U.S. says China to scrap some export subsidies

By Diane Bartz

WASHINGTON (Reuters) - China has agreed to scrap some export subsidies on a range of products from metals to agriculture and textiles, the United States said on Thursday, in a step by Beijing to reduce trade frictions with Washington.

China ended a program which provided export subsidies of some $1 billion over three years to Chinese companies in seven economic sectors, the U.S. Trade Representative's office said.

Some industry executives were skeptical about the deal's impact given remaining disputes over other supports that China give to its exporting industries. Steel has been a particular flashpoint.

One source knowledgeable about the agreement said it was not comprehensive enough to do much to help the U.S. steel industry, given its focus was only on specialty steel products.

In part, the dropping of the subsidies is an effort by China to move away from labor-intensive production and emphasize more-sophisticated industries such as semiconductors.

"The Chinese want to become a high-tech country. They want to move up the value chain," said James Lewis, a senior fellow at the Center for Strategic and International Studies.

Chinese agriculture products that will lose the subsidies include apples, beef, mushrooms, pork, tea, tomatoes, beans, ginseng, poultry, seaweed and, garlic, USTR said.

Candidates in the U.S. presidential election, especially Republican front-runner Donald Trump, accuse China of treating the United States unfairly in trade.

But White House spokesman Josh Earnest said the accord "is an example of how committed this administration is to ensuring that we're fighting in the international community for American businesses and American workers."

The United States had complained to the World Trade Organization about the program, alleging unfair practices by China.

The Chinese industries that have received the subsidies under the program include textiles, light industry, specialty chemicals, medical products, hardware, agriculture and advanced materials and metals, including specialty steel and aluminum products, the trade representative's office said.

STEEL INDUSTRY

Since it joined the WTO in 2001, China has frequently drawn complaints that its exports are being "dumped," or sold at unfairly cheap prices on foreign markets.

Chinese Embassy spokesman Zhu Haiquan said Beijing is committed to WTO regulations.

“China has been firmly committed to the WTO rules, continuously expanded its opening-up, deepened the reform of its foreign trade system, improved its foreign trade legal system, reduced trade barriers and administrative intervention,” Zhu said in an email.

U.S. Steel Corp President and Chief Executive Mario Longhi

said he was cautious about the latest Chinese move.

“People can say whatever they want, and I think China has been saying a lot of things for the past couple of decades," Longhi told reporters in Washington. "You need to ask yourself what, from a practical perspective, is really happening. We need to see the proof in actions, not just in verbiage."

The U.S. steel industry is under huge pressure this year

from cheap imports, a strong dollar, and falling oil prices, which have decimated demand for steel tubes used by the

oil and gas industry.

China still has other forms of support for industry in place, including relatively cheap and easy credit from state banks, state-regulated power prices that have often favored industry, and low prices for other inputs such as water.

"While it is clearly an important result, it is only one feature in a universe of other measures that China foresees for its steel sector," said Karl Tachelet, trade director at European steel industry body EUROFER.

Wall Street shrugged off news of the agreement, with stocks in related sectors showing a mixed bag of results. Alcoa Inc (AA.N) was up 2.2 percent, and Freeport-McMoRan Inc (FCX.N) rose 0.3 percent while U.S. Steel Corp (X.N) shed 1.1 percent.

(Additional reporting by David Morgan, Susan Heavey and David Lawder in Washington, Barbara Lewis in Brussels, Chuck Mikolajczak in New York and Jason Subler in China; Writing by Alistair Bell; Editing by Bill Trott and Alan Crosby)