United States Files Trade Complaint Against China’s Subsidies

By Jaroslaw Anders and Kathryn McConnell
USINFO Staff Writers

Washington – The United States has filed a complaint with the World Trade Organization (WTO) about China's use of what U.S. officials say are illegal subsidies.

The subsidies give "unfair competitive advantage" to Chinese exports and deny U.S. makers of products ranging from steel and wood to information technology the opportunity to compete fairly in China's market, U.S. Trade Representative Susan Schwab said in a February 2 briefing with reporters.

By encouraging Chinese exports and discouraging imports, China's export subsidies "are so trade-distorting that WTO rules prohibit them outright," Schwab said.

China applies a series of measures that, by allowing for refunds, reductions or exemptions from taxes and other payments appear designed to subsidize exports of manufactured goods or support the purchase of domestic over imported equipment and certain other products, according to a press release from the Office of the U.S. Trade Representative (USTR).

The measures appear to be contrary to WTO rules that explicitly prohibit export and import substitution subsidies, USTR said.

China had committed to eliminate prohibited subsidies by the time it joined the WTO in 2001.

The United States repeatedly has raised concerns with China's officials about subsidies but no action has been taken to withdraw the subsidies, the agency said.

“China’s use of market-distorting subsidies creates an uneven playing field,” Schwab said. She added that the subsidies are inconsistent with stated Chinese policies “seeking to rebalance China’s economy with greater emphasis on domestic consumption-led growth rather than export-led growth, and to promote the efficiency of China’s domestic manufacturers.”

In a written statement presented February 2 to the U.S.-China Economic and Security Review Commission, Thomas J. Christensen, deputy assistant secretary of state for East Asian and Pacific Affairs, said correcting the substantial imbalances is among of the Bush administration’s top priorities in U.S.-China economic relations.

“We will continue to seek cooperative and pragmatic resolutions to our concerns through bilateral dialogue with China, but will not hesitate to use WTO dispute settlement when dialogue fails,” Christensen said in his testimony.

The United States previously has brought only two disputes to the WTO against China; a third was settled on the eve of a planned WTO filing.

Christensen said in his statement that the WTO dispute settlement process is not a sign of hostility because the United States also files WTO complaints against its closest allies and trading partners.

He noted that the value of U.S. exports to China as of November 2006 was $50 billion – almost triple of what it was in 2001 when China joined the WTO. China’s participation in the global economy helped raise tens of millions of its citizens out of poverty, educated a generation of Chinese entrepreneurs, opened China’s economy to quality U.S. products and services, and also contributed to keeping inflation low in the United States, he said.

This is an example, said Christensen, that “what is good for the United States is also good for China.”

The full text of the press release on the WTO filing against China is available on the USTR Web site.

The full text of Christensen’s prepared remarks is available on the State Department’s Web site.