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Leaders tout trade deal as global litmus test

Associated Press Modified: January 28, 2011 at 1:29 pm •  Published: January 28, 2011

DAVOS, Switzerland (AP) — German Chancellor Angela Merkel and British Prime Minister David Cameron swung their weight behind calls to clinch a global trade deal Friday, citing it as a key test for the international community's ability to cooperate in reviving the world economy.

Both leaders warned that failure to conclude the so-called Doha round of trade talks risks setting back efforts to liberalize global commerce by years, if not decades.

Their call came on the eve of a meeting of commerce ministers in Davos, Switzerland, timed to coincide with the World Economic Forum at which business and political leaders mingle each year to discuss the state of the planet.

"The conclusion of the Doha round is of utmost importance," said Merkel. "We are literally meters away from the finishing line."

She warned that if a deal isn't reached soon, "decades will go by without this opportunity offering itself again."

The trade talks, launched 10 years ago in the Qatari capital Doha, have been declared moribund by experts for a long time, as rich and poor countries clash over lowering tariffs and easing access to each others' markets.

"People feel like this is somehow Monty Python's dead parrot, but we won't stop talking about it," Cameron said. "I profoundly believe that is not true."

Proponents say a Doha deal could add billions to the global economy. "This is a stimulus that doesn't cost money, so it is the stimulus that we need," Cameron said.

Experts remain skeptical that a deal can be reached this year, mainly because China and the United States remain at loggerheads on key issues. Pushing the talks into 2012 — a U.S. presidential election year — would make a conclusion even less likely because the sensitive issue of trade would be a hard sell for politicians of any stripe.

"It may not be dead, but it's playing possum," said Jean-Pierre Lehmann, professor of business at the IMD business school in Lausanne, close to the World Trade Organization's Geneva headquarters.

Not reaching a deal this year could be a firm sign that the world is headed for one or more trade wars, Lehmann said.

The discussion over trade echoes concerns that the global economic downturn since 2007 has made it harder for leaders to put immediate national interests aside and work together toward a bigger goal — be it combating climate change, global food price rises or currency speculation.

Merkel said earlier that Eurozone countries had to abide by the rules set out when the common currency was founded, including sticking to government debt limits.

She branded the public debt that has seen Greece and Ireland seek bailouts from fellow EU members as "the biggest danger to prosperity on this continent."

Cameron said his country's austerity measures, aimed at reducing debts and boosting confidence in the British economy, had already begun to bear fruit and urged other to follow suit.

Many of the 2,500 attendees at Davos are looking to the United States to lead the world out of global and political impasses, but Washington's presence at this year's meeting is low-key.

The highest-ranking U.S. official, Treasury Secretary Tim Geithner, told participants that Washington was prepared to take radical action to rebalance the world's biggest economy, which for so long has been the driver of global growth.

"There is a much greater recognition across the U.S. political system that our fiscal position is unsustainable in the long-run," Geithner said.

"What business and individuals need is the ability to understand over time how we're going to solve it," Geithner said. "We know we're going to solve it, but the idea ... is to lay out a path to allow people to plan and adjust."

His remarks came a day after Moody's Investors Service said that the U.S. rating outlook remains under pressure, increasing the likelihood that it might fall to 'negative' from 'stable' over the next two years due to high levels of debt.

Touching on another issue of international concern Friday, U.N. chief Ban K-moon warned that the world's current economic model itself was a problem, an environmental "global suicide pact" that will result in disaster if it isn't reformed.

"We need a revolution," the secretary general of the U.N. told a panel at the World Economic Forum on how best to make the global economy sustainable. "Climate change is also showing us that the old model is more than obsolete."

His words received a mixed reception from fellow panelists, including Mexico's President Felipe Calderon and Indonesian President Susilo Bambang Yudhoyono.

Yudhoyono, whose country of 230 million people is often labeled a keeper of one of the world's last major rain forests, said Indonesia was trying to plant 1 billion trees a year. But he pushed back against the suggestion that developing countries should give up on their aspiration to achieve the same level of wealth as the rich world.