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Sino-US Negotiation on Chip Disputes Faces New Challenge

Sino-US trade disputes have taken a new turn. The US unilaterally filed a complaint against China at the World Trade Organization, alleging that China's tax policies have unfairly limited US semiconductor manufacturers' profits.
Alarm bells started ringing when a reporter with a leading Chinese newspaper called the US trade representative office late last week, asking them to comment on speculation of an imminent complaint against China. Soon after, a spokesman with the world trade body confirmed the news.

"We received from the United States a request for formal consultations under the disputes settlement understanding with China."

The issue is a sensitive one because China and the US have been trying to solve their disparities over semiconductors through talks and negotiations since last year. The US side says China's current tax policies have held back US exports. China offers domestic semiconductor manufacturers tax refunds of up to 14 percent. However, imports of semiconductor chips are subject to full tax rates.

When hearing about the US unilateral move, spokesman for China's Ministry of Commerce, Chong Quan, expressed his incomprehension.

"China and the US have been carrying out several rounds of negotiations on the semiconductor issue. We have also seen some progress. Such an abrupt, unilateral move was totally beyond China's expectations. China is carefully studying the consultation request by the US"

The U.S is asking for remedy for losses, which it claims, stood at some 340 million dollars last year.

So far there is no news on whether the WTO will adjudicate the complaint. But the US side has said it is certain, as both countries are WTO members.

Under WTO rules, if the two parties cannot solve disputes through consultation within the two months following the formal complaint, the world trade body will form a panel to carry out investigation. And the final ruling is expected in at least one year.

(CRI March 22, 2004)

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