USTR Seeks Comment on Alleged Chinese Export Subsidy Scheme for Industrial Clusters

In today’s Federal Register (March 27, 2015) the Office of the US Trade Representative published a request for comments from private industry with regard to an alleged export subsidy provided to select industries by the People’s Republic of China. On February 11, 2015, the USTR requested consultations with the Chinese government under the World Trade Organization (WTO) concerning export contingent subsidies under a program that involves “Foreign Trade Transformation and Upgrading Demonstration Bases.” Through the formation of industrial clusters, firms in textiles, light industry, agriculture, medical products, special chemical engineering, new materials and hardware and building materials are alleged to be eligible to receive cash grants as well as free services provided through “common service platforms.” The subsidies are alleged to be tied to export performance.

Because the subsidies are alleged to be tied to exports, the US government in its request for consultation under the WTO with the Chinese, alleges that this scheme appears to be inconsistent with Article 3.1(a) of the WTO. The USTR is taking the position that China appears to be in violation of Article 3.2 of the WTO. In today’s Federal Register the USTR announced that it is soliciting public comment from industry on these allegations. If the current intergovernmental consultations do not result in an amicable solution, this alleged subsidy scheme could be elevated to a dispute settlement panel at the WTO in Geneva.

If any of our clients has any knowledge of this subsidy program and wishes to make comment to USTR please contact our office at 210-757-0618 for complete details on submission requirements for of comments to the USTR.

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