US REQUESTS DISPUTE PANEL ON CHINESE SUBSIDIES

The US announced on 12 July that it had requested the creation of a WTO dispute panel to examine its claim that a range of Chinese government tax policies have been effectively serving as illegal subsidies.

Washington alleges that Beijing has implemented a series of illegal tax refunds, reductions, and exemptions that discriminate against imports while supporting the export of Chinese manufactured goods.

The US, later joined by Mexico, initiated dispute settlement proceedings over the Chinese subsidies in early February (see BRIDGES Weekly, 7 February 2007). Just prior to the joint consultations on the dispute, which were held in March, China did away with one of the challenged subsidy programmes, but instituted a new set of income tax exemptions that the US and Mexico also claimed were out of step with WTO rules (see BRIDGES Weekly, 28 March 2007). To address this last dispute, the three nations held supplemental consultations on 22 June; like the March talks, however, the latest round of negotiations also failed to resolve the disagreement.

"Although our two rounds of WTO consultations with China have been constructive, they have not resolved our concerns about China's apparent use of trade-distorting subsidies that it pledged to eliminate upon joining the World Trade Organization," Sean Spicer, a spokesperson with the US trade representative's office, said in a written statement.

Mexico is also expected to request a WTO dispute panel over the Chinese subsidies, according to the USTR statement.

In keeping with WTO rules, the Dispute Settlement Body will consider the US request at its next meeting, scheduled for 24 July. China can block the US' request once, but would be unable to do so a second time.

The Bush administration has recently intensified pressure on China to reform many of its international trade policies, as the US Congress has increasingly called for measures to address the large US trade deficit with China, which reached a record $232.6 billion last year.

ICTSD reporting; "U.S. takes subsidies dispute with China to World Trade Organization," ASSOCIATED PRESS, 12 July 2007; "US seeks WTO China subsidies probe as talks fail," REUTERS, 12 July 2007.