US takes aim at Chinese export subsidies

13 Feb, 2015 06:45 AM
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China subsidies for fruits, vegetables and poultry will have a significant effect on California

THE Obama administration has opened a broad challenge to China's subsidy program, which it said unfairly benefits exports of a range of products from shrimp to steel while harming US companies and workers.

The US initiated the case at the World Trade Organisation accusing China of making companies in seven industries eligible for incentives for computer or training services at 179 domestic "demonstration bases" across the country, US Trade Representative Michael Froman said.

"All of these services, provided for free or at a discount, undermine fair competition," Mr Froman said.

China, the world's No. 2 economy after the US, joined the WTO in 2001 promising to open its markets and honour agreements that restrict many forms of government-backed aid, according to the US statement. The US and other nations complain that China has broken those pledges.

The case was filed at the Geneva trade arbiter as the administration seeks from Congress authority to negotiate trade agreements in exchange for a quick up-or-down vote from lawmakers. Mr Froman has argued the deals let the US pursue enforcement cases when violations occur.

Though many labour unions oppose "fast-track" authority for the President, the 850,000-member United Steelworkers of America praised Mr Froman for the new case against China.

Union members' "jobs have been lost or are at risk because of China's practices", USW president Leo Gerard said. "It appears that China will stop at nothing to continue to grow its economy at our expense."

China's trade practices have led to 32 cases accusing the nation of violating its promises, the WTO said. While the US has won some cases, China has complied with few rulings.

For that reason, Derek Scissors, a China expert at the American Enterprise Institute, said the prospects are low for resolving the alleged breaches through the WTO.

"It's not clear the US will win the case, while it is clear that it will take the WTO a long time to act," Mr Scissors said. "This is the key to Chinese WTO compliance: By the time cases are fully settled, the Chinese find a different way to skirt the rules."

The export aid program has provided at least $US635,000 ($830,000) a year to some Chinese companies, and the government in Beijing has given almost $US1 billion over three years in discounted services, the US statement said.

The US has filed cases against China on renewable energy products, poultry imports and export restrictions on minerals used in high-tech devices.

The US has already charged that China unfairly subsidises the automobile and auto parts industries, and Mr Froman said the US developed new information that the program might be broader than originally thought.

A US investigation uncovered Chinese support for industries including agriculture and apparel, Mr Froman said. The list now includes specialty steel, titanium and aluminum products, chemicals, medical products and building materials.

"This program violates the commitment China made when it joined the WTO not to provide certain export subsidies," Mr Froman said. "It injures American workers, farmers, ranchers and businesses - really anyone who plays by the rules and wants to compete fairly, on the merits of their hard work and the quality of their products."

China subsidies for fruits, vegetables and poultry "will have a significant effect on California's trade", said Representative Jim Costa, a California Democrat. China is the state's third-largest export market, he said.

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READER COMMENTS

Pete Rothwell
13/02/2015 8:23:45 AM

Wow! Am I seriously reading this? The US is a joke! Talk about the pot calling the kettle black!
James
13/02/2015 9:45:39 AM

We have our own considerations. There is more likely equity between nations of equivalent size. China and the USA are comparable. Australia is not comparable to either in size and our negotiators probably take the best we can get. That said, if we can improve our situation we should. Transparency is key, Forts and Castles of information are not useful albeit protective of those who have made the deals. Remember the Castles are to protect from the populace, not the International influences.
Peter
16/02/2015 5:25:01 AM

Obviously Chinese farmers are stupid inefficient agrarian socialists, right Bushie?

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