The World Trade Organisation confirmed on Friday it had ruled against China over its import tariffs for car parts, in the first WTO ruling against China since it joined the global trade body in 2001.
The WTO's dispute settlement panel urged China to bring what it termed "inconsistent measures ... into conformity with its obligations."
A WTO panel ruled in February that China improperly taxes imported car parts at the same rate as finished vehicles. The case, initiated by the United States, European Union and Canada, is the first time China has been the subject of a complaint that went all the way to the WTO's Dispute Settlement Body, since joining the organization in 2001.
Beijing has a minimum local content requirement of 60 percent for home produced cars. If this level is exceeded, it then levies the same tariff on the vehicle as it would if it were imported completely built.
China, which can still appeal, says the tariffs are intended to stop whole cars being imported in large chunks, allowing companies to avoid the higher tariff rates for finished cars. It argues that all measures are fully consistent with WTO rules and do not discriminate against foreign auto parts.
But the United States, as well as co-complainants Canada and the European Union, argued that the measure violated China's WTO accession agreement, which pledged a progressive opening up of Chinese markets.
The measure puts pressure on foreign auto parts producers to re-locate their manufacturing facilities to China and discourages car manufacturers in China from using foreign auto parts in the assembly of the vehicles, the United States argued.
China's car-making market has grown rapidly and it is now third in auto sales after the U.S. and Japan.
The United States exported auto parts worth $840 million to China in the first nine months of 2007, up 38 percent from the same period a year earlier, according to the U.S. Commerce Department.
European carmakers have about 25 percent of the car production market in China. Figures provided in 2006 put its auto parts exports to China at about 3 billion euros ($4.75 billion) annually.
China's full-year vehicle sales in 2007 rose 22 percent to 8.8 million units, according to the government-sanctioned China Association of Automobile Manufacturers.
(Agencies via CRI July 19, 2008)
