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US EU, Japan seek to complete text on subsidies to rein in China

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US Trade Representative Robert Lighthizer, European Trade Commissioner Cecilia Malmstrom and Japanese Economy Minister Hiroshige Seko met on Thursday for the latest in a series of discussions on addressing trade distortions that began in 2017.

[PARIS] The United States, the European Union and Japan are working to finalise proposals to reform global rules on industrial subsidies, designed to limit what they see as distort practices by China.

US Trade Representative Robert Lighthizer, European Trade Commissioner Cecilia Malmstrom and Japanese Economy Minister Hiroshige Seko met on Thursday for the latest in a series of discussions on addressing trade distortions that began in 2017.

In a joint statement after their meeting in Paris, they said progress had been made on a common text regarding increased transparency, identifying harmful subsidies that might merit stricter treatment, and appropriate benchmarks.

"Ministers instructed their staff to continue efforts to finalise trilateral text-based work on these and other issues," the statement said.

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They aim to present tougher rules for industrial subsidies and state-owned enterprises to other members of the World Trade Organisation, and to start negotiations on adopting them.

The statement did not mention China, but refers to elements of the Chinese economy that industrialised countries say distort global competition - non-market policies and forced technology transfer as well as subsidies and state-owned firms.

The three countries have complained of subsidies in the form of preferential loans from state-owned banks, grants, export credits, tax breaks and the provision of land and raw materials at artificially low prices.

Their complaints reflect growing frustration among industrialised countries over China's trade practices, along with concerns that other developing countries will follow Beijing's lead.

However, most prefer the route of dialogue rather than the trade war Washington has engaged in.

All 164 WTO members, including China, would need to approve reforms for them to be adopted by the global trade body.

The need for consensus has meant every new initiative risks becoming a bargaining chip in a bigger negotiation.

Few reform efforts have succeeded and many are stuck, including talks on cutting agricultural subsidies or liberalising trade in services.

However, Chinese premier Li Keqiang promised the European Union in April that Beijing would no longer force foreign companies in China to share sensitive know-how and said he was ready to discuss new global rules on industrial subsidies.

REUTERS