Rush for global free trade deal before Bush goes

New EU trade commissioner Baroness Ashton signalled that officials were racing to secure a deal with George Bush's administration, fearing delays that could last years.

President-elect Obama has worried British ministers and the European Commission with his calls on the campaign stump for new measures to protect American jobs from overseas threats. Now that President Bush is no longer hampered by domestic public opinion, there are hopes that he could try to make a new trade deal a key "legacy" of his time in office.

The scale of the economic challenge facing Mr Obama was underlined overnight after the Dow Jones index slumped by nearly 500 points, despite his election. Fears that the country is in the grip of recession that could be long and deep were also heightened when computer giant Cisco Systems warned of a drop in demand.

Former Tory Cabinet minister John Redwood claimed that the markets had been "scared" by the President-elect's talk of protectionism and barring imports. The world trade talks were heading towards agreement this summer, with insiders claiming that it was "85 per cent" of the way there.

But the talks stalled in July when India and the United States failed to agree on farm tariffs. Mr Redwood added: "The morning after the great result, reality set in. We need a change in policy. We need the right sort of change. It is tough on him (Mr Obama) because he inherits a mess.

"It is now his mess, and the sooner he turns up at economic meetings and starts to assert himself the better. There is no time for partying and choosing the curtains."

The so-called "Doha round" of the World Trade Organisation has been trying since 2001 to lower tariffs on food and industrial imports. The Europeans and Indians are looking to make a deal and believe that the White House is now in a mood to act swiftly.

Baroness Ashton told BBC Radio 4's Today programme today: "The point about the [Doha] round is that you've got the modalities, as we call it, the technical issue which we could settle by the end of the year and it would be extremely good to do so because that's a very positive signal.

"There are further issues that have to be resolved. It's not about one President or another, it's about the country of America actually engaging and wanting to finish the deal."

Lord Mandelson, Baroness Ashton's predecessor in the EU trade commissioner job, was one of the strongest advocates of a free trade deal. Now Business Secretary, he is still closely involved in trying to get an agreement.

President Bush will seek to use next week's meeting in Washington of the G20 body of world leaders, a group that includes Brazil, India and China, to argue that protectionism is self-defeating.