U.S. files WTO cases against China, Mexico
The U.S. government filed a case at the World Trade Organization calling for China to end its tax rebate policy for domestic integrated circuits, and filed another dispute over Mexico's beverage sweetener tax.
The U.S. government alleges this policy puts U.S. integrated circuit exporters at a disadvantage in the China market, and it’s inconsistent with China’s national treatment obligations as a WTO member.
“U.S. manufacturers of semiconductors and other products have a right to compete on a level playing field with Chinese firms,” said U.S. Trade Representative Robert B. Zoellick in a statement. “As a WTO member, China must live up to its WTO obligations; it cannot impose measures that discriminate against U.S. products.”
U.S. companies exported $2.02 billion worth of integrated circuits to China in 2003, which the Chinese government subjected to a 17-percent value-added tax, costing about $344 million.
Chinese integrated circuit board producers were allowed to obtain a partial refund of the 17 percent tax, reducing the tax rate for these companies to as low as 3 percent.
According to the USTR, China’s integrated circuit market is valued at $19 billion, the world’s third-largest. Although imports represent about 80 percent of China’s market, its semiconductor industry is expanding rapidly, with substantial investment from foreign firms, the USTR said.
The filing of the U.S. government’s case with the WTO Thursday marks the beginning of a 60-day consultation period required under WTO rules.
The U.S. government has also taken a dispute over Mexico’s beverage sweetener tax to the WTO.
The U.S. government alleges that Mexico’s beverage sweetener tax is inconsistent with the country’s obligations in the WTO to apply taxes on comparable domestic and imported products in a non-discriminatory manner.
“Mexico’s beverage taxes are discriminatory and protectionist,” Zoellick said in a statement. “We attempted to settle this dispute through negotiations, in close consultation with our industry. Unfortunately, the negotiations did not resolve the matter, so now it is time to enforce our rights in the WTO.”
Only beverages that contain high fructose corn syrup or any other sweetener than cane sugar are subject to Mexico’s 20-percent sales tax and 20-percent distribution tax. The tax, which Mexico approved in January 2002, has effectively squeezed U.S. high fructose corn syrup manufacturers out of the Mexican market. In 2003, U.S. exports were 4,111 metric tons, valued at $1.5 million.
The beverage sweetener tax war with Mexico dates back to the mid-1990s when U.S. manufacturers began shipping large quantities of high fructose corn syrup to Mexican soft drink bottlers. In1997, U.S. exporters shipped 193,519 metric tons of high fructose corn syrup to Mexico, valued at $63 million.
In 1998, Mexico imposed antidumping duties on imported U.S. high fructose corn syrup. The United States challenged these antidumping duties in the WTO and won the case.