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Wednesday, April 05, 2006

Dispute on auto part tariff among China and EU and US

The dispute about high tariff on autoparts has started to take a serious shape among China and United States and the European Union.

First EU filed a complaint followed by the United States. They are saying that by putting higher tariff on imported auto parts China is breaking its resolutions as a member of the WTO. China has imposed higher tariffs on whole vehicles and spare auto parts that make up 60% or more of the value of a final vehicle. In April last year, this figure was 30% for the whole vehicle and 15% for auto parts.

US Trade Representative Rob Portman said, "What the Chinese policy does is favour its domestic industry or force US companies to relocate to China to avoid these illegal taxes,"
(Source:
http://news3.xinhuanet.com/english/2006-04/01/content_4370951.htm )
EU also voiced the same complaint that in order to encourage the local car makers China is increasing its tariff which is illegal and against WTO rules and most of all against the norms of free market economy.


On 20th March,2006 China’s division chief under the Department of Industrial Policy in the National Development and Reform Commission, Li Wanli, said the United States' complaints were groundless. He said, "We consider (the auto-parts tariff policy) complies with WTO rules,"
(Source:
http://news3.xinhuanet.com/english/2006-03/20/content_4321558.htm)



The problem is that China considers some auto parts as complete vehicles and charges higher tariff and from 1 July, 2006 this higher tariff will be extended to any auto parts that value 60% or more of complete vehicle.

Regarding this issue EU on 31st March, 2006 asked for bilateral consultation of WTO. Peter Mandelson, Trade Commissioner of the European Union said: "Consultations will allow us to clarify the legal issues and find a mutually satisfactory solution. It remains my strong preference and intention to seek an amicable solution to this issue."
(Source:
http://news.xinhuanet.com/english/2006-03/31/content_4366038.htm )

In addition, a senior official of the U.S. Trade Representative Office (USTR) said that China should be a "responsible stakeholder" in the world trade system.

(Source:
http://news3.xinhuanet.com/english/2006-03/03/content_4254401.htm )

Recently, China's Ministry of Commerce expressed its regrets regarding this issue. Cong Quan, a spokesman said that china is seriously considering the request for dispute settlement.
(Source:
http://news.xinhuanet.com/english/2006-04/03/content_4377107.htm )

According to the rule of the WTO if a dispute is not resolved within 60 days then the WTO will take it over.

(Written by S M Mehdi Hasan)
To read about the best of South Asian Business everyday, visit http://www.southasiabiz.com this website is updated 4-5 times daily.

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