U.S. files trade case against China

[Ron Burgundy]

AP - The Bush administration filed a complaint with the World Trade Organization on Friday accusing China of providing companies with improper subsidies that hurt U.S. firms.

The action came as the administration faced increased pressure from the Democratic-controlled Congress to do something about the nation's soaring trade deficits and lost manufacturing jobs, which critics blame in part on unfair trade practices by foreign nations.

The complaint alleges that China uses WTO-illegal tax breaks to encourage Chinese companies to export more to the United States while imposing tax and tariff penalties to limit purchases of U.S. products in China.

"We are seeking to level the playing field to allow U.S. manufacturers to compete fairly with Chinese firms," U.S. Trade Representative Susan Schwab said in announcing the case.

"The United States believes that China uses its basic tax laws and other tools to encourage exports and to discriminate against imports of a variety of American manufactured goods," Schwab said.

The decision to go to the WTO with a trade complaint will trigger a 60-day consultation during which trade negotiators will try to resolve the dispute. If that fails, a WTO hearing panel will be convened and if the U.S. wins the case, it will be allowed to impose economic sanctions on Chinese products.

Schwab's announcement came two days after Treasury Secretary Henry Paulson faced stiff questioning before a congressional panel, where both Democrats and Republicans accused the administration of doing too little to deal with America's record trade deficits including deficits with China which are at all-time highs.

While an official with China's delegation to the WTO in Geneva said the Chinese would have no immediate comment on the case, members of Congress and U.S. business groups praised the action.

"Forcing China to eliminate its illegal subsidies will keep world markets open to U.S. goods, keeping jobs at home," said Senate Finance Committee Chairman Max Baucus (news, bio, voting record), D-Mont.

"This case represents a step in the right direction, but it must be part of a much more aggressive program to take actions against violations of WTO obligations," said Rep. Sander Levin (news, bio, voting record), D-Mich. and the head of a House Ways and Means trade panel.

John Engler, the former Michigan governor who is now head of the National Association of Manufacturers, said he was disappointed that other major trading partners including Japan and the European Union refused administration requests to join in filing the case.

"We hope that other countries will reconsider joining the case, recognizing it is not fair to have the United States do all the heavy lifting," Engler said.

The case against China on subsidies is the second WTO case the administration has filed in the past year. Last March, it filed a case accusing China of using a WTO-illegal tax system to block imports of U.S. and other foreign-made auto parts into China.

Two other potential WTO cases involving Chinese barriers to sale of U.S.-made computer chips and linerboard were resolved before dispute panels were convened.

Paulson told the Senate Banking Committee on Wednesday that he believed a high-level dialogue that was begun last December with top Chinese officials offered the best approach to dealing with America's trade problems with China.

The administration has been trying to get China to allow its currency to rise in value against the dollar. U.S. manufacturers contend that the Chinese currency, the yuan, is undervalued by as much as 40 percent, giving Chinese products a huge competitive advantage against American goods.

Paulson announced Friday that Undersecretary Timothy Adams, the department's top official on China and other international issues, was resigning.

Adams, who also served under former Treasury secretaries Paul O'Neill and John Snow, said requirements of the international job, with its extensive travel, were "simply incompatible" with his responsibilities to his wife and three young children.

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On the Net:

U.S. Trade representative: http://www.ustr.gov

source: http://news.yahoo.com/s/ap/20070202/ap_on_go_pr_wh/us_china_trade [link]