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Tuesday, July 16, 2024

World Trade Organization witnesses US-China trade standoff

United States of America and China are not done with each other. Trump threatens China with withdrawal of special status from World Trade Organization if it fails to meet demands. China and US have been on a trade row for some time and matter seemed to be going in the right direction with Trump XI meeting.


President Donald Trump on Friday threatened to withdraw recognition of the special “developing nation” status of China and other relatively rich countries at the World Trade Organization unless changes are made to the body’s rules.

The salvo fell the week before top US trade officials are due to return to China to rekindle trade talks that acrimoniously collapsed in May.

“The WTO is BROKEN when the world’s RICHEST countries claim to be developing countries to avoid WTO rules and get special treatment. NO more!!! Today I directed the U.S. Trade Representative to take action so that countries stop CHEATING the system at the expense of the USA!,” Trump said on Twitter.

In a memo to Robert Lighthizer, the US trade representative, Trump said the global trade body uses “an outdated dichotomy between developed and developing countries that has allowed some WTO members to gain unfair advantages.”

Despite Trump’s animosity, in fact, the United States has won the majority of complaints it has file with the WTO

Without “substantial progress” to reform WTO rules within 90 days, Washington will no longer treat as a developing country any WTO member “improperly declaring itself a developing country and inappropriately seeking the benefit of flexibilities in WTO rules and negotiations,” the statement said.

It was another unilateral attack on the multilateral trade body, which was created to settle disputes and prevent all-out trade wars but which Trump has repeatedly criticized the WTO since taking office.

Trump’s order directs Lighthizer’s office to “use all available means to secure changes at the WTO,” with the cooperation of other countries where possible.

“Lighthizer applauded the move”

“This unfairness disadvantages American who plays by the rules, undermines negotiations at the WTO and creates an unlevel playing field,” he said in a statement.

Read more: US China trade standoff; global market plunges

While Trump’s statement points to multiple countries that benefit from the developing nation designation, it focuses mostly on China.

The statement notes that seven of the 10 wealthiest economies in the world claim developing country status, as do Mexico, South Korea, and Turkey, which are members of the Group of 20 leading economies.

It is unclear how the measure would change US policy in practice though it likely could open the door to even more retaliatory tariffs against Beijing.

‘Cannot go unchecked’

Jennifer Hillman, a former top US trade official who served at the WTO, questioned the rationale since the benefits granted to countries with the special status in most cases has long passed.

“Therefore even self-declared developing countries are now obliged to meet most of the same legal requirements that the US and other developed countries must meet,” she told AFP.

Any new tariffs Trump wants to impose still would have to be justified under current US law, which requires an investigation into whether developing country status harms US companies.

And she said Trump’s unilateral approach already has angered countries like India and South Africa.

But Trump said allowing wealthy economies to claim developing country status will harm “economies that truly require special and differential treatment,” and that “cannot continue to go unchecked.”

Developing country status in the WTO allows governments longer timelines for implementing free trade commitments, as well as the ability to protect some domestic industry and maintain subsidies.

The Trump administration has long complained that WTO rules are unfair to the United States, and has nearly throttled key WTO proceedings by refusing to name new members of the appellate body for the dispute settlement system, which will cease to function later this year.

Read more: China & US: Black Swans killing global economy

Hillman said that is a much more pressing threat to the world’s trade referee since it will block the ability to enforce rules or for countries to comply with decisions.

Despite Trump’s animosity, in fact, the United States has won the majority of complaints it has file with the WTO.

AFP with additional input by GVS news desk