04/03/2006, 00.00
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Looming trade war between China, US and EU

The EU has imposed import tariffs on Chinese shoes while together with the US it is appealing to WTO against Chinese tariffs on car parts. Meanwhile, China will acquire 20,000 tons per year of uranium from Australia.

Beijing (AsiaNews/SCMP) – Differences between China and the West on trade matters are rising. The European Union has introduced duties on Chinese shoes and together with United States it is calling for the intervention of the World Trade Organisation (WTO) against the imposition of tariffs on car parts imports used to make cars in China. Meanwhile, Tokyo has accused China of posing a military threat as Beijing is busy acquiring uranium from Australia.

Starting on April 7, the EU will apply import duties on shoes from China (19.4 per cent) and Vietnam (16.8 per cent), because it contends that the two countries are selling their wares below cost. In China, there are more than 20,000 companies that produce leather shoes, with an export volume worth 33 billion US dollars in 2005, a 20 per cent increase over 2004. The EU accuses Chinese firms of enjoying unfair state subsidies like low-cost financing, tax exemptions and export incentives.

These moves have drawn anger, concern and bitter criticism from the eastern city of Wenzhou, China's shoe capital.

"They have no proof or legal grounds [to impose taxes]," said Chen Zengxin, director of Kangnai Group, a leading shoe manufacturer that produced six million shoes in 2005 and employs 4,000 workers. "This decision damages the interests of Chinese firms but also of European consumers."

Chen added that firms have prepared a counter-strategy that involves exporting their goods to Europe through a third country, thus avoiding having to pay duties.

The US and the EU have in recent days turned to the WTO to tackle the "illegal imposition" of tariffs on foreign car parts used in assembly plants in China. Beijing must respond to this charge in the coming days and if an agreement is not reached, the matter will pass into the hands of the WTO.

Both the EU and the US complain that Beijing has failed to fully open its domestic market, while Chinese products have flooded their markets. Moreover, Washington has accused China of keeping its currency too low and not stopping the widespread counterfeiting of expensive Western brand name products.

In a bid to "resolve trade differences", Beijing announced its intention to reduce the tax on foreign cars (from 30 to 28 per cent) and other goods (like cosmetics, palm oil and spare parts for cars), said Huo Jianguo, vice director-general of the Department of Foreign Trade on April 1. It will also grant preferential credit to encourage imports.

Chinese Prime Minister Wen Jiabao, who is on a four-day visit to Australia, signed an agreement today in Canberra for the acquisition of uranium – 20,000 tons per year starting in 2010.

Australia has around 40 per cent of the world's uranium and is selling it to China for "exclusively peaceful use", Downer said.

Beijing already imports iron, copper, aluminium and coal from Australia and, since June, liquefied natural gas.

Australia sells uranium to 35 countries on condition that it not be used to manufacture arms.

For some time now, China has been saying it wants to quadruple its production of nuclear energy by 2020.

But for Japan, China is a military threat, Foreign Affaire Minister Taro Aso said yesterday. Aso criticized the rapid increase in military spending and the lack of transparency in how the money is spent. Beijing has approved a defence budget of 280.7 billion yuan for 2006, a 14.7 per cent increase over 2005. 

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