China Claims Politics Behind U.S., Mexico WTO Cases

North American countries accuse Beijing of using World Trade Organization-prohibited tax breaks to encourage boost in Chinese exports.

BEIJING (AP) — China said Tuesday domestic politics were behind bids by the U.S. and Mexico to have the World Trade Organization open investigations into allegations Beijing provides illegal subsidies for a range of industries.
The WTO set up an expert panel Friday to probe the charges.
The two countries accuse Beijing of using WTO-prohibited tax breaks to encourage Chinese companies to boost exports, while imposing tax and tariff penalties to limit purchases of foreign products in China.
The Commerce Ministry said in a statement posted on the government's main Web site that the allegations were based on ''huge misunderstandings.''
''Their actions are motivated by domestic politics. They attempt to mix up the self-improvement in China's tax laws and regulations with the fruits of the WTO's dispute settlement mechanism,'' the statement quoted an unnamed commerce spokesman as saying.
The administration of U.S. President George W. Bush — later joined by Mexico — brought the complaint to the WTO earlier this year amid pressure from the Democrat-controlled U.S. Congress to do something about America's soaring trade deficits and lost manufacturing jobs, which critics blame in part on unfair trade practices by foreign nations.
The U.S. trade deficit set a record for the fifth consecutive year in 2006 at US$765.3 billion (euro553.24 billion). The imbalance with China grew to US$232.5 billion (euro168.08 billion), the highest ever with a single country.
The WTO could take months — and possibly years — to reach a final ruling that would open the door to retaliatory sanctions.
A WTO panel is already examining a complaint by the United States and the 27-nation European Union on whether China maintains an illegal tax system to block imports of foreign-made auto parts into China. A first decision in the dispute — first registered in October 2006, five years after Beijing's 2001 entry into the WTO — is expected late this year or in early 2008.
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