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Wire & Cable ASIA – November/December 2008
29
Automotive
The WTO rules against China over tariffs
on foreign auto parts
In hopes of offsetting slumping sales in North America,
Europe, and Japan, overseas car makers have invested
more than $20 billion in the Chinese auto market,
Asia’s biggest.
In a finding of keenest interest to these producers, the
World Trade Organisation has ruled that China violates
global trade rules by requiring that auto makers operating
in the country buy their components from local suppliers
or face penalties.
China compels Ford Motor, Volkswagen, Renault, and other
foreign auto makers operating there to buy a quota of their
components from local suppliers – or pay more than double
the standard import duty on their parts. Since April 2005,
auto makers have had to provide detailed information to
Chinese authorities on the quantity and value of imported
parts in their vehicles.
When a set level of foreign-parts content is reached,
the parts become subject to the 25% tariff applicable
to complete vehicles instead of the 10% tariff that applies
to parts.
The WTO case dates to March 2006 when the European
Union, Canada and the US filed a complaint against China.
The decision represents the first time China has lost a case
before the WTO since becoming a member of the global
trade supervisor in 2001.
News of the WTO decision, issued 18
th
July in Geneva,
was welcomed by American lawmakers who have accused
China of employing subsidies, tax incentives, and an
undervalued currency to give an unfair advantage to its
own companies.
The combination of benefits has, in this view, helped
to drive up China’s record trade surplus. “The panel
report leaves no doubt that China’s discriminatory treatment
of US auto parts has no place in the WTO system,”
the US trade representative, Susan C Schwab, said in
a statement.
The latest US government data show that hard times
❖
in the nation’s auto industry have led to a big decline in
industrial output.
The Federal Reserve reported 15
th
September that
industrial output dropped 1.1% in August, nearly four
times the amount that economists had been expecting.
The weakness was led by an 11.9% drop in production
of motor vehicles and parts. The problems in autos
contributed to a 1% overall drop in manufacturing, the
first decline since a 0.9% fall in April.
Statue of Liberty Image from BigStockPhoto.com
Photographer: Marty