China Loses Appeal in WTO Auto parts Case
18 December 2008
China has lost a key part of its appeal against a World Trade Organization ruling that its auto parts tariff policy violates international rules.
The appellate body called on the WTO to recommend that China bring its measures into line with the trade group's rules. Under WTO procedures, the appeal report will be adopted within 30 days, after which China will have to implement its findings.
Otherwise, the parties that brought the original complaint - the United States, the European Union and Canada - could be given the right to impose their own trade sanctions.
Industry experts said yesterday that it may take some time for the full effects of the ruling to be felt. Foreign auto makers, they noted, are already expanding domestic sourcing of auto parts, and that trend is unlikely to change dramatically, given the price advantages of Chinese products.
The dispute centered on China's insistence that foreign car manufacturers producing vehicles in the country must pay a higher tariff on imported auto parts exceeding 60 percent of a vehicle's value.
China considers auto parts as a complete vehicle if they account for 60 percent or more of the value of a complete vehicle.
China imposes a maximum tariff of 25 percent on vehicles and 10 percent on auto parts.
In 2005 the country started to charge car manufacturers importing parts the 25 percent rate if they did not use the required quantity of components made in China.
The move was designed to prevent foreign car makers from gaining an unfair advantage by importing vehicles in parts to circumvent the higher tariff.
The WTO ruled in July that the two-tier tariffs violated the organization's rules. It was China's first defeat since it joined the organization in 2001.
China appealed the ruling in September.
"It is likely that China will scrap the trading practices and meet its obligations to the WTO," said Jia Xinguang, a former chief analyst at the China Association of Automobile Manufacturers.
Source : english.chinabuses.com
Editor : Ida
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