Car-Parts Investigation In China Delayed

GENEVA (AP) - China delayed a World Trade Organization investigation into a complaint made by the United States, the European Union and Canada over the Asian nation's tariffs on foreign auto parts, trade officials said Thursday.

The WTO, however, will almost certainly establish an investigative panel to rule on the trade spat at a meeting of its dispute settlement body next month.

Under WTO rules, China was able to block the first request for an investigative panel. The U.S., EU and Canada have the chance to make second request on Oct. 26, at which point the panel will be automatically established.

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

The dispute marks the first time the Western allies have teamed up to seek a formal WTO investigation over China's trade practices. Their announcement earlier this month to seek litigation came after negotiations with Beijing failed.

Brussels and Washington have said China could be breaking trade rules by applying the same tariff it places on finished cars to the import of parts. Manufacturers have to source 40 percent of parts by value in China to avoid the tax.

Beijing has claimed the tariffs are intended to stop cars from being imported in large chunks to avoid the tariff for finished cars. The EU and the United States said China had promised not to treat parts as whole cars when it joined the WTO.

This tariff on parts 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, the U.S. and EU said in March when they requested formal consultations with the Asian country. Canada later joined the dispute.

China's car-making market has grown rapidly and it is now second only to the United States. China's economic boom has caused friction as its trade imbalances with major European and American partners widen.

The U.S. trade deficit with China soared to $202 billion last year, the highest ever with a single country. The EU also has a ''sizable and widening'' trade deficit with China that reached 106 billion euros ($128 billion) in 2005.

European carmakers have between 20 percent and 25 percent of the car production market in China. The EU values its auto-parts exports to China at about 3 billion euros ($4 billion).

The United States exported $681 million in auto parts to China in 2005, an increase of 6.5 percent over 2004. But during the same time, the market for auto parts in China increased by 16.8 percent and the number of passenger cars sold in the country jumped by 27 percent.

Canada says it exported an average of $256 million in parts annually from 2003 to 2005.

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