Zoellick also addressed the ongoing dispute with China over a wireless network encryption proposal scheduled to take effect on June 1.

China has adopted discriminatory tax policies ?most blatantly onsemiconductors ?and new wireless network encryption standards intended to block U.S. market access. We are pressing China to resolve these disputes promptly,?Zoellick told the House Ways and Means Committee on Thursday (March 11).

Imported chips are subject to a 17 percent value-added tax (VAT) in China. Domestically produced chips have only a 6 percent VAT, one of several factors fueling China's boom in fab construction. The 17 percent VAT is slated to be reduced in the next three to four years as China adheres to World Trade Organization rules governing international commerce. But domestic foundries are taking advantage of this tax differential, U.S. industry groups complain.

The Semiconductor Industry Association issued a report last October detailing what it said is Discriminatory?Chinese tax rebate that distorts trade investments and imposes a cost penalty for semiconductor importers trying to compete for sales in China.?

Zoellick's comments on the wireless network crypto standard follow the release of a letter last week by the Bush administration to Chinese officials designed to pressure Beijing to drop the controversial proposal. Intel Corp. and other communications chip makers said earlier this week they would stop shipping wireless chips to China if the government proceeds with its Wired Authentication and Privacy Infrastructure proposal.

By: DocMemory
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