China To End Subsidies On ‘Famous Brands’ Manufacturing

China has agreed to eliminate dozens of subsidies supporting the export of so-called “famous
brands” in a move that U.S. Trade Representative (USTR) Ron Kirk says will  “level the playing
field” for U.S. manufacturers of a wide range of products. The subsidies were the subject of a
World Trade Organization (WTO) dispute initiated by the U.S. government in the face of what it
believed were illegal subsidies under WTO rules.

Kirk said the agreement is designed to resolve U.S. concerns raised in a WTO case the United
States initiated in December 2008. He said the United States had challenged a Chinese industrial
policy that generated a “vast number” of central, provisional and local government subsidies
promoting increased worldwide recognition  and sales of famous brands for merchandise.

While the subsidies in some cases applied to textiles and apparel, the action is not seen by
U.S. textile manufacturers as a major step toward addressing what they believe is an ongoing
problem with illegal Chinese subsidies. However, Cass Johnson, president of the National Council of
Textile Organizations, said he is pleased that the USTR has shown an interest in addressing the
question of illegal Chinese subsidies. Retailers and other importers of textiles and apparel do not
feel this particular issue is of major importance, but they do feel it is important for China to
live up to its WTO obligations, and where illegal subsidies are found, they should be eliminated.

The famous brand subsidies were given to Chinese manufacturers to help them develop private
label brands that would compete with other apparel products. The U.S. government challenged the
subsidies, saying they gave China an unfair advantage that denied U.S. manufacturers the chance to
compete fairly with them in the United States and third-country markets.

January 5, 2010