Indonesia says EU-U.S. trade deal could revive global talks

BRUSSELS (Reuters) - Efforts to agree a U.S.-EU trade pact could spur the rest of the world to revive global talks for fear of being sidelined in the emerging shape of global commerce, Indonesia's candidate to head the World Trade Organisation said.

The United States and the European Union are expected to launch negotiations this year towards a free-trade deal that would encompass a third of global trade. That would give Washington and Brussels the potential to set rules on issues ranging from investment to the environment when countries do business.

"The U.S.-EU deal will be a catalyst," Mari Pangestu told Reuters in an interview in Brussels this week. "Others will see the momentum and they won't want to be overtaken by events," she said during a European tour to rally support for her bid to succeed WTO chief Pascal Lamy, who steps down in August.

Pangestu is a former trade minister who is still in government in Indonesia, which hosts the WTO's next ministerial conference, in Bali, in December.

World trade talks - called the Doha Development Agenda after the Qatari capital where they were launched in 2001 - collapsed in 2008. Brazil, China and the United States, among others, could not agree how much countries should open their markets.

That has led to concern the WTO, created as part of post-World War Two institutions alongside the World Bank and the International Monetary Fund, is becoming just a forum in which to resolve international trade disputes.

SETTING A PRECEDENT

Pangestu, a U.S.-trained economist is one of nine candidates seeking the top job at the WTO and many diplomats say the trade body needs a bold leader to avoid it becoming redundant.

"As a former trade minister and trade negotiator committed to Doha, she is viewed as a frontrunner, even though many people would like to see the new WTO head come from Latin America or Africa," said an EU diplomat in Brussels.

Being Asian could count against Pangestu because another Asian - Thailand's Supachai Panitchpakdi - held the job before Lamy took over in 2005.

While the Doha Round has not been officially abandoned, Washington and Brussels are pushing ahead with bilateral deals to try to drive economic growth through trade when consumers at home are suffering from the aftermath of the global financial crisis and the euro zone debt crisis.

In all, the European Union is pursuing deeper trade ties with more than 80 countries and there is barely a region in the world where Brussels is not negotiating some kind of pact.

EU-U.S. negotiations could start this year and even though a free-trade deal would be years in the making, industry groups have already drawn up guidelines on how a deal might look.

A central motivation in Brussels and Washington to further integrate their economies is to set a global template for trade rules on areas ranging from services and competition policy.

Trade negotiations have grown more sophisticated since Doha was launched, bringing in not just tariff reductions but things like technical standards, regulation and intellectual property rights. What the United States and Europe decide will probably set a precedent in all future talks, including in multilateral ones.

This is especially crucial for companies. Final products are made up of parts produced by several companies in different countries and require the import and export of intermediate goods - what companies call the global supply chain.

"Production is fragmented, so rules on services and investment matter much more now in a trade pact," Pangestu said.

(Editing by Susan Fenton)