US President Donald Trump on Friday threatened to withdraw recognition of the special “developing nation” status of China and other relatively rich nations at the WTO unless changes are made to the body’s rules.
The salvo fell the week before top US trade officials are to return to China to rekindle trade talks that 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 wrote on Twitter.
Photo: AFP
In a memo to US Trade Representative Robert Lighthizer, Trump said that the global trade body uses “an outdated dichotomy between developed and developing countries that has allowed some WTO members to gain unfair advantages.”
Without “substantial progress” to reform WTO rules within 90 days, Washington would 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.
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 Americans who play by the rules, undermines negotiations at the WTO and creates an unlevel playing field,” he said in a statement.
While Trump’s statement points to multiple countries that benefit from the developing nation designation, it focuses mostly on China.
The statement says 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 G20.
It is unclear how the measure would change US policy in practice, although it likely could open the door to even more tariffs against Beijing.
Jennifer Hillman, a former top US trade official who served at the WTO, questioned the rationale, since the benefits granted to nations 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 said.
Any new tariffs Trump wants to impose would still have to be justified under US law, which requires an investigation into whether the developing country status harms US companies.
Trump’s unilateral approach has already angered countries such as India and South Africa, she added.
However, Trump said that allowing wealthy economies to claim developing country status would harm “economies that truly require special and differential treatment.”
Developing country status in the WTO allows governments longer timelines for implementing free-trade commitments, as well as the ability to protect some domestic industries and maintain subsidies.
The Trump administration has nearly throttled key WTO proceedings by refusing to name new members of the appellate body for the dispute settlement system, which would cease to function later this year.
Hillman said that is a much more pressing threat, since it would block the WTO’s ability to enforce rules and for nations to comply with decisions.
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