Just this Friday, the outgoing USTR filed yet another case against China at the WTO. This new one pertains to China aiming to establish what it calls "Famous Brands." The USTR claims that China applies WTO-illegal measures to companies lucky enough to merit this designation. Something which continues to largely elude China is the creation of brands with international recognition. Given that it has patterned itself on previous Asian exporting powerhouses like Japan and South Korea (think Samsung and Hyundai), China hasn't been entirely happy about this state of affairs. Hence, it has deployed industrial policies aimed at creating such brands. And, these policies have now attracted the ire of the US. From the USTR's site:
U.S. Trade Representative Susan C. Schwab announced today that the United States has requested World Trade Organization (WTO) dispute settlement consultations with the People’s Republic of China regarding China’s “Famous Brands” programs. These programs appear designed to promote the development of global Chinese brand names and to increase sales of Chinese- branded merchandise around the world. The United States is concerned not only because these programs appear to incorporate export subsidies (which are generally prohibited by applicable WTO rules), but also because of the protectionist industrial policy apparently underlying these programs.Like the folks at the IELP, I am at a loss as to why the USTR is filing this claim now when (a) it is near Christmas and (2) the handover to the Obama administration and his new USTR will proceed in a few weeks' time. Suffice to say, Ron Kirk and not Susan Schwab will be pursuing this bit of unfinished business. Perhaps the USTR believes it's on a roll. IELP commentators note that the expiration of China's voluntary export restraints (VERs) on clothing at the end of 2008 demanded another action be taken against the PRC to assuage China-bashing interests. In any event, do not be surprised to see yet another official Chinese proclamation of "regret" over losing this case.
“We were disturbed to find that China still appears to be using WTO-illegal measures to promote its exports, ranging from textiles and refrigerators to beer and peanuts. We are going to the WTO today because we are determined to use all resources available to fight industrial policies that aim to unfairly promote Chinese branded products at the expense of American workers, farmers, ranchers, manufacturers and intellectual property owners,” said Ambassador Schwab.
USTR worked closely with the Commerce Department to uncover and analyze the dozens of Chinese programs at both the central and local government level. Secretary of Commerce Carlos Gutierrez stated, “While dialogue is always our preferred option, we have always stated our willingness to use WTO rules and our own laws to ensure that our workers and businesses are not subject to unfair practices. This is one of these instances. We will continue to use all of the tools at our disposal to ensure that China plays by the rules.”
The United States has discovered that China, as part of its industrial policy aimed at promoting the sale of Chinese products abroad and encouraging worldwide recognition of Chinese brand names, apparently provides numerous subsidies at multiple levels of government. The subsidies appear to include cash grant rewards for exporting, preferential loans for exporters, research and development funding to develop new products for export, and payments to lower the cost of export credit insurance. The designated Chinese brands represent a wide range of sectors, including household electronic appliances, textiles and apparel, a range of light manufacturing industries, agricultural and food products, metal and chemical products, medicines, and health products. These subsidies apply across the economy and therefore may unfairly alter the competitive landscape around the world for any industry competing with these Chinese products. The United States also has found other apparent export subsidies for Chinese products in particular sectors of the Chinese economy, available whether or not the products are famous brands. These sectors include textiles, agricultural products and products with high-technology content.
Such industrial policies promoting Chinese exports to the United States and other countries unfairly disadvantage U.S. manufacturers, farmers, ranchers and workers. China’s policies favoring domestic brands also raise questions regarding China’s commitment to providing a level playing field for foreign owners of important intellectual property rights, namely the trademark rights of U.S. brand owners. Elimination of the unfair and what appear to be WTO inconsistent aspects of the famous brands programs, as well as the sector-specific export subsidies, will help restore a level playing field for U.S. products sold in the United States and in markets throughout the world.
I'd also like to hear what Dani Rodrik has to say about this case. Developing countries' continuing lack of clout in international affairs may mean measures aimed at preserving much-vaunted "policy space" will come under increasing scrutiny. Again, LDCs need to speak up or keep drawing the short straw in a world where the rules were not drawn up with their interests firmly in mind.
