investment and competition policies, government contracts or procurement and so-called trade facilitation issues which include cutting the red tape that blocks trade. These are all lumped together in the ?Singapore issues,? so named because they were first discussed at a meeting in the Asian city state in 1996. The European Union, Japan, Switzerland and others have urged these reforms but they are bitterly opposed by a large group of developing countries, especially India and Malaysia.

Negotiators said the EU finally agreed to separate the issues rather than insist they be handled all together. But the talks collapsed when poor nations refused to agree to talks on cutting red tape.

The developing countries say not enough preparatory work was done to open talks and they wanted more clarification. They say they fear the rules would be expensive to implement. India also rejected outright the idea of a pact on investment, saying it would undermine the ability of governments to set their own economic policies. The dispute was not, however, only between rich and poor countries. The United States was not particularly keen on pacts for investment and competition, while some developing countries in Latin America and elsewhere backed them. The United Nations has estimated that the average customs transaction involves going through 20-30 different agents, filling out 40 documents and then having to present everything again at least two out of three times. Complying with customs formalities often costs more than the import tariffs that have to be paid and ? critics say ? acts as a major barrier to trade, especially for small and medium-sized companies.

- Industrial goods

As in agriculture, the deadline for a partial deal on industrial goods ? an issue known in the WTO as ?nonfarm market access? ? was missed earlier this year and it did not feature as a major issue at Cancun. Ministers tried to strike a deal on a less ambitious plan that could be used as a springboard toward a later deal with proposed tariff reductions on different industrial sectors and target dates. Central to the argument on industrial goods is the formula to be adopted for tariff cuts. As with farm trade, some prefer across the board percentages, referred to in farm talks as the ?Uruguay formula.? Others want a more aggressive approach known as the ?Swiss formula? which would see the highest tariffs falling furthest. Special conditions for poor countries such as softer tariff cuts and longer implementation periods are also a key element in the talks. For many poorer nations, import duties on farm and industrial goods are a vital source of government revenue.