Chinese Program Unfairly Benefits Seven Industries, Including Textiles, Agriculture, Chemicals, and Advanced Materials and Metals

Washington, D.C. – United States Trade Representative Michael Froman announced today that the United States has pursued dispute settlement consultations with the Government of China at the World Trade Organization (WTO) concerning China’s “Demonstration Bases-Common Service Platform” export subsidy program.  Under this questionable program, China seems to provide prohibited export subsidies through “Common Service Platforms” to manufacturers and producers across seven economic sectors and dozens of sub-sectors located in more than one hundred and fifty industrial clusters throughout China known as “Demonstration Bases.”  This unfair Chinese program is harmful to American workers and American businesses of all sizes.

“President Obama has made vigorous enforcement a touchstone of his trade agenda,” said Ambassador Froman. “Under the President’s leadership, USTR will continue working tirelessly to ensure that China and all WTO Members play by the rules so we can grow solid, middle-class jobs here in America.  American workers, farmers, manufacturers, and businesses rank among the most productive and innovative in the world, and where there is a level playing field they can compete and win.  This Administration is dedicated to ensuring that they get all the economic opportunities we’ve negotiated under our trade agreements.”

“I am convinced that American workers and industry can compete with anyone in the world when given an even playing field and clear set of rules,” said U.S. Rep. David Price (NC-04). “That is why today’s action against China is important to American industry, particularly the textile industry, which has suffered from a lack of enforcement of international standards. While the WTO’s rules are limited in scope, they do provide an important framework for our international economic relationships, and it is imperative that the USTR enforce them.”      

“China’s actions are damaging our international marketplace, undercutting American businesses, and hurting workers in communities across our country,” said U.S. Rep. Mike Thompson (CA-5). “This case is about making sure the playing field is level and that China operates under the same fair and basic set of rules that American businesses and workers must abide by.”

“Unfairly subsidized shrimp imports threaten the historic Gulf shrimp industry that supports thousands of Louisiana families,” said U.S. Rep. Charles Boustany (LA-03). “I’ll continue working with the Office of the U.S. Trade Representative to protect these jobs that are vital part of Louisiana’s economy and culture.”

“China needs to engage in ‘above the board’ trading practices with the United States to increase market access for their products and ours,” said U.S. Rep. Jim Costa (CA-16). “The Chinese market represents the third largest trading partner for California agriculture at roughly $1.4 billion. The export subsidies sponsored by the Chinese government for fruits, vegetables, and poultry will have a significant effect on California’s trade. That is why this challenge brought by the USTR is so important.”

“China has illegally subsidized manufacturers and producers across seven economic sectors – several of which directly harm businesses and farms in my District,” said U.S. Rep. Suzan DelBene (WA-01). “I’m grateful that Ambassador Froman is stepping in to help protect these industries not just in my state but for the whole county. We need strong rules to govern our trade policy, but equally important is the ability to enforce these rules.”

“Washington State is the most trade dependent in the nation, which means our workers are counting on us to make sure they are competing on an even field,” said U.S. Rep. Derek Kilmer (WA-06). “We have to be vigilant and make sure that trade rules are enforced so that other countries are held to the same high standards that we hold ourselves to.”

“I am encouraged by this action to protect American companies and workers that are playing by international rules,” said U.S. Rep. Scott Peters (CA-52). “Medical device companies in San Diego, where they employ nearly 11,000 workers, and across the United States should have fair opportunity to compete. As we work to expand global markets to American-made products, vigilant enforcement of the rules will only become more important.”

Pursuant to the Demonstration Bases-Common Service Platform program, China provides free and discounted services through “Common Service Platforms as well as cash grants and other incentives to enterprises that meet export performance criteria and are located in 179 Demonstration Bases throughout China.  Each of these Demonstration Bases is comprised of enterprises from one of seven sectors:  (1) textiles, apparel and footwear; (2) advanced materials and metals (including specialty steel, titanium and aluminum products); (3) light industry; (4) specialty chemicals; (5) medical products; (6) hardware and building materials; and (7) agriculture.  China maintains and operates this extensive program through over 150 central government and sub-central government measures throughout China. 

Today’s action continues this Administration’s vigorous enforcement efforts to hold its trading partners to their WTO obligations. In 2014 alone, the United States achieved these significant victories:

• In June, the WTO found that China breached WTO rules by imposing unjustified extra duties on American cars and SUVs.  In 2013, an estimated $5.1 billion of U.S. auto exports were covered by those duties.
   
• In August, the WTO found that China breached WTO rules by imposing duties and quotas on exports of rare earths, tungsten, and molybdenum.  Those export restraints promote China’s own industry and discriminate against U.S. companies using those materials, which are key inputs by critical American manufacturing sectors, including hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum, and chemicals. 
   
• Also in August, a WTO panel agreed with the United States that Argentina’s import licensing requirement and other import restrictions breach international trade rules.  The Argentine measures unfairly restrict the importation of U.S. goods into Argentina and potentially affect billions of dollars in U.S. exports each year.  Key U.S. exports to Argentina include energy products, electronics and machinery, aerospace and parts, pharmaceuticals, precision instruments and medical devices, miscellaneous chemicals, motor vehicles and vehicle parts, and agricultural products.  The panel’s decision was affirmed and Argentina’s claims were rejected on appeal in January 2015.
   
• In October, a WTO panel found in favor of the United States in a dispute challenging India’s ban on various U.S. agricultural products – such as poultry meat, eggs, and live pigs – allegedly to protect against avian influenza.   The panel agreed with the United States that India’s ban breached numerous international trade rules, including because it was imposed without sufficient scientific evidence.

Background:

The United States previously brought a WTO challenge to what appear to be prohibited export subsidies that China provides for auto and auto parts manufacturers pursuant to China’s “National Auto and Auto Parts Export Base” program.  After requesting consultations with China on those subsidies in an effort to resolve its concerns, USTR further developed information and concern that China had created the Demonstration Bases program to provide prohibited export subsidies to many other industries.

China appears to be providing export subsidies under the Demonstration Bases-Common Service Platform program.  Export subsidies provide an unfair advantage to a vast array of Chinese exporters and are expressly prohibited under WTO rules.  Due to China’s lack of transparency, it is difficult to assess the exact extent of the subsidies provided to enterprises in each of the 179 Demonstration Bases in China.  The total value of the subsidies provided per base appears to vary depending on the industry, size, and location of the base, but there is evidence that certain Demonstration Base enterprises have received at least $635,000 worth of benefits annually.  In addition, China has given almost $1 billion over a three-year period to Common Service Platform suppliers that agree to provide discounted or free services to Chinese companies, including exporters located in the Demonstration Bases, according to publicly available documents.

Exports from Demonstration Bases comprise a significant portion of China’s global exports.  For example, in 2012 sixteen of the approximately 40 Demonstration Bases in the textiles sector accounted for 14 percent of China’s textile exports and six of the ten Demonstration Bases specializing in seafood production accounted for 20 percent of China’s seafood exports.

This dispute was developed by the Monitoring and Enforcement unit of USTR’s Office of General Counsel, together with the Office of China Affairs, Office of WTO and Multilateral Affairs, Special Textiles Negotiators’ Office, Office of Agricultural Affairs, and Interagency Trade Enforcement Center (ITEC), created by the Administration to provide enhanced investigative and analytical resources. 

Consultations are the first step in the WTO dispute settlement process.  If the United States and China are not able to reach a mutually agreed solution through consultations, the United States may request the establishment of a WTO dispute settlement panel.

To view a copy of the consultation request letter, please click here.

Office of The United States Trade Representative

Feb 2015

Quote from: “https://ustr.gov/about-us/policy-offices/press-office/press-releases/2015/february/united-states-launches-challenge“

Complaint is one of many U.S. filed with the WTO against Chinese trade practices

 

China ended an export-subsidy program after the U.S. challenged it at the World Trade Organization. Above, containers at a port in Lianyungang, Jiangsu Province, China. PHOTO: REUTERS

China ended an incentive program that effectively subsidized exports from small firms, a year after the U.S. challenged it at the World Trade Organization, U.S. officials said.

The subsidy program benefited seven industries, including textiles and seafood, by giving companies a small but crucial advantage in exports, contrary to the rules of the WTO, U.S. officials said.

U.S. officials have estimated that particular program amounted to around $1 billion over three years—a drop in the bucket compared with overall Chinese exports to the U.S., which totaled $482 billion last year.

American firms say Beijing effectively subsidizes billions more in exports through its support for state-controlled behemoths that ship low-cost products around the world, threatening rivals in the U.S. and other countries.

The Obama administration has sought to boost enforcement of alleged trade violations in part to rally support for new trade agreements, including the embattled Trans-Pacific Partnership, concluded last year with Japan and 10 other countries around the Pacific, but not China. Approval of the pact is now effectively stalled in Congress.

The administration has brought 20 cases at the WTO, with 11 targeting Beijing’s practices. Many of the cases involve deep investigations of Beijing’s trade-related policies, often not publicly disclosed. Still, politicians critical of President Barack Obama’s policy say the WTO cases often provide relief that is too little or too late.

The WTO settlement announced Thursday ends a program that aided small exporters through “common-service platforms” at nearly 200 “demonstration bases” throughout China.

U.S. Trade Representative Mike Froman, flanked by House Democrats, praised the settlement as a victory for American companies, workers and farmers.

“This is a win for Americans employed in seven diverse sectors,” Mr. Froman said. “It also demonstrates the resolve with which we will enforce the high standards negotiated in the Trans-Pacific Partnership.”

Rep. Sander Levin of Michigan, the top Democrat on the House committee that oversees trade, said the settlement “reinforces the critical need to take action on all fronts against China’s predatory actions, which cause major job losses and serious damage to the American economy.”

U.S. officials have said that, while it is difficult to quantify the subsidies involved in the case, China apparently provided around $1 billion over three years to the suppliers that gave discounted or free services to Chinese companies through the common-service platforms, including to exporters located in the demonstration bases.

Republican presidential front-runner Donald Trump has singled out China in his broader criticisms of U.S. trade policy, saying Beijing regularly dodges its international obligations and the Obama administration doesn’t hold the second-biggest economy to account.

China’s Commerce Ministry and the Chinese Embassy in Washington didn’t immediately comment on the announcement.

The incentive program forms only a part of a vast array of subsidies given to Chinese companies and exporters. Among those are billions of dollars annually worth of subsidized land and electricity as well as cash grants from local governments.

The settlement, however, appeared to show Beijing taking a step to ease trade tensions that were on display this week in Washington as steel companies and unions protested China’s alleged dumping of metal at artificially low prices.

Mr. Froman said the U.S. was prepared to consider “serious trade responses” beyond the specific antidumping cases it has approved if China doesn’t address the issue.

“We can’t just keep filing trade cases and assume that China will behave,” said Leo Gerard, president of the United Steelworkers union, in an interview. “They’re exporting steel, and they’re exporting unemployment.”

Write to William Mauldin at william.mauldin@wsj.com

Wall Street Journal

24/4/2016

Quote from: “http://www.wsj.com/articles/china-halts-export-subsidy-program-u-s-says-1460643214“

Industry representative bodies led by Synthetic Rayon Textiles Export Promotion Council (SRTEPC), Federation of Indian Art Silk Weaving Industry (FIASWI) and Association of Synthetic Fibre Industry (ASFI), among others have made an anti-subsidy petition with the central government against Chinese imports.

Troubled by Chinese imports that have been impacting the domestic man-made fibre industry, industry bodies have asked the government to expedite work on seeking clarification from the Chinese government on various subsidies offered to its exporters that leads to dumping of synthetic fibre and yarn products in India.

“Four main industry bodies which represent man-made fibre industry in India together have approached the Ministry of Finance and Ministry of Commerce on how to curb cheap imports from China. These imports are mainly due to several subsidies offered by China. In our representation, we have suggested a levy of 20% levy as anti-subsidy based on a list of over 20 subsidy schemes that are offered to Chinese exporters,” said Anil Rajvanshi, chairman of SRTEPC.

Synthetic textiles imports from China to India in 2015-16 stood at $ 800 million, primarily because of surplus capacity in the neighbouring country.

While India has a total installed capacity of five million of synthetic fibre, China has a surplus of nine million tonnes. Due to slowdown in China, the country has been dumping the surplus into India on the back of subsidies offered by the government.

“We have requested the Indian government to seek an explanation from their Chinese counterpart on the subsidies. Based on the responses, we hope a custom duty will be charged on the landed price after calculating the subsidies,” said Rajvanshi.

CCFGroup

17/6/2016

Quote from: “http://www.ccfgroup.com/newscenter/newsview.php?Class_ID=600000&Info_ID=20160617119“

Surat: There is some good news for textile manufacturers in the country’s largest man-made fabric (MMF) hub in Surat, facing onslaught of imported undervalued Chinese fabrics.

Central government is in the process of imposing anti-subsidy duty on import of fabrics from China, which is intended to make the prices of domestic fabric manufactured by the MMF sector competitive.

Synthetic & Rayon Textile Export Promotion Council (SRTEPC) chairman Anil Rajvanshi said this during his visit to the Diamond City for the exhibitors’ roadshow for the upcoming global buyer-sellers meet for man-made fibres and textile on Saturday.

This country specific duty, also known as a countervailing duty, on imports is imposed to nullify subsidies provided by other nations and is intended to make prices of domestic products competitive. Importing countries also have other options, such as introducing an anti-dumping duty, to make domestic prices at par. The inquiry by India has been initiated under the supervision of directorate deneral of Anti-Dumping and Allied Duties, an arm of the ministry of commerce and industry.

“The government has started an anti-subsidy investigation for MMF fabric from China, which has been flagged by the industry,” said Rajvanshi

He said import of Chinese fabrics in India is pegged at about 7 per cent of the total volume of fabrics manufactured in India. The fabric is imported by undervaluing the prices in the range of Rs 6 to Rs 8 per metre.

He said, “We have filed anti-subsidy application. Representatives from the government will visit companies in Surat to get the cost data of the production. Thus, we expect that the Chinese fabric imports will attract around 25 per cent anti-subsidy duty.”

According to the Vietnam Textile and Apparel Association (Vitas), textile and apparel exports in the first four months of this year exceeded US$8.1 billion, up 6.2 percent over the same period last year.

A garment plant in HCMC (Photo: SGGP)

Of which, garments exports topped $6.8 billion, an increase of 6.95 percent; staple fiber exports reached $824 million, an increase of 2.87 percent; raw materials exports were at $273 million, up 4.14 percent; whereas, nonwoven fabrics exports hit $145 million, down 3.97 percent.
 
Countries participated in the Trans-Pacific Partnership account for 65 percent of Vietnam’s total textile and apparel exports, with the US accounting for 48 percent, and Japan 12 percent. The EU market accounts for 15 percent and South Korea takes about 10 percent.
 
The representative of Vitas said that although the country’s raw materials exports bring in billions US dollar annually, several garment companies still have to import fabrics for manufacturing of export clothes. Vitas recommended that garment companies and raw material producers should strengthen connection and try each other’s products.
 
Raw materials producers should focus on meeting requirements for quality, quantity, competitive price, and delivery time. In long term, garment companies should shift from doing outsourcing to making products to export under FOB (free on board), ODM (original design manufacturer) or OBM (original brand manufacturer) modes and cut down exporting via intermediary. Thenceforth, garment and textile companies are able to meet the rules of origin under the TTP and FTA.

By Lac Phong – Translated by Thuy Doan

Saigon Giai Phong

27/05/2016

Quote from: “http://www.saigon-gpdaily.com.vn/Business/Economy/2016/5/119038/“

HCM CITY – TUV SUD, an international service provider in testing, inspection, audit and certification yesterday signed a memorandum of understanding (MOU) with the HCM City Association of Garment Textile Embroidery and Knitting (AGTEK) to help its members access global markets.

Under the MOU, the two sides will co-organise quality and safety workshops and awareness programmes related to the textile and garment industry, according to Sathish Kumar Somuraj, general director of TUV SUD Vietnam.

The in-house training sessions would aim to provide local manufacturers an updated and more in-depth understanding of stringent international quality and safety standards, he said.

Pham Xuan Hong, AGTEK chairman, said Viet Nam has improved its business opportunities by signing free trade agreements with some key global players like the EU, US, Japan, Korea, and ASEAN, he said.

While these agreements would bring global market access to Vietnamese businesses, it also means that Vietnamese manufacturers have to comply with more stringent quality and safety regulations, he said.

“International government safety and quality regulations on textile and garment products are changing constantly, especially in today’s free trade business landscape.

“Global buyers, especially those in Europe and the US, are increasingly demanding with respect to the kind and quality of products they want.”

Somuraj said quality and safety control are essential for companies in Viet Nam, especially those looking to take their products to international markets.

The MOU also includes a special promotion for the association’s members, who are mainly small and medium-sized enterprises for whom cost is a concern, he said.

The agreement is expected to immensely benefit member companies and take their business to the next level, he added. 

CCFGroup

27/05/2016

Quote from: “http://www.ccfgroup.com/newscenter/newsview.php?Class_ID=600000&Info_ID=20160527008“

“According to one estimate, Vietnam’s textile exports will double in the decade from 2015 to 6 trillion yen ($55 billion). In addition to low labor costs, expected cuts in tariffs under the agreement are drawing textile companies to the emerging country.”

Vietnam is emerging as a potential new world production center of textile products, as major global apparel makers are expanding their production in the Southeast Asian country.

Avery Dennison RBIS, a U.S. manufacturer of apparel labels and tags, and South Korean clothing maker Panko are building new plants in Vietnam, which is part of the Trans-Pacific Partnership trade liberalization pact among 12 Pacific Rim countries, including the U.S. and Japan.

According to one estimate, Vietnam’s textile exports will double in the decade from 2015 to 6 trillion yen ($55 billion). In addition to low labor costs, expected cuts in tariffs under the agreement are drawing textile companies to the emerging country.

New entrant

State-of-the-art label printers are rolling off paper tags for global apparel brands such as Nike and Adidas at Avery’s brand-new plant in Long An Province in southern Vietnam. The plant, which came on stream in January, can print 10,000 tags per hour containing information like prices and materials used. Its production capacity is twice that of the old plant. The tags are then delivered to factories in the surrounding areas that mainly manufacture sports apparel.

According to Rishi Pardal, the company’s vice president in charge of North Asia, Vietnam will replace China as the principal hub of textile exports to Western and Japanese markets.

Meanwhile, Panko is building a new plant in Quang Nam Province, central Vietnam, at a cost of $100 million. The company is responding to growing orders from global apparel brands, including Uniqlo. Choi Jae-ho, a director at Panko’s local unit, said the company’s sales increased 30 per cent last year and the outlook is for a similar expansion this year, too.

Incidentally, China is still the dominant player in Asia’s apparel business, with a total export value of 30 trillion yen. The figure dwarfs India’s annual apparel exports of slightly less than 5 trillion yen, the second largest in Asia.

But rising labour costs, which have doubled in five years, are threatening China’s status as the regional champion. Textile exports from China fell last year for the first time in six years, signaling that apparel makers are looking to other countries with lower costs.

Clearly, Vietnam has the potential to become a serious challenger to China’s supremacy in textile production and exports. In addition to low labor costs, which are nearly 60 per cent less than in China, the TPP, which is expected to come into force around 2018, will further enhance Vietnam’s competitiveness.

The trade pact will, for instance, immediately scrap tariffs averaging 20 per cent on 70 per cent of the items Vietnam exports to the U.S. Vietnam’s advantage as an exporter will receive an additional boost from its free trade agreement with the EU, which is pending ratification.

To gain the most benefits from the tariff cuts under the TPP, a country needs to have both upstream and downstream sectors. In the textile industry, that means Vietnam needs both spinning and dying as well as sewing businesses.

Huntsman Textile Effects, a division of Huntsman and a leading manufacturer of textile dyes and chemicals, is seeking to capitalise on new business opportunities in Vietnam created by the trade accord.

The company used to transport dyes for yarns and cloths from a warehouse in Thailand to Vietnam, which took two to three weeks to deliver products after receiving orders. But, last year, Huntsman opened its own bonded warehouse in Dong Nai Province in southern Vietnam, which cut delivery times down to as short as four business days.

Acting on time

Meanwhile, even though China has not joined the TPP, Chinese textile companies are also expanding their operations in Vietnam.

Texhong Textile Group, a major Chinese textile manufacturer, has spent 600 million yuan ($92.6 million) to build new production facilities on 220,000 sq. meters of land it purchased in Quang Ninh Province in northern Vietnam. In partnership with a Hong Kong-based knitwear manufacturer, the company is planning to build up integrated textile manufacturing and sales operations in the country, starting with yarn production.

According to Hong Tianzhu, Texhong’s chairman, his company will seek to be the top player in Vietnam, which he describes as the biggest beneficiary of the TPP.

Shoe manufacturers are also expanding in Vietnam. Pou Chen of Taiwan, the world’s largest contract manufacturer of footwear, which counts Nike and other major brands among its customers, made 42 per cent of its products in Vietnam as of the end of 2015, compared with 25 per cent in China.

But Vietnam is facing tough challenges in its quest to become a global textile giant: Minimum wages in the country are rising at double-digit rates, and its underdeveloped petrochemical industry is limiting production capacity.

If it wants to become the world’s new textile plant, Vietnam needs to quickly upgrade its industrial structure while its textile exports still maintain price competitiveness.

Other Asian countries are also trying to benefit from the TPP. Since the trade deal was struck in October last year, Indonesia, Thailand and the Philippines have announced their intention to join. These countries are clearly feeling pressure to keep up with their neighbors in global competition.

Foreign investment in Vietnam’s textile industry totaled $5.7 billion in 2014-15, equal to nearly 70 per cent of the accumulated investment over the past 20 years. Such rapid growth cannot be attributed solely to the TPP, but the trade pact has no doubt been a major factor.

The situation poses a puzzle for Japanese textile makers operating in countries such as Thailand and Indonesia. They must decide whether to expand into Vietnam now or wait for its neighbors to join the TPP.

FashionatingWorld

10/5/2016

Quote from: “http://www.fashionatingworld.com/new1-2/item/5569-vietnam,-a-contender-for-major-textile-exports.html“

HA NOI (Biz Hub) — The garment-textile and leather-footwear sectors brought in US$10.5 billion from exports in the first four months of this year.

Of the total, the garment-textile sector generated $6.82 billion, an annual increase of 6.2 percent.

The Vietnam Textile and Apparel Association (VITAS) said most orders sealed in the period came from major markets including the US, EU, the Republic of Korea and Japan.

Overall export revenue increased, but the value of orders stayed unchanged, it said.

According to the Ministry of Industry and Trade, a number of apparel producers have secured enough orders for production until the end of the second quarter; others even have enough work for the entire year.

The leather-footwear industry earned $3.68 billion worth of export turnover in January-April, up 4.8 percent compared to the same period last year.

The Vietnam Leather and Footwear Association (Lefaso) said many firms operating in the sector are ramping up their production to fill export orders in May and June.

VNA/VNS

10/5/2016

Quote from: “http://bizhub.vn/news/16411/apparel-footwear-exporters-enjoy-upbeat-turnover-in-four-months.html“