US files formal WTO complaint on China industry subsidies

WASHINGTON (AFP) - The United States on Thursday requested a formal WTO hearing on Chinese industrial subsidies that US officials said violated global trading rules.

The request for a World Trade Organization dispute settlement panel came after Washington initiated a complaint in February on what it called "illegal" subsidies on a variety of products.

"Although our two rounds of WTO consultations with China have been constructive, they have not resolved our concerns about China's apparent use of trade-distorting subsidies that it pledged to eliminate upon joining the World Trade Organization," said Sean Spicer, spokesman for the office of the US Trade Representative (USTR).

"China has taken a positive step by repealing one of the subsidy programs we challenged, but much more needs to be done.

"We continue to prefer a negotiated settlement to this dispute, but without assurance of complete corrective action by China, we must continue to pursue the WTO process to enforce our rights."

State subsidies for steel, paper, information technology and other industries allow China to export its goods on the cheap and so prevent US companies from competing fairly, both at home and in third markets, US officials say.

The announcement comes amid growing pressure in Washington to respond to a burgeoning trade deficit with China and concerns that Beijing is flouting rules used by most US trading partners.

Figures released earlier Thursday showed the trade gap with China, the giant engine of cheap consumer goods, climbed to 20 billion dollars in May, a gain of 3.3 percent from April.

Last week, Secretary of State Condoleezza Rice said China "doesn't play fair" in trade and that Washington would not hesitate to take action against Beijing to respond to WTO violations.

The USTR said Mexico joined the United States in the dispute on February 26 and before joint consultations were held on March 20.

US officials said China eliminated one of the subsidy programs challenged in the complaint, but also adopted a new income tax law providing additional tax breaks for qualifying Chinese firms.

This is the second dispute against China for which the United States has requested a WTO dispute settlement panel. Last September, the United States, joined by Canada and European countries, asked for a hearing on China's local "discriminatory charges" on imported auto parts.