Trump Presses World Trade Organization on China

https://www.nytimes.com/2019/07/26/us/politics/trump-wto-china.html

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WASHINGTON — The Trump administration on Friday escalated pressure on the World Trade Organization, giving the international group a 90-day ultimatum to alter a provision that the United States argues has long allowed China to game the global trading rules.

In a proclamation, President Trump said that the United States would “use all available means” to secure changes to a provision at the World Trade Organization that allows countries to decide whether they qualify as “developing countries.” Countries that claim that label — which includes nearly two-thirds of the organization’s 164 members — qualify for certain preferential treatment, like longer time horizons to carry out trade agreements.

The Trump administration argues that dozens of countries abuse those rules and has singled out China, the world’s second-largest economy and the largest global exporter for about a decade, saying it should not be classified as a developing nation.

Administration officials have bristled that China claims easier treatment at the global trade body, while pumping out low-priced manufactured goods that have displaced American jobs and moving to dominate the high-tech industries of the future, like autonomous vehicles and robotics.

“The United States has never accepted China’s claim to developing country status, and virtually every current economic indicator belies China’s claim,” the proclamation read.

On Twitter on Friday, Mr. Trump called the World Trade Organization broken and said it was allowing other countries to take advantage of the United States.

“The WTO is BROKEN when the world’s RICHEST countries claim to be developing countries to avoid WTO rules and get special treatment,” he said. “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!”

The administration said that if the United States trade representative concluded that substantial progress had not been made toward overhauling the organization’s rules in 90 days, it would no longer treat countries that it did not consider to be developing nations as such. The United States also threatened to withhold support for a country’s membership in the Organization for Economic Cooperation and Development, a group of the world’s 36 most advanced countries, if the trade representative did not agree that it was a developing nation.

It is not immediately clear what the practical effect of those changes would be — for example, whether the Trump administration would block current negotiations at the World Trade Organization where countries like China claim developing country status.

The organization has produced little consensus among all of its members in recent years, but it is pushing to resolve a trade deal that would curb global overfishing by the end of the year. Dozens of countries, including China, have claimed developing country status in those talks, which would give them more time to enforce potentially costly new rules if any are agreed upon.

The United States trade representative did not immediately respond to requests for comment.

The Trump administration submitted a proposal to the World Trade Organization this year to exempt countries from developing country status if they are members of the Organization for Economic Co-Operation and Development or if they are among the Group of 20’s most advanced economies. The proposal would also strip the developing country title from nations that the World Bank considers to be high-income countries, or make up at least 0.5 percent of global merchandise trade.

But some trade officials in Geneva have criticized that proposal as arbitrary and potentially disruptive to an organization that is based on consensus and voluntary action from countries.

“It has been a concern that predates the Trump administration,” Chad P. Bown, a senior fellow at the Peterson Institute for International Economics, said of China’s claim of developing country status. “What’s new is the Trump administration is not interested in diplomatic niceties.”

The new announcement is part of a broader offensive on the World Trade Organization by the Trump administration, which argues that the group has failed to check China’s unfair economic behavior and is in desperate need of change.

The Trump administration has also nearly shut down the organization’s ability to settle trade disputes among its members. It has blocked appointments to a body that hears appeals to such disputes, arguing that the organization has overstepped its mandate and created a situation of judicial overreach that the United States never signed up for. In December, the body will have too few members to hear cases, leaving countries without a formal system to complete dispute settlements.

In taking on the developing country provision, the Trump administration could also be picking a global fight that would extend beyond China.

In the announcement, the administration said that seven of the 10 wealthiest economies on a per-capita basis, including Brunei, Hong Kong, Qatar and Singapore, claim developing country status, as do several members of the Organization for Economic Co-Operation and Development, like Mexico, South Korea and Turkey.

“The status quo cannot continue,” the proclamation said. “The W.T.O. is in desperate need of reform, without which the W.T.O. will be unable to address the needs of workers and businesses or the challenges posed by the modern global economy.”