MercoPress. South Atlantic News Agency

First WTO defeat for China over foreign made car parts

China has experienced its first defeat at the World Trade Organization (WTO), in a case referred to restrictions on the importation of foreign-made car parts. Upholding a complaint from the European Union, Canada and United States, the preliminary WTO finding agrees that current Chinese practice is protectionist.

Under existing Chinese rules, its carmakers must use 60% Chinese-made parts, or pay higher taxes. The ruling says China must end this policy to meet its WTO obligations. "We can confirm that, in all major respects, the panel has agreed with the United States that China has acted inconsistently with its WTO commitments" said a US trade official who pointed out that the report indicates that foreign-made car parts are currently in a "less favorable" position than their Chinese-made alternatives. "The dispute settlement body requests China to bring these inconsistent measures as listed above into conformity with its obligations," says the ruling. The WTO is now due to make its final report later this year, when the Chinese government will have the opportunity to appeal. According to trade lawyers China's first defeat at the WTO may trigger more complaints against the nation, which already faces another four cases challenging its commercial practices. China's 19 billion US dollars vehicle market is the world's third largest as annual economic expansion of 10.6% over the past five years has boosted incomes and spending on cars and homes. The case over car-part duties is the first in which governments have jointly filed a WTO complaint against China. Based in Switzerland, the WTO is tasked with increasing global free trade, and rules on such disputes between countries. China first joined the organization in 2001, pledging to open up its domestic market to overseas firms and abide by WTO rules for international trade. However, Western governments have repeatedly complained that China is not moving quickly enough. The US announced last year that it was seeking a WTO inquiry over whether Chinese limits on imports of copyrighted US goods broke trade rules. The US has also complained against continuing high levels of music and film piracy in China. Separately, the EU said earlier this month that it was considering launching WTO action against Chinese restrictions on foreign financial news groups. China in return has complained about EU limits on Chinese shoe exports. Speaking from Moscow EU Trade Commissioner Peter Mandelson told reporters that he hopes China "complies fully and puts itself right by the WTO, not only in this question concerning auto parts, but in other respects where it is falling short" in its WTO commitments. Mandelson will travel to Beijing next week, where he'll meet with Chinese Commerce Minister Chen Deming to discuss the creation of a group to address trade imbalances and exchange-rate changes, as agreed by the two governments in November.