According to U.S. Trade Representative Michael Froman, the Obama administration’s decision to file a World Trade Organization challenge to certain Chinese export subsidies once again demonstrates the president’s commitment to ensuring “a level playing field” for American producers in international trade. That’s an important message to convey as Congress takes up the trade deals Mr. Obama is pursuing, as well as a renewal of fast track negotiating authority. It’s also completely misleading.
Froman acknowledges that “Due to China’s lack of transparency, it is difficult to assess the exact extent of the subsidies” his agency is challenging. The only specifics his office provides: “…evidence that certain Demonstration Base enterprises have received at least $635,000 worth of benefits annually. In addition, China has given almost $1 billion over a three-year period to Common Service Platform suppliers that agree to provide discounted or free services to Chinese companies.”
Here, however, is a sense of the kinds of Chinese trade-related subsidies Obama’s level playing field campaign has continually missed:
In October, 2010, China’s State Council announced plans to support development of seven “strategic emerging industries” between 2011 and this year. Estimated price tag? $1.5 trillion.
In addition, in 2012, Simon Evenett of Switzerland’s St. Gallen University reported that China’s Value-Added Tax system has served as a subsidy for some $1.1 trillion worth of Chinese exports every year. That’s seven percent of total global exports.
And no one should forget the cheap-currency subsidy that China has long handed out. That affects all of its exports – including those turned out by the offshoring multinational companies that so strongly support fast track, the Trans-Pacific Partnership (TPP), and the rest of the administration’s trade agenda.
Clearly, the real lesson taught by this latest U.S. announcement is that, as with its predecessors, the Obama administration’s trade enforcement approach is so piecemeal and reactive that the most accurate label is not “strategy” but “tokenism.” And even that seems awfully charitable.