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China to Eliminate WTO-Banned Subsidies

U.S. claims victory for manufacturers

"I am very pleased to report we have just signed an agreement with China that will lead to complete elimination of these WTO-prohibited subsidies. We expect the agreement to be fully implemented by January 1, 2008," U.S. Trade Representative Susan Schwab said Nov. 29. "This outcome represents a victory for U.S. manufacturers, producers and their workers."

Schwab said Washington and Beijing had signed a memorandum of understanding in Geneva to settle a complaint challenging the Chinese subsidies filed by the U.S. and Mexico at the World Trade Organization in February. The complaint alleged China was maintaining several subsidy programs prohibited under WTO rules across a spectrum of industrial sectors in China including steel, wood products and information technology. The top trade official said the illegal subsidies had distorted the playing field for U.S.-produced goods sold in the U.S., China and third-country markets.

Under the agreement, Schwab's office said China has committed to complete a series of steps by January 1 "to ensure that the WTO-prohibited subsidies cited in the U.S .complaint have been permanently eliminated, and that they will not be re-introduced in the future."Two broad types of Chinese subsidies are affected: export subsidies, which give Chinese goods an unfair advantage abroad, and import substitution subsidies, which encourage companies in China to purchase Chinese-made goods instead of imports.

The trade official said the export subsidies included benefits such as hefty income tax reductions that had the potential to benefit up to 60% of China's exports.

Copyright Agence France-Presse, 2007

TAGS: The Economy
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