CANCUN, Mexico (Reuters) - Rich countries under pressure to slash lavish farm subsidies set to work on Thursday to pry apart a powerful new alliance of poor states bent on rewriting world trade rules they say are rigged against them.
The success of a five-day World Trade Organization meeting at this Mexican resort aimed at reviving the stalled market-opening global talks hinges on striking a compromise on the complex, emotional issue of farm handouts.
Developing countries blame the some $300 billion doled out mainly by the United States and the European Union to their farmers each year for distorting trade and keeping poorer producers out of world markets.
In an important twist, a new rainbow coalition of 21 developing countries has gone even further, demanding the complete abolition of subsidies without offering in return the promise of greater access for others to their own markets.
The Group of 21, which includes powerhouses China, India and Brazil, poses a real challenge to the United States and the EU in a 146-strong organization that operates by consensus.
"This is a significant shift in the dynamic structure of this organization," said Australian Trade Minister Mark Vaile.
But as ministers got down to hard bargaining on Thursday after an opening day of formal speeches, the United States took the lead in trying to undermine the fledgling group.
"It's really unclear to us what is the unifying principle there among those countries," said Deputy U.S. Trade Representative Peter Allgeier.
"On the one hand, you've got some of those countries that were among the most ambitious countries for agricultural reform. Then it goes across the spectrum ... to countries that have not been advocates of reform," he told reporters.
THE GLUE THAT DOESN'T BIND
Another senior U.S. official asked rhetorically what a backer of farm reform such as Brazil had in common with India, a fellow member of the G21 group of developing countries, which shelters behind some of the world's highest tariff walls and is reluctant to open its markets.
"We're not quite sure the glue that binds them beyond making the point that they want their voices to be heard. Our goal is to work with those who share our broader ambition to really make it happen here. We feel a big number of those in that group are in that camp," the official added.
Diplomats said the subtext of Washington's message was that, with the 2004 U.S. presidential election looming, the United States will find it hard to improve on what it sees as a generous offer that has already drawn political flak.
Seen in this light, the risk for poor states is that if they refuse the offer now on the table, the Cancun talks will fail and they will be saddled with the present set of subsidies for several more years, diplomats said.
"It can't be a one-way street whereby the United States agrees to eliminate subsidies but the rest of the world does nothing," said Chuck Grassley, who chairs the U.S. Senate Committee on Finance and has jurisdiction over trade matters.
The EU, which spends about $100 billion a year on farm subsidies, appeared unruffled by the G21 pressure and, like Washington, suggested the group was a marriage of convenience.
"We do not see the G21 as some kind of a threat. It is a temporary alliance which wants to push the joint interests of its members together," said EU spokeswoman Arancha Gonzalez.
Thursday saw no repeat of the clashes a day earlier when some 5,000 protesters were blocked by riot police from marching on the meeting. A South Korean farmer stabbed himself to death in what a friend called an "act of sacrifice" to show his disgust at the WTO and its policies.
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