WTO panel to probe China's auto parts imports

China defended its import duties on auto parts on Friday, deploring the World Trade Organization's decision to launch a panel to hear US and European complaints that the duties are unfair protection.

The WTO announced on Thursday that a panel would examine claims that China is improperly shielding its $19 billion auto parts market through a 25 percent tariff on components for cars, trucks and other vehicles.

A man stands in a car dealership in Shanghai in this March 10, 2006 file photo. The WTO decided on Thursday to set up a panel to investigate into the complaints of the US and EU on China's import duties on auto parts. [Reuters]

The reaction from China's Ministry of Commerce was swift and unyielding, suggesting that Beijing is not courting compromise in the high-profile dispute.

"The relevant rules are in keeping with commitments China made on joining the WTO," spokesman Chong Quan said in a statement on the ministry Web site (www.mofcom.gov.cn).

"We have shown the utmost sincerity in seeking to resolve the issue through negotiation. So it is extremely regrettable for the EU, US and Canada to again demand setting up this panel."

Once its three members are appointed, the panel will have six months to report its findings. But either side can appeal, meaning a final ruling could come as late as 2008.
Washington, Brussels and Ottawa first asked for a panel to consider their complaint last month but China exercised its right to block the first request. The second request entered on Thursday automatically triggered creation of the panel.

China considers car parts as a whole vehicle if they account for 60 percent or more of the value of a final vehicle and it charges a higher tariff on them.

Chong said China's rules on auto parts were to prevent customs duties evasion and "protect the rights and interests of consumers".

China's average import duties on whole vehicles had fallen from 80 percent before it joined WTO to 25 percent, and duties on auto parts have fallen from 30 to 10 percent, Chong said.

"In market access, (China) has given other WTO members unprecedentedly open opportunities," he added.

Car makers from both sides of the Atlantic have invested heavily in China to set up joint ventures to make vehicles.

Australia, Japan, Mexico and Argentina all signed up as interested third parties in the auto parts panel, and other countries have 10 days to register.

Until now, China has only been involved in WTO disputes as an observer or complainant. In 2002, it joined a case launched by several trading powers against the United States over tariffs Washington imposed on steel parts.

The United States started a WTO case against Beijing in 2004 over duties on semi-conductors, but dropped it before the panel stage when the two countries negotiated a settlement.