February 03, 2007	Saturday	Muharram 14, 1428

WASHINGTON, Feb 2: The US government on Friday signalled a sharp escalation in its trade frictions with China by filing a WTO action against the fast-growing Asian economy over “illegal” industrial subsidies.

“Our decision to bring this case to the WTO comes after our efforts at dialogue failed,” US Trade Representative Susan Schwab told reporters.

“The case is important because we are seeking to level the playing field to allow US manufacturers to compete fairly with Chinese firms,” she said.

The decision heralds a shift in US policy away from quiet negotiations with China on a host of trade frictions including Beijing’s currency regime, at a time when the Democratic-led Congress is ratcheting up angry rhetoric on trade.

The USTR office said it was seeking formal dispute settlement from the WTO to remedy tax and other tools allegedly used by China “to encourage exports and to discriminate against imports of a variety of American manufactured goods.”

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, it said.

“This case is about standing up for America’s workers and manufacturers,” Schwab said.

The case is only the third time that the United States is taking China to the Geneva-based arbiter of global trade since the Asian powerhouse joined the World Trade Organisation in 2001.

The first case, involving China's tax treatment of computer chips, was resolved before it reached the formal WTO dispute stage. But the second, a case against Chinese auto tariffs, is now awaiting arbitration with the United States joined by Canada and the European Union in its suit against China.

In an annual report on Thursday, the USTR office and the Commerce Department attacked China for being “unwilling to commit to the immediate withdrawal of the prohibited subsidies in question.”

In October, US industry filed a petition with the Commerce Department requesting a “countervailing duty” be slapped on some Chinese paper imports. To apply such a duty, the commerce department says it must first rule that China is officially a “market economy.”

Last week, 23 US senators told the commerce department to go ahead with special duties on imports from China, which they claimed were heavily subsidised by the state and were hurting US manufacturers and workers.

“We believe firmly that the countervailing duty law should be applied to China, and that the Department of Commerce possesses the legal authority to do so,” the senators said in the letter, a copy of which was obtained by AFP.