GENEVA — China has rejected requests by the U.S. and seven other trading powers, including the European Union and Brazil, to join as interested third parties in talks aimed at resolving a World Trade Organization complaint filed by Mexico that asserts the world’s biggest textiles and apparel exporter provides a host of subsidies to the sector that breach global trade rules.

This story first appeared in the December 5, 2012 issue of WWD. Subscribe Today.

“I can tell you that we were disappointed that China did not permit interested third parties, including the United States, from sitting in on these consultations,” said a U.S. trade official, who did not want to be named. “The United States continues to believe that Mexico’s request for consultations appears to raise serious questions about numerous Chinese government subsidies that may be causing market distortions in the textiles and apparel sector. Mexico’s complaint also alleges that some of these subsidies are import substitution subsidies and export subsidies, both of which are prohibited under WTO rules.”

Fernando de Mateo, Mexico’s WTO ambassador, said, “To our mind, it was unusual and a surprise China did not accept the other parties to join the consultations.”

De Mateo said the talks were “difficult,” but noted both parties have expressed a willingness to reach an agreement.

The U.S. filed a request on Oct. 28 to participate, but was not given the go-ahead by China to join the first round of confidential consultations held on Nov. 21 and 22. Requests by Australia, Guatemala, Peru, Honduras and Colombia were also rejected.

The Mexican ambassador said no date had been set for another round of talks. But De Mateo said, “We are not ready to accept our country losing markets, particularly in the U.S., because of Chinese subsidies.”

Mexico estimates billions of dollars worth of apparel exports are adversely affected by the Chinese subsidies.

A Chinese trade official said the action to turn down the requests was in compliance with the WTO rules governing the dispute settlement, but declined to comment on the reasons for the action.

The relevant WTO statute notes third parties can join “provided that the member to which the request for consultations was addressed agrees that the claim of substantial interest is well founded.” The U.S. and the other countries would now need to file their own complaints against China over apparel and textile industry subsidies.

Diplomatic sources close to Mexico said all indications are that it will end up in a WTO dispute panel being set up down the road to rule on the Chinese measures.

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