Crucial global trade talks open in the luxury holiday resort of Cancun Wednesday with 146 countries squaring up for a bruising five days of negotiations amid little expectation that much headway will be made to bridge yawning gaps between rich and poor.

With security at almost paranoid levels - a third Mexican warship anchored off the Caribbean beachfront yesterday - the two big power blocks, the EU and the US, were playing their negotiating cards close to their chest.

But there was a new militancy among developing countries, led by China, Brazil and India, which are determined not to be bulldozed in the horse-trading which starts later today.

Whereas previous trade rounds have been stitched up by the EU, US and Japan, poor countries have roundly rejected a last minute deal on agriculture from Washington and Brussels as inadequate.

Instead a coalition of developing countries representing 60% of the world's farmers have tabled their own far more ambitious proposal which would substantially cut western farm subsidies - currently worth six times more than all global aid spending.

A raft of charities and developing world groups yesterday demanded that these subsidies be reduced and that further liberalisation of the world economy be stopped.

"The failure of developed countries to honour their commitments to a development round calls into question the credibility of the WTO," said a spokesman for ActionAid.

The trade secretary, Patricia Hewitt, arrives later this week to lead British negotiations, but the environment secretary, Margaret Beckett, already here, was optimistic yesterday.

"There are a lot of delicate and difficult negotiations ahead. Most people do not want these talks to fail. That would be disastrous for the international economy. At the moment there appears to be a critical mass of people who want the talks to be successful."

However, delegates have been at each others' throats in the weeks leading up to the meeting on everything from farm subsidies to intellectual property rights.

A largely symbolic deal on cheap drugs for the developing world is all there is to show for two years of haggling since the new round of talks were launched in Doha, Qatar, in November 2001.

In Doha, the developing world was promised that if they agreed to participate in the new round, the west would phase out export subsidies which experts blame for the mountains of cheap food dumped each year in poor countries, bankrupting local farmers.

The EU and US also promised to open their markets to poor country agricultural exports and to trim the most trade-distorting subsidies which keep their inefficient farmers in business.

Two years after Doha, it is clear that the EU would prefer cosmetic not radical surgery. Having botched reform of its Common Agricultural Policy, Brussels has taken to denouncing developing countries for demanding what was promised at Doha.

Washington blew its credentials as champion of farm reform when the Bush administration passed a farm bill giving US farmers an extra $80bn (￡50bn) in subsidies over the next 10 years.

Trade experts say that without a deal on agriculture the negotiations could stall in Cancun, making it even less likely that they will end on schedule by January 1 2005.

"There are two requirements for a successful outcome," said Kevin Watkins of Oxfam. "First, industrialised countries need to agree a clear - and short - timeframe for eliminating export subsidies. Second, they need to cut the production subsidies that generate surpluses and facilitate export dumping."

The most contentious area is the EU's demand for global foreign investment and competition rules.

Developing countries fear that this could prevent them from imposing stringent regulations on foreign multinationals.

Led by India, half of the WTO's developing country members have signalled that they are unhappy about the talks.

Investment is the issue most likely to cause a bust-up within the EU caucus. Britain, once the most fervent supporter, is back-pedalling furiously.

If Pascal Lamy, Europe's top trade negotiator, insists on forcing the issue against developing country opposition he could face a rebellion in his own caucus room.

Privately ministers hint that the round is unlikely to end on time. The best that can be hoped for is that ministers are still on speaking terms when they fly out of Cancun.

Key issues

Agriculture Developing countries want richer nations to cut huge farming subsidies

Industrial tariffs The US wants to open developing world markets to exports, but states fear cheap imports will swamp infant industries

Global investment EU wants WTO global rules putting foreign investors on same footing as local firms

Services West wants free trade expanded into service sector, where its banks and financiers enjoy advantages

Special deals for poorer countries Developing nations want concessions on onerous WTO rules and agreements

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