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China Backs Down in WTO Subsidy Dispute

The United States has resolved a dispute with China over that country's industrial subsidies, which Washington had challenged at the World Trade Organization, the top U.S. trade official said on Thursday.

"This outcome represents a victory for U.S. manufacturers and their workers," U.S. Trade Representative Susan Schwab said in a statement.

"The agreement also demonstrates that two great trading nations can work together to settle disputes to their mutual benefit," she added.

The United States began the case in February by targeting six Chinese export subsidy programs, covering up to 60 percent of China's exports, and three other programs that U.S. officials said discriminate against imports by subsidizing Chinese company purchases of local goods.

China said in March it was eliminating one of the export subsidy programs. However, the two sides were not able to resolve differences over the remaining eight programs and in July the United States took the formal step of requesting a WTO dispute settlement panel to hear its complaint.

Now China has agreed to eliminate all of the subsidies the United States found objectionable by Jan. 1, 2008 and has pledged not to reintroduce them, according to Schwab.

However, the U.S. case avoided an issue -- China's exchange rate policy -- that many lawmakers and manufacturers believe provides Chinese companies the biggest subsidy by undervaluing the yuan against the dollar from 15 to 40 percent.

"While many challenges still remain, today's news is concrete and welcome," Schwab said.