Contact:

Robert Kapp, 202-429-0340
Jeremie Waterman, 202-429-0340

US-CHINA BUSINESS COUNCIL WELCOMES RESOLUTION
OF CHINA SEMICONDUCTOR DISPUTE

(Washington, July 8, 2004) The US-China Business Council today welcomed Washington's announcement that a long-simmering dispute between the United States and China over semiconductors had been resolved on terms satisfactory to US producers.

The Office of the US Trade Representative today disclosed that lengthy negotiations with Beijing had produced a signed agreement calling for China's elimination of tax policies that the United States and other countries claimed discriminated against imported semiconductors. China, already a huge market for computer chips, has progressed rapidly in domestic semiconductor production in recent years, but remains heavily dependent on foreign imports vital to its technological modernization.

In March, the United States took its grievances to the World Trade Organization (WTO), which China joined in late 2001. The settlement announced today means that the United States will not pursue the matter further with the Geneva-based WTO.

Robert Kapp, president of the US-China Business Council, noted the new agreement with satisfaction.

"That this case was settled before the long, complex, and expensive WTO dispute resolution mechanism was fully deployed is good news for both sides. This is, in fact, not only a solid achievement by US Trade Representative Robert Zoellick and his team, but also a victory for the WTO and a vindication of China's membership in the world trade body. All American businesses active with China take heart when difficult disputes involving Chinese commercial behavior are resolved through mature, energetic negotiation under the framework of the WTO.

"Only the strongest, most air-tight cases should rise to the level of American initiation of WTO dispute resolution against China, if the benefits to the US of a strong and stable global trading system are to be fully realized. Looking ahead, it will be up to the American administration to continue to apply strict standards to future complaints, which today's resolution are likely to render more numerous.

"Moreover, the rising tide of US antidumping actions against China also raises the specter of deepening trade frictions and further disillusionment. At the very least, we can expect China to act increasingly often against US imports under China's own antidumping regime, which is modeled heavily on our own. The antidumping fever, while legal under US law and politically potent, has its own dynamic and its own volatility that may not serve the broader interests of the US economy.

"Furthermore, while the lengthening track record of successful negotiations over difficult trade issues is testimony to the maturity and the seriousness with which conscientious US and Chinese professional counterparts are learning to work together, the two Administrations ought to apply these learned behaviors to other areas of the US-China relationship that are today in much more serious trouble. We are concerned that the Taiwan situation in particular may be drawing our two nations down a darkening path that neither should be seeking to travel. The US-China Business Council hopes that the ability of the two nations to manage major trade disputes will augur well for their ability to manage other frictions which, improperly addressed, could threaten the larger interests of both nations and the world as a whole."