US announces deal for China to scrap export subsidies to cool trade frictions between the two powers
China has agreed to scrap some export subsidies on a range of products from metals to agriculture and textiles, the United States said on Thursday, in a step by Beijing to reduce trade frictions with Washington.
China ended a programme which provided export subsidies of some US$1 billion over three years to Chinese companies in seven economic sectors, the US Trade Representative’s office said.
Some industry executives were sceptical about the deal’s impact given remaining disputes over other supports that China give to its exporting industries. Steel has been a particular flashpoint.
One source knowledgeable about the agreement said it was not comprehensive enough to do much to help the US steel industry, given its focus was only on specialty steel products.
In part, the dropping of the subsidies is an effort by China to move away from labour-intensive production and emphasise more-sophisticated industries such as semiconductors.
“The Chinese want to become a high-tech country. They want to move up the value chain,” said James Lewis, a senior fellow at the Center for Strategic and International Studies.
Chinese agriculture products that will lose the subsidies include apples, beef, mushrooms, pork, tea, tomatoes, beans, ginseng, poultry, seaweed and, garlic, USTR said.
Candidates in the US presidential election, especially Republican front-runner Donald Trump, accuse China of treating the United States unfairly in trade.
But White House spokesman Josh Earnest said the accord “is an example of how committed this administration is to ensuring that we’re fighting in the international community for American businesses and American workers.”
The United States had complained to the World Trade Organization about the programme, alleging unfair practises by China.
“People can say whatever they want, and I think China has been saying a lot of things for the past couple of decades. You need to ask yourself what, from a practical perspective, is really happening. We need to see the proof in actions, not just in verbiage.”
US Steel Corp President and Chief Executive Mario Longhi
The Chinese industries that have received the subsidies under the programme include textiles, light industry, specialty chemicals, medical products, hardware, agriculture and advanced materials and metals, including specialty steel and aluminium products, the trade representative’s office said.
Since it joined the WTO in 2001, China has frequently drawn complaints that its exports are being “dumped,” or sold at unfairly cheap prices on foreign markets.
Chinese Embassy spokesman Zhu Haiquan said Beijing is committed to WTO regulations.
“China has been firmly committed to the WTO rules, continuously expanded its opening-up, deepened the reform of its foreign trade system, improved its foreign trade legal system, reduced trade barriers and administrative intervention,” Zhu said in an email.
US Steel Corp President and Chief Executive Mario Longhi said he was cautious about the latest Chinese move.
“People can say whatever they want, and I think China has been saying a lot of things for the past couple of decades,” Longhi told reporters in Washington. “You need to ask yourself what, from a practical perspective, is really happening. We need to see the proof in actions, not just in verbiage.”
The US steel industry is under huge pressure this year from cheap imports, a strong dollar, and falling oil prices, which have decimated demand for steel tubes used by the oil and gas industry.
China still has other forms of support for industry in place, including relatively cheap and easy credit from state banks, state-regulated power prices that have often favoured industry, and low prices for other inputs such as water.
“While it is clearly an important result, it is only one feature in a universe of other measures that China foresees for its steel sector,” said Karl Tachelet, trade director at European steel industry body EUROFER.
Wall Street shrugged off news of the agreement, with stocks in related sectors showing a mixed bag of results. Alcoa Inc was up 2.2 per cent, and Freeport-McMoRan Inc rose 0.3 per cent while US Steel Corp shed 1.1 per cent.