- The Washington Times - Thursday, October 26, 2006

GENEVA (AP) — The World Trade Organization announced its first formal investigation into charges of illegal Chinese trade practices yesterday, establishing a panel to examine whether China’s tariffs on the import of foreign auto parts break international trade rules.

The complaint was made by the United States, the European Union and Canada, whose first request for a panel was blocked by China last month. Under WTO rules, a panel is established automatically with the second request.

The three trade powers argue that it is illegal for China to apply a tariff for whole cars to the import of parts that make up 60 percent or more of the value of the finished vehicle.

“These measures discourage auto manufacturers in China from using imported parts in the assembly of new vehicles,” U.S. trade negotiator David Shark told the WTO’s dispute-settlement body, adding that the practice could not be justified under the global trade body’s rules.

Beijing has asserted the tariffs are intended to stop whole cars being imported in large chunks to avoid higher tariff rates for finished cars, but the EU and the United States said China had promised not to treat parts as whole cars when it joined the WTO in December 2001.

China’s WTO delegation expressed disappointment that the U.S., EU and Canada had “ignored China’s arguments and good faith to resolve this dispute through consultations” and decided to proceed with the panel request, a move it described as “unproductive.”

A previous dispute between Beijing and Washington over a Chinese tax rebate for semiconductor chips was resolved during the consultation phase, thereby avoiding a full WTO investigation.

The investigation could last months and even years before a final judgment, but could eventually result in punitive tariffs being imposed on Beijing.

China’s auto industry has grown rapidly and it is now second only to the United States. However, manufacturers have to source 40 percent of parts by value in China to avoid the tax.

China’s trade boom has caused friction as its trade imbalances with major European and American partners widen, and this dispute marks the first time the Western allies have teamed up to seek a formal WTO investigation of China’s trade practices.

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