Posted on 03/25/2004 10:45:54 AM PST by hedgetrimmer
SHANGHAI (AFP) - China said it was "extremely puzzled" by Washington's complaint to the World Trade Organization 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 US trade counterparts in hopes of finding a solution.
"China has had several rounds of negotiations with the US 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 US "suddenly raised demands for discussions under the WTO mechanism for conflict resolution.
"China is extremely puzzled by this. We are currently seriously looking into US demands."
The US challenge lodged Thursday 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 US technology products; it's wrong and it's time to pursue a remedy through the WTO," US Trade Representative Robert Zoellick said.
Japan weighed in Friday 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.
"We have both an interest in, and concerns about the dispute," Trade Minister Shoichi Nakagawa said.
"We are not at the stage of filing a complaint with the WTO immediately but we are considering taking action in the future if necessary," the minister said.
International chip makers such Intel and Micron Technologies complain that Chinese government tax rebates of up to 14 percent for its fast growing 19-billion dollar 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 US and other imports, Zoellick said.
"US manufacturers of semiconductors and other products have a right to compete on a level playing field with Chinese firms," he said.
Li Ke, a director at the China Semiconductor Industry Association, expressed regret over the dispute, pledging to work toward a viable solution but also faulting US refusals to recognise that international chip makers in China were entitled to the same rebates.
"There are lots of multinational corporations who invest in the Chinese semiconductor industry and they have been enjoying the same preferential treatment ... so there's no discrimination," Li said.
"But they don't want to recognize this and they want to expand this."
The latest in a spate of trade disputes between the two countries coincides with attempts by some US manufacturing interests to launch punitive action as the US presidential election campaign heats up.
In the wake of China's meteroric economic rise, many Americans blame a tide of mainland imports for displacing US industry and for contributing to the loss of nearly three million jobs over the past three years.
Analysts said that if the complaint were to go before a WTO court -- a process that could take up to two years -- China could well lose the case.
The tax measures currently employed are likely to be seen as protectionist, especially as domestic chip makers, such as Seminconductor-Manufacturing International Corp (SMIC), ramp up production to meet demand expected to be worth 30 billion dollars by 2006.
"According to the WTO's National Treatment articles, what China does against chip imports is very likely to be ruled unfair," said a Shanghai lawyer who did not want to be named.
"The preferential tax policy on Chinese semiconductor makers looks like a non-tariff barrier, which is prohibited under the WTO rules," he said.
In the days before the globalists got their clutches on our trade system, this would have been a matter that the US and China could solve on their own. Now we need to have the "problem" solved by our friends from the EU and other WTO members.
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