News and Analysis • Volume 12 • Number 4 • August 2008
Dispute Settlement - China Auto Parts
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China lost its first ever WTO dispute on 18 July, when a panel on the WTO-compliance of its auto part tariffs found in favour of the complainants – Canada, the EU and the US – on all essential points. The main issue in the dispute was the 25-percent import tariff China imposed in 2005 on certain car parts despite having bound its tariffs for such goods at 10 percent at the WTO. The complainants alleged that the tariff hike and some associated administrative regulations violated China’s scheduled tariff commitments, as well as the GATT national treatment principle and the Agreement on Trade-related Investment Measures (Bridges Year 10 No.6 page 6).
China had argued that the new tariff was necessary to prevent tax evasion by companies that import whole cars as spare parts to avoid the higher tariffs applicable to entire automobiles. The complainants, however, maintained that the measures were designed to encourage auto manufacturers in China to use domestic parts in the assembly process, as well as give foreign auto part makers an incentive to relocate production to China.
China has until mid-October to appeal the panel ruling.
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