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China puzzled over US tax complaint at WTO
(China Daily)
Updated: 2004-03-19 23:29

The Chinese Government on Friday said it was puzzled by a US complaint to the World Trade Organization (WTO) over a tax policy, while analysts claimed the US is posturing to the public in an election year.

Chinese Foreign Ministry spokesman Kong Quan. [newsphoto/file]
Chong Quan, spokesman of the Ministry of Commerce, said in a statement that China and the United States had held several rounds of talks on the issue of a value-added tax on semi-conductors and made some progress.

"In the normal course of bilateral consultations, the US side suddenly raised a request under the WTO dispute resolution mechanism. China really does not understand this," Chong said.

The US complaint, filed on Thursday, was the first against China since it joined the WTO in late 2001. The complaint says a tax break for domestically manufactured semiconductors gives them an unfair advantage over imports.

Chong's response is in conflict with earlier reports that China is resolute on the issue.

The Financial Times, citing unidentified US officials, reported that US trade representative Robert Zoellick's office planned to delay a filing until after the April 21 meeting in Washington involving top economic officials from China and the US, then changed that plan after the Chinese Government told a US trade official in Beijing last week there was no chance of dropping the tax.

Lu Jinyong, a professor from the University of International Busi-ness and Economics in Beijing, accused the US Government of wanting to show a tough stand to the public.

President George W. Bush's ad-ministration is being criticized byDemocrats who say he has not done enough to crack down on Chinese practices they say violate global trade rules.

"The dispute can be solved by negotiation. China is a developingcountry and a new WTO member. We need time," Lu said.

An unnamed official from the Min-istry of Information Industry also said more contact and communica-tion is needed between China and the United States if the dispute is going to be resolved.

He added that China's policies regarding value-added tax on semiconductors have not brought substantial financial benefits to domestic manufacturers.

Zhang Qi, a director-general at the ministry, was quoted earlier saying: "We imported more than 80 per cent of our semiconductors last year, and I do not see how much more open our market could be." The US$19 billion Chinese semi-conductor market has become a major market for foreign-made chips, including US$2 billion worth from the United States last year.

The dispute between the world's largest economy, the US, and the world's sixth-largest, China, has erupted amid efforts at the Geneva-based WTO to revive the latest round of global trade talks, which collapsed last September.

China worked with the US to try to break the impasse in Cancun, Mexico.

"Widening conflict between both major countries will not be good for global trade," WTO Director General Supachai Panitchpakdi told reporters in Bangkok on Friday.

Under WTO rules for resolving disputes, the US and China must hold consultations for at least two months before a panel will begin to adjudicate the complaint.

Japan, a key player in the Chinese semiconductor market, has applied to the WTO to be an interested party in the case, meaning it would be allowed express its opinions during the trade body's deliberations.

Lu meanwhile said the case, if accepted by the WTO, could take up to two years to resolve.

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