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UPDATE 2-Trump targets China in call for WTO to reform 'developing' country status

By Jeff Mason and David Lawder

(Adds Lighthizer statement)

By Jeff Mason and David Lawder

WASHINGTON, July 26 (Reuters) - U.S. President Donald Trump put pressure on the World Trade Organization on Friday to change how it designates developing countries, singling out China for unfairly getting preferential treatment.

Trump, in a memo, directed the United States Trade Representative to stop treating such countries as developing countries for the purpose of WTO membership if "substantial progress" toward reform had not been made within 90 days.

The WTO is one of many multi-lateral organizations that Trump has criticized, but his wider beef is with China, with whom the United States has engaged in trade talks that have so far not resulted in an agreement.

"The WTO is BROKEN when the world's RICHEST countries claim to be developing countries to avoid WTO rules and get special treatment. NO more!!!" Trump wrote in a tweet on Friday.

The memo provides more detail on Trump’s frequent complaints that many large emerging market countries such as China have been taking unfair advantage of their status as developing economies under WTO rules, which allow them to maintain higher tariffs and other trade barriers aimed at boosting domestic growth.

The U.S. has been working with Japan and the European Union to formulate and try to push forward WTO rule changes aimed largely at China, to rein in government subsidies and other non-market trade practices. But altering WTO rules has been notoriously difficult since the body’s creation in 1995, as all 164 member countries must agree on any changes.

U.S. Trade Representative Robert Lighthizer, who has long viewed WTO rules as unable to rein in China's trade practices, said he looked forward to implementing it.

"For far too long, wealthy countries have abused the WTO by exempting themselves from its rules through the use of special and differential treatment," Lighthizer said in a statement. "This unfairness disadvantages Americans who play by the rules, undermines negotiations at the WTO, and creates an unlevel playing field."

In March, USTR said the United States would not allow itself to be held to a “straitjacket” of WTO obligations to which it never agreed.

If the Trump administration moves forward with steps outlined in the memo to stop treating certain countries as developing economies, it would likely be another move toward essentially ignoring some WTO rules.

The memo said nearly two-thirds of WTO member countries had been given access to special treatment by designating themselves developing countries, especially China.

"The United States has never accepted China's claim to developing-country status, and virtually every current economic indicator belies China's claim," it said, noting China's gross domestic product was the second largest in the world, behind only the United States.

"China and too many other countries have continued to style themselves as developing countries, allowing them to enjoy the benefits that come with that status and seek weaker commitments than those made by other WTO Members," it said. (Reporting by Jeff Mason and David Lawder; Additional reporting by Andrea Shalal Editing by Chris Reese)