US to haul China to WTO over industry subsidies

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WASHINGTON, July 14 (AFP) : The United States will haul China into the World Trade Organisation (WTO) for a formal hearing on industrial subsidies that US officials said violated global trading rules, officials said.
The request for a WTO dispute settlement panel came after Washington and Beijing failed to resolve their differences on a February complaint over China's "illegal" subsidies on a variety of products.
"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 WTO," said Sean Spicer, spokesman for the office of the US Trade Representative (USTR).
"China has taken a positive step by repealing one of the subsidy programs we challenged, but much more needs to be done.
"We continue to prefer a negotiated settlement to this dispute, but without assurance of complete corrective action by China, we must continue to pursue the WTO process to enforce our rights."
State subsidies for steel, paper, information technology and other industries allow China to export its goods on the cheap and so prevent US companies from competing fairly, both at home and in third markets, American officials say.
The announcement comes amid growing pressure in Washington to respond to a burgeoning trade deficit with China and concerns that Beijing is flouting rules used by most US trading partners.
Figures released earlier Thursday showed the trade gap with China, the giant engine of cheap consumer goods, climbed to 20 billion dollars in May, one-third of the overall trade deficit.
"It's another month of deficit-busting trade policy with China-a nation that doesn't play by the rules," Ohio Senator Sherrod Brown said after the trade figures were released.
"China manipulates its currency, exploits workers and environmental standards, and exports contaminated food, medicine, and products. Enough is enough."
Auggie Tantillo of the American Manufacturing Trade Action Coalition said "the reason why the US trade deficit remains sky-high is because the US government shirks from confronting the predatory trade practices of other countries."
Last week, Secretary of State Condoleezza Rice said China "doesn't play fair" in trade and that Washington would not hesitate to take action against Beijing to respond to WTO violations.
Peter Morici, an economist at the University of Maryland, said China "provides numerous tax incentives and rebates, and low-interest loans, to encourage exports and replace imports with domestic products" in violation of WTO rules.
But he said the petition could take years to resolve even while US manufacturing jobs are lost.
"China will have many options to reconfigure these practices before it ultimately, if ever, relinquishes them," Morici said.
"The real danger is that the Bush administration is using the WTO complaint process to butt congressional pressure to apply the countervailing duty laws to China and to avoid taking meaningful steps against Chinese currency manipulation."
The USTR said Mexico joined the United States in the dispute on February 26 and before joint consultations were held on March 20.
US officials said China eliminated one of the subsidy programmes challenged in the complaint, but also adopted a new income-tax law providing additional tax breaks for qualifying Chinese firms.
This is the second dispute against China for which the United States has requested a WTO dispute settlement panel. Last September, the United States, joined by Canada and European countries, asked for a hearing on China's local "discriminatory charges" on imported auto parts.