Tax Competition, Trade Friction And The Trade Tax Competitiveness Of China

China's foreign trade has developed fast since its entry into WTO. When China became the third big trading country in the world in 2004, it also entered into the period of confronting frequent trade frictions. China became the first big exporting country surpassing Germany in 2009, when it was also the country confronting the most trade frictions and lost the most because of trade frictions in the world. The other countries made trade frictions to China not only limiting the export of products made in China, but also challenging China's all kinds of economic systems and policies, including tax system. China's tax system was often doubted by trade partners in the past several years. For example, the tax cases account for about 40 percent of the 16 trade disputes in which China was as the defendant in WTO. Based on the ground of China's foreign trade development since its entry into WTO, the paper studies the reasons, manifestation, effects and trend of trade frictions concerning tax. Tax competition and tax coordination is the clue of this paper, which focuses on the relationship between WTO and tax. Based on the study of tax competition and tax coordination in trade, this paper promotes the study to tax competitiveness, which is the key goal.In the part of theoretic analysis, this paper gives the concept of tax concerning free trade and tax concerning protectionism. That means all the taxes affecting international trade are divided into the two types. The trade effects of the taxes, including tariff and internal tax, indirect tax and direct tax, tax of big trading countries and tax of small trading countries, and regional tax integration are discussed respectively. The tax coordination in international trade has two types, one is cooperative coordination and the other one is non-cooperative coordination. Cooperative tax coordination helps to advance the free trade. But the non-cooperative tax coordination mainly aims to encourage export or limit import, which can be looked on as one type of trade competition using the method of tax. So it can also be called tax competition in trade. Tax competition in trade often leads to trade friction. From the perspective of economics, it is the manifestation of Economic Integration Trilemma. From the perspective of law, it is the conflict between taxation law and trade law. Therefore the trade friction concerning tax is to some extents unavoidable. Compared to the other trade frictions, the trade friction concerning tax has the characteristics of sovereignty, systematics and comprehensiveness. It is also different to the international tax dispute. Since the trade friction concerning tax is caused by non-cooperative tax coordination, it needs the cooperative tax coordination to resolve. That means WTO will strengthen the intervention of the tax laws of sovereign countries, which in turn weakens the sovereign tax right of one country. The tax coordination with WTO rules is divided into two types, one is passive and the other one is active. Passive coordination means abiding by the WTO rules, while the active coordination focuses on the use of rules for the benefit of own country besides abiding rules. Looking forward to the future of tax coordination, WTO will continue to interpose the tax of countries. It is possible to establish one type of system to give up tax sovereign under the WTO. The tax coordination in trade may also develop between cooperativeness and non-cooperativeness.In the part of practical analysis, on the one hand, under the background of China's trade development and tax system reform, the paper analyses the tax sensibility of export, taking the export tax rebate for instance. First, the describing statistics is used to value the tax sensibility of export. Second, use the overall country trade and tax data to make the analysis of time series. Third, use the 31 province data to make the panel analysis. It is good that the result of different analyses is almost the same. It is testified that China's export has high sensibility of export tax rebate. On the other hand, this paper put forward the concept of trade tax competitiveness based on the concept of tax competition and tax coordination. The tax system of one country should have high international competitiveness if it combines competitiveness and coordination. After the study of meaning, characteristics, factors and value index of trade tax competitiveness, the questionnaire is designed and used to make investigation in more than 100 trade companies in Shanghai. According to the investigation result and theoretic analysis, this paper thinks China's current trade tax competitiveness has some shortcomings. Both the competitiveness and international coordinating ability are to some extents weak. The frequently changed export rebate policies are doubtable from the perspective of competitiveness. The international coordinating ability of China's tax system needs to improve.In the part of case analysis, this paper focus on the three tax disputes since China's entry into WTO. Besides, making some comparison of China's cases and tax cases in other countries, including the famous DIS,FSC,ETI tax cases of U.S. After the study of the tax issues which often leads to the trade frictions under WTO, this paper draws some inspirations.In the end, based on the study of the above theoretic and practical analysis, some conclusions and advises are made. It is suggested to establish strategic trade tax system of China, which includes tax competition, tax coordination and anti-harmful tax competition, and aims to improve the international tax competitiveness of China.