The Office of the U.S. Trade Representative has requested consultations under the World Trade Organization dispute settlement process to try to force Chinese officials to end their government’s “Famous Brands” export subsidy programs.
The “Famous Brands” programs cover textile manufacturing as well as appliances, medical equipment, chemicals and agricultural products. Such programs appear to be prohibited export subsidies and are protectionist industrial policies, according to U.S. farm and manufacturing groups.
“The United States has discovered that China, as part of its industrial policy aimed at promoting the sale of Chinese products abroad and encouraging worldwide recognition of Chinese brand names, apparently provides numerous subsidies at multiple levels of government,” U.S. Trade Representative Susan Schwab said in a press release.
“The subsidies appear to include cash grant rewards for exporting, preferential loans for exporters, research and development funding to develop new products for export, and payments to lower the cost of export credit insurance.”
Schwab said the designated Chinese brands represent a wide range of sectors, including household electronic appliances, textiles and apparel, a range of light manufacturing industries, agricultural and food products, metal and chemical products, medicines, and health products. “These subsidies apply across the economy and therefore may unfairly alter the competitive landscape around the world for any industry competing with these Chinese products,” she said.
“We are going to the WTO because we are determined to use all resources available to fight industrial policies that aim to unfairly promote Chinese branded products at the expense of American workers, farmers, ranchers, manufacturers, and intellectual property owners."
Organizations such as the National Cotton Council, National Council of Textile Organizations and the American Manufacturing Trade Action Coalition expressed their gratitude for the USTR action.
“The U.S. cotton industry applauds the efforts of USTR to level the playing field in agricultural product and textile trade,” said NCC Chairman Larry McClendon. “Our domestic textile industry has been decimated by subsidized imports. Our producers need open markets in China as the current economic crisis dampens world demand.”
“The WTO case announced by Ambassador Schwab against China’s illegal activity had to be done,” said AMTAC Executive Director Auggie Tantillo. “The only way for China to live up to its WTO commitments is to stop these illegal subsidy programs, which are destroying thousands of critical middle class jobs each year.”
The genesis of this case was an investigation that AMTAC and other industry trade associations recently conducted on illegal Chinese subsidies as they specifically relate to the textile and apparel sector. In addition, 73 members of the U.S. House of Representatives sent a letter to President Bush last Sept. 26 calling for a specific program to monitor China's textile and apparel exports to the United States for illegal activity.
“We are pleased that the U.S. Trade Representative has responded to our efforts to uncover what we believe to be a systematic program of egregious cheating on the part of China to gain unfair advantage in the global marketplace,” Tantillo said. “We are pleased that this case will encompass a wide range of manufacturing sectors since virtually all components of the U.S. industrial base have been damaged by China’s illegal activity.”
Working with the Commerce Department and U.S. industry, USTR stated that they have identified more than 70 separate subsidy programs applied by various levels of government in China.
The announcement requesting dispute settlement consultations with the Chinese is the first step in a WTO dispute. Under WTO rules, parties that do not resolve a matter through consultations within 60 days may request the establishment of a WTO dispute settlement panel.