China to eliminate WTO-banned subsidies: US

China to eliminate WTO-banned subsidies: US

WASHINGTON (AFP) - The United States announced Thursday that China has agreed to eliminate a dozen WTO-banned subsidies that have given Chinese exports a broad, unfair trade advantage.

US Trade Representative Susan Schwab said Washington and Beijing had signed an agreement that would resolve a complaint filed by the United States and Mexico at the World Trade Organization in February.

The agreement marked a significant step forward in easing strained trade relations with China, which has by far the largest trade surplus with the US.

"This outcome represents a victory for US manufacturers, producers and their workers," Schwab said at a news conference. The banned subsidies are to be eliminated by January 1.

The US-Mexico complaint at the Geneva-based WTO alleged China was maintaining several subsidy programs prohibited under the international institution's rules across a spectrum of industrial sectors in China including steel, wood products and information technology.

Schwab said the 12 illegal subsidies distort the playing field for US-produced goods sold in the United States, China and third-country markets. Many of the subsidies are tax breaks that are available to benefit up to 60 percent of China's exports.

She said she could not quantify the amount of benefits that would be gained by their elimination but said they were "very substantial because the subsidies were so pervasive."

Two types of Chinese subsidies are affected: export subsidies, which give Chinese goods an advantage abroad, and import substitution subsidies, which encourage companies in China to purchase Chinese-made goods instead of imports.

The US has case is one of several pending at the WTO over the politically charged trade relationship between the US and China. Many lawmakers in the US accuse China of using illegal subsidies and an artificially low currency to boost exports, resulting in a massive trade deficit for the United States.

China's surplus with the US in September ballooned by 5.5 percent from August to 23.8 billion dollars.

Schwab underscored that Beijing's renunciation of the banned subsidies "is excellent news for China as a WTO member and excellent news for world trade.

Schwab said the agreement was reached after lengthy negotiations and showed the policy of dialogue and enforcement of the Republican administration of President George W. Bush was working.

"It clearly shows the wisdom of this approach over some legislative approaches that would simply impose retaliatory tariffs," she said.

The US-China Business Council welcomed China's decision to settle the case.

"The resolution of this case demonstrates that engagement with China, through bilateral discussion and through multilateral forums such as the WTO, successfully advances the interests of US companies and workers," said council president John Frisbie.

But US Senator Sherrod Brown, a Democrat, insisted: "We still need to do more. We must aggressively and consistently enforce our trade laws and safety standards, labor rights must be promoted, and future trade deals must be written to promote economic growth, not endless trade deficits."

Schwab noted upcoming bilateral meetings of the Joint Commission on Commerce and Trade and the high-level Strategic Economic Dialogue and said "more results are needed, and at a faster pace."

Treasury Secretary Henry Paulson will lead a delegation to the SED talks scheduled for December 12-13 in China.