Bridges Weekly Trade News Digest • Volume 12 • Number 30 • 18th September 2008
China Appeals WTO Auto Parts Decision
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China has appealed a WTO ruling that found in favour of Canada, the EU and the US in a dispute over auto part tariffs.
The Chinese appeal came on 15 September, just hours before the WTO’s Dispute Settlement Body (DSB) was to meet and formally adopt the ruling on its car imports.
The WTO ruling, which represented China’s first legal defeat at the multinational trade body since its accession in 2001, found that Chinese measures “accord imported auto parts less favourable treatment than like domestic auto parts.” The panel, which circulated its decision on 18 July, largely upheld the complainants’ arguments that Chinese tax measures on imported auto parts resulted in unfair competition and violated international trade rules (see BRIDGES Weekly, 4 September 2008, http://ictsd.net/i/news/bridgesweekly/27666/).
The Appellate Body, which has the authority to maintain or overthrow a verdict of the DSB, has up to 90 days to review and rule on the case.
In contention are the tariffs that China imposes on imported auto parts. Beijing has set a maximum tariff of 25 percent for whole vehicles and 10 percent for auto parts. These tariff rates are in accordance with the Chinese WTO accession package, which obliged the country to set a lower duty on imported auto parts than on finished vehicles.
However, since 2005 China has taxed auto parts at a 15 percent higher rate if the parts end up constituting 60 percent or more of the value of a finished vehicle. Beijing maintains that the higher duty is aimed at preventing tax evasion by companies that import whole cars as spare parts.
Canada, the EU and the US initiated the dispute in 2006 with concerns that the Chinese measure pressures foreign auto parts producers to relocate manufacturing facilities to China. The complainants also said that tariffs unfairly discouraged Chinese manufacturers from using foreign auto parts.
ICTSD reporting; “China appeals WTO car parts ruling: spokeswoman,” AGENCE FRANCE PRESSE, 15 September, 2008; “China appeals WTO ruling on auto parts,” XINHUA, 15 September, 2008; “China appeals auto parts ruling, first WTO loss,” ASSOCIATED PRESS, 15 September, 2008.
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