Agreement to Terminate Export Subsidies Under China’s Demonstration Bases-Common Service Platform Program

On April 14, 2015, the United States and China Signed a Memorandum of Understanding Related to the Dispute China – Measures Related to Demonstration Bases and Common Service Platforms Programs (DS489).

On February 11, 2015, the United States filed a challenge in the WTO against China’s “Demonstration Bases-Common Service Platform” program that provides prohibited export subsidies to Chinese enterprises located in 179 industrial clusters throughout China known as “Demonstration Bases.”

Each of these Demonstration Bases was comprised of enterprises from one of seven sectors: (1) textiles, apparel and footwear; (2) advanced materials and metals (including specialty steel, titanium and aluminum products); (3) light industry; (4) specialty chemicals; (5) medical products; (6) hardware and building materials; and (7) agriculture.

The WTO established a panel in April 2015 to review this matter. Nonetheless, the parties continued to discuss how China could address U.S. concerns that China’s program provides export subsidies prohibited under WTO rules.

To address the concerns raised by the United States, China agreed to take specific actions in a memorandum of understanding (MOU) signed on April 14, 2016 by China and the United States.

In the MOU, China agreed to take the following actions with respect to the Demonstration Bases-Common Service Platform program:

1. Defund the Common Service Platform (CSP) program by removing central government level funding;
2. Terminate the preferential service agreements between sub-central governments and CSP providers, which had been the sources of free or discounted services provided to Demonstration Base enterprises;
3. Prohibit CSP providers from continuing to provide free or discounted services to enterprises in export-contingent Demonstration Bases;
4. Terminate sub-central government export-contingent cash grant measures;
5. Eliminate any export-contingent criteria from the Demonstration Base designation process; and
6. Re-evaluate all national and provincial level bases without the use of export-contingent criteria.