China expressed regret [it always uses this term to denote diplomatic dissatisfaction] Tuesday over a World Trade Organisation ruling that its tariffs on imported car parts were not in line with global rules, and refrained from saying it would comply. Commerce ministry spokesman Yao Jian said Beijing welcomed sections of the WTO ruling on imported car kits, but was unhappy its appeal on imported parts was turned down. "We express our regret over the appeal panel's verdict over the rest of the ruling," Yao said in a statement on the ministry's website, referring to the judgement on auto parts.In effect, the import duty of 25% previously applied by China should be reduced to 10% to attain compliance with the ruling.
The WTO's Dispute Settlement Body ruled in July that China's policies were inconsistent with WTO rules, a decision that was welcomed by the United States which brought the complaint along with Canada and the European Union.
China appealed against the ruling, but the WTO's appeal body said Monday in Geneva that it upheld the original verdict. Following the verdict the United States asked China to honour the WTO ruling and lift its tariffs.
"I expect China to comply promptly with its WTO obligations by removing an unlawful and unfair trade barrier that is harming US workers and manufacturers," US Trade Representative Susan Schwab said in a statement. Welcoming the ruling, Europe's top trade official Catherine Ashton said: "China should now put an end to the discrimination and ensure a level playing field in its automotive sector."
Beijing requires that home-produced cars contain a minimum of 60 percent local content. A vehicle that fails that criterion is slapped with the same tariff as if it had been imported completely built. China imposes an import duty of 25 percent on whole vehicles and 10 percent on auto parts. It has said the rules aim to prevent tax evasion by companies that import whole cars as spare parts to avoid higher tariff rates.
China Loses WTO Auto Parts Appeal
To no one's real surprise, China has lost its appeal in regard to the auto parts case (DS 339, 340, and 342) lodged by the EC, US, and Canada, respectively [1, 2, 3]. The summary and the full ruling are available on the WTO site. The main point of contention centered on discrimination against foreign auto parts makers' wares. Cars made in China having less than 60% domestic parts content were treated similary to imported automobiles and were assigned a tariff rate of 25%. Conceivably, foreign auto parts manufacturers facing slumping auto demand at home can now more easily market their wares in the Middle Kingdom given its eventual compliance. From Agence-France Presse:
