Mexico, China textile talks falter; WTO dispute panel eyed

MEXICO CITY Fri Nov 23, 2012 2:36am GMT

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MEXICO CITY (Reuters) - Mexico will likely ask the World Trade Organization to settle a dispute with China over government aid to textile makers after bilateral talks failed to reach a deal, an economy ministry spokesman said on Thursday.

Mexico's economy ministry said in a statement that trade officials from both countries had met but that they could not come to an agreement. The ministry said that it still hoped to negotiate a solution, but that it would defend Mexico's interests under WTO rules.

Formerly requesting a dispute panel "is a natural step once an agreement is not reached during the consultation period," an economy ministry spokesman said.

The economy ministry said Australia, Brazil, Colombia, the European Union, Guatemala, Honduras, Peru and the United States had expressed interest to join Mexico in its complaint.

China refused to allow other countries to participate in talks, the ministry said.

In October, Mexico filed a complaint with the WTO accusing China of giving tax breaks and other favourable deals to its own clothing and textile businesses, starting the clock on a 60-day deadline for a bilateral deal under WTO rules.

Mexico could ask the WTO to rule on the case after December 15, the ministry said.

In its complaint, Mexico said Beijing was effectively subsidizing Chinese textile and clothing firms by exempting them from income taxes, value-added taxes and municipal taxes.

Mexico also said Chinese support including cash payments from government agencies and discounts on loans, land rights and electricity prices broke WTO regulations.

The textiles spat is Mexico's fourth WTO complaint against China. The two countries are top competitors in the U.S. market and vie against one another for foreign investment.

(Reporting by Adriana Barrera; Editing by Lisa Shumaker)

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