US Objects To Chinese Tax On Textile Exports

by Leroy Baker, Tax-News.com, New York

12 January 2005

The United States government has criticised the new Chinese textile export tax, judging it as insufficient to have an economic impact.

Speaking during a visit to Hong Kong, US undersecretary for international trade Grant Aldonas also said he believed the new tax contravenes WTO rules.

"A 2-4 percent export tax is technically illegal under WTO," he stated.

China imposed a tax of between 0.2 yuan (US$0.024) and 0.5 yuan (US$0.060) on 148 textile products from January 1, 2005 in a bid to allay fears from the US and European Union that markets will be flooded with cheap Chinese products after the dismantling of a thirty-year-old system of textile quotas.

However, Aldonas argued that the tax would have little effect on Chinese exports to the US, and called on the Chinese government to deregulate its textile industry and eliminate rebates and other incentives for domestic producers to level the playing field.

"Liberalisation would force China up the value chain," Aldonas commented.

Under WTO rules, the US may impose annual limits on Chinese textile imports until 2008. However, a federal court ruling has so far prevented the Commerce Department from restricting Chinese imports.

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