WTO CONFIRMS CHINA'S BREACH OF TRADE LAWS IN CAR PARTS CASE

KUALA LUMPUR, Dec 19 (Bernama) -- The World Trade Organisation (WTO) has
circulated its appellate body's report in the case brought by the European Union
(EU), the United States and Canada against China's imposition of taxes on
imported car parts.
The appellate body has confirmed that China breached its WTO obligations by
creating a system of registration and taxation of imported car parts that
promoted the use of domestic components.
Under this system, car manufacturers in China have to pay an additional 15
percent tax, atop the 10 percent customs duty normally levied on imported auto
parts, when they do not use a sufficient quantity of parts made in the country.
In its Trade News weekly digest made available to Bernama, EU Trade
Commissioner Catherine Ashton said: "We welcome the appellate body's
ruling."
She said China should now put an end to the discrimination and ensure a
level playing field in its automotive sector.
The system questioned is part of China's "New Automobile Policy", which was
adopted in 2004.
If imported parts assembled in a specific model exceeded a certain
threshold,an additional charge of 15 percent is imposed on top of the normal 10
percent customs duty.
The additional charge is easily triggered, either by a specific combination
of even a few imported parts or if the imported parts represent 60% or more of
the price of the final vehicle.
A WTO panel decided in July 2008 that China's rules were contrary to both
WTO rules and its WTO commitments.
The system was found to be in breach of GATT Article III, which does not
allow internal fiscal and regulatory measures to discriminate against imported
products in favour of domestic products.
The panel also concluded that, even if the charges were to be classified as
customs measures rather than internal measures, they would still breach GATT
Article II by imposing a customs duty higher than the one agreed to by China
when it joined the WTO.
China appealed the panel's conclusion before the WTO appellate body in
September this year and the appellate body has now rendered a final report which
largely confirms the panel's conclusions.
This is the first dispute brought by the EC against China, and the
first
time a dispute with that country as reached the stage of the panel and appellate
body.
China now has a reasonable period of time to bring its measures into
compliance with WTO law.
The period will be negotiated or determined by arbitration, after
which, if China has not remedied the breach of WTO law, the EC may adopt trade
sanctions.
In 2007, EU exports of car parts to China exceeded three billion
euros.
Total trade in goods between the EU and China was in excess of 300
billion
euros in 2007.
The EU requested WTO consultations with China on this issue in March
2006,
after repeatedly having expressed its interest in a negotiated
settlement.
The United States and Canada subsequently joined the EU as
co-complainants.
The WTO panel was established in October 2006.
The panel report, as backed by the appellate body, will now be adopted
by
the Dispute Settlement Body and China has to bring its laws into compliance with
its WTO obligations.
-- BERNAMA