USTR - Remarks by U.S. Trade Representative Susan C. Schwab Regarding U.S. Request for WTO Consultations on China’s Prohibited Subsidies
Office of the United States Trade Representative

 

Remarks by U.S. Trade Representative Susan C. Schwab Regarding U.S. Request for WTO Consultations on China’s Prohibited Subsidies
02/02/2007


Introduction

  • Thank you all for coming.
  • United States has requested dispute settlement consultations with China at the World Trade Organization over China’s use of what we contend are illegal subsidies. 
  • The Administration is committed to challenging China’s WTO-inconsistent practices that harm American workers and businesses.  China’s use of market-distorting subsidies creates an uneven playing field and subverts China’s own efforts to foster consumption-led growth. 
  • We recognize that China has taken significant steps to open its market and reform its trade practices since becoming a Member of the WTO, and both countries are benefiting from a deeper and stronger trade relationship. However, where China has failed to meet its commitments, we will use the full array of tools available to secure compliance.  Our decision to bring this case to the WTO comes after our efforts at dialogue failed.
  • The case is important because we are seeking to level the playing field to allow US manufacturers to compete fairly with Chinese firms.  It is important because it shows our continued commitment to hold China to its WTO commitments.  And it is important because it seeks to support continued reform in China – away from use of outdated export-centric industrial policies, in favor of more balanced, domestic consumption-led growth.        

Specifics of the case

  • The case is a fairly simple one.  The United States believes that China uses its basic tax laws and other tools to encourage exports and to discriminate against imports of a variety of American manufactured goods.
  • China’s subsidies can particularly distort trade conditions for small and medium-sized American enterprises (SMEs) and their workers.
  • The subsidies at issue are offered across the spectrum of industry sectors in China—whether in steel, wood products, information technology, or others—and they tend to distort trade in two specific ways:
  • First, the export subsidies give an unfair competitive advantage to Chinese products when they are exported.  That means a range of domestically produced goods in the United States, from steel to wood products to infotech, are denied an opportunity to compete fairly in the United States and in third country markets where they are up against subsidized products from China
  • Second, the import substitution subsidies give Chinese-made goods a significant edge in the China market over high-quality, fairly-priced goods from the United States and other countries.
  • These export and import substitution subsidies are known as “prohibited subsidies” – subsidies that are so trade-distorting that WTO rules prohibit them outright. 
  • Because these types of subsidies are so trade-distorting China had to commit to eliminate them by the time it joined the WTO in 2001. 
  • Unfortunately, based on our research and following an extensive dialogue with the United States on these specific measures, China has taken no action to eliminate them. 
  • So the time has come for the United States to use one of the tools we have available when a trading partner has not lived up to its commitments – namely, WTO dispute settlement, beginning with formal consultations.
  • At its core, his case is about standing up for America’s workers and manufacturers

U.S.-China trade relations

  • Now, I want to underscore that the United States and China have each benefited from our growing trade and investment relationship over the last 20 years – and particularly in the five years since China joined the WTO. 
  • China has complied with many of its WTO commitments to open its market.  As a result, our exports to China have been growing robustly – they grew at an average annual rate of almost 23 percent in the last five years, and were on pace to grow 33 percent last year.
  • However, as we noted in last year’s Top-to-Bottom Review of our trade relations with China, China needs to be held fully accountable as a mature member of the international trading system – for the benefit of US companies and workers, the global trading system, and for its own sake
  •   Part of being a mature member of the international trading system means complying with WTO commitments.  It also means allowing your companies to compete fairly and on a level playing field with companies from other countries.
  • And it means working to address differences when they arise.  As mature trading partners, the US and China confer with each other on our differences – as we did in this case.  When we cannot resolve these differences through dialogue, we turn to dispute settlement mechanisms, including the action we are taking today.

China’s Reform Process

 
click here for printer friendly version
 




Help Link Site Map Link Contact Us Link
 
 Search Title Image
Document Library Link
   
 
Related Links
item: 02/02/2007 | United States Files WTO Case Against China Over Prohibited Subsidies
item: 02/02/2007 | Fact Sheet on WTO Case Challenging Chinese Subsidies
More on Enforcement
item: Monitoring and Enforcement
item: Dispute Settlement
item: U.S. Trade Law Enforcement
item: Subsidies Enforcement
item: Press Releases
item: Federal Register Notices
More on China
item: China
item: 2004 Report to Congress on China's WTO Compliance
item: Press Releases
item: Fact Sheets
item: Op-Eds
item: Speeches
item: Testimony
item: Statements from the Press Secretary