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Chinese textile subsidies grow to $10 billion

25
Nov '08
On the eve of the expiration of quotas on Chinese textile and apparel products, the Chinese government has increased export subsidies to its textile industry by $10 billion, a 55 percent rise. The Chinese government action came shortly after China pledged to “reject protectionism” and defend “open markets” during the recent G20 Summit on Financial Markets and the World Economy. This action also followed the release of U.S. Government figures which showed that China had posted the biggest overall trade surplus in history with the U.S. while manufacturing job losses in the U.S. accelerated.

NCTO President Cass Johnson called on the Obama Administration and the new Congress to take tough actions against China's predatory practices. “By dramatically increasing subsidies just prior to the phase-out of quotas, China is throwing down a gauntlet that the U.S. government and the U.S. Congress must not ignore. At a time of international economic turmoil, the Chinese government is essentially bankrolling the destruction of the U.S. textile industry and the jobs of American workers.”

Johnson noted that Vice President-Elect Joe Biden spoke to the need for action last month in Charlotte, North Carolina when Biden observed, “This state's textile industry is getting killed not because our workers cannot compete, not because our products aren't the best, but because no one has been willing to stand up to China and nail them when they compete unfairly. We are for fair trade, not free trade.”

Last Thursday, China announced that it would increase a subsidy (called the “export tax rebate”) currently given to Chinese textile and apparel exporters from 14 to 17 percent. This move followed two similar increases already given to Chinese industry earlier this year, for an overall increase in the export rebate from 11 percent to 17 percent, or an increase of 55 percent since July 2008. As a result, Chinese exporters have seen export subsidies from the Central Government increase from $19 billion to $29 billion in just the last four months.

Johnson called on the Obama Administration to act swiftly against China by self-initiating trade remedy cases against China, if China surges once quotas are removed on January 1st, 2009. Johnson noted that President-Elect Barack Obama committed last month to a textile monitoring program directed at China and illegal trade activities. Johnson also urged the Administration to consider taking China to the WTO regarding its textile subsidy schemes, noting that there is strong evidence that China is in violation of Article V of the WTO Agreement on Subsidies and Countervailing Duties.

Johnson explained that the U.S. Congress is also monitoring the Chinese imports, clarifying that the Ways and Means Committee under Chairman Rangel instituted its own monitoring system in September this year and has the authority to self-initiate safeguard cases as well.

Johnson urged the Congress toquickly pass legislation allowing U.S. companies to defend themselves and their workers against Chinese currency manipulation, noting that China has reneged on promises to steadily appreciate its dramatically undervalued currency. “In November, Americans sent a signal that they want tough enforcement and a fair playing field in international trade.” China stopped allowing its currency to appreciate in July.


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