Trade
Effective immediately, China will not certify any new semiconductor products or manufacturers for eligibility for VAT refunds. China will no longer offer VAT refunds that favour semiconductors designed in China. By April 1, 2005, China will stop providing VAT refunds on Chinese-produced semiconductors to current beneficiaries.
The resolution will ensure full market access and national treatment for US devices in China. The US Trade Representative at the WTO says that China represents a market worth more than $2bn to the USA. The agreement resolves the first WTO case filed against China by any WTO member.
Under China's tax policy, importers of integrated circuits into China paid up to five times as much tax as local manufacturers. VAT on ICs in China without refunds stands at 17.5%. Refunds on locally produced devices could reduce this to as low as 3%.
US Trade Representative Robert B Zoellick says: "America is the global innovator. American ingenuity has spurred far-reaching gains in human achievement, and we need to ensure that there is a level playing field so that our innovators and manufacturers continue to lead the world."
The agreement, once implemented, will resolve the case that the United States initiated at the WTO on March 18, 2004, and is the culmination of several rounds of discussions between negotiators and legal experts from the two countries. Third parties Japan, the European Union and Mexico also participated.
