China's Chip Designs Concern U.S.
SHANGHAI — China's drive to become a leading global supplier of semiconductors within a decade is rapidly propelling that nation up the technology ladder -- and creating new trade tensions with the United States.
U.S. high-tech industry executives contend that China has an arsenal of unfair tactics at its disposal, including complicated, China-only technical standards that are in the works and a tax they say discriminates against foreign chip makers.
At the urging of U.S. producers, the Bush administration is considering filing its first complaint against China with the World Trade Organization, arguing that the tax violates world trade rules. Nicholas Lardy, a China specialist at the Institute for International Economics in Washington, called the tax "a fairly straightforward" WTO violation having "great economic significance" to the United States.
The unbalanced trade across the Pacific has been a thorn in the bilateral relationship. Expanding imports from China contributed to a record U.S. trade deficit of $43.1 billion in January, according to data released Wednesday by the Commerce Department. Overall U.S. imports were down slightly to $132.1 billion, but exports also declined to $89.05 billion despite the weaker dollar, which makes U.S. products cheaper overseas. The U.S. trade deficit with China widened to $11.5 billion in January, a 6.6% gain.
As further evidence of the growing tensions, Secretary of State Colin L. Powell, Commerce Secretary Don Evans and U.S. Trade Representative Robert B. Zoellick took the unusual step of sending a letter this month to Chinese Vice Premiers Wu Yi and Zeng Peiyan urging Beijing to repeal a proposed encryption standard for wireless communications products set to take effect June 1. The U.S. officials said the new security standard violated world trade rules.
Industry leader Intel Corp. said Wednesday that it had warned customers that it would quit shipping its wireless chips to China in May because it could not comply with the proposed new standard. Intel spokesman Chuck Mulloy said the Santa Clara, Calif.-based company had determined that it could not find a way to comply without compromising the quality of its products.
"These are both very serious issues that need to be resolved quickly," said Patrick Powers, director of China operations for the U.S.-China Business Council, referring to the tax and wireless standard. The stakes in the dispute are high.
