China rejects US subsidy accusation

Nation abides by WTO rules, says MOC

China's commerce ministry said Thursday that its demonstration bases for exporters comply with WTO rules, rejecting an accusation by the US that China uses the bases to unfairly subsidize certain exports.

China has consistently followed WTO rules, and policies in the country's demonstration bases for exporters are in line with the rules, the Ministry of Commerce (MOC) said in a statement posted on its website Thursday.

In a case filed with the WTO Wednesday, the US government said China allows subsidies for smaller exporters at nearly 200 demonstration bases throughout the country, and it has requested consultations with China on the issue at the WTO, the Wall Street Journal (WSJ) reported Thursday.

"The subsidy program, benefiting seven industries ranging from textiles to seafood, gives Chinese companies a small but crucial advantage in exports, contrary to the rules of the World Trade Organization," a US official was quoted by the WSJ as saying.

While it is difficult to quantify the subsidies involved, China apparently provided around $1 billion over three years in discounted or free services to companies in the demonstration bases, the WSJ reported, citing US officials.

China set up a first batch of 59 demonstration bases in 2011 to accelerate the upgrading of its foreign trade. At the bases, clusters of closely related businesses are gathered together.

But there are no unfair subsidies, either from China's central government or local governments, to enterprises in the demonstration bases, and the US accusation is ill-founded, a local commercial official working at a demonstration base in North China's Shanxi Province told the Global Times on Thursday, requesting anonymity.

The purpose of establishing the bases was to create concentrations of export firms focused on one particular industry, not to offer subsidies to them, the Shanxi official said.

Export firms in the demonstration bases can benefit by sharing marketing channels and information with each other. These benefits have nothing to do with subsidies, or government-backed discounted or free services, Bai Ming, a research fellow with the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Thursday.

As they are unfamiliar with the actual situation in China, US officials erroneously believe the Chinese government "unfairly" subsidizes exports by industries such as agriculture, Bai said.

"The agriculture industry enjoys less government support in China than in some developed countries, including the US, where there is wide application of government subsidies," Bai noted.

The US complaint comes after the country saw a large trade deficit in its foreign trade with China in January.

According to data from the General Administration of Customs, China exported goods worth $35.3 billion to the US in January, while the US exported goods worth $13.8 billion to China, resulting in a $21.5 billion trade deficit.

Launching the subsidy case against China is "evidence that President Obama ... will be unflinching in standing up for the rights of American workers," Mike Froman, the US trade representative, was quoted by the Financial Times as saying on Wednesday.

The move also came at a time when the Obama administration is seeking congressional support for a free trade agreement known as the Trans-Pacific Partnership. Media reports have suggested that the administration is hoping to get more support by taking a tough stance on protecting US labor rights.

As the total volume of bilateral trade between China and the US has grown, it's normal to see a corresponding increase in trade friction between the two countries, but China has accumulated enough experience in recent years to be able to resolve trade disputes, He Weiwen, co-director of the China-US-EU Study Center under the China Association of International Trade, told the Global Times on Thursday.

Reuters reported Wednesday that there are 24 disputes being examined by the WTO involving the US and China, 15 of them brought by the US.

China should actively respond to the criticism from the US and cooperate with the WTO to resolve trade disputes, He said.