WTO rules against China over trade

The World Trade Organisation on Wednesday ruled against China in a complaint over import duties on car parts from the US, the European Union and Canada. The ­ruling is the first official condemnation of China’s trade practices since it joined the WTO in 2001.

US officials confirmed that a WTO dispute panel, in an interim judgment given to the parties, had “in all major respects ... agreed with the US that China has acted inconsistently with its WTO commitments”.

Interim rulings are issued for comment and rarely changed. China will have the right of appeal, delaying a definitive decision to late this year or 2009.

The panel was set up in 2006 to investigate China’s surcharge on imported car parts, imposed if they make up more than a specified ­proportion of the finished vehicle. The complaining countries said the surcharge, equivalent to the tariff on imports of complete cars, exceeded China’s permitted tariff ceiling and violated international trade rules ­forbidding discrimination against imports. The duty on complete cars is typically 25 per cent, compared with 10 per cent for parts.

Beijing had argued that the surcharge was necessary to prevent circumvention of the car duty by importing large chunks of vehicles for local assembly. The three complainants claimed it was a protectionist device to discourage imports and build up China’s domestic motor manufacturing industry.

Meanwhile, Susan Schwab, US trade representative, offered a guarded reaction to new texts intended to serve as a starting point for fresh negotiations on the Doha trade round.

Ms Schwab, speaking at the Institute for International Economics, a Washington think-tank, struck an optimistic note on agriculture – “These are going to be tough calls but they are manageable.” – and less so on industrial goods – “This is certainly not a step designed to take us closer to ministers making choices.”

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