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US hauls China before WTO over subsidies

The US accuses China of using tax breaks and other tools to encourage exports, and to discriminate against imports of US manufactured goods.

india Updated: Feb 03, 2007 15:43 IST

The United States on Friday accused China of illegally subsidising exports to the US and hauled China's government before the World Trade Organization, escalating a simmering dispute.

US-Chinese talks to resolve the issue have failed, prompting the US to ask China for dispute settlement talks at WTO "over China's use of what we contend are illegal subsidies," US Trade Representative Susan Schwab said.

The US accuses China of using tax breaks and other tools to encourage exports and to discriminate against imports of US manufactured goods.

"The United States repeatedly raised its concerns with Chinese officials, but China has taken no steps to withdraw these measures," the US trade office said in a statement.

The subsidies are available for all Chinese-made products, such as steel, wood, paper and other manufactured goods, and Beijing also offers Chinese companies incentives to buy equipment and accessories from domestic firms rather than US rivals, the US says.

"These measures appear to be contrary to a number of WTO rules," the US statement said.

Seeking WTO consultations is the first step when nations take a dispute to the rule-making body of world trade. If no settlement is reached, WTO can launch an inquiry and recommend penalties.

It is the third time the US has gone to WTO in a dispute with China, which joined the 150-nation trade body in Dec 2001.

The dispute is flaring as displeasure with Chinese trade practices grows in the US Congress, where lawmakers worry that Chinese imports are wiping out US jobs and have accused Beijing of keeping its currency artificially low to make its products cheaper to buy abroad.

Democrats, who won control of both chambers in November elections, have long been hawkish on trade, but President George W. Bush's Republicans have joined in criticism of China.

"This case is about standing up for America's workers and manufacturers," Schwab said.

Americans' appetite for Chinese goods is fuelling record US trade deficits. The US trade gap is largest with China, rising to an estimated $230 billion in 2006 - an all-time high.

Anger at Beijing surfaced Wednesday at a Senate hearing in Washington, where lawmakers pressed US Treasury Secretary Henry Paulson to get tougher with China.

Paulson told the Senate Banking Committee he shares its frustration about what many US policymakers view as China's slowness on market reforms and revaluing its currency.

"The international community will run out of patience with China unless the pace of its reform accelerates," he told the panel.

"China must live up to its WTO commitments" and do more to protect intellectual property rights, open its markets and "observe the law," he said.

Republican Senator Jim Bunning put it more bluntly.

"They'll engage you, talk to you, talk to you until you're blue in the face, but we're not getting any results," he said at the hearing.