YAOUNDE - World Trade Organization talks ended deadlocked early on Monday as Brazil blocked a bid by the U.S. and other countries to secure an extension to a moratorium on customs duties for electronic transmissions like digital downloads, diplomats said.

WTO Director-General Ngozi Okonjo-Iweala said the e-commerce moratorium had expired, meaning that countries could apply duties on electronic goods. But she said the WTO hoped to be able to restore the moratorium and that Brazil and the U.S. were trying to reach some sort of agreement on it.

The marathon talks at a WTO meeting in Cameroondid make progress on drafting a plan for broader reform of the organisation, though agreements are still pending.

WTO talks would continue in Geneva, said the conference chair, Cameroon Trade Minister Luc Magloire Mbarga Atangana. Those talks are expected to be in May, WTO officials said.

The talks were seen as a test for the WTO's relevance after a year of trade turmoil and major disruptions due to the Iran war. But ministers could not agree to extend the moratorium more than two years following objections from Brazil, officials said.

Failure to reach a collective decision at the WTO talks was a "major setback for global trade," said Britain's Business and Trade Secretary Peter Kyle.

U.S. WANTED PERMANENT EXTENSION

Diplomats had been working throughout Sunday to close the gaps between Brazil, which had originally sought a two-year extension, and the U.S. which wanted a permanent extension, by drafting a proposed document of a four year extension with a one year sunset buffer, concluding in 2031.

Brazil later proposed a four-year extension, with a review clause half way through, but that was not supported, two diplomats told Reuters.

A U.S. official said Brazil had opposed a "near-consensus document", adding: "It's not U.S. vs Brazil. It's Brazil and Turkey v 164 members."

Meanwhile a Brazilian diplomat said "The U.S. wanted the sky," and that Brazil wanted to be prudent in renewing the moratorium by two years, as in previous ministerial conferences.

"In four or five years' time, no one will be able to predict what e-commerce will be about, and this has an influence on a number of countries' policies," the Brazilian diplomat said.

Another diplomat present said that U.S. Trade Representative Jamieson Greer made delegates "uncomfortable" as he suggested there "would be consequences," if the U.S. did not get a long-term extension to the moratorium.

Business leaders lamented the outcome of the talks in Yaounde, with International Chamber of Commerce Secretary General John Denton saying it was "particularly concerning at a time of real strain on the global economy."

John Bescec, Microsoft's director of customs and trade affairs said: "Business was expecting more certainty and predictability ... Instead, we got the exact opposite."

Getting a deal on the e-commerce moratorium was seen as key to securing support for the WTO from the U.S., which under President Donald Trump has retreated from global multilateral institutions.

DRAFT REFORM PLAN TAKES SHAPE

A new draft of a reform roadmap, seen by Reuters, that provides a timeline for progress and sets out the key issues to address was close to being agreed in Cameroon, diplomats said.

Those include improving decision-making in a consensus-based system that has long been stymied by a few countries, and the trade benefits extended to developing countries.

A declaration on reform will also be sent to Geneva for further discussion, WTO conference chair Mbarga said.

The reform debate comes amid efforts to rework WTO rules to render subsidy use more transparent and make decision-taking easier. The U.S. and European Union argue China in particular has taken advantage of current rules to their detriment.

-Reporting by Olivia Le PoidevinAdditional reporting by Lisandra Paraguassu in Brasilia and David Lawder in Washington; Editing by Helen Popper, Alexander Smith, Nick Zieminski and Michael Perry/Reuters