BEIJING: China’s Commerce Ministry on Wednesday expressed regret over the U.S. challenge against Beijing’s allegedly discriminatory taxes on smaller aircraft, and said it would handle the dispute in accordance with international trade rules.
The comments came a day after U.S. Trade Representative Michael Froman sought formal consultations with China through the World Trade Organization, over what Washington describes as Beijing’s preferential tax policies for its domestic aerospace industry. U.S. officials say China levies taxes on imported smaller planes while homemade aircraft are exempt.
“China has always respected WTO rules, and insists on promoting the development of the aerospace-manufacturing industry in a manner that complies with WTO rules,” an official at the commerce ministry’s treaty and law department said in a statement.
Beijing will handle the U.S. challenge “in accordance with the WTO’s dispute-settlement procedures,” the official said.
The U.S. alleges that China imposes a 17% value-added tax, or VAT, on imported aircraft, hurting U.S.-made smaller planes and part makers, while exempting the country’s domestic producers. China is working to build up its domestic aviation industry to reduce its reliance on American and European aircraft.
U.S. officials said China hasn’t been transparent about the taxes on planes, and part of the case is based on Beijing’s transparency requirements under international trade agreements. If formal consultations don’t resolve the dispute, the U.S. could bring the matter to arbitration at the WTO, based in Geneva.
The trade dispute comes as the Obama administration seeks to prioritize the enforcement of existing trade rules amid efforts to bring a sweeping Pacific trade agreement that doesn’t include China to a congressional vote next year. The 2016 election season is already complicating the politics of trade, with Donald Trump and other candidates repeatedly accusing China of violating global economic and trade norms.
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