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WTO at crossroads amid blocked trade deal

Weakened by its failure in July to seal a key deal on a global customs pact amid continued wrangling with India, the World Trade Organisation is at a crossroads, observers say.

"We are in a unique situation in the history of the organisation," a European diplomat said on condition of anonymity ahead of a meeting later in October that others warn could fatally undermine the global trade body if the deal is not rescued.

A draft of the so-called Trade Facilitation Agreement emerged at the WTO's Bali conference in December 2013 and was meant to be finalised at the end of July.

But sparring between members, notably over demands from India that the world body give the green light to the developing power's stockpiling of food, have put the long-sought deal on ice.

India and its supporters say such stockpiling is essential to ensure poor farmers and consumers survive in the cut-throat world of business, while Western countries meanwhile have raised concerns that this food could be syphoned onto global markets, skewing trade.

If WTO gives in to India's demands, this would "create a very bad precedent", the European diplomat said, warning this would open a Pandora's box as other member states would certainly take the move as a licence to change positions and block texts they had helped pass by consensus.

"How could we know if another member state won't say: we don't accept anymore what we have agreed?" the diplomat said.

The Europeans staunchly insist that Bali cannot be renegotiated, the diplomat said, warning that WTO's credibility was at stake.

Instead, "we need to find a solution based on Bali," the diplomat said.

The 160 countries which make up the WTO set trade rules among themselves in an attempt to ensure a level playing field and spur growth by opening markets and removing trade barriers, including subsidies, excessive taxes and regulations.

Bali was the first multilateral agreement concluded by the WTO since its inception in 1995.

It also signalled the first concrete progress on the Doha Round of trade liberalisation talks, launched in 2001 and aimed at underpinning development in poorer nations.

It took nearly a decade to conclude the trade facilitation part of the talks, which began in 2004, and the organisation is loath to return to the drawing board.

At Bali, India was granted the right to continue its food stockpiling subsidies until a final solution is found by the end of 2017.

But, last July, the country insisted it wanted the issue conclusively settled by the end of 2014.

Western countries, however, insist the trade facilitation deal must move in lockstep with other parts of the Doha deal on agricultural and industrial goods.

Late September, Indian Prime Minister Narendra Modi told US President Barack Obama he hoped for a deal "soon" to allow the blocked trade facilitation deal to go forward.

"India supports trade facilitation. However, I also expect that we are able to find a solution that takes care of our concern on food security.

"I believe that it should be possible to do that soon," Modi said.

WTO Director-General Roberto Azevedo has been tirelessly campaigning to save the deal, which would streamline global customs procedures, and, he claims, create billions of dollars in benefits each year.

"We must resolve the current impasse and begin to define the path forward for the WTO," he told business leaders in Toronto.

WTO's General Council, its executive branch, will seek to resolve the issue when it meets on October 21.

"If, on October 21, there is no solution, the organisation will enter into an existential (crisis)," warned a diplomat based in Geneva, where WTO has its headquarters.

If there is no resolution, the consequences will be "too heavy," the diplomat warned.