Mexico Threatens China with WTO Tribunal

November 11, 2011Marketsby EW News Desk Team



Mexico has raised the stakes, threatening to seek arbitration from the World Trade Organisation, in a long-running dispute over the sale of cheap Chinese products in its markets.

In a letter to his Chinese counterpart on Wednesday, Mexican Economy Minister Bruno Ferrari asked Chinese officials to address trade practices that are distorting and hurting several sectors of Mexico's manufacturing industry.

Mexico's NTN24 news network reports that Ferrari told China's Commerce Minister Chen Deming that if China did not respond to Mexican concerns, his country will seek arbitration against China at the WTO.

It would be the fourth time that Mexico takes action against China at the WTO since China joined in 2001.

Related: Mexico economy
Related: Mexico’s trade account

Related: China's economic ties

Trade between the two nations has growth rapidly over the past decade, from $3 billion in 2000 to almost $50 billion in 2010. The trade balance, however, leans heavily in favour of the Chinese, with the value of Mexican imports running at 10 times the size of exports to China.

When China applied for WTO membership, Mexico was the last country to give its stamp of approval, in 2001. The concerns from the South American nation were twofold: One, that the path of guaranteed access to American markets would negatively weaken the (relatively more expensive) demand for Mexican exports up north, and secondly, that cheap Chinese imports would flood the domestic Mexican market. In 2003, China exports into the United States exceed the levels and size of Mexico for the first time.

In order to reduce the impact of Chinese competition on the domestic market, Mexico introduced a protectionist tariff ranging from 100 percent to 1,100 percent on all Chinese imports for seven years, a bargaining chip for Mexico’s vote on China’s WTO accession, a deal that was extended for another 3 years and is slated to end in December 2011.

Mexico has previously taken China to WTO tribunals over restrictions on commodity exports, illegal subsidies and measures related to intellectual property rights.

According to the complaint file by Mexico, Chinese products frequently enter Mexico via United States, where they are labelled ‘made in USA’ and in that sense exempted from tariff under the NAFTA.

Read more about the North American Free Trade Agreement (NAFTA)

The process, known as triangulation, enables Chinese goods to sell in Mexico at bargain prices that local manufacturers are unable to compete with.


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