Chinese Law Prof Blog

Editor: Donald C. Clarke
George Washington University Law School

Friday, March 31, 2006

US and EU bring WTO complaint against China

The US and the EU yesterday brought a formal complaint against China before the WTO, thus starting a 60-day consultation period at the end of which they can ask for formal dispute resolution proceedings before a WTO panel.

According to a report in the Financial Times,

The case aims at regulations intended to encourage Chinese carmakers to use domestic rather than imported car parts. The US and EU claim China is imposing unfair “local content’’ rules through a complex tariff system that raises the import tariffs from 10 per cent to 25 per cent if foreign parts make up more than a certain proportion of a car.

If you're a glutton for detail, here's an excerpt from a press release from the Office of the United States Trade Representative:

Under China’s regulations governing the importation of auto parts, all vehicle manufacturers in China that use imported parts must register with China customs and provide specific information about each vehicle it assembles, including a list of the imported and domestic parts to be used, and the value and supplier of each part. If the number or value of imported parts in the assembled vehicle exceed specified thresholds, the regulations assess each of the imported parts a charge equal to the tariff on complete automobiles (typically 28%) rather than the tariff applicable to auto parts (typically 10-14%).

The regulations appear designed to encourage manufacturers in China to increase the amount and value of Chinese parts they use in the assembly process – at the expense of parts from the United States and elsewhere. The regulations also provide an incentive for auto parts producers to relocate manufacturing facilities to China.

The United States maintains these regulations impose a tax on U.S. auto parts beyond that allowed by WTO rules, and result in discrimination against U.S. auto parts. As such, China appears to be acting inconsistently with several WTO provisions including Articles II and III of the General Agreement on Tariffs and Trade 1994 and Article 2 of the Agreement on Trade-Related Investment Measures, as well as specific commitments made by China in its WTO accession agreement.

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