You will either find this very interesting or come away thinking that I’m a conspiracy theorist that hides in the basement with tin foil on my head (so as to block alien transmissions from Mars, of course).

Here’s the deal. Earlier this month, the US Trade Representative complained to the WTO about China’s support (more specifically, illegal subsidies) of certain famous local brands. From the USTR Fact Sheet:

As part of its industrial policy aimed at promoting worldwide recognition of Chinese brand names and branded products, China appears to be providing numerous WTO-illegal subsidies at multiple levels of government. These include providing exporters:

• Cash grant rewards for exporting
• Preferential loans
• Research and development funding
• Cash grants to lower the cost of export credit insurance

The programs in question are not industry-specific and potentially cover a wide range of companies. At the time I read up on this, I had no way of verifying much of this and therefore put the issue to one side. I was hoping to get back to it when/if more information came to light.

Then yesterday, I see this article from McClatchy on the expiration of the textile deal between the U.S. and China. Now, I know all about this deal, I remember when it was struck, and I recall writing a paper about it in grad school. For some reason, I had forgotten about the deal’s impending expiration, however. As a gross generalization, note that the deal essentially put a stop to certain kinds of Chinese textile exports to the U.S. for a few years, supposedly to allow the U.S. market to adjust to the competition. (Also note that there have been similar deals in place regarding textiles since 1978 or thereabouts, so the U.S. market doesn’t seem to be all that good about adjusting.)

Like the good little blogger I am, the first question that popped into my mind was whether there was a connection between the end of the textile deal and the WTO complaint made in December, scant weeks before the current administration leaves office. Seemed like weird timing all the way around.

So, going back to that Fact Sheet, let’s take a closer look at the effect of these subsidy programs:

Most of the Chinese subsidies at issue are not limited to particular sectors – they appear to be available to any enterprise that meets the eligibility criteria, which include export performance and, typically, a successful home grown domestic brand. That means these subsidies are available across a huge swath of the Chinese economy. They would unfairly alter the competitive landscape for any U.S. industry competing with Chinese products that have received them.

Some of the subsidies at issue, however, are available only to a defined set of sectors (or to a single sector) in the Chinese economy. The sectors eligible for these subsidies include the high-tech, electromechanical, textiles, and agricultural sectors.

Hmm. We have four sectors mentioned, and textiles is one of them. Moreover, although it’s possible that there things going on in the agricultural, high-tech and electromechanical sectors that argue for immediate (a few weeks before the president leaves office) action with respect to alleged Chinese subsidies, we do know for sure that something important will happen in the textile sector in a few days.

Is there any evidence that these two things are directly related? In other words, was the action of the USTR motivated for the most part by the expiration of the textile deal? I can’t say for sure, but I do find all this intriguing.

One last comment. My cynicism of Bush’s trade policy has deep roots in many hypocritical positions over the past eight years. And yes, even this move is hard to swallow in light of the discussions in D.C. about the auto industry bailout. Reuters, in an article on the WTO complaint, was quick to point this out:

The USTR action also came on the same day the White House announced a $17.4 billion government loan program to bail out ailing U.S. automakers, a step that itself raises questions on whether it violates WTO rules on industrial subsidies.