November 30, 2007
Schwab Hails China's Decision To Halt Contested Subsidies
China yesterday agreed to end subsidies challenged by the United States as a violation of world trade rules, a move touted by the Bush administration as proof that its policy of engagement is working. "I think this announcement makes clear that the administration's policy of serious dialogue and resolute enforcement is delivering real results," U.S. Trade Representative Susan Schwab said. "It clearly shows the wisdom of this approach over some legislative approaches that would simply impose retaliatory tariffs."
Schwab said the subsidies, which were the subject of a World Trade Organization case the United States filed in February, had provided significant benefits to China-based exporters across a range of industries, including steel, wood products and information technology. A U.S. official said the United States had made no concessions. China has agreed to terminate the subsidies by the end of the year.
The White House has jousted repeatedly with lawmakers who want to impose sanctions on Chinese imports as a way to influence the country's behavior. Sens. Charles Schumer, D-N.Y., and Lindsey Graham, R-S.C., have threatened legislation imposing tariffs against Chinese imports unless China allows its undervalued currency to float freely on the market.
Senate Finance Chairman Max Baucus, D-Mont., applauded China's decision, saying it shows the WTO dispute settlement process works. House Ways and Means Trade Subcommittee Chairman Sander Levin, D-Mich., welcomed the news but said the administration's pressure on China to reverse its policies was "overdue."
The United States alleged the subsidies harmed U.S exporters by giving Chinese products an unfair competitive advantage and by encouraging companies in China to purchase Chinese-made goods. Most of the subsidies are tax breaks benefiting foreign-invested businesses, including firms with just a small amount of foreign ownership. Schwab acknowledged that the subsidies benefited some U.S. corporations invested in China but said many of the subsidized enterprises were partly owned by U.S. competitors in Asia. Small- and medium-sized U.S. firms, with their limited reach into China, will particularly benefit from the new agreement, she said.
The case was filed after months of talks that Schwab said had nearly resolved the issue without litigation. China and the United States resumed their dialogue on the issue in March, culminating in yesterday's deal. Administration officials said they did not know why China abandoned the subsidies.
The United States has three remaining WTO cases against China -- on auto parts, intellectual property and market access for copyrighted goods. Schwab indicated there was unlikely to be any spillover effect from the subsidies case to the others and said she saw no immediate prospect for resolution of those cases.
-Keith Koffler, CongressDaily
