Sun, Feb 04, 2007 - Page 1 News List

Chinese subsidies hurting firms: US

COMPLAINT Upset by what it feels are illegal tax breaks on Chinese exports, US companies lodged a grievance with the global trade body


The Bush administration filed a complaint with the WTO accusing China of providing companies with improper subsidies that hurt US firms.

The action came as the administration faced increased pressure from the Democratic-controlled Congress to do something about the nation's soaring trade deficits and lost manufacturing jobs, which critics blame in part on unfair trade practices by foreign nations.

The complaint filed on Friday alleges that China uses illegal tax breaks to encourage Chinese companies to export more to the US while imposing tax and tariff penalties to limit purchases of US products in China.

"We are seeking to level the playing field to allow US manufacturers to compete fairly with Chinese firms," US Trade Representative Susan Schwab said in announcing the case.

"The United States believes that China uses its basic tax laws and other tools to encourage exports and to discriminate against imports of a variety of American manufactured goods," Schwab said.

The dispute centered on Chinese subsidies of steel, wood products, information technology and other products that compete with goods made in the US, she said.

The decision to go to the WTO with a trade complaint will trigger a 60-day consultation during which trade negotiators will try to resolve the dispute. If that fails, a WTO hearing panel will be convened and if the US wins the case, it will be allowed to impose economic sanctions on Chinese products.

Schwab's announcement came two days after US Treasury Secretary Henry Paulson faced stiff questioning before a congressional panel, where both Democrats and Republicans accused the administration of doing too little to deal with the US' record trade deficits, including deficits with China, which are at all-time highs.

"Forcing China to eliminate its illegal subsidies will keep world markets open to US goods, keeping jobs at home," said Senate Finance Committee Chairman Max Baucus, a Democrat.

John Engler, the former Michigan governor who is now head of the National Association of Manufacturers, said he was disappointed that other major trading partners including Japan and the EU refused administration requests to join in filing the case.

"We hope that other countries will reconsider joining the case, recognizing it is not fair to have the United States do all the heavy lifting," Engler said.

The case against China on subsidies is the second WTO case the administration has filed in the past year. Last March, it filed a case accusing China of using an illegal tax system to block imports of US and other foreign-made auto parts into China.

Two other potential WTO cases involving Chinese barriers to sales of US-made computer chips and linerboard were resolved before dispute panels were convened.

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