Thursday, April 14, 2016

CHINA HALTS EXPORT SUBSIDY PROGRAM

China Halts Export-Subsidy Program After U.S. Challenge

Complaint is one of many U.S. filed with the WTO against Chinese trade practices


China ended an export-subsidy program after the U.S. challenged it at the World Trade Organization. Above, containers at a port in Lianyungang, Jiangsu Province, China. ENLARGE
China ended an export-subsidy program after the U.S. challenged it at the World Trade Organization. Above, containers at a port in Lianyungang, Jiangsu Province, China. Photo: Reuters
China ended an incentive program that effectively subsidized exports from small firms, a year after the U.S. challenged it at the World Trade Organization, U.S. officials said.
The subsidy program benefited seven industries, including textiles and seafood, by giving companies a small but crucial advantage in exports, contrary to the rules of the WTO, U.S. officials said.
U.S. officials have estimated that particular program amounted to around $1 billion over three years—a drop in the bucket compared with overall Chinese exports to the U.S., which totaled $482 billion last year.
American firms say Beijing effectively subsidizes billions more in exports through its support for state-controlled behemoths that ship low-cost products around the world, threatening rivals in the U.S. and other countries.
The Obama administration has sought to boost enforcement of alleged trade violations in part to rally support for new trade agreements, including the embattled Trans-Pacific Partnership, concluded last year with Japan and 10 other countries around the Pacific, but not China. Approval of the pact is now effectively stalled in Congress.
The administration has brought 20 cases at the WTO, with 11 targeting Beijing’s practices. Many of the cases involve deep investigations of Beijing’s trade-related policies, often not publicly disclosed. Still, politicians critical of President Barack Obama’s policy say the WTO cases often provide relief that is too little or too late.
The WTO settlement announced Thursday ends a program that aided small exporters through “common-service platforms” at nearly 200 “demonstration bases” throughout China.
U.S. Trade Representative Mike Froman, flanked by House Democrats, praised the settlement as a victory for American companies, workers and farmers.
“This is a win for Americans employed in seven diverse sectors,” Mr. Froman said. “It also demonstrates the resolve with which we will enforce the high standards negotiated in the Trans-Pacific Partnership.”
Rep. Sander Levin of Michigan, the top Democrat on the House committee that oversees trade, said the settlement “reinforces the critical need to take action on all fronts against China’s predatory actions, which cause major job losses and serious damage to the American economy.”
U.S. officials have said that, while it is difficult to quantify the subsidies involved in the case, China apparently provided around $1 billion over three years to the suppliers that gave discounted or free services to Chinese companies through the common-service platforms, including to exporters located in the demonstration bases.
Republican presidential front-runner Donald Trump has singled out China in his broader criticisms of U.S. trade policy, saying Beijing regularly dodges its international obligations and the Obama administration doesn’t hold the second-biggest economy to account.
China’s Commerce Ministry and the Chinese Embassy in Washington didn’t immediately comment on the announcement.
The incentive program forms only a part of a vast array of subsidies given to Chinese companies and exporters. Among those are billions of dollars annually worth of subsidized land and electricity as well as cash grants from local governments.
The settlement, however, appeared to show Beijing taking a step to ease trade tensions that were on display this week in Washington as steel companies and unions protested China’s alleged dumping of metal at artificially low prices.
Mr. Froman said the U.S. was prepared to consider “serious trade responses” beyond the specific antidumping cases it has approved if China doesn’t address the issue.
“We can’t just keep filing trade cases and assume that China will behave,” said Leo Gerard, president of the United Steelworkers union, in an interview. “They’re exporting steel, and they’re exporting unemployment.”
Write to William Mauldin at william.mauldin@wsj.com