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Japan, US, EU seek tougher rules against trade-distorting subsidies

A worker waits to transport containers at a container port in Qingdao in eastern China's Shandong province, on Jan. 14, 2020. (Chinatopix Via AP)

WASHINGTON (Kyodo) -- Trade ministers from Japan, the United States and the European Union on Tuesday agreed on the need to impose tougher rules against trade-distorting subsidies in a move that may irritate China, which is known for its extensive industrial subsidy policy.

    "The current list of prohibited subsidies...is insufficient to tackle market and trade distorting subsidization," the three said in a statement issued following their talks on ways to reform the World Trade Organization, proposing adding new conditions to the list.

    The joint statement cited four new types of subsidies that should be unconditionally banned, such as those with "unlimited guarantees" and those granted "to an insolvent or ailing enterprise in the absence of a credible restructuring plan."

    "Based on this agreement, we would like reach out to other WTO member countries that are interested in this matter and continue this discussion," Japanese Economy, Trade and Industry Minister Hiroshi Kajiyama told reporters in Washington after meeting with U.S. Trade Representative Robert Lighthizer and European Commissioner for Trade Phil Hogan.

    While Kajiyama said the discussions did not take place with the aim to target a "specific country," a Japanese government source said the reform proposal will likely irk China.

    The meeting took place at a time when the WTO's dispute-settling system has effectively ceased to function as the United States has continued to block the appointment of new judges to the trade body's appellate panel, which is criticized for its judicial "overreaching."

    In December, the WTO's Appellate Body, which reviews appeals in dispute cases, fell below the minimum number of members to hear new appeals after the terms of two of the remaining three judges expired. The body is normally composed of seven members.

    Kajiyama said the topic was touched upon during his bilateral meeting with Lighthizer a day before, but did not elaborate.

    "It is essential that the WTO will work as a whole to swiftly restore its dispute-settlement function," the Japanese minister said.

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