BEIJING — China shrugged.
This story first appeared in the January 6, 2010 issue of WWD. Subscribe Today.
The reaction of the Chinese government and industry to a recent World Trade Organization-brokered agreement in which Beijing agreed to end a substantial package of export subsidies, including to the textile and apparel industries, ranged from silence to the view that it is a positive, but minor, development.
The WTO said on Dec. 18 that China had agreed to end a series of subsidies for exports, including textiles and apparel, following a December 2008 complaint from the U.S. over unfair trade practices. The U.S. textile industry and many politicians have claimed for years that these government subsidies give Chinese manufacturers an unfair advantage by lowering the cost of production and the price of exported goods, and that they have caused thousands of American jobs to be lost.
U.S. Trade Representative Ron Kirk said the Chinese government agreed to “full elimination of the numerous subsidies we identified as prohibited under WTO rules.” Since the announcement, however, China’s Ministry of Commerce has yet to comment on the decision.
Several national industry associations in Beijing rebuffed interview requests about the topic, but a few experts who did agree to talk about it said China simply took a proactive measure to avoid escalation.
“Obviously, there were some problems that needed to be solved before it turned into serious trade friction and China just took a proactive step to deal with it,” said Zhao Zhongxiu, a trade specialist at Beijing’s University of International Business & Economics.
Zhao argued that the move will not have a major impact on China’s already ailing textile and apparel industries. Rather, he said, ending government subsidies for export-bound goods will increase competitiveness within the industry.
“Brand strategies should come from the companies’ own business decisions and should not depend on government support,” said Zhao. “The industry needs to find its own way forward and improve its internal competitive practices.”
Shi Hongmei, a textiles industry analyst with Dongfang Securities, said she didn’t think the move was a major loss for China’s export industries.
“It is a small amount of money for every single industry,” said Shi. “It seems there’s not much reaction, even in the news.”
The subsidies battle began in late 2008, when the U.S. lodged a complaint with the WTO over Chinese subsidies to exported goods, saying they provided unfair trade advantages. The complaint, in part prompted by the U.S. National Council of Textile Organizations, specifically targeted a $10 billion annual value-added tax rebate program on exported goods, targeted subsidies for dozens of product categories. The subsidies were said to have come in the form of preferential loans and cash grants to brands from central, provincial and local governments.