UPDATE 1-EU-U.S. businesses: Doha needs sector breakthrough

(Adds details, background)

By Darren Ennis

BRUSSELS Nov 20 (Reuters) - European and U.S. business leaders said on Thursday deals scrapping tariffs in individual industrial sectors would increase the chance of a successful conclusion to the World Trade Organisation's Doha round.

"A breakthrough on sectoral tariff agreements by the G20 ... would go a substantial distance toward facilitating the conclusion of the Doha round," BusinessEurope and the U.S. National Association of Manufacturers said in a letter to the EU and U.S. trade chiefs.

"In order for modalities to offer the promise of substantial market openings to the world, however, there will need to be additional reductions in tariff and non-tariff barriers by the advanced emerging countries like China, Brazil, and India," the letter, obtained by Reuters, said.

The leaders of the Group of 20 rich and emerging nations pledged last Saturday to reach an outline agreement in the Doha round by the end of the year. The talks, launched seven years ago to open up world trade, stalled in July after ministers failed to hammer out a deal.

"We believe that the global economy would benefit significantly from a near-term successful conclusion of the Doha round," the letter said.

"However, the unresolved issues in the Doha round are complex ... one way to reduce the number of outstanding issues and reach accord on modalities would be an ambitious outcome in negotiations on the sectoral tariff agreements."

U.S. PRIORITY

Sectoral discussions -- a priority of the United States -- remain a major stumbling block in resurrecting the talks. Major developing countries, including Argentina, Brazil, India and South Africa, oppose such moves.

The opposing group of countries, known as the NAMA-11, say such deals conflict with the spirit of the Doha round's development mandate, which calls for developing countries to make smaller moves than rich nations.

They say such deals would particularly hurt the poorest developing countries that rely on preferential access to rich-country markets for their goods.

In the Doha round, countries are negotiating cuts in tariffs on industrial goods across the board under which most developing countries would be completely exempt. Middle-income emerging countries would receive some waivers, to give their infant industries continuing protection.

But the United States and some other rich countries, which want the talks to result in increased export opportunities for their businesses, are seeking additional, voluntary deals in individual sectors -- from chemicals to car parts -- that would cut tariffs to zero, freeing up more trade in those areas.

"The current formula and flexibility proposals do not lead to enough market opening opportunities in many WTO members," the letter said.

"However, broad participation in the sectoral agreements would reduce this gap as advanced emerging countries would take up their responsibilities and could not benefit as free-riders of a sectorals outcome."

The NAMA-11 do not object to the voluntary sectoral deals. But they claim the United States is effectively trying to make them compulsory by linking participation in the 14 proposals under discussion to an overall Doha trade deal.

China -- not part of the NAMA-11 -- is incensed at proposals calling for sector deals to have "critical mass" which Beijing sees as code for Chinese participation, given the size of the Chinese market. (Editing by Dale Hudson)