Bush pushed to tackle China trade subsidies

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THE Bush administration, kowtowing to a more belligerent Congress on China trade, has hauled Beijing before the World Trade Organisation (WTO) over “illegal” industrial subsidies.

In the largest action of its kind – one that could escalate tensions between the two trading giants – Washington said China has persisted with subsidies that, under WTO rules, distort global trade.

“We are seeking to level the playing field to allow US manufacturers to compete fairly with Chinese firms,” US Trade Representative Susan Schwab said.

She added: “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.”

The decision to go to the WTO is the first step in what could be an 18-month process to determine whether Beijing has contravened trade laws.

In the first instance, both sides will try to resolve the dispute through consultation. If these talks fail, the WTO will step in. If it rules in favour of the US, there could be sanctions on China’s products – with huge ramifications for Beijing’s exports and for ties between the two nations.

American trade officials said Washington was targeting six Chinese export subsidy programmes that might cover up to 60 per cent of China’s exports.

They revealed that there were three others that discriminated against imports by subsidising Chinese company purchases of domestic goods.

This is the third case the United States has filed against China since it joined the WTO in 2001. One was resolved before it reached WTO arbitration, and the other, filed with the European Union and Canada in tow, is now in the formal dispute stage.

But the significance of the latest action should not be underestimated. This is the first time that the US is threatening across-the- board sanctions.

Indeed, hovering in the background is a possible fourth WTO case against China for rampant piracy of American goods.

Breathing populist rhetoric, Congressional Democrats have been calling for stiffer action against China.

Just last week, Treasury Secretary Henry Paulson had to face tough questions before a bipartisan congressional panel, with both Democrats and Republicans charging that the White House was doing little to deal with the ballooning trade deficit with China.

China expert Ted Carpenter, of the Washington-based Cato Institute, said: “This does not look like a bluff even if the administration is responding to domestic pressures.”

Deputy US Trade Representative Karan Bhatia told The Sunday Times: “We hope that Beijing will engage in meaningful consultations to get rid of the subsidies. If not, we are ready to push this through to the end.”

China, in its first reaction, said it was studying the US move.

The Commerce Ministry said in a brief statement: “China feels that it is regretful that the United States has filed a request for consultation with the WTO even though the two sides have been engaged in negotiations over the issue.”

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