US asks WTO to rule on China's chip tax

The US government has filed an official complaint with the World Trade Organisation (WTO) regarding the tax rebates China offers to its domestic chip makers

As reported yesterday, US Trade Representative Robert Zoellick last week said of the tax rebates: "If they don't stop it, we're going to take action."

And that's just what the Bush administration has done. "US manufacturers of semiconductors and other products have a right to compete on a level playing field with Chinese firms," said Zoellick in an Associated Press report. "As a WTO member, China must live up to its WTO obligations."

In 2000, China imposed a 17 per cent sales tax on semiconductors. However, it permits local manufacturers to claim an 11 per cent rebate on the levy. If they design the chips as well as make them, they can claim a 14 per cent rebate. Neither tax break is open to overseas suppliers.

Such preferential treatment for local firms is a violation of WTO rules against discriminatory treatment, the US government claimed.

The Semiconductor Industry Association (SIA), the trade body representing US chipmakers, yesterday welcomed the government's move. It has been calling for some time for the US government to take the case to the WTO.

With the complaint filed, China and US trade representatives now have 60 days to negotiate a settlement. If talks prove unsuccessful, the case will come before a WTO panel. ®

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