US challenges China at WTO, alleges that it unfairly subsidizes exporters

WASHINGTON – The United States is challenging China at the World Trade Organization, alleging that 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,” U.S. Trade Rep. Michael Froman said. “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.

“This unfair Chinese program is harmful to American workers and American businesses,” USTR said.

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 that the U.S. trade deficit with China set another record last year, rising 23.9 per cent to $342.6 billion. The trade gap with China has been America’s biggest deficit since China surpassed Japan in that category in 2000.

The complaint comes as the Obama administration seeks congressional support for an ambitious trade agreement with 11 Pacific Rim countries including Japan, Australia, Canada and Mexico. The agreement, called the Trans-Pacific Partnership, does not cover China. The administration also wants so-called fast track authority to negotiate trade deals that go to Congress for an up-or-down vote, no nitpicking allowed.


AP Economics Writer Martin Crutsinger contributed to this report.