China says U.S. policies are causing existential damage to the WTO

GENEVA (Reuters) - China said on Monday U.S. policies are threatening the existence of the World Trade Organization, setting out a string of grievances in a WTO “reform proposal” published by the WTO on its website.

Since entering office, Trump has taken a tough line on the WTO, accusing it of unfairly penalizing U.S. trade while being soft on China, which was a far smaller economy when it joined the WTO in 2001.

He has threatened U.S. withdrawal unless the WTO can “shape up” and has blocked judicial appointments at the WTO’s Appellate Body, effectively the supreme court of world trade, meaning that trade disputes could go into legal limbo from December.

China did not name the United States in the document, but referred to the block on the appointment of WTO appeals judges and “national security” tariffs on aluminum, steel and cars, policies uniquely associated with Washington.

The document was posted just as China and the United States ratcheted up their trade war.

Beijing said on Monday it would impose higher tariffs on a range of U.S. goods including frozen vegetables and liquefied natural gas, defying a warning from U.S. President Donald Trump not to retaliate after Washington raised tariffs on $200 billion in Chinese imports.

China said a “certain member” of the WTO had unilaterally raised trade barriers and imposed import tariffs in an arbitrary way and without authorization from the WTO.

“The abuse of national security exception, unilateral measures inconsistent with the WTO rules, as well as misuse or abuse of existing trade remedy measures have severely damaged the rules-based, free and open international trade order,” China’s document said.

Trump has criticized the way the WTO gives special treatment to any country that declares itself to be “developing” - including China - and its perceived failure to root out subsidies for Chinese state-owned firms.

China said it was “crucial” to safeguard the rights of developing countries, although the rules should be clearer.

The WTO is unlikely to be involved in any resolution of the highly political tariff battle. Washington says its tariffs are not subject to WTO rules, and any Chinese attempt to argue the case legally would take years, even if the WTO’s legal system continues functioning.

On subsidies, where the European Union and Japan have joined U.S. criticism, China said WTO reform should not discriminate against companies “with different ownership structures”.

The WTO was not impeccable but it was the most desirable channel for liberalizing and facilitating trade and investment on a global scale, it said.

Reform should cover four areas of concrete action, it said, including “resolving the crucial and urgent issues threatening the existence of the WTO”; increasing its relevance in global economic governance; improving its operational efficiency and enhancing the inclusiveness of the multilateral trading system.

Reporting by Tom Miles; Editing by Frances Kerry and Alison Williams