China has agreed to scrap some trade subsidies, handing US officials a rare chance to claim success in international affairs. Industry reaction has been upbeat, but workers remain unimpressed as the impact remains to be seen. Beijing said on Thursday it had signed a memorandum of understanding rescinding a raft of tax breaks and subsidies that Washington had challenged earlier.

The concessions come in the run up to high-level trade talks scheduled for next month and aimed at reducing Sino-US economic tensions. A similar deal was reached with Mexico, which had joined the US complaint at the WTO, China’s mission to the Geneva-based institution announced. Beijing thus headed off a formal WTO ruling under which it might have been found guilty of stacking the deck against US and Mexican competitors with measures that encouraged Chinese firms to export more than they otherwise would and rewarded them for using domestic, rather than imported, goods.

The top US trade envoy quickly claimed the laurels. “This outcome represents a victory for US manufacturers, producers, and their workers,” Trade Representative Susan Schwab told reporters here. The offending Chinese tax incentives and subsidies would be abolished by Jan. 1, she said. Industry quickly chimed in. “The settlement of this case is great news,” the National Association of Manufacturers, the largest US industrial exporters’ lobby, said in a statement.

“China is to be commended for recognising that these subsidies were illegal and for acting responsibly to eliminate them without going through prolonged litigation. We hope this is a harbinger of things to come,” it added. The AFL-CIO, a federation of some 54 unions claiming a combined membership of some 10 million US and Canadian workers, demanded stronger action to reduce the US trade deficit with China. “This is an important accomplishment,” John Sweeney, the AFL-CIO president, said of the Chinese decision.

“However, we hope that USTR and the Bush administration will show equal diligence in addressing worker rights violations, import safety and currency manipulation, all of which contribute to the enormously lopsided trade imbalance between the United States and China,” he said, referring to the US trade representative’s office. China ran a record trade surplus of $187.6 billion with the United States in the first nine months of this year and seems set to surpass last year’s surplus of $232.5 billion. Workers and politicians have been baying for an end to the haemorrhage.

Democrats in Congress are advancing measures that would make it easier to impose tariffs on imports and thus protect US firms against China’s subsidies and weak currency. Schwab said the administration of President George W Bush remained opposed to such punitive measures. The administration succeeded in bringing Beijing around because it shunned a punitive approach in favour of negotiation, buttressed with litigation at the WTO.

“The agreement demonstrates the two great trading nations can work together to settle disputes to their mutual benefit,” she told reporters. Sweeney, however, said the US complaint and its resolution were too long in coming. “These subsidies should have been eliminated when China joined the WTO six years ago,” he said. — IPS