China Blocks First Move In WTO Auto Parts Tussle

China blocked on Sept. 28 an attempt by the EU, U.S. and Canada to seek a World Trade Organization ruling on the legality of Beijing's tariffs on auto parts. During a regular meeting of the WTO dispute settlement body, China opposed the request to set up a panel of experts to referee the trade tussle.

Such a move is allowed under the rules of the 149-nation WTO, which tries to resolve disagreements over international commerce. However, WTO members can only use the blocking tactic once and panels are usually created at the following dispute settlement body session. The next session is due in October, and the potential panel would thereafter have six months to issue its ruling.

The auto parts complaint is only the second against China since it joined the WTO at the end of 2001. In March 2004 the U.S. took China to the WTO over what it said were Beijing's tax breaks for Chinese computer chip makers, but the two sides negotiated an end to the dispute four months later and the WTO was never called in.

But Brussels, Washington, Ottawa and Beijing failed to settle the auto parts issue in direct negotiations, and the aggrieved trio announced on September 15 that they were turning to the WTO. The three plaintiffs claim that the tariff regime puts their car manufacturers at a disadvantage compared to local Chinese producers when they import spare parts. The plaintiffs claim that the rules are an underhand way of imposing a quota of at least 40% of Chinese-made spare parts on cars that are built in China, in breach of Beijing's obligations as a WTO member. WTO rules forbid governments from forcing companies to source products locally.

China has countered that the regulations are aimed at preventing criminals from using the difference in import tariffs on entire cars and on auto parts to escape customs supervision and evade taxes.

Copyright Agence France-Presse, 2006

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