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US leads push to file WTO case over China auto tariffs

The US, the EU and Canada would file complaints with the World Trade Organization over China's tariffs for the import of foreign auto-parts, US and EU officials said yesterday.

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 consultations 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 litigation at the global trade body as a last recourse.

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

China's trade boom has caused friction as the country's surplus widens with its major partners.

The US trade deficit with China soared to US$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 US$128 billion last year.

Car production in China has grown rapidly in recent years and it is now second only to the US. However, manufacturers have to source 40 percent of 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 US 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 US exported about US$540 million of auto-parts to China last year, a market worth US$19 billion, the Wall Street Journal reported this week. The EU's auto-parts exports to China are worth US$3.8 billion.
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