The World Trade Organization agreed to examine China's duties on imported car parts in the first case against the Asian nation to reach arbitration.
China requires General Motors Corp., Volkswagen AG, Renault SA and other automakers operating in the country to buy a certain quantity of their components from local suppliers and applies a 25% import duty on parts. The European Union, the US and Canada say that violates pledges China made when it joined the WTO in 2001. “These measures discourage auto manufacturers in China from using imported parts” to assemble cars, David Shark, a US diplomat in Geneva, said in a statement to WTO ambassadors today. Furthermore, China can't justify its rules on the grounds that they prevent companies from importing complete cars to avoid paying a higher duty on parts, he said. China is facing increasing pressure from trade partners to live up to its WTO membership commitments to protect copyrights and open its borders to foreign investors. The EU joined the US this week in pushing China to let its currency rise, making its exports more expensive and cutting record trade surpluses with the 25-nation bloc and the world's biggest economy. The request for a WTO ruling on the legality of the duties on car parts comes after months of negotiations to resolve the dispute failed. The three countries lodged a preliminary complaint against the tariffs in March and the legal case is expected to last at least 18 months.
On September 28, the Chinese government called the auto parts complaint “regrettable” and said it has “significantly reduced” duties on auto parts, providing “unprecedented market access opportunities for all trading partners.” The levies “serve to prevent tariff evasion by companies who import complete automobiles as auto parts to avoid higher tariff rates,” China said at the time. China's $19 billion vehicle market is the world's third largest as annual economic expansion of more than 9.5% over the past five years has spurred incomes and spending on cars and homes. Vehicle imports in the first eight months of the year surged 72% to $4.84 billion, the official Xinhua news agency reported on October 11. Around 88% of the imported vehicles came from the EU, South Korea and the US, Xinhua said, citing the General Administration of Customs. (Bloomberg)