US challenges China at WTO over aircraft tax policy

WASHINGTON - The United States has launched dispute settlement proceedings at the World Trade Organization (WTO) by requesting consultations with China over its different tax policy on foreign aircraft versus planes produced in China, a top US trade official said Tuesday.

US Trade Representative (USTR) Michael Froman said that China imposes a 17 percent value-added tax (VAT) on imported aircraft generally weighing under 25 metric tons while exempting such aircraft made in China from the tax.

The Chinese government has also failed to publish its tax exemptions for domestically produced aircraft, he added.

"Transparency of laws and regulations impacting trade is a core WTO commitment that China must uphold, just as it expects other countries to do," Froman said. "For these reasons, the United States is filing a trade enforcement case to hold China accountable."

Consultations are the first step in the WTO dispute settlement process. If the United States and China are not able to reach a mutually agreed solution through consultations, the United States may request that the WTO establish a dispute settlement panel to examine the matter.

In a briefing with reporters, US trade officials said the United States exported about half a billion US dollars' worth of small- to mid-sized aircraft to China in the past three years, and they see China's newly self-developed regional jet ARJ21 as a competitor against US aircraft in the future.

The USTR's request came as US House and Senate lawmakers are nearing an agreement on a trade customs and enforcement bill, which would help strengthen US trade enforcement.

The House and Senate have passed different versions of the customs and enforcement bill, but have yet to reconcile their differences to pass a final measure.

"Today's case is an important confirmation that enforcement matters. At the same time, I will continue working through the customs conference committee to give USTR even more enforcement tools," said Dave Reichert, chairman of the House Ways and Means Subcommittee on Trade.

The Chinese Ministry of Commerce has repeatedly urged the United States to abide by its commitment against trade protectionism and work together with China and other members of the international community to maintain a free, open and just international trade environment.