China ends Export Credit Subsidy

China has terminated a central bank program that allowed a select group of large exporters to take advantage of discounted loans unavailable to many other companies.

The loan program was among nine Chinese activities the US had identified in the past as possible violations of WTO rules.

Several countries including USA, EU, Canada, Japan, Australia and Mexico had challenged various Chinese subsidy programs as a prohibited export subsidy and requested World Trade Organization (WTO) dispute settlement consultations.

This is the third time, when US has opened up a front against the Chinese subsidy programs. In 2004, US challenged China’s Value-Added Tax rebates. The matter was resolved in consultation phase. In 2006, it challenged Chinese duties on imported auto parts jointly with EU and Canada. The US has settled down a case  on Chinese duties on certain US paper products in January 2007 at consultation stage only.

USA claims that Chinese subsidies in form of tariff exemptions, discounted lending rates and income-tax reductions and refunds available to China-based FIEs, either for achieving certain export performance or import substitutions are discriminatory against the US producers in Chinese markets.

Chinese subsidies cover such sectors as steel, wood products and information technology, among others.

USTR fact sheet alleges following Chinese subsidies actionable in WTO

• Income tax reductions and refunds available to companies that satisfy certain export performance requirements
• Value-added tax (VAT) exemptions available to companies that satisfy certain export performance requirements
• Tariff exemptions available to companies that satisfy certain export performance requirements
• Discounted lending rates available to companies that satisfy certain export performance requirements
• Exemptions from mandatory worker benefit contributions available to companies that satisfy certain export performance requirements
• Income tax refunds available to companies that purchase Chinese-made equipment and accessories rather than imports
• VAT refunds available to companies that purchase Chinese-made equipment and accessories rather than imports

EU to review its AD/CVD laws

EU Trade Commission has published a green paper on the review of its AD/CVD/ Safe guard laws and sought inputs from various stakeholders. Last date of submitting the inputs to commission is 31st March 2007.

Major issues for discussion cited by the paper are

• Transparency in conducting trade remedy investigation/actions
• Assessing the general economic benefits to EU i.e. greater importance to “consumer interests”
• Excluding politics from trade remedy investigation/actions,
• Minimizing the conflict related to
  • Conditions for launching trade defense investigations,
  • Determining the existence of dumping and
  • deciding the type and level of duties imposed would benefit from review

It is expected by various EU trade law specialist that commission may

• Raise the domestic industry support norms for initiation of trade remedy action from current 25% to 40% to avoid narrowly supported trade remedy actions and keep the politics out of such action
• Compel the companies to publish data causing them material injury to make penalty process more transparent.
• Reverse the current voting pattern and make it constructive i.e. unlike current practice where abstention from voting is counted as support for induction of action.