By turning to the World Trade Organization (WTO) to settle a row
about China's new auto-parts tariffs, the United States and the
European Union have made a slightly better move than other
protectionist measures they have recently saber-rattled.
Yet, it is still regrettable. Instead of challenging escalating
protectionism at home, policy makers from these developed economies
have wrongfully and unyieldingly directed their fire at China.
As a first step towards filing a formal WTO complaint, the EU
and the US both requested to engage in formal talks with China
about its upcoming import tariffs on car parts.
Starting July 1, China will place a higher tariff on imported
auto parts valued at 60 percent or more of the complete vehicle's
total price.
By doing so, the country intends to stop whole cars from being
imported in large chunks, a practice that helps importers avoid
higher tariff rates on finished cars. But EU and US manufacturers
complained that the auto-parts tariff policy, which targeted no
specific firm, goes against WTO rules.
This is the first time the EU has taken China to the global
trading body since it joined in 2001, and it is the second time the
US has made such a move.
Undoubtedly, the filing comes at a time of rising trade tensions
between China and rich countries on both sides of the Atlantic.
A soaring deficit with China has driven some US politicians to
urge actions, fair or not, against Chinese exports. The EU's recent
endorsement of anti-dumping duties on Chinese shoes merely betrayed
a lack of resolve among EU trade officials to resist protectionist
pressure.
Now, a cross-Atlantic trade alliance has emerged to press the
charge against China.
But even a joint effort by the world's two largest economies
does not add substance to the complaint, especially in a sector
that thrives on the intensified competition in China.
No carmaker can afford to overlook the Chinese market, one of
the world's largest auto markets, that is expected to grow by 10
percent year-on-year over the next two decades.
It is no wonder why German carmaker Volkswagen plans to increase
the sourcing of spare parts in the country 10 fold this year from
2005. It is the unmistakable advantage of China's cheaper
costs.
Also unsurprising is General Motors' expansion in China given
its gloomy performance in its home country. This US auto giant
sells more cars than any other competitors in China at present.
The boom of the car-making industry in China has created major
opportunities for the parts and accessories business. It is natural
that manufacturers of car parts around the world would try to grab
a larger share of the increasing orders placed by carmakers in
China.
It is reported that more than 1,000 foreign auto parts companies
have moved production to China, ostensibly to cut costs both in
labor and transportation.
For those EU or US auto parts manufacturers who feel left
behind, the pressing task is to adapt themselves to the market
changes. Their success will hinge on the competitiveness of their
products, rather than the extent of protection they enjoy.
For trade officials from these two economies, it is wise to
notice that the Chinese Government is pondering how to achieve
trade balance with more imports. But it would be unwise if they try
to appeal to domestic industries by piling unfair demands on
China.
The real challenge for the United States and the EU, and for
China as well, is to help domestic enterprises survive global
competition through reforms, not resorting to protectionist
measures.
(China Daily April 3, 2006)
