You may have heard that the latest round of World Trade Organization talks just collapsed. The main sticking point was agriculture. Yet energy is easily on par with farm goods at the top of everyone's economic worries.

So what's the WTO doing on energy, and biofuels in particular?

China and India helped scuttle this round of WTO talks, dubbed the Doha round after the capital of Qatar where it originated back in 2001. The Middle Kingdom wants to keep up its Great Wall of tariffs to fortify domestic agriculture and avoid shortfalls in staples like rice and wheat. That's the same tune we've heard from developed countries and other emerging markets like India and Brazil.

But the flipside of one country gaining market access is, well, that country allowing market access. In 2001, China gained admission to the WTO by lowering major trade barriers, and in return it got to unload its cheap goods on the West.

Now, domestic protectionism and rising food prices are pushing China, India, and Brazil to demand less free flow in agricultural goods, even while they want trinkets and cars to move without obstacles. Of course, it takes more than one party to cause an impasse, and the U.S. trade representative Susan Schwab told reporters that China's desired increases could have put new tariffs on soybeans in 8 out of the next 10 years.

Too bad, because agreements on farm goods were a necessary first step in getting to real debate on the food-fuel question.

Brazil is even threatening a "blockbuster" WTO case against the United States over our propping-up of corn ethanol against superior Brazilian sugarcane fuel. The U.S. is the world's largest ethanol producer, but Brazil is the largest exporter even with American resistance. Under the framework of the Doha round, this dispute was supposed to be settled. Now all bets are off, and all grievances are back out in the open.

You see, the interplay between food and fuel isn't just about riots when tortillas get too expensive (Mexico) or petrol is so dear that truckers block highways in protest (Spain).

A breakthrough on the U.S. corn subsidy would net billions for Brazilian ethanol market movers like national oil company Petrobras (NYSE:PBR), and it's not accidental that the government-backed company is being supported in international trade talks by friendly federal negotiators.

Brazilian trade hawks also have nature on their side.

Brazilian Ethanol for the U.S.? Better, Not the Best

Floods in the Midwest this summer caused bottlenecks in ethanol shipments to the coasts, prompting calls to remove the 54-cent-per-gallon ethanol import tariff for the sake of our own energy security.

The U.S. already lost a 2005 WTO case brought by Brazil which charged that American cotton subsidies hurt producers in other countries by depressing prices. As important as cotton is to the world economy, trade distortions in fuel markets have more impact mentally and at market. The U.S. will have to acknowledge its domestic crutch as a major point of inefficiency in global trade.

Trade chiefs all around the world are scrambling to rescue the Doha round now, and the world press is touting the stand of China, India and Brazil as the dawn of a new era where the U.S. and European Union can't simply impose their will on meeker members of the WTO.

I'm personally fine with a new world order emerging, but it has to be a real world where global problems can be addressed with minimal bellyaching and much more political maturity than we've seen. Rioters don't know about hushed trade discussions in their capitals, and ministers are often too far removed from the man on the street to notice anything but demonstrations. By the time sparks fly, it's too late.

And without ongoing dialogue about food and fuel issues in the WTO, a real worldwide solution will only come piecemeal and slowly.

Regards,

Sam Hopkins

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