The US will boost its offer to restart world trade talks and spur global economic growth amid demands from the European Union that it make further concessions on farm subsidies.

US Trade Representative Susan Schwab said the world's biggest economy would expand an offer made in July. Schwab made the comments as the EU's ambassador to the World Trade Organization, Carlo Trojan, called on the US to slash domestic support.

“We know that everyone is going to need to stretch,'' Schwab said today in an interview in the northern Australian city of Cairns, where trade and agriculture officials from 19 countries and the EU are meeting. “In spite of the fact that we have a very bold offer on the table already, both in terms of market access and in terms of domestic support, we're prepared to do more.''

The Cairns meeting is seeking to revive the Doha Round of trade talks aimed at cutting tariffs and farm subsidies, a deal that could pump at least $96-billion into the world economy. The five-year-old talks broke down in July when the US refused to make a new offer to cut agricultural spending, according to Brazil, the EU and Japan.

US Treasury Secretary Henry Paulson this week said “protectionist sentiment'' eclipses even global imbalances as a risk to world economic growth.

Anne Krueger, who until last month was the IMF's first deputy managing director, said the talks needed a “jump start'' and that “one hopes there's still time to resume.''

Krueger made the comments in an interview in Singapore on Sept. 20.

“The US should flag its willingness to do something in terms of effective cuts in domestic support, and from there we can start the ball rolling again,'' Trojan told reporters today at the meeting in Cairns. “Having invested deeply in this exercise, we want to see a successful outcome.''

The WTO must reach an accord this year to leave enough time for the US Congress to approve a final agreement before the negotiating mandate of President George W. Bush's administration ends in July 2007, unless Congress extends his mandate next year.

“Without the fast-track authority, it doesn't make sense to negotiate with the Americans,'' Trojan said. “We need an extension to complete the round.''

Schwab said the November US midterm congressional elections would not dictate negotiations on the round, although the US wanted to see a “breakthrough'' in the next six months.

“As far as we are concerned, the sooner the better,'' Schwab said. “We don't want to lose what little momentum we have. A timeframe within the next four to six months, if we can find a breakthrough, would be very positive.''

EU Trade Commissioner Peter Mandelson will fly to Washington on Sept. 26 for talks with Schwab, Congressional leaders and farmers.

Schwab said the US would not put a fresh offer to Mandelson at that meeting and that there would be only “broader consultations'' during the visit.

“Today's moves are significant for the current round,'' said Alan Oxley, head of the Asia-Pacific Economic Co-operation center at Melbourne-based Monash University. “The test is how far the US is willing to go.''

The two sides were divided on Australian Trade Minister Mark Vaile's proposed compromise, under which the EU would slash farm subsidies by a further 5% and the US would cut $5-billion from its agricultural subsidies.

Nobody should reject any proposal out of hand because the only way we are going to get an agreement, if we reach an agreement, is by putting forward new combinations of numbers, new initiatives,'' Schwab said. “We can't endorse it, but it is a very positive contribution.''

Trojan rejected the Australian model, saying the Group of 20 proposal, which calls for deeper cuts in US farm subsidies, was “the middle ground.''

The countries with representatives at the Cairns meeting are Argentina, Australia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Paraguay, the Philippines, South Africa, Thailand, the US and Uruguay. The European Union and the World Trade Organization are also represented.

Schwab said a statement from the group, which accounts for 13% of global economic growth and a quarter of its farm exports, would join other nations calling for an “ambitious outcome'' in world trade talks. If the round failed, Schwab said it may mean a three-year wait for fresh negotiations.

“I think it would be a real opportunity forgone, it would be really unfortunate,'' Schwab said. “If we don't manage to get a breakthrough in the next six months, then it doesn't mean the round is over, but it may mean a two or three-year hiatus.''

International Monetary Fund Managing Director Rodrigo de Rato said this week world economic growth “may be turning'' down, prodding policy makers to revive stalled global trade talks.

If an agreement “does not materialize, prospects are for lower growth,'' he said.

There is an impressive trade pact on the table and it would be a quantum leap for economies,'' World Trade Organization Director-General Pascal Lamy said yesterday in Cairns. “The consequences of a failure of the round is less potential for economic growth and less potential to reduce poverty.''

US Agriculture Secretary Mike Johanns said a statement from the Cairns meeting would increase pressure to restart talks.

A statement from Cairns, an effort by a country like Australia, hopefully supported by other countries to move the talks forward around a specific proposal,'' Johanns said in an interview in Cairns. “That's part of the energy that's necessary.''