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WTO expected to launch probe of alleged Chinese industrial subsidies

WTO expected to launch probe of alleged Chinese industrial subsidies

The World Trade Organization will almost certainly open a formal investigation Friday into U.S. and Mexican allegations that China is providing illegal subsidies for a range of industries.
The North American countries will make their second request for an investigative panel at a meeting of the WTO's dispute settlement body. China blocked a first request last month, but cannot under WTO rules delay a panel's establishment a second time.
Beijing, meanwhile, is expected to prevent the global commerce body from launching a separate probe of Chinese rules for protecting intellectual property rights. But the move might only push back creation of a panel until September, when Washington can bring up the issue at the next meeting of the WTO's dispute body.
The two disputes were brought to the global commerce body by the administration of U.S. President George W. Bush as the Democrat-controlled U.S. Congress has stepped up pressure on it 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.
In the subsidies dispute, the U.S. accuses Beijing of using WTO-prohibited tax breaks to encourage Chinese companies to export more to the United States while imposing tax and tariff penalties to limit purchases of U.S. products in China. Mexico later made its own complaint.
"China is providing numerous subsidies that appear to be prohibited under WTO rules," U.S. trade lawyer Juan Millan told the WTO's dispute body last month. "China offers tax refunds, reductions and exemptions that discriminate against imported products ... or that subsidize China's exports."
Beijing rejects all claims of wrongdoing.
The WTO could take months _ and possibly years _ to reach a final ruling that would open the door to retaliatory sanctions.
Washington brought the second complaint, over rampant product piracy in China, back to the WTO earlier this month after consultations with Beijing failed.
China is one of the world's biggest sources of illegally copied goods ranging from movies, music and designer clothes to sporting goods and medications. But the WTO's scope would only focus on whether Beijing has taken sufficient action to combat the intellectual property theft.
The U.S. contends that Beijing's lax enforcement of copyright and trademark protections costs American companies billions of dollars (euros) annually. It argues that China effectively provides a safe haven for pirates and counterfeiters by maintaining "excessively high" piracy thresholds for criminal prosecution.
More U.S.-China trade disputes are pending.
The two countries plan to hold another round of consultations over a U.S. complaint about Chinese restrictions on the sale of American movies, music and books that don't apply to Chinese products. Washington expanded its complaint last month to include what it says are similar discriminatory practices for music downloads and cinema rights that hurt Hollywood studios and U.S. Internet music providers such as Apple Inc.'s iTunes store.
A WTO panel is already examining a complaint by the United States and the 27-nation European Union on whether China maintains a WTO-prohibited tax system to block imports of foreign-made auto parts into China. A first decision in the dispute _ which came as a five-year transition period following Beijing's 2001 entry into the WTO ended _ is expected late this year or early 2008.