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China's measures to offer subsidies to manufacturers in certain industries is in conformity with World Trade Organization rules and will help the country ship more quality products to the world market.

The comment came after the Office of the United States Trade Representative challenged China at the WTO, claiming that the Chinese government offers subsidies for the exports of seven industries through "demonstration bases" that receive free or discounted services from suppliers. .

Given current global economic conditions, building model manufacturing bases and public service platforms to offer subsidies to cash-starved domestic companies is a practical way for them to seek and gain new market growth points, as well as improving the technical content and environmental protection standards of their products. The ministry expressed its regret over the matter and said all disputes will be resolved under the WTO rules and the analysts said the US' chances of winning its complaint at the WTO over alleged Chinese export subsidies to seven domestic industries are mixed, that subsidies cited by the US resemble in part tax breaks that local, state and the federal governments hand over to American firms.

The seven sectors of the Chinese economy involved with the subsidies cited by the US complaint are textiles, apparel and footwear; advanced materials and metals (including specialty steel, titanium and aluminum products); light industry; specialty chemicals; medical products; hardware and building materials, and agriculture.

This case will directly affect negotiations for a Trans-Pacific Partnership since China is not a participant in the talks. TPP is a proposed free-TRADE deal covering the US, Canada and 10 countries in the Asia-Pacific region (not including China) that has been under discussion since 2005.

Last year, the WTO sided with the US in at least two trade disputes. In June, the WTO found that China breached WTO rules by imposing extra duties on US cars and sport utility vehicles. In August, the WTO found that China breached WTO rules by imposing duties and quotas on exports of rare earths, tungsten and molybdenum. Those export restraints promote China's own industry and discriminate against US companies using those materials.

The gLAWcal Team

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(Source: China Daily)