Bridges Weekly Trade News Digest • Volume 12 • Number 43 • 17th December 2008
WTO Appellate Body Rejects China’s Auto Parts Appeal
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The WTO’s Appellate Body upheld an earlier dispute panel ruling against China in an on-going battle with Canada, the EU and the US over auto part tariffs, the WTO announced on Monday.
The seven-member Appellate Body recommended that China bring its import duties on foreign auto parts into “conformity with its [WTO] obligations.”
Beijing now has a ‘reasonable period of time’ to comply with the ruling, after which a different WTO panel will determine whether the country is still in violation, in which case the complainants could be allowed to impose retaliatory tariffs.
“The WTO Appellate Body confirmed that China’s discriminatory taxation of US auto parts is fundamentally at odds with core WTO principles,” US Trade Representative Susan Schwab said in a statement.
“International trade must be a two-way street. Both the United States and China benefit from our trade relationship, but as this dispute makes clear, when China adopts measures that unfairly restrict US exports, we will not hesitate to use all available tools to ensure that China complies with the rules of the international trading system,” Schwab said.
EU Trade Commissioner Catherine Ashton also welcomed the ruling: “China should now put an end to the discrimination and ensure a level playing field in its automotive sector,” she said in a statement.
In September, Beijing appealed a July dispute panel ruling that found Chinese auto tariffs to be in violation of WTO rules and China’s scheduled tariff commitments (see BRIDGES Weekly, 4 September 2008, http://ictsd.net/i/news/bridgesweekly/27666/; see BRIDGES Weekly, 18 September 2008, http://ictsd.net/i/news/bridgesweekly/29501/).
Beijing’s duties on foreign auto parts were first challenged by Canada, the EU and the US at the WTO in 2006, a year after China enforced a system of levying tariffs on auto parts based on the number of imported parts used in completed vehicles.
Canada, the EU and the US argued that China violates international trade law by charging a 25 percent tariff on auto parts that account for 60 percent or more of the value of an entire vehicle. In all other cases, China charges a 10 percent tariff on the parts.
The complainants also said these policies discriminate against foreign auto parts producers, as they effectively subsidise domestic production, pressure foreign auto part producers to relocate to China, and contravene China’s WTO accession promise “not to treat parts as whole cars.”
However, Beijing had argued the duties were necessary to stop the import of whole cars in chunks, which would also circumvent the higher taxes on finished cars.
This dispute represented a number of firsts for the Asian giant: the rulings signify China’s first legal defeat since joining the multilateral trade body in 2001; indeed, it is the first dispute to reach the stage of panel and appellate reports, and it is the first dispute bought by the EU against China.
ICTSD reporting; “WTO rejects China appeal against auto parts ruling,” ASSOCIATED PRESS, 15 December 2008; “China loses appeal of WTO ruling on car-parts duties,” BLOOMBERG, 15 December 2008; “China loses appeal against WTO car parts ruling,” AGENCE FRANCE PRESSE, 15 December 2008.
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