China Agrees to Resolve Dispute Over Tax Breaks

The Bush administration, proclaiming a triumph for its trade policy, said yesterday that China has backed down in a dispute over computer chips about which Washington lodged a complaint with the World Trade Organization.

Beijing agreed to stop giving tax breaks to domestic producers of semiconductors that it doesn't give to companies that export such products to China, U.S. Trade Representative Robert B. Zoellick announced. The dispute was resolved less than four months after it was filed as the first WTO case against China, which joined the organization in late 2001.

"The decision means fair treatment for America's high-tech exporters in a very large but fast-growing market," Zoellick said at a news conference, at which he was joined by representatives of the semiconductor industry.

The announcement had heavy political overtones, as Zoellick stood on a podium with "Real Results" emblazoned on a banner behind him. Those words, which Zoellick used frequently during his remarks, were a reply to the Democratic presidential candidate, Sen. John F. Kerry (D-Mass.). Kerry has attacked the administration for being "asleep at the wheel" in not enforcing trade laws more aggressively and not filing more WTO cases, especially against China's trade practices.

The Kerry campaign dismissed the significance of the settlement announced yesterday. "It's too little, too late," said Phil Singer, a spokesman. "In 2001, 2002 and 2003 the administration's own reports cited China for flagrant violations of the trade rules on semiconductors, but they waited until an election year to file the first WTO case on the issue." By not acting earlier, Singer said, "the administration sent the wrong message to the Chinese, allowing them to continue with unfair trade practices."

Zoellick made no apology for the administration's trade policy. "There have been some that have tried to measure [the toughness of U.S. policy] by the number of cases that have been brought," Zoellick said. "That's not our approach. . . . We have produced real results that have produced increased sales for our companies to China."

The United States is content to negotiate with Beijing but when China balks, the Bush administration isn't afraid to resort to litigation or other such measures, Zoellick said, citing the chip case as an example.

In April, U.S. and Chinese officials agreed on measures that address a number of problems facing U.S. firms that do business in China. The agreement included the acceleration of steps to allow foreign firms to import and export products in China without going through local state trading companies. It also deferred a rule that would have forced some U.S. high-tech companies operating in China to enter joint ventures with Chinese firms and transfer technology to them.

That deal was derided by Democrats as insufficient to stop Chinese practices that cost U.S. jobs.

Yesterday's resolution of the computer-chip dispute came as the potential for another spat with China emerged, concerning the long-running problem of Chinese pirating of U.S. intellectual property. Pfizer Inc. said Wednesday that Beijing withdrew the company's Chinese patent for Viagra.