China agrees to end some industrial subsidy programs

WASHINGTON â€”  China has agreed to eliminate a dozen subsidy programs the United States challenged this year before the World Trade Organization, the top U.S. trade official said Thursday.

“This outcome represents a victory for U.S. manufacturers and their workers,� U.S. Trade Representative Susan Schwab said. “The agreement also demonstrates that two great trading nations can work together to settle disputes to their mutual benefit.�

China’s decision will abolish tax breaks and other subsidies that benefit the broad spectrum of Chinese industries, including steel, wood products and information technology, Schwab said.

Most of the programs are designed to boost China’s exports, which have grown from about $150 billion in 1996 to $970 billion last year. The rest discourage imports by encouraging companies in China to buy domestically manufactured goods.

Even so, China’s imports also have risen rapidly over the last 10 years to $792 billion in 2006, making the country one of the leading economic growth engines for the world.

U.S. lawmakers welcomed the agreement but said more steps were needed to ensure that China adhered to global trade rules.

“We need a comprehensive trade policy toward China, requiring action on piracy, import safety, dumping and currency manipulation,� said Sander M. Levin (D-Mich.), chairman of the House Ways and Means subcommittee on trade.

The U.S. trade deficit with China hit a record $234 billion in 2006 and is expected to surpass that this year, fueling complaints in Congress about China’s trade practices.

Thursday’s announcement came just a few weeks before the U.S. and China are scheduled to hold high-level trade and economic talks in Beijing.

Schwab said the timing was not influenced by the upcoming meeting and added she did not expect a breakthrough in three other pending WTO complaints against China.

Under the agreement signed Thursday in Geneva, China will eliminate the 12 subsidy programs by Jan. 1, although one targeted regulation will remain until January 2009, Schwab said.

The U.S. will suspend its WTO case for now and formally withdraw it after the subsidy programs are ended. The agreement eliminates only China’s subsidies that are specifically prohibited under WTO rules.

Certain other subsidies are still allowed, but countries can legally apply countervailing duties against some of them -- as the U.S. has recently begun and will continue to do, Schwab said.