The World Trade Organization has rejected an appeal by China against a ruling that favored the United States in a dispute over car parts, 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.
Volkswagen cars are seen at a dealership in Shanghai December 14, 2008. REUTERS/Aly Song (CHINA)
U.S. and European trade officials welcomed the decision.
“Especially in light of the current problems faced by the U.S. auto industry, I expect China to comply promptly with its WTO obligations by removing an unlawful and unfair trade barrier that is harming U.S. workers and manufacturers,” said U.S. Trade Representative Susan Schwab.
Her European counterpart, EU Trade Commissioner Catherine Ashton, said, “China should now put an end to the discrimination and ensure a level playing field in its automotive sector.”
Officials at China’s mission to the WTO could not immediately be reached for comment.
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 percent 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.