How Will China Cancel Its Export Subsidies Such As Textiles?

After the United States filed a complaint with the World Trade Organization (WTO), China has agreed to cancel its various subsidies to export enterprises.

The two governments reached a bilateral agreement to end a dispute that lasted for more than a year.

Although China is trying to shift from reliance on exports to more emphasis on domestic consumption, exporters still enjoy a series of concessions, which the United States believes are prohibited under the WTO rules.

They include cash grants and free or preferential services for designated enterprises.

Michael Froman, the trade representative, announced the agreement on Thursday, calling it "a victory for Americans who are employed in 7 different industries from agriculture to textiles". Michael said

In February 2015, the United States launched an attack on China to provide incentives for China to export to its own 7 industries.

These industries are: textiles,

And footwear; advanced materials and metals; light industry; specialty chemicals; medical products; Hardware building materials; and agriculture.

Trade with China became an important topic in the US presidential election in 2016. The Republican presidential campaign leader Donald Trump (Donald Trump) often bombed Beijing unfairly for US businesses.

Last year, the US trade deficit reached US $366 billion.

So far this year, the US trade deficit has risen by more than 10% over the same period.

The European Union, Japan and Brazil later joined the complaint against what China called the "demonstration base" (receiving industrial subsidies to achieve export targets).

American officials list 179 such things.

Earlier, they discovered what they call illegal subsidies in WTO cases around auto parts.

To dig deeper, American investigators carefully studied more than 5000 pages of Chinese government documents plated from Chinese.

Pedersen Gary for International Economics, a trade expert at Peterson Institute for, said that the agreement would not help to reshape trade flows.

"It will not bring about any big changes," he said.

He added that it would only reduce the rising US trade deficit by 5 billion US dollars.

When China makes this concession, the United States and Europe threaten not to recognize China's "market economy status", and the market economy status will make Chinese products be judged in accordance with China's current prices in anti-dumping cases.

Without this position, Chinese enterprises accused of dumping may be compared with the prices of third countries, and the result will almost certainly be higher prices in third countries.

According to the terms of China's accession to the WTO, China should be granted market economy status 15 years after its accession to the WTO in December.

In recognition of the abolition of subsidies, Beijing also acknowledged that over the past 15 years China has developed a serious surplus capacity in metals, coal and consumer products.

Chinese planners now worry that a large number of factories, built on subsidies and bank loans, are destroying profit margins and increasing the difficulty of dealing with a pile of debt that is undermining the economic performance.