WTO Rejects China Appeal against Auto Parts Ruling

(The Canadian Press)

The World Trade Organization has rejected an appeal by China against a ruling in a dispute over car parts that favoured the United States, the European Union and Canada. The WTO appeals panel recommended in a ruling released Monday that China be asked to bring its import tariffs for foreign auto parts into compliance with international trade rules.

Beijing had appealed the original ruling made in July, arguing that the taxes were needed to stop whole cars being imported in large chunks, allowing companies to avoid the higher tariff rates for finished cars. It was the first time China lost a case before the world trade body.

Under the import rules, cars made in China must contain at least 40% Chinese-made parts or they are taxed at the rate of imported finished cars. The U.S., the 27-nation EU and Canada argued that the tariffs made it cheaper for car parts companies to shift production to China, costing Americans, Canadians and Europeans their jobs.

China now has a “reasonable period of time” to make legislative changes, after which a separate WTO panel has to determine whether Beijing has come into compliance or is still breaking the rules, in which case sanctions can be imposed.