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US Files WTO Challenge to Chinese Subsidies

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The United States is pursuing a dispute settlement with the Government of China at the World Trade Organization (WTO) over China’s export subsidy program. The U.S. asserts that the Chinese government has funded companies prohibited under current trade agreements.

U.S. Trade Representative Michael Froman said the program is not well known in the U.S., but it gives Chinese companies an unfair advantage, which harms American workers and business initiatives.

China’s subsidy program, called “Demonstration Bases-Common Service Platform,” provides free and discounted services through “Common Service Platforms” as well as cash grants and other incentives to manufacturers and producers across seven economic sectors, including textiles, apparel and footwear, in more than 150 industrial clusters throughout China known as “demonstration bases.”

“China designates certain companies in these sectors as being ‘demonstration bases,’ which is contingent on them exporting their product. Once designated, they’re eligible for subsidized services provided by the ‘common service platform,'” U.S. Trade Rep. Michael Froman said. “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. All of these services, provided for free or at a discount, undermine fair competition.”

Rep. Mike Thompson (D-Calif.) also weighed in. “China’s actions are damaging our international marketplace, undercutting American businesses, and hurting workers in communities across our country,” Thompson said. “This case is about making sure the playing field is level and that China operates under the same fair and basic set of rules that American businesses and workers must abide by.”

The National Council of Textile Organizations (NCTO) lauded Froman’s decision to pursue dispute settlement consolations with the WTO and encourages the U.S. to “strenuously pursue” the matter.

“It has been NCTO’s long-standing position that China’s rise in the global textile and apparel market has been substantially aided by illegal and unfair trading practices,” said NCTO president Augustine Tantillo. “These illegal practices distort the global marketplace and put the entire U.S. manufacturing base at the considerable disadvantage.”

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