On October 19, the United States Trade Representative (USTR) invoked Article 25.10 of the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (Subsidies Agreement) to notify the Chinese government of a list of measures that the United States believes should be reported to the WTO as subsidy programs. This “counter-notification” is the third that USTR has made with regard to Chinese subsidies in four years.
WTO rules require Members to submit annual notifications listing all subsidy programs that fall within the scope of Articles 1 and 2 of the Subsidies Agreement. Since joining the WTO in 2001, however, China has provided only two such notifications and has not included any subsidies implemented after 2008 or subsidies provided by sub-national levels of government.
The October 19 counter-notification is directed specifically at subsidies provided to “strategic emerging industries” (SEI). According to USTR, China’s SEI policies are “perhaps China’s primary industrial support policy for the 12th Five-Year planning period (2011-2015).” In an October 2010 policy document, China’s State Council identified seven broad SEIs:
- Energy efficient and environmental technologies;
- Next generation information technology;
- High-end equipment manufacturing;
- New energy;
- New materials; and
- New-energy vehicles.
Since then, these industries have benefitted from extensive state support, but China has not reported the relevant measures to the WTO, as it is required to do under the Subsidies Agreement. USTR’s counter-notification identifies 64 specific national and sub-national measures, including high-level planning documents, specific funding measures, and industry-specific five-year plans, which provide guidelines and objectives for SEI support.
While the seven SEIs are defined broadly in the State Council’s October 2010 policy, central and local five-year plans target industries like renewable energy, specialized steel, electric vehicles, semiconductors, and the internet of things, revealing a highly targeted web of industrial policy planning and state support that China has used in promoting indigenous manufacturing and technological development.
The Chinese Communist Party leadership is currently meeting in the Fifth Plenum of the 18th Central Committee, where they are expected to begin drafting the 13th Five Year Plan, covering 2016-2020. Earlier this year, the State Council released a plan called “Made in China 2025” to be implemented during the 13th Five Year Plan period. Some have described this plan as a broader iteration of the 12th Five Year Plan’s SEI support policies.