China Loses WTO Car Parts Case Against U.S.

WTO found that China follows discriminatory practices against U.S. auto parts.

The World Trade Organization on July 18 said it had ruled against China in a complaint brought by the U.S. over Chinese import tariffs on car parts. The WTO's dispute settlement panel urged China to bring what it termed "inconsistent measures ... into conformity with its obligations."

Beijing has a minimum local content requirement of 60% for home produced cars. If this level is exceeded, it then levies the same tariff on the vehicle as it would if it were imported completely built. China has said the rules aim to prevent tax evasion by companies that import whole cars as spare parts to avoid higher tariff rates. But the U.S., as well as co-complainants Canada and the EU, argued that the measure violated China's WTO accession agreement, which pledged a progressive opening up of Chinese markets.

The measure puts pressure on foreign auto parts producers to re-locate their manufacturing facilities to China and discourages car manufacturers in China from using foreign auto parts in the assembly of the vehicles, the U.S.

In February, sources close to the case said that China had lost, but an official judgement was issued only on July 18. Reacting to the judgement, US Trade Representative Susan Schwab said she was "extremely pleased" with the "very strong report" by the panel. "The panel report leaves no doubt that Chinas discriminatory treatment of U.S. auto parts has no place in the WTO system." Highlighting the importance of the auto industry to the U.S. economy, she said that the administration would "not stand idly by" when U.S. goods and services were not given fair treatment.

EU trade spokesman Peter Power also said the bloc hoped China would "act swiftly to remove any discrimination and create a level playing field in the automotive sector in China." In 2007, EU exports of car parts to China exceeded 3.0 billion euros (US$4.75 billion), or about one percent of the more than 300 billion euros in total trade between the two parties.

Copyright Agence France-Presse, 2008

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