8th January 2009

Mexico, US challenge Chinese ‘famous brands’ at WTO

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Alleging illegal subsidies on a wide range of exported goods, Mexico and the United States have filed requests for WTO consultations with China over the support that Beijing provides domestic exporters under its ‘famous brands’ programme.

In a release on 19 December, the United States Trade Representative’s office asserted that China was violating world trade laws by offering its exporters cash grant rewards, preferential loans, research and development funding, and payments to lower the cost of credit insurance.

The USTR asserted that Beijing’s ’famous brand’ designation, under which those subsidies are granted, covers a wide range of sectors, including household electronic appliances, textiles and apparel, a range of light manufacturing industries, agricultural and food products, metal and chemical products, medicines and health products.

“We are going to the WTO today because we are determined to use all resources available to fight industrial policies that aim to unfairly promote Chinese branded products at the expense of American workers, farmers, ranchers, manufacturers and intellectual property owners,” USTR Susan Schwab said in the release.

But Beijing contends that the ‘famous brands’ programme is not inconsistent with its WTO obligations. Hui Boyang, a Chinese official responsible for the selection of brands that qualify for the special treatment, said that “China gives no subsidies to help the export of ‘famous brands’,” and that the designation is “an honorary title,” Xinhua News Agency reported.

“Some local governments do give rewards to those selected enterprises, but the rewards are small, symbolic and one-off, not a long-term preferential policy,” Boyang said.

However, Beijing indicated that it would cooperate with the complainants in the case. “On the US and Mexican request of dispute settlement consultations through the WTO, the Chinese side will deal with it according to WTO rules,” the Chinese Ministry of Commerce said in a statement on 22 December.

Under WTO rules, Mexico, the US and China will have 60 days to hold formal consultations. If the parties fail to reach a resolution by the end of that period, the complainants may ask a WTO dispute settlement panel to consider the case.

But there is still some hope for the future of US-Sino trade relations, according to a recent USTR report to the US Congress on China’s compliance with its WTO commitments. The report, which was released just four days after the ‘famous brands’ case was brought to the WTO, stated that “based on the increased willingness that China displayed in 2008 to work cooperatively and pragmatically with the United States on contentious issues, the United States is optimistic that significant progress is obtainable in 2009.”

The report indicated, however, that the US would continue to use WTO dispute settlement mechanisms should bilateral dialogue fail to resolve future issues.

ICTSD reporting; “Official: China doesn’t subsidize export of “famous brands,” XINHUA, 23 December 2008; “US sees progress in easing trade disputes with China,” AFP, 24 December 2008.