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China Agrees to Eliminate Export Subsidies

President Obama is on a roll in his mission to improve the marketplace for American manufacturers.

On Thursday, the Office of the U.S. Trade Representative (USTR) said China signed an agreement with the U.S. to end export subsidies, which—to borrow from the government’s favorite trade-related buzzphrase—will level the playing field for American makers.

Under its Demonstration Bases-Common Service Platform program, China was encouraging exports over domestic sales and providing export subsidies like cash grants and free or discounted services to companies in seven sectors, including textiles, apparel and footwear, and advanced materials and metals.

“Export-contingent subsidies, such as those provided by China under this program, created an unfair advantage for a vast array of Chinese exporters and are expressly prohibited under WTO [World Trade Organization] rules,” USTR explained.

The U.S. filed a challenge with the WTO against China’s practice in February last year and the WTO agreed that the practice didn’t play by the rules.

Now all companies will be eligible for the same services instead of some getting subsidies and others not, which will make U.S.-China trade more predictable.

“This is a win for Americans employed in seven diverse sectors that run the gamut from agriculture to textiles to medical products, who will benefit from a more level playing field on which to compete,” U.S. Trade Representative Michael Froman said.

Beyond underscoring the administration’s commitment to enforce trade agreements (trade naysayers have been known to criticize the leadership for lack of enforcement), the deal shows a dedication to supporting American jobs and strengthening the middle class, Ambassador Froman said.

“It also demonstrates the resolve with which we will enforce the high standards negotiated in the Trans-Pacific Partnership, whether on labor, environment, intellectual property rights or other commercial issues,” he added.

Rick Helfenbein, president and chief executive officer of the American Apparel and Footwear Association (AAFA) said he was happy to hear the news.

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“AAFA is pleased to see that the United States and China were able to resolve the long-standing dispute over China’s export subsidies that are not consistent with international trade obligations and a balanced business model,” Helfenbein said. It’s global adherence to these kinds of international trade commitments that keep apparel and footwear retailers competitive and create U.S. trade-based jobs, he added.

China said it will pull government funding and stop any preferential agreements for those platforms that were getting it, ban the continuation of any extended free or discounted services, and eliminate any export-contingent criteria that had been part of the Demonstration Bases process.