The Mexican government has launched an audacious attack at the World Trade Organization (WTO) on Chinese industrial policy regarding the textile and clothing sector - claiming almost all Beijing's support for the industry is illegal.

Mexico City has requested formal consultations with China, which is the first stage of an official disputes case.

In the highly likely event that the Chinese cannot satisfy Mexico's demands, the Mexican government could request that the WTO dispute settlement body rules on its claims that China's textile and clothing industrial policy breaks the WTO's subsidies and countervailing measures agreement, the general agreement on tariffs and trade (GATT), the agriculture agreement and china's own WTO accession commitments.

Mexico is claiming all this support is illegal under world trade law: income tax, import duty, VAT and municipal tax exemptions, reductions and refunds; low-cost loans, extended loan repayment periods, debt forgiveness by state-owned banks; preferential prices for land use rights; government fee refunds; discounted electricity rates; cotton production, import and distribution subsidies; and government cash payments to the sector.

With the US (and the European Union) able to support Mexico's case as third parties if they wish, the move has been welcomed by Cass Johnson, president of the USA's National Council of Textile Organizations.

"We strongly support the Mexico government's initiative. We believe that it is a crucial first step to peeling back the layers of subsidies China has given to its textile and apparel industry over the last several decades. [It's a] very good thing, good for everyone."

With additional reporting by Leah Germain.