The United States and European Union are to join consultations between Mexico and China at the World Trade Organization (WTO) on the issue of subsidies provided by China to support its textile and clothing industry.

Mexico earlier this month requested formal consultations with China as the first stage of an official disputes case.

The US and EU are supporting Mexico's case as third parties, and had ten days to make a decision after Mexico first requested consultations.

The move has been welcomed by Cass Johnson, president of the US's National Council of Textile Organizations (NCTO), who describes the case as a "landmark."

"For decades, large and comprehensive subsidies by the Chinese government have prevented free and fair markets from operating in world trade in textiles and apparel," he says.

NCTO has listed 30 subsidies given to Chinese textile and apparel producers by the Chinese government, and notes that US imports of Chinese textile and apparel products have increased by 523% or $34bn over the past 11 years, and now total nearly $41bn. Over the same time, Chinese market share has increased from 10% to 40%.   

"The US government decision to join the consultations sends a strong signal of support to the government of Mexico in this important case," he adds.

Johnson also told just-style that the US typically joins consultations regarding China and subsidies because of longstanding concerns about China's government subsidies - so it would have been unusual if there was no involvement.

The US government has "made numerous statements at the WTO and through USTR [the US Trade Representative] regarding the failure of China to notify its subsidy structure to the WTO (as required) and have filed a number of WTO cases just over the last two years aimed at Chinese subsidies in other areas," he added.   

The preferred course of action is for WTO members to settle the dispute amongst themselves, but if a solution is not agreed within 60 days, the complainant can request adjudication by a panel.

The Mexican government claims China's textile and clothing policy breaks the WTO's subsidies and countervailing measures agreement, the general agreement on tariffs and trade (GATT), the agriculture agreement and China's own WTO accession commitments.

Support that Mexico says is illegal under world trade law includes: income tax, import duty, VAT and municipal tax exemptions, reductions and refunds; low-cost loans, extended loan repayment periods, debt forgiveness by state-owned banks; preferential prices for land use rights; government fee refunds; discounted electricity rates; cotton production, import and distribution subsidies; and government cash payments to the sector.