U.S. Launches First WTO Complaint Against China

By Agence France-Presse The United States launched the first World Trade Organization complaint against China, attacking tax breaks for the integrated circuit industry, officials said March 18. "U.S. manufacturers of semiconductors and other products have a right to compete on a level playing field with Chinese firms," said U.S. Trade Representative Robert Zoellick. China flouted WTO rules by providing preferential tax treatment to integrated circuits produced in China, disadvantaging U.S. and other imports, he said. "As a WTO member, China must live up to its WTO obligations; it cannot impose measures that discriminate against U.S. products." By filing the WTO case, the United States triggered a 60-day consultation period. If those talks fail, Washington can ask for a WTO panel to consider whether China is breaking the rules. "We have been pressing these and other concerns with the Chinese. These discussions will continue because we prefer compliance rather than litigation," Zoellick said in a statement. "However, the bottom line is that China is discriminating against key U.S. technology products: It's wrong, and it's time to pursue a remedy through the WTO." It was the first complaint filed with the Geneva-based WTO against China by any of the 146 members since Beijing joined the organization in December 2001. The United States said it exported $2.02 billion of integrated circuits to China in 2003. But Washington said the U.S. exports were subject to a 17% value-added tax costing approximately $344 million while China allowed domestic producers to obtain a substantial VAT refund. As a result of the refund policy, the effective VAT rate on domestic products could be as low as 3%, the United States said. China also allows for a partial refund of VAT paid on integrated circuits designed in China but manufactured abroad, it said. "We believe that this policy is also inconsistent with China's international trade obligations," the U.S. Trade Representative's office said. Copyright Agence France-Presse, 2004