The U.S. government is seeking to expand the types of subsidies that are currently prohibited under the WTO agreement on subsidies and countervailing measures. At the current time only two types of subsidies are banned, export subsidies and import substitution subsidies. The U.S. is seeking to expand the banned subsidies to five additional categories of subsidies that it defines as trade distorting. In addition, the U.S. is also seeking additional WTO transparency procedures that would be applicable to state owned companies and government subsidies in those companies.

The five additional categories of banned subsidies are;

1) Coverage of operating losses

2) Forgiveness of government held debt

3) Lending to un-creditworthy companies

4) Equity investments in un-credit worthy companies

5) Other financing such as royalty-based financing that is not commercially available.

The action appears aimed at Chinese and Vietnam and has long been advocated by the U.S. textile lobby. There has been no reaction by the Chinese government to the U.S. proposal