US charges China over subsidies

The United States has questioned China's pork subsidies¹ in a letter posted on the website of the World Trade Organization (WTO), reflecting new tension between the two trading giants.

The letter, which appeared on the site last week, argues that pork and some of China's other agricultural products are unfairly exempted³ from taxes and enjoy government subsidies.

China Daily yesterday contacted the Ministry⁴ of Commerce but it said it had no comment.

However, China will respond to the allegations at a WTO review of the country's trade policies on Sept 17-18.

The letter to the WTO was issued shortly after the collapse⁵ of the latest Doha round of trade talks last month.

The global forum⁶ failed after lengthy⁷ negotiations⁸ because developed and emerging countries could not reach agreement on tariffs⁹ and subsidies for some agricultural products.

In the letter, the US argues that loopholes in China's corporate¹⁰ income tax law could exempt² processors of pork from the tax, and asked the Chinese government how much revenue its pork producers and processors are generating each year.

It also asked about a subsidy¹¹ of 100 yuan ($14.60) paid for every sow, double what it said was the previous rate.

The US cited an old Chinese government valuation of $886 million for the subsidy, but asked for new figures and clearer details of the program.

Pork price soared in China last year due to disease outbreaks and reduced output. The government has since introduced a number of measures to encourage farmers to raise more pigs, boost pork production, and ease inflation driven by high food prices.

Under WTO rules, certain agricultural subsidies are allowed, although they must comply with a set of specific requirements for each country.

The payments can be challenged if they fail to meet the guidelines and are found to unfairly harm competitor industries in other countries.

Zhou Shijian, a standing¹² member of the China Association of International Trade, said China's agricultural subsidy is in accordance with the WTO rules so it should have no fear answering the charges.

He said he was also surprised at the US raising the case, as "the subsidy on agricultural products in the US is among the highest in the world".

The US was China's second largest trading partner last year, and China has a surplus of $163.3 billion of the $302 billion total.

Questions:

1. What are the US complaining to the WTO about concerning China?

2. When will China respond to the allegations?

3. What is China’s current trade surplus with the US, the country’s second largest trading partner?

Answers:

1. That pork and some of China's other agricultural products are unfairly exempted from taxes and enjoy government subsidies.

2. At a WTO review of the country's trade policies on Sept 17-18.

3. $163.3 billion.