* EU states reject labels for products from clones' offspring
* "Novel food" rules to be redrawn after 3 years of talks
(Adds quotes from EU consumer commissioner, diplomat)
By Charlie Dunmore
BRUSSELS, March 29 (Reuters) - Talks within the European Union broke down on Tuesday over how to deal with food from cloned animals, sending EU proposals on the sale of new types of foods back to the drawing board after three years of debate.
The failure to reach an agreement means EU rules on cloning and on so-called "novel foods" -- defined as foodstuffs not consumed significantly in the EU before 1997 -- must now be redrafted and could take several years to agree.
"This was the pity of not coming to an agreement, because the present situation -- where there is no control at all on cloning techniques or clones -- will be again the rule in Europe," EU consumer commissioner John Dalli told reporters.
Following all-night negotiations in Brussels, EU lawmakers were ready to drop their demand for a ban on the sale of food from the conventionally bred offspring of cloned animals, in return for mandatory labelling for all such products.
But EU governments said that would risk dragging the 27-nation bloc into a "full blown trade war" with countries that export goods derived from the young of cloned animals, such as the United States.
"The European Parliament ... tried to push the (European) Council to accept a misleading, unfeasible 'solution' that in practice would have required drawing a family tree for each slice of cheese or salami," said Hungary's farm minister Sandor Fazakas.
Hungary, which chaired the showdown talks as holder of the EU's rotating presidency, said it had been ready to accept a ban on cloning for food production in Europe and "the gradual introduction of labelling" for products from the offspring of clones, starting with beef.
A Brussels-based diplomat from a non-EU country told Reuters the failure of the talks was good for states that export meat and other products to Europe.
"We are happy about the current situation because it keeps the status quo. Parliament's position would have had very hard consequences for international trade," the diplomat said.
CONSUMER CONCERNS
The European Parliament's negotiators in the talks accused EU governments of ignoring public opinion, citing a 2008 consumer survey that showed that 58 percent of Europeans believed cloning should never be used for food production.
"We made a huge effort to compromise, but we were not willing to betray consumers on their right to know whether food comes from animals bred using clones," lawmakers Gianni Pittella and Kartika Liotard said in a joint statement.
The use of cloning for food production is not currently believed to be widespread in Europe, but Denmark is the only EU country to have banned the practice, and the lack of EU rules means there is a dearth of reliable data on its use.
The United States is the most advanced country in terms of cloning for food production, with estimates provided by companies suggesting that "thousands of cattle" and "hundreds of pigs" have been cloned there so far.
The United States currently has a voluntary moratorium on the marketing of food from cloned animals but not from their offspring.
Animal cloning, which uses DNA transfer to create an exact genetic copy of an animal, currently has a success rate below 20 percent, with most cloned animals dying during or shortly after birth.
The technique is complex and costly, ensuring that cloned animals are unlikely to be used themselves as food, but they can be bred traditionally to produce offspring that share similar traits, such as high milk production or rapid growth.
The EU's executive -- the European Commission -- said it would reflect on the failure of the talks before deciding whether to redraft rules on cloning and on novel foods, which includes the approval and labelling of nanotechnology in foods.
(Additional reporting by Juliane Von Reppert Bismarck in Brussels, editing by Rex Merrifield and Keiron Henderson)