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In a similar case involving US methods in deciding when foreign imports are unfairly priced, another WTO panel ruled in support of some claims by India against tariffs on steel exports from three of its major firms.
Trade diplomats said the two cases, both under scrutiny for nearly two years by the separate panels, reflected a widespread concern in the 160-member WTO over what many see as illegal US protection of its own producers.
In the $7.2 billion Chinese case, the panel found that Washington had overstepped the mark in justifying the so-called countervailing duties it imposed as a response to alleged subsidies to exporting firms by China's government.
Under the 1964 Marrakesh accords, which also set up the WTO, these duties can only be levied when there is clear evidence that state-owned or partially state-owned enterprises passing on the subsidies are "public bodies."
The panel found that Washington had produced insufficient evidence for this, and was also at fault in its calculations of the value of the subsidies to Chinese firms producing items like kitchen shelving, grass cutters and even citric acid.
And it told the United States it should adapt its measures to bring them into line with the WTO's agreement on subsidies and countervailing measures, dubbed the SCM in trade jargon.
Some comfort
The ruling, which gave the United States some comfort in rejecting some aspects of the Chinese complaint, was welcomed in a statement from China's Ministry of Commerce distributed by Beijing's trade mission in Geneva.
"China urges the United States to respect the WTO rulings and correct its wrongdoings of abusively using trade remedy measures, and to ensure an environment of fair competition for Chinese enterprises," the statement said.
The United States said it was weighing its options.
US Trade Representative Michael Froman said the decision to reject many of China's challenges was a victory for American businesses and workers.
"With respect to the other findings in the panel report, the Administration is carefully evaluating its options, and will take all appropriate steps to ensure that US remedies against unfair subsidies remain strong and effective."
Many other members of the organisation, including the European Union and Japan, declared themselves interested parties in the disputes, although they did not say if their sympathies lay with the United States or its challengers.
The ruling in the Indian case - which involves steelmakers like Tata, Jindal and Essar who are supplied by the state-run iron-ore mining firm, NMDC - was not so clear-cut.
It said the United States had "acted inconsistently" in terms of some provisions of the SCM agreement and had unfairly reduced Indian trade revenue. Washington should bring its measures into line with the pact, the panel said.
But it rejected many of the technical aspects of the Indian case.
Froman hailed the panel ruling while recognising it as a "mixed result."
"The panel's findings rejecting most of India's numerous challenges to our laws and determinations is a significant victory for the United States and for the (US) workers and businesses making these steep products," he said.
