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China Agrees To End Tax Breaks For Manufacturers

by Mary Swire, for LawAndTax-News.com, Hong Kong

03 December 2007


After extended pressure from US trade officials, China has agreed to end a string of tax breaks which are, according to the US, giving Chinese manufacturers an unfair advantage over their rivals.

According to the Office of the US Trade Representative, the disputed subsidies, which mainly related to exports, gave "an unfair competitive advantage to Chinese products" whilst "denying US manufacturers the chance to compete fairly with them in the United States and in third country markets".

US Trade Representative, Susan C. Schwab announced in a statment released late last week that:

"I am very pleased that we have been able to sign an agreement with China that should lead to full elimination of these prohibited subsidies. "This outcome represents a victory for US manufacturers and their workers. The agreement also demonstrates that two great trading nations can work together to settle disputes to their mutual benefit."

Under the terms of the agreement signed last week, China has committed to complete a series of steps by January 1, 2008 to ensure that the WTO-prohibited subsidies cited in the US complaint have been permanently eliminated, and that they will not be re-introduced in the future.

The USTR further explained that:

"US companies and workers will benefit from the removal of China’s trade-distorting subsidies much sooner than would have been possible if the United States had litigated this case to its conclusion. At the same time, if for any reason China does not meet its MOU commitments, the United States has the right to re-start WTO proceedings."


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