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U.S. disputes China’s export subsidies, says they violate fair trade rules

U.S. Trade Representative Michael Froman testifies Jan. 27 to the House Ways and Means Committee on Capitol Hill in Washington. (Associated Press)
Paul Wiseman Associated Press

WASHINGTON – The United States is challenging China at the World Trade Organization, alleging the Chinese government unfairly subsidizes exports in seven industries.

The Office of the U.S. Trade Representative said Wednesday that China designates certain export companies as “demonstration bases” that receive free or discounted services from suppliers. The U.S. says China paid the suppliers almost $1 billion over three years to provide those services.

Getting help are textile and clothing makers, advanced materials and metals companies, light industrial firms, specialty chemical manufacturers, medical product makers and agricultural firms.

The U.S. says the subsidies violate WTO rules.

“If you’re a Chinese textile firm designated as a demonstration base, you might get subsidized IT services, subsidized product design services and subsidized training services for their employees, showing them how to use yarn spinning techniques and weaving technologies,” said U.S. Trade Rep. Michael Froman. “All of these services, provided for free or at a discount, undermine fair competition.”

The challenge arose from an earlier investigation into Chinese subsidies of auto and auto parts exporters.

The move is the first step toward bringing a formal case against China. The USTR said it will try to reach a settlement with China at the WTO. If that fails, the U.S. can ask the WTO to rule on the dispute.

Zhu Haiquan, spokesman for the Chinese embassy in Washington, said, “We hope the trade disputes can be properly dealt with under (the) WTO dispute settlement mechanism.”

The subsidies case is one of a number of trade disputes the United States has with China, underscoring the economic tensions between the world’s two largest economies. The Commerce Department reported last week the U.S. trade deficit with China set another record last year, rising 23.9 percent to $342.6 billion. The trade gap with China has been America’s biggest deficit since China surpassed Japan in that category in 2000.