LONDON -- The European Union (EU) has joined with the United States in a complaint against China put before the World Trade Organization, over value added tax (VAT) on sales of integrated circuits, according to a Bloomberg report issued Wednesday (March 31, 2004).
China imposes 17 percent VAT all semiconductor sales but chips made in China qualify for an 11 percent rebate of the VAT and chips that are designed as well as made in the country qualify for a 14 percent rebate. The U.S. has complained, and is now backed by the EU according to reports, that this practice discriminates against U.S. and other foreign chip vendors and is an artificial barrier to trade.
The reason the 15-state union decided to support the U.S. complaint, was the "systemic implications of China's actions," the report quotes Isabel Ramallo, a Beijing-based spokeswoman for the EU, as saying.
The Chinese government this week agreed to talks with the U.S. over the controversial tax, after earlier criticizing the U.S. for mounting the action (see March 26 story).
"We cannot say that the EU is being economically affected because most of our chipmakers are already established in China," the report quotes Arancha Gonzalez, European Commission spokeswoman for trade, as saying. "But we have a systemic interest in that it may be chips today but tomorrow apply to other products where we do have an interest."
As a third party to the complaint the European Union will have access to information about the case, and can make its own submissions, the report quoted Ramallo as saying.