The US government on February, 2 signaled a sharp escalation in its trade frictions with China by filing a WTO action against the fast-growing Asian economy over illegal industrial subsidies. The case is important because they are seeking to level the playing field to allow US manufacturers to compete fairly with Chinese firms.

The decision heralds a shift in US policy away from quiet negotiations with China on a host of trade frictions including Beijings currency regime, at a time when the Democraticled Congress is ratcheting up angry rhetoric on trade. It was seeking formal dispute settlement from the WTO to remedy tax and other tools allegedly used by China to encourage exports and to discriminate against imports of a variety of American manufactured goods.

State subsidies for steel, paper, information technology and other industries allow China to export its goods on the cheap and so prevent US companies from competing fairly, both at home and in third markets. The case is only the third time that the United States is taking China to the Genevabased arbiter of global trade since the Asian powerhouse joined the World Trade Organization in 2001.

The first case, involving Chinas tax treatment of computer chips, was resolved before it reached the formal WTO dispute stage. But the second, a case against Chinese auto tariffs, is now awaiting arbitration with the United States joined by Canada and the European Union in its suit against China.