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Trade war

US takes aim at China's status as a developing nation

WTO proposals would eliminate favorable treatment for world's No. 2 economy

China maintains that it is a developing country, but the U.S. argues it belongs among the advanced nations.(Farmer photo by Reuters, lunar probe model photo by China Space News/Reuters)

TOKYO/GENEVA/WASHINGTON -- The U.S. argued Thursday that it no longer makes sense for China to receive special World Trade Organization privileges that were originally designed to assist developing nations.

"There is nothing special or differential when a member that has landed a rover on the dark side of the moon ... insists on the same treatment as one of our poorest members," Dennis Shea, the U.S. ambassador to the WTO, said at the Geneva headquarters.

The WTO currently allows countries to decide for themselves whether they are developing nations. Although China is the world's second-largest economy, it still claims that status. That makes China eligible for "special and different" treatment exempt from certain trade liberalization requirements.

That special treatment has given China cover to maintain protectionist policies during trade talks, including high tariffs and generous agricultural subsidies, experts say.

Under a reform plan proposed by Shea, a nation would not receive special WTO privileges if one of the four points is true -- it is part of the Organization for Economic Cooperation and Development, a member of the Group of 20 leading economies, designated by the World Bank as a high-income nation, or accounts for 0.5% or more of global trade.

This move is part of the pressure campaign against China launched by the U.S. under President Donald Trump. "China, which is a great economic power, is considered a Developing Nation within the World Trade Organization," Trump tweeted last April. "They therefore get tremendous perks and advantages, especially over the U.S. Does anybody think this is fair."

Shea looks to form a consensus on WTO reforms with Japan and the European Union, then present his case to other members.

In response, China joined India, South Africa, Venezuela and other self-declared developing nations in issuing a joint communique pushing back against the proposed reforms. In the text, they say the self-declaration rule is optimal for accommodating vast disparities in economic development. On Thursday, the Chinese representative at the WTO said the U.S. is arbitrarily choosing economic standards.

During last November's Asia-Pacific Economic Cooperation gathering in Papua New Guinea, Chinese President Xi Jinping told leaders of Pacific island nations that China remains a developing nation, despite all the progress it has made. "I assume it would be hard for [China] to shed its current status since it is acting as the leader of developing countries," said a source close to the Japanese government.

Stripping China of developing nation status could also have a knock-on effect on existing free trade agreements and other trade deals.

The U.S. has indicated it is prepared to withdraw from the WTO if the reforms fail to advance. Washington could bring up the topic during meetings with senior trade officials from Tokyo and Brussels, and request a presentation of a joint proposal.

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