On December 19, 2008, the United States requested consultations with China regarding government support tied to China’s industrial policy to promote the sale of Chinese brand name and other products abroad. This support is provided in the form of cash grant rewards, preferential loans, research and development funding, and payments to lower the cost of export credit insurance. Because these subsidies are offered on the condition that enterprises meet certain export performance criteria, they appear to be inconsistent with several provisions of the WTO Agreement, including Article 3 of the Agreement on Subsidies and Countervailing Measures and Articles 3, 9, and 10 of the Agreement on Agriculture, as well as specific commitments made by China in its WTO accession agreement. In addition, to the extent that the grants, loans, and other incentives also benefit Chinese-origin products, but not imported products, the measures appear to be inconsistent with Article III:4 of the General Agreement on Tariffs and Trade 1994. Mexico and Guatemala also initiated disputes regarding the same subsidies.
Joint consultations were held in February 2009. On December 18, 2009, the parties concluded a settlement agreement in which China confirmed that it had eliminated all of the export-contingent benefits in the challenged measures.
