In a major decision that will greatly affect the apparel industry, China has agreed to eliminate a number of subsidy initiatives the U.S. government considered to be unfair.

U.S. Trade Representative Ron Kirk announced on Dec. 18 that China said it would no longer continue the dozens of subsidies earmarked for so-called “famous brands,” which help make those goods cheaper when sold overseas.

One year ago, the United States, Mexico and later Guatemala filed a formal complaint about the subsidies to the World Trade Organization, whose 153 members are to abide by certain trade rules. Subsidizing export industries is not allowed.

“I am very pleased that we have signed an agreement with China confirming full elimination of the numerous subsidies we identified as prohibited under WTO rules,” Kirk said in a statement.

The United States and the other governments challenged China’s policy of granting a number of central, provincial and local government subsidies to promote better worldwide recognition and sales of famous brands of Chinese merchandise. The subsidies were found primarily in the apparel and textile industry, high technology, agriculture, and electronics. Exporters had to meet certain export performance criteria to quality for the programs.

The United States and Mexico initiated the dispute and consulted with China on Dec. 19, 2008. On Jan. 19, 2009, Guatemala requested consultations with China on the same subject.

Following consultations in Geneva in February, all the parties worked to come up with a solution, which resulted in China agreeing to remove its various levels of export subsidies.

The move was hailed by the National Council of Textile Organizations, a textile trade group in Washington, D.C.

However, U.S. apparel importers might see the price of apparel and textiles go up with the subsidies ending.

Source: Apparel News.Net, December 23, 2009