The Bush administration yesterday announced it is taking China to the World Trade Organization over extensive subsidies it says are barred by the international trade organization’s rules.
The administration filed a complaint over nine subsidy programs that include income tax reductions and refunds, value-added tax and tariff exemptions, discounted lending rates and exemptions from mandatory worker-benefit contributions.
U.S. Trade Representative Susan C. Schwab said yesterday the subsidies — in such industries as steel, wood products and information technology — are harming U.S. workers, particularly in smaller businesses.
Although Mrs. Schwab said it was not possible to put a figure on how much damage the subsidies have caused, it could be significant.
“We do know that you’re talking about workers who make products that compete with imports from China in the United States, workers who make products for export to the Chinese market and workers who make products for export to third-country markets where we compete with exports from China,” she said.
The administration says six of the nine Chinese programs provide financial incentives to encourage companies to export and three are aimed at encouraging companies to buy domestic instead of foreign goods, both of which are banned by the global trade body.
The export subsidies give Chinese products an unfair advantage in the United States and other countries over U.S. products, while the subsidies aimed at stemming imports into China hurt sales of U.S. products there, the administration says.
“Part of being a mature member of the international trading system means complying with WTO commitments,” Mrs. Schwab said.
“It also means allowing your companies to compete fairly … with companies from other countries,” she said.
The United States has filed two disputes in the WTO against China. One, over semiconductors, was resolved during consultation, while the other, over auto parts, has led to establishment of an adjudication panel. A third dispute, involving kraft liner board, a type of paper used for shipping, was settled before the planned U.S. filing.
Rep. Sander M. Levin, Michigan Democrat, applauded the administration’s recognition that Chinese subsidies have hurt U.S. workers, farmers and businesses, but called for further tough trade steps.
“This case represents a step in the right direction, but it must be part of a much more aggressive program to take actions against violations of WTO obligations,” said Mr. Levin, chairman of the House Ways and Means trade subcommittee.
Senate Finance Committee Chairman Max Baucus, Montana Democrat, also praised the announcement, adding, “I hope that today’s action is a signal that the U.S. trade representative will take more vigorous action in the future when China or any other country fails to abide by trade agreements.”
Meanwhile, the committee’s senior Republican, Sen. Charles E. Grassley of Iowa, also lauded yesterday’s action. “American businesses and consumers stand to lose if we overreact. But when the case is clear, we need to take strong action. That’s what we’re doing today.”
If the matter is not resolved within 60 days, the United States can ask that the WTO set up a dispute-settlement panel.