Posted on 03/17/2004 2:07:47 AM PST by sarcasm
The US is set to launch its first World Trade Organisation complaint against China, charging that Beijing is violating global trade rules by offering big tax breaks for domestic semiconductor producers.
The case, which US officials said could be filed as early as Wednesday, will mark the end of a two-year honeymoon in which Washington has tried to resolve a series of disputes with China without resorting to the WTO.
A combination of election-year pressures on the Bush administration to take a tough stand on China and Beijing's refusal to budge on the tax issue has led Washington to bring the case.
At issue is a 17 per cent value-added tax that China imposes on all semiconductors. The Chinese government rebates all but 3 to 6 per cent of that tax for domestic producers but retains the full tax on imports, giving domestic chipmakers a huge advantage in an industry with narrow profit margins.
The Chinese tax has become the biggest international trade issue for the $70bn (£39bn, E57bn) US semiconductor industry, which fears the rebate is encouraging semiconductor production in China at the expense of US imports.
The US industry had wanted a negotiated solution to the dispute, which would have prevented a long WTO dispute settlement process. But China has refused to relent, arguing it is a critical part of its development strategy.
The US industry now hopes that once the case is filed, it will affect investment plans because companies will fear that China will be forced by the WTO to end the tax discrimination.
Semiconductors are the second largest US export to China, and US chips are used in a wide variety of Chinese electronics goods shipped around the world.
But foreign companies also invested $3.6bn in Chinese semiconductor production between 2000 and 2002, with investment expected to reach $12bn next year and $25bn by 2013.
In testimony last month before a US congressional commission, the Semiconductor Industry Association called this "an unprecedented amount of investment that cannot be justified on commercial terms and is likely to lead to severe overcapacity in the industry in future years".
The US trade representative's office had originally been planning to hold off the case until after an April 21 meeting in Washington involving the top economic officials from China and the US. But Chinese officials told a senior USTR official who visited Beijing last week there was no chance that China would relent on the issue.
Since China joined the WTO in December 2001, the US has been able to resolve several trade disputes with Beijing through negotiation, such as lifting barriers to US cotton and soybean sales and opening China's market for US car finance companies.
Noet that this is a case for the semiconductor industry, they have clout on the hill because they are large capital intensive businesses. Countries also give tax incentives for outsourcers. We will not see the government go before the WTO for the average citizen who loses a job.
China wanted WTO membership badly, but they have to play by the rules.
The solution is not some "brave new world" but a return ti the national interest as it was practiced for most of our history.
Global economic integration is global plotical intergration.
You have to remember, though, that this is one of those "world governing" bodies, which might as well read "anti-USA" bodies.
Is there any international organization that exists to the benefit of the USA? Maybe NATO?
If we won this it would cause a major restructuring of international tax practice in a way that profited the "developed" world and punish the "developing world." It will never happen, IMHO. We lost control of the WTO a long time ago. It is more harmful to us than the UN. We need to have foreign trade managed Through the WH, the Dept. of Commerce and the State Dept. not an international organization where others can regulate our economy.
I am not against Bush, but this case, like Powell's laughable presentation in India yesterday, is just election year window dressing.
The real issue is the fact that China requires US tech companies to set up R & D centers in China and transfer technology to a local Chinese "partner." The administration needs to just say no. They won't
If we would have done to the USSR what we are doing to China they would still be around. We are just creating a major competitor and global adversary.
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