US accuses China of 'illegal
subsidies' By Emad Mekay
WASHINGTON - The United States said on
Friday it is taking China before the World Trade
Organization (WTO) to complain about Beijing's use
of "illegal subsidies", a move Beijing says is "a
pity".
Quoting a spokesman for the Chinese
Ministry of Commerce, the official Xinhua news
agency this weekend said Beijing was considering
the US position.
US Trade Representative
Susan Schwab said talks with China
over
the issue have failed and Washington has been left
with no option but to request WTO consultations to
eliminate those subsidies. "The case is important
because we are seeking to level the playing field
to allow US manufacturers to compete fairly with
Chinese firms," Schwab said.
Washington
alleges that China is fixing its tax laws and
using other means to promote its own exports and
to discriminate against imports of US manufactured
goods.
The subsidy programs provide
incentives for companies in China to purchase
domestic equipment and accessories, instead of
buying from US exporters, said the Office of the
United States Trade Representative (USTR).
"This case is about standing up for
America's workers and manufacturers," Schwab said.
"China's subsidies can particularly distort trade
conditions for small and medium-sized American
enterprises [SMEs] and their workers."
Washington argues that a range of
domestically produced goods in the United States,
from steel to paper to computers, are denied an
opportunity to compete in the Chinese market and
in third-country markets where they are forced to
vie with highly subsidized Chinese imports.
The alleged Chinese subsidies cover such
sectors as steel, wood products and information
technology, among others.
The Chinese
Embassy in Washington did not respond to requests
for comment on Friday.
A fact sheet
distributed by the USTR office said that among the
tactics China uses to give its companies an edge
over US competitors are tariff exemptions,
discounted lending rates and income-tax reductions
and refunds available to China-based companies
that meet certain export performance benchmarks.
These benefits have lured many firms,
especially from neighboring Asian nations, which
have moved their final assembly operations to
China since its accession to the WTO.
The
subsidies being challenged by Washington
purportedly go to foreign companies that invest in
China and that meet those criteria. US officials
say those companies accounted for nearly 60% of
China's export of manufactured goods in 2005.
The US itself has been widely criticized
by developing countries for paying billions of
dollars in agricultural subsidies to farmers, who
have the effect of depressing local markets for
farm products. In 2005, for example, a WTO dispute
panel found that $3.2 billion in annual cotton
subsidies and $1.6 billion in export credits paid
by the US in cotton and other commodities were
illegal under WTO rules.
Washington has
nevertheless taken the offensive against China,
albeit in a different sector - manufactured goods
and services.
"China needs to be held
fully accountable as a mature member of the
international trading system - for the benefit of
US companies and workers, the global trading
system, and for its own sake," Schwab said in her
remarks to the media.
The complaint comes
only a day after a number of US lawmakers publicly
lamented that the United States was not filing
enough complaints about China before the WTO. The
lawmakers said they were alarmed by the large, and
growing, trade deficit between the two nations.
In 2005, China exported $243 billion worth
of goods to the US - six times the amount that the
US exported to China - leaving the US with a
deficit of $202 billion in 2005, the largest
deficit with any country.
In 2006, the
US-China trade deficit is expected to exceed $230
billion.
"One reason for this glaring
trade imbalance is China's continued
non-compliance with its WTO obligations and our
failure to challenge this non-compliance," Senator
Carl Levin said before the US-China Economic and
Security Review Commission hearing on relations
between the two countries on Thursday.
The
same day, the USTR and the Commerce Department
presented the "2007 Subsidies Enforcement Report",
which documents US efforts to monitor foreign
government subsidy practices worldwide. The report
said: "China has been unwilling to commit to the
immediate withdrawal of the prohibited subsidies
in question."
It also spoke of an
explosive growth of China's steel production.
US business groups quickly sided with the
USTR, and said they wanted to see more
transparency in China's subsidies policies.
"China must play by the rules," said Myron
Brilliant, vice president for Asia at the US
Chamber of Commerce.
Since China was
coaxed by Washington into joining the WTO, US
exports to China have been growing robustly. US
exports grew at an average annual rate of almost
23% in the past five years, and were on pace to
grow 33% for 2006, but business leaders say they
could do far better if the alleged Chinese
subsidies were dealt with.
"This case
expands the [US] administration's efforts to
address China's distortions of trade, along with
pressure to obtain greater Chinese actions to
control product counterfeiting and copyright
piracy, pushing for currency appreciation and
acting in other areas where China needs to do more
to live up to its WTO obligations," said National
Association of Manufacturers president John
Engler. The United States has previously
brought the only two disputes in the WTO against
China, and the US and China settled a third
dispute on the eve of a planned US WTO filing.
The first case was filed in March 2004; it
involved value-added-tax rebates that
discriminated against imported semiconductors. The
two sides were able to resolve that dispute during
the consultation phase.
Last March,
Washington joined forces with Canada and the
European Union to challenge Chinese rules that
impose local-content requirements in the
automotive sector.
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