U.S. Requests WTO Consultations with China Regarding Prohibited Subsidies
The Office of the U.S. Trade Representative (USTR) has posted to its Web site numerous documents announcing that the U.S. has requested World Trade Organization (WTO) dispute settlement consultations with China regarding its provision of subsidies that appear to be prohibited by WTO rules.
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USTR consultation request addresses nine export and import substitution subsidy programs. The USTR states that its consultation request addresses nine subsidy programs. Six of the challenged subsidy programs appear to be export subsidies, granted on the condition that the recipients meet certain export performance criteria. The USTR states that these subsidies offer significant benefits and are available for all products made in China, including, for example, steel, wood, paper, and other manufactured products.The USTR also states that companies targeted for many of these subsidies, i.e., companies with some foreign participation, accounted for nearly 60 percent of China's exports of manufactured goods in 2005, according to a WTO report.
The USTR further states that the remaining three subsidy programs appear to be import substitution subsidies, conditioning the grant of subsidies on the recipient's purchase of domestic over imported goods. According to the USTR, export subsidies and import substitution subsidies are prohibited under the WTO Agreement on Subsidies and Countervailing Measures.
Elimination of China's subsidies will help level playing field for U.S. business. By subsidizing Chinese exports to the U.S. and denying U.S. exporters a fair opportunity to compete in China, these subsidy programs unfairly impact U.S. manufacturers and their workers. Elimination of the subsidies will help level the playing field for U.S.-based manufacturers and, in particular, for America's small and medium-sized businesses across a range of industries. The subsidies being challenged also are inconsistent with clearly 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.
Subsidies were critical issue in China's WTO accession. The USTR notes that given the extensive involvement of the Chinese government in commercial activity in China, disciplines on subsidies were a critical issue in the negotiations leading to China's December 2001 accession to the WTO. The importance of this issue is reflected in China's express commitments in its accession protocol to abide by WTO prohibitions on the granting of export and import substitution subsidies. However, the Chinese government has continued to use a number of industrial policy tools &8722; including these kinds of subsidies &8722; to support Chinese industry.
The USTR states that the U.S. has repeatedly raised its concerns about these subsidies in discussions with relevant Chinese officials; however, China has taken no steps to withdraw these measures.
If consultations do not resolve matter within 60 days, dispute settlement panel may be requested. Consultations are the first step in a WTO dispute. Under WTO rules, parties that do not resolve a matter through consultations within 60 days may request the establishment of a WTO dispute settlement panel.
BP Note
In December 2006, the International Trade Administration (ITA) requested comments on whether it should apply the countervailing (CV) duty law to imports from China. The ITA stated that it intends during the course of the present CV duty investigation on coated free sheet paper from China to determine whether the CV duty law should now be applied to imports from China. (Since at least 1986, the ITA has exercised its discretion to not apply the CV duty law to non-market economy (NME) countries, such as China and Vietnam.)
(See ITT's Online Archives or 12/19/06 news, 06121925, for BP summary of ITA request for comments.
See ITT's Online Archives or 11/28/06 news, 06112835, for BP summary of ITA's notice initiating the CV duty investigation on coated free sheet paper from China.)
USTR press release (dated 02/02/07) available at http://www.ustr.gov/Document_Library/Press_Releases/2007/January/United_States_Files_WTO_Case_Against_China_Over_Prohibited_Subsidies.html.
USTR fact sheet (dated 02/02/07) available at http://www.ustr.gov/assets/Document_Library/Fact_Sheets/2007/asset_upload_file143_10465.pdf.