NTA excerpts some of passages of most interest to US textile trade

05 Apr '10

4 min read

The 2010 National Trade Estimate Report on Foreign Trade Barriers (NTE) is the twenty-fifth in an annual series that surveys significant foreign barriers to U.S. exports. This document is a companion piece to the President's Trade Policy Agenda published in March. The issuance of the NTE Report continues the elaboration of an enforcement strategy, utilizing this report, among other tools, in that strategy.

With regard to China the Report makes several observations. The National Textile Association has excerpted some of the passages of most interest to the U.S. textile trade.

The report cites Uneven application of China's single most important revenue source – the VAT, which ranges between 5 percent and 17 percent, depending on the product – continues. Importers from a wide range of sectors report that, because taxes on imported goods are reliably collected at the border, they are sometimes subject to application of a VAT that their domestic competitors often fail to pay.

China retains an active VAT rebate program for exports. However, rebate payments to exporters are often delayed and in some cases have been reduced. In 2008, the global economic crisis and China's stated desire to remove barriers to exports as part of its stimulus programs led to a reversal of the trend of gradually reducing export VAT rebates. Since July 2008, China has increased export VAT rebates on many products seven times. On July 30, 2008, VAT rebates for certain textile and bamboo products were increased. In October 2008, China announced VAT rebate increases on 3,486 products including textiles, toys, garments, furniture, and some high value-added electrical machinery, representing approximately one quarter of China's total exports. Specifically, rebate on clothing and textiles increased from 13 to 14 percent. Effective February 1, 2009, the government again increased VAT rebates on clothing and textiles to 15 percent.

The recport also cites a general lack of transparency that makes it difficult to identify and quantify possible export subsidies provided by the Chinese government. China's subsidy programs are often the result of internal administrative measures and are not publicized. U.S. industry has alleged that subsidization is a key reason that Chinese exports are undercutting prices in the United States and gaining market share. Of particular concern are China's practices in the steel, petrochemical, high technology, forestry and paper products, textiles, hardwood, plywood, machinery, and copper and other nonferrous metals industries.

In its Protocol of Accession to the WTO, China committed to eliminate all subsidies prohibited under Article 3 of the WTO Subsidies Agreement, including all forms of export subsidies on industrial and agricultural goods, upon its accession to the WTO in December 2001. China finally submitted its long overdue subsidies notification to the WTO's Subsidies Committee in April 2006. Although the notification is lengthy, with over 70 subsidy programs reported, it is also notably incomplete, as it failed to notify any subsidies provided by state-owned banks or by provincial and local government authorities. In addition, while China notified several subsidies that appeared to be prohibited under WTO rules, it did so without making any commitment to withdraw them, and it failed to notify other subsidies that appeared to be prohibited.

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