Puzzled China Working To Resolve First-Ever WTO Trade Spat With U.S.

By Agence France-Presse China said March 19 it was "extremely puzzled" by Washington's complaint to the World Trade Organization (WTO) over its tax system for domestic chip makers but said it is willing to work with the United States to resolve the dispute. The Ministry of Commerce has yet to receive any official documentation but said it was in touch with its U.S. trade counterparts in hopes of finding a solution. "China has had several rounds of negotiations with the U.S. on this issue and we have already made progress," commerce ministry spokesman Chong Quan said in a statement. He added, however, that China had been taken aback when the U.S. "suddenly raised demands for discussions under the WTO mechanism for conflict resolution." The U.S. challenge lodged March 18 is the first WTO complaint filed against China by any member of the global trade body since Beijing joined the organization in December 2001. "China is discriminating against key U.S. technology products; it's wrong and it's time to pursue a remedy through the WTO," U.S. Trade Representative Robert Zoellick said. Japan weighed in by saying it could seek to join the dispute between the United States and China with similar action on behalf of its own chip industry as an interested third-party, which is allowed under WTO rules. International chip makers such Intel and Micron Technologies complain that Chinese government tax rebates of up to 14% for its fast growing $19-billion semiconductor industry give domestic companies an unfair advantage over imports. China has flouted WTO rules by providing preferential tax treatment for chips produced in China, thereby disadvantaging U.S. and other imports, Zoellick said. "U.S. manufacturers of semiconductors and other products have a right to compete on a level playing field with Chinese firms," he said. Copyright Agence France-Presse, 2004