Potential Parts Problems For U.S., EU And China Carmakers

Geneva (AP) — The United States, the European Union and Canada will file complaints later Friday with the World Trade Organization over China’s tariffs for the import of foreign auto parts, U.S. and EU officials said.

The auto parts dispute, which marks the first time the Western allies have teamed up to seek a formal WTO investigation in a trade spat with China, will be included as an agenda item at a meeting of the organization’s dispute settlement body on Sept. 28, said the officials, who spoke on condition of anonymity because no formal announcement had been made.

Brussels and Washington have said China could be breaking trade rules by applying the same tariff for finished cars to the import of spare parts that make up 60 percent or more of the value of the final vehicle.

This discourages automakers from using imported car parts for the vehicles they assemble in China and creates an incentive for car parts companies to shift production to China, they said in March when they requested formal consultation with the Asian country.

Officials have said that China refused to change its protectionist policy on the auto parts in those negotiations, which Canada joined later, leaving trade litigation at the global trade body as a last recourse.

The WTO investigation could result in punitive special tariffs being imposed on Beijing.

China’s trade boom has caused friction as the trade deficit widens with major European and American partners.

The U.S. trade deficit with China soared to $202 billion last year, the highest record ever with a single country. The EU also has a “sizable and widening” trade deficit with China that reached $128 billion in 2005.

China’s carmaking market has grown rapidly in recent years and it is now second only to the United States. However, manufacturers have to source 40 percent on spare parts by value in China to avoid the tax.

Beijing has claimed 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.

European carmakers have between 20 percent and 25 percent of the car production market in China.

The U.S. exported only about $540 million of auto parts to China last year, a market estimated at $19 billion, the Wall Street Journal reported this week. The EU says its auto-parts exports to China are valued at about $4 billion.

More in Global