In July, a presidential memorandum called upon the World Trade Organisation (WTO) to reform its economic classification systems in order to prevent China from taking advantage of its status as a “developing country”.
“Since joining the WTO in 2001, China has continued to insist that it is a developing country and thus has the right to avail itself of flexibilities under any new WTO rules,” the memorandum read.
“The United States has never accepted China’s claim to developing country status, and virtually every current economic indicator belies China’s claim.”
The WTO does not actually have any criteria for what qualifies as a developing country, and it is up to countries to declare themselves “developing” or “developed”. Developing countries receive special provisions under the WTO agreements, including longer time periods for implementing agreements and commitments and measures to increase trading opportunities for developing countries. The idea that China would receive these benefits, despite being the world’s second-largest economy, is ludicrous.
“The WTO is BROKEN when the world’s RICHEST countries claim to be developing countries to avoid WTO rules and get special treatment,” President Donald Trump tweeted in July.
“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!”
President Trump has a point on this one, though – as always – his phrasing is slightly off. However, it is difficult to view the statement as separate from the ongoing US-China trade war. Continued pressure here could well endanger the proposed “phase one” trade deal (of which we have heard much but seen little); going after China at the WTO sees the US committing to a trade war on all fronts with China, seeking to kneecap their economic primacy not just in relation to the US but the world at large.
President Trump also spoke on the issue at the Economic Club of New York last week.
“But we wrote them a letter and we said, much more strongly than the letter, that – not fair to have China as a developing nation. One of the reasons they’ve taken advantage of us is because of that. And we’re considered the big, fat cow. And no longer. No longer. We have a lot of things to work out,” he said.
Whether they can work it out remains to be seen.
