Mexico has threatened to seek arbitration from the World Trade Organization in a long-running dispute accusing China of flooding its market with cheap goods, the Economy Ministry said.

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

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.

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

The latest warning comes as Mexico prepares to drastically reduce tariffs on Chinese goods on December 11, under an agreement reached by both countries in 2007.

Footwear for example will be allowed to enter the country free of import fees. The Mexican National Footwear Chamber expects that local production will decrease by one third within the next four years as a result of tariff reductions.

According to the Economy Ministry’s complaint, Chinese products such as shoes and toys frequently enter Mexico via the United States, where they are labeled as made in the USA, thereby gaining tariff exemptions reserved for members of the North American Free Trade Agreement.

The scheme, which is known as “triangulation”, enables Chinese goods to sell in Mexico at bargain prices that local manufacturers are unable to compete with.

Mexico says that footwear, textiles and toymakers are the industries that have been hit the hardest by the practice.

In an effort to defend Mexican manufacturers, the ministry also asked China to review cases of price dumping and to act against Chinese exports whose value is understated in order to avoid import tariffs. (Reuters)