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China refuses to give up ‘developing country’ status at WTO, despite US demands

China will refuse to give up the “special and differential treatment” it enjoys as a developing nation at the World Trade Organisation, in a rebuke to a US proposal that would pare back the privileges China and other nations enjoy on trade.

China is categorised as a developing country at the Geneva-based institution, which affords it “special and differential treatment”. This enables China to provide subsidies in agriculture and set higher barriers to market entry than more developed economies.

The dispute reflects a fundamental divide within the WTO that has threatened the future of the global multilateral trading system.

The United States has long complained that too many WTO members – about two-thirds – define themselves as developing countries to take advantage of the terms the status permits them to trade under.

US President Donald Trump has railed against the organisation, calling it “a catastrophe” and “a disaster”.

However, countries such as China and India insist that the preferential treatment is an important cornerstone of the global trading system. Despite being the world’s second-largest economy and its biggest exporter, Beijing continues to label itself as “the world’s largest developing country”.

Commerce ministry spokesman Gao Feng said in a press conference on Thursday that China would stand by its position, even as Brazil has agreed to forgo the status in exchange for US support in joining the Organisation for Economic Co-operation and Development, an influential intergovernmental economic organisation with 36 member countries.

“China’s position on WTO reform has been very clear. China is the largest developing country in the world,” Gao said.

“We do not shy away from our international responsibilities and are willing to assume obligations in the WTO that are compatible with our own economic development level and capabilities. In fact, we do the same and will continue to do this.

“At the same time, we will work with other developing members to firmly uphold our fundamental rights and to voice our common voice and safeguard our development interests,” he said.

The US claims that current WTO rules go too far in allowing China to subsidise its industries, support state-owned firms and discriminate against foreign investors. The terms have helped foster problems such as the forced transfer of technology and theft of intellectual property, Washington claims.

At the Boao Forum for Asia in Hainan last week – billed as China’s answer to the World Economic Forum in Davos – Zhou Xiaochuan, the former governor of China’s central bank, acknowledged that some of the criticisms brought up by the US were valid.

But he said there was also some misunderstanding from other WTO members regarding China’s trade practices.

“We have substantially reduced market distortions and unreasonable subsidies [in moving from a planned economy to a market economy], but because this is a process of transformation, it is necessary that it has taken many years, so some distortions will remain,” he said during a panel discussion on WTO reforms.

“The Chinese government is very willing to speed up the reform process to eliminate this distortion, so these distortions will eventually disappear. [The criticisms] may be caused by a misunderstanding,” Zhou said.

“We need to do some clarification work. China is a big country. In the process of implementation, there may be inconsistencies. The implementation at the local level may not be consistent, and local governments may have behaved inappropriately, but this does not represent the Chinese government’s stance,” he said.

China, India, South Africa and Venezuela have opposed a US proposal to reform the “special and differential treatment”, published earlier this year.

The four have already submitted a paper to the WTO saying that the self-classification of developing member status has been a long-standing practice and best serves the WTO’s objectives.

The joint letter also claims that many WTO rules have actually favoured the US and other developed countries, in the areas of agricultural support, textile quotas and intellectual property rights protection.
Source: South China Morning Post

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