An investor walks past an electronic screen displaying stock index at a securities company in Wuhan, Hubei Province, China, on May 8, 2007. (Photo : Getty Images)
China has shut down an incentive program that effectively subsidized exports from small firms, a year after the U.S. challenged it at the World Trade Organization (WTO).
The subsidy program covered several industries, including textiles and seafood, by giving companies a small but crucial advantage in exports, contrary to the regulations set by the WTO, according to a Wall Street Journal report published Thursday.
Washington estimates the program has amounted to around $1 billion over three years, which is miniscule compared to the overall Chinese exports to the U.S., which reached $482 billion in 2015.
Beijing effectively subsidizes billions more in exports through its support for state-controlled firms that shop low-cost products across the globe, threatening competitors in the U.S. and other countries, the Wall Street Journal said in its report.
The Obama administration has pushed for stronger reinforcement of alleged trade violations in part to rally support for new trade agreements, including the controversial Trans-Pacific Partnership (TPP), which was approved by Japan and 10 other countries but not China. Approval of the pact is now effectively stymied in Congress.
The White House has brought 20 cases at the WTO, with 11 targeting China's practices. Many of the cases involve deeper investigations of Chinese trade-related policies, most of which were not disclosed publicly. However, politicians critical of President Obama's policy say the WTO cases are too little or too late.
The WTO settlement announced Thursday concludes a program that helped small exporters through so-called "common-service platforms" at nearly 200 "demonstration bases" throughout China.
Flanked by House Democrats, U.S. Trade Representative Mike Froman said the settlement is a victory for American companies, workers and farmers.
"This is a win for Americans employed in seven diverse sectors," 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 on 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 quantifying the subsidies involved in the case can prove to be a challenge, China apparently gave around $1 billion over the past three years to suppliers that provided discounted or free services to Chinese companies through the common-service platforms, including to exporters inside the demonstration bases.
Republican presidential candidate Donald Trump has singled out China in its criticisms of U.S. trade policies, saying Beijing regularly sidesteps its international obligation and the Obama administration doesn't hold the world's second biggest economy accountable for it.
China's Commerce Ministry and the Chinese Embassy in Washington declined comment on the announcement to the press.
The incentive program forms a part of a wide-ranging set of subsidies given to Chinese companies and exporters, including billions of dollars worth of subsidized land and electricity per year as well as cash grants from local governments.
Analysts see the settlement as Beijing's step toward easing trade tensions that were on display earlier this month in Washington as steel companies and unions protested China's alleged dumping of metal at artificially low prices.
Froman said the U.S. is prepared to consider "serious trade responses" beyond the specific antidumping cases it has approved should China fail to address the issue.
"We can't just keep filing trade cases and assume that China will behave," Leo Gerard, president of the United Steelworkers union, told the Wall Street Journal. "They're exporting steel, and they're exporting unemployment."
