Spat brewing over car parts tariffs

PUBLISHED : Monday, 03 April, 2006, 12:00am
UPDATED : Monday, 03 April, 2006, 12:00am

The next battle brewing on the trade front is over vehicle components, and this time the European Union and the United States are working together to claim China is unfairly favouring domestically produced parts.

Last year, the mainland introduced rules effectively raising import tariffs on car components, by charging the same duties as an entire car if the parts made up at least 60 per cent of the final value. The move makes using domestic components more attractive.

In a joint action, the EU and the US have asked China to take part in 'consultations' on the issue, the initial step towards referring it to a World Trade Organisation panel.

President Hu Jintao's imminent trip to the US has helped prompt Washington to make the move, since the bilateral meeting could also provide a forum to discuss the problem.

A US business executive familiar with the issue said the case had the advantages of being easy to prove, with clear ties to WTO principles and the possibility of a quick resolution. 'It's an easy case,' he said.

When China joined the WTO, it pledged to cut tariffs on car parts to an average 10 per cent from 23 per cent, and slash duties on cars to 25 per cent from as high as 80 or 100 per cent. Beijing also agreed to scrap rules requiring a certain proportion of local content in cars.