U.S., China resolve tax dispute over semiconductors
China has agreed to end its policy of favoring domestic semiconductor manufacturers through tax refunds for integrated circuits that the United States complained forced U.S. exporters to pay up to five times as much in tax.
U.S. exports of integrated circuits to China were more than $2 billion in 2003.
The Office of the U.S. Trade Representative announced the agreement Thursday, which resolves the first World Trade Organization case filed against China by any WTO member.
The March complaint to the WTO noted that U.S. exports of integrated circuits to China are subject to a 17-percent value-added tax. Chinese firms are allowed to obtain a partial refund of the VAT, leaving the effective rate on domestic products as low as 3 percent in many cases.
Effective immediately, China will no longer offer new VAT refunds that favor semiconductors designed in China. By April China will stop providing VAT refunds on Chinese-produced semiconductors to current recipients.
“Today’s agreement … will ensure that our high-tech firms have full access to one of our fastest growing markets,” Trade Representative Robert Zoellick, said in a statement.