USTR: China uses taxes, other tool to discriminate against U.S. goods

The U.S. has charged China with violating World Trade Organization standards by subsidizing its steel, wood products, IT, and other industries, in what is said to be the the largest trade complaint ever lodged against China at the WTO. According to the agreement that admitted China to the WTO in 2001, industrial subsidies are prohibited.

U.S. Trade Representative Susan Schwab stated: "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 American Iron and Steel Institute, the Washington-based trade association that represents most U.S. producers, welcomed the decision. AISI president and CEO Andrew G. Sharkey, III, called it "an important first step, but just a first step."

China's trade surplus versus the U.S. amounted to $213.5 billion over the first 11 months of 2006 — reportedly almost 30% of the total U.S. shortfall. Over the same 11-month period in 2005, that figure was $185.3 billion.

In steel, China's 2006 production totaled of 418.8 million metric tons, far and away the largest steel-producing nation in the world and an 18.5% increase in output from 2005. Numerous Chinese sources also detail the nation's rising rate of steel exports.

Sharkey continued: "This filing, while significant, only touches the tip of the iceberg of the full range of subsidies being provided to steel and other manufacturing industries in China. An essential and urgently needed next step is to ensure that U.S. countervailing duty law will be applied in an effective manner to counter the trade and market-distorting impacts of subsidies provided by China and other non-market economies."

China has been the object of numerous WTO trade violation charges in recent years and months, covering industries as varied as semi-conductors and paperboard, but the new charge covers a diverse set of products and markets — and could prolong an already lengthy investigation and resolution process.

China is given 60 days to respond to the complaint, toward a negotiated solution between the two nations. After that, the U.S. may request a panel of WTO trade ministers to hear evidence and reach conclusions in the case. An appeal process may follow any decision.

If the WTO rules for the U.S., China will have to remove the subsidies or face U.S. import penalties. If China wins, the subsidies may remain.